UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                           -----------------------
                                  FORM 10-Q

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

For the Quarterly period ended September 30, 1998

                                      OR
                           -----------------------

              TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
---------     SECURITIES EXCHANGE ACT OF 1934

For the transition period from                to
                                     --------------         -------------
                       Commission file number 33-95298

                             GALAXY TELECOM, L.P.
         -----------------------------------------------------------
            Exact name of Registrant as specified in its charter)


            Delaware                                          43-1697125
--------------------------------                     --------------------------
 (States or other jurisdiction of           (IRS Employer Identification Number)
  incorporation or organization)


      1220 North Main, Sikeston, Missouri                      63801
      --------------------------------                    ------------------
   (Address of principal executive offices)                   (zip code)

Registrant telephone number, including area code: (573) 472-8200

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

           Yes         X            No
                   -----------------          ---------------


<PAGE>


                             GALAXY TELECOM, L.P.
                                  FORM 10-Q

                   FOR THE QUARTER ENDED SEPTEMBER 30, 1998

                                    INDEX
                                                                            PAGE
                                                                         -------
PART I.  Financial Information

Item 1.    Consolidated Financial Statements
              Galaxy Telecom, L.P.  ........................................3
              Notes to Consolidated Financial Statements....................6

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

Item 3.    Quantitative and qualitative disclosures
              about market risk............................................20

PART II.   Other Information...............................................21

Signatures    .............................................................22

Exhibit Index .............................................................23



                                       2
<PAGE>


PART I.  FINANCIAL INFORMATION

Item 1. - FINANCIAL STATEMENTS

                     GALAXY TELECOM, L.P. AND SUDSIDIARY
                         CONSOLIDATED BALANCE SHEETS
                                 (Unaudited)

<TABLE>
<CAPTION>
                                                       September 30,     December 31,
      ASSETS                                               1998             1997
                                                        -------------   -------------

<S>                                                     <C>             <C>         
Cash and cash equivalents                              $   1,628,576    $   2,403,098
Subscriber receivables, net of allowance
   for doubtful accounts of $119,639 and
   $154,692, respectively                                  4,931,988        5,424,260
Systems and equipment, net                               114,776,011      138,729,592
Intangible assets, net                                    46,869,918       57,193,102
Prepaids and other                                         2,199,138        3,297,573
                                                       -------------    -------------
   Total assets                                        $ 170,405,631    $ 207,047,625
                                                       =============    =============

   LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)

Accounts payable and accrued expenses                  $  15,785,889    $  17,152,286
Subscriber deposits and deferred revenue                   4,641,112        5,434,097
Long-term debt and other obligations                     163,544,472      179,250,312
                                                       -------------    -------------

     Total liabilities                                   183,971,473      201,836,695
                                                       -------------    -------------
Commitments and contingencies

Partners' capital (deficit):
   General partners                                      (13,565,842)            --
   Limited partners                                             --          5,210,930
                                                       -------------    -------------
   Total partners' capital (deficit)                     (13,565,842)       5,210,930
                                                       -------------    -------------
   Total liabilities and partners' capital (deficit)   $ 170,405,631    $ 207,047,625
                                                       =============    =============

<FN>

  The  accompanying  notes are an integral  part of the  consolidated  financial statements.

</FN>
</TABLE>



                                       3
<PAGE>




                     GALAXY TELECOM, L.P. AND SUDSIDIARY
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (Unaudited)
<TABLE>
<CAPTION>

                                  For the three months ended  For the nine months ended
                                          September 30,              September 30,
                                  --------------------------  --------------------------
                                       1998         1997          1998         1997
                                   ------------ ------------  ------------  -----------

<S>                                       <C>             <C>             <C>             <C>        
Revenues                                  $ 16,852,423    $ 17,362,684    $ 51,655,423    $ 51,333,357
                                          ------------    ------------    ------------    ------------

Operating expenses:
    Systems operations                       7,925,228       8,069,528      24,120,258      23,420,184
    Selling, general and administrative      2,069,006       2,189,666       6,254,961       5,980,386
    Management fee to affiliate                761,759         781,321       2,325,880       2,310,119
    Depreciation and amortization            6,010,057       6,198,209      18,357,303      18,473,534
                                          ------------    ------------    ------------    ------------
    Total operating expenses                16,766,050      17,238,724      51,058,402      50,184,223
                                          ------------    ------------    ------------    ------------

Operating income                                86,373         123,960         597,021       1,149,134

Interest expense                            (5,115,239)     (5,285,888)    (15,663,033)    (15,635,671)
Gain (loss) on sale of assets               (3,262,273)         48,489      (3,517,111)        (93,955)
Interest income and other                      (56,973)       (177,714)       (193,649)       (197,809)
                                          ------------    ------------    ------------    ------------

    Net loss                              $ (8,348,112)   $ (5,291,153)   $(18,776,772)   $(14,778,301)
                                          ============    ============    ============    ============

<FN>

  The  accompanying  notes are an integral  part of the  consolidated  financial statements.

</FN>
</TABLE>



                                       4
<PAGE>
                     GALAXY TELECOM, L.P. AND SUBSIDIARY
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (Unaudited)
<TABLE>
<CAPTION>
                                                For the nine months ended September 30,
                                                --------------------------------------
                                                             1998         1997
                                                       ------------    ------------
<S>                                                     <C>            <C>          
Cash flows from operating activities:

Net loss                                               $(18,776,772)   $(14,778,301)
Adjustments to reconcile net loss to net cash
provided by operating activities:

   Depreciation expense                                  15,501,517      15,394,589
   Amortization expense                                   2,855,786       3,078,945
   Amortization of debt issue costs                         701,082         701,082
   Provision for doubtful accounts receivable               928,393       1,496,115
   Loss on sale of assets                                 3,517,111          93,954

Changes in assets and liabilities:
   Subscriber receivables                                  (436,121)       (846,299)
   Prepaids and other                                     1,098,435        (425,585)
   Accounts payable and accrued expenses                 (1,366,397)      3,919,957
   Subscriber deposits and deferred revenue                (792,985)        259,780
                                                       ------------    ------------
Net cash provided by operating activities                 3,230,049       8,894,237
                                                       ------------    ------------
Cash flows from investing activities:
Acquisition of cable systems                               (133,633)           --
Capital expenditures                                     (7,813,668)    (13,620,486)
Proceeds from sale of assets                             21,530,553         921,280
Other intangible assets                                  (1,160,453)       (343,189)
                                                       ------------    ------------
 Net cash provided by (used in) investing activities     12,422,799     (13,042,395)
                                                       ------------    ------------
Cash flows from financing activities:

Borrowings under revolver                                 4,425,000       7,925,000
Payments on revolver                                    (22,550,000)       (801,377)
Borrowings on other debt                                  3,853,500         259,386
Payments on other debt                                   (1,479,339)        (63,004)
Debt issuance costs                                        (676,531)           --
                                                       ------------    ------------
Net cash provided by (used in) financing activities     (16,427,370)      7,320,005
                                                       ------------    ------------
Net increase (decrease) in cash and cash equivalents       (774,522)      3,171,847

Cash and cash equivalents, beginning of period            2,403,098       2,338,345
                                                       ------------    ------------
Cash and cash equivalents, end of period               $  1,628,576    $  5,510,192
                                                       ============    ============

  <FN>

  The  accompanying  notes are an integral  part of the  consolidated  financial statements.

</FN>
</TABLE>



                                       5
<PAGE>


GALAXY TELECOM, L.P. AND SUBSIDIARY            

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED                                                        

1.  BASIS OF PRESENTATION AND OTHER INFORMATION

      The attached unaudited interim consolidated financial statements of Galaxy
Telecom,  L.P. and its subsidiary  ("Galaxy" or the "Partnership") are presented
in  accordance  with  the  requirements  of  Article  10 of  Regulation  S-X and
consequently do not include all of the footnote disclosures required for audited
financial  statements by generally accepted accounting  principles.  The results
for  the  three  and  nine  month  periods  ended  September  30,  1998  are not
necessarily  indicative of the results to be expected for the entire 1998 fiscal
year.  The  accompanying  consolidated  financial  statements  should be read in
conjunction  with  Galaxy's  Annual  Report on Form  10-K/A  for the year  ended
December 31, 1997.

      The following  notes,  insofar as they are  applicable to the three months
and  nine  months  ended  September  30,  1998 and  1997,  are not  audited.  In
management's  opinion,  all  adjustments,  consisting  of only normal  recurring
accruals,  considered  necessary for a fair  presentation  of such  consolidated
financial statements are included.

2.    RECENT ACCOUNTING PRONOUNCEMENTS

      In June 1997, the Financial  Accounting  Standards  Board ("FASB")  issued
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures about
Segments of an Enterprise and Related  Information," which establishes standards
for the way that public business  enterprises report information about operating
segments  in annual  financial  statements  and  requires  that  those  business
enterprises  report  information  about operating  segments in interim financial
statements  issued to shareholders.  It also  establishes  standards for related
disclosures  about products and services,  geographic areas and major customers.
SFAS No. 131 is effective for financial  statements  for years  beginning  after
December 15, 1997.

      Management  does not  believe the  implementation  of SFAS No. 131 will
have a material effect on its financial statements.

                                       6
<PAGE>

      In June 1998,  the FASB issued SFAS No. 133,  "Accounting  for  Derivative
Instruments  and Hedging  Activities."  SFAS No. 133 is effective for all fiscal
quarters of all fiscal years beginning after June 15, 1999 (January 1, 2000, for
the  Partnership).  SFAS No. 133 requires  that all  derivative  instruments  be
recorded on the balance sheet at their fair value.  Changes in the fair value of
derivatives are recorded each period in current earnings or other  comprehensive
income,  depending  on whether a  derivative  is  designated  as part of a hedge
transaction and, if it is, the type of hedge transaction.

     Management of the Partnership  anticipates that, due to its limited use of
derivative instruments, the adoption of SFAS No. 133 will not have a significant
effect on the Partnership's results of operations or its financial position.


3.    REPORTING COMPREHENSIVE INCOME

      In 1998,  Galaxy  adopted SFAS No. 130  "Reporting  Comprehensive  Income"
which  establishes  standards for reporting and display of comprehensive  income
and  its  components  in a full  set of  general-purpose  financial  statements.
Comprehensive loss was the same as net loss reported.

4.    SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION (Non-Cash Transactions)

      During the first nine months of 1998,  Galaxy traded four systems  located
in and around Sheridan County, Nebraska,  representing 853 subscribers,  for one
system located in Jefferson  County,  Colorado  representing  approximately  800
subscribers.

5.  RELATED PARTY TRANSACTIONS

      Galaxy  incurs  management  fees and  expenses  pursuant to the terms of a
management  agreement  with Galaxy Systems  Management,  Inc., an affiliate of a
general partner,  under which it manages Galaxy's business.  Management fees are
calculated  at 4.5% of gross  revenues as defined in the  management  agreement.
Management  fees totaled  $761,759 for the three months ended September 30, 1998
and  $781,321 for the three months ended  September  30, 1997.  Management  fees
totaled  $2,325,880 for the nine months ended  September 30, 1998 and $2,310,119
for the nine months ended September 30, 1997.


                                       7
<PAGE>


      6.    LONG-TERM DEBT

      Long-term debt consisted of the following:

                                          September 30,      December 31,
                                               1998                1997
                                          ------------      ------------
      Revolving Credit Facility            $41,100,000       $59,225,000
      Senior Subordinated Notes            120,000,000       120,000,000
      Unamortized discount                    (420,000)         (465,000)
      Other                                  2,864,472           490,312
                                          ------------      ------------
         Total                            $163,544,472      $179,250,312
                                          ============      ============

      In  August  1998,  Galaxy  amended  the  Revolving  Credit  Facility  (the
"Revolver").  The amendment allows the Partnership to borrow up to $55.9 million
until June 1999 when the outstanding balance converts to a term loan.  Principal
payments  are due in  installments  of 18  percent of the  converted  balance on
September 30, 1999, 4 percent of the converted  balance on December 31, 1999 and
in subsequent quarterly  installments  escalating annually from 16 percent to 30
percent of the converted  balance  through  December 2002. Net proceeds from any
system sale will be used to reduce the commitment  available under the Revolver.
In April 1998, Galaxy borrowed approximately $3.0 million from a bank (the "Bank
Note").  The Bank Note  carries  interest at 8.25% for 3 years and is payable in
quarterly  installments,  the final installment to be paid in December 2000. The
Bank Note was used to finance the purchase of vehicles.

7.    SALES, ACQUISITIONS AND TRADES

      Galaxy  believes  its  real  opportunity  lies in the  development  of its
properties in Nebraska,  Kansas,  Illinois,  Kentucky and Mississippi (the "Core
Areas").  The Core Areas are considered  such due to Galaxy's  opportunity to be
the  dominant  operator in these  areas and the  ability to generate  additional
revenue through its fiber network (see  "Technology and  Engineering"  discussed
below).  The  properties  that are not in the Core  Areas are  currently  in the
process of being sold,  traded or  re-evaluated as being able to be converted to
Core Areas.

      On January 15, 1998,  Galaxy sold its cable television  systems located in
Wyoming  and Idaho  (the  "Wyoming  Sale"),  representing  approximately  4,000,
subscribers for $4.9 million,  or $1,225 per subscriber,  and recorded a gain on
sale of approximately  $695,000.  Galaxy used the proceeds from the Wyoming Sale
to pay down principal of the Revolver.

                                       8
<PAGE>

      On February 1, 1998,  Galaxy sold its cable  television  system located in
Hooper,  Nebraska,  representing 242 subscribers for approximately  $262,000, or
approximately $1,080 per subscriber.  Galaxy used the proceeds from this sale to
pay down principal of the Revolver.

      On March 31, 1998,  Galaxy sold two cable  television  systems  located in
Olathe,  Kansas and  Independence,  Missouri,  representing  250 subscribers for
approximately  $190,000,  or approximately $760 per subscriber.  Galaxy used the
proceeds from this sale to pay down principal of the Revolver.

      On March 31, 1998, Galaxy sold six cable television systems located in and
around Ottawa County,  Kansas,  representing 752 subscribers,  for approximately
$623,000,  or approximately $830 per subscriber,  and recorded a loss on sale of
approximately $860,000.

      On March 31, 1998, Galaxy purchased one cable television system located in
Brooks  and  Colquitt  Counties  in  Georgia,   representing  approximately  300
subscribers, for approximately $141,000, or approximately $470 per subscriber.

      On March 31,  1998,  Galaxy  traded  four  systems  located  in and around
Sheridan County,  Nebraska,  representing 853 subscribers for one system located
in Jefferson County, Colorado, representing approximately 800 subscribers.

       On April 30, 1998, Galaxy sold seven cable television  systems located in
and around Lincoln County, Kansas,  representing  approximately 500 subscribers,
for approximately  $395,000,  or approximately $790 per subscriber.  Galaxy used
the proceeds from this sale to pay down principal of the Revolver.

      On June 30,  1998,  Galaxy  sold one cable  television  system  located in
Goessel,  Kansas,  representing  approximately 100 subscribers for approximately
$110,000, or approximately $1,100 per subscriber.  Galaxy used the proceeds from
this sale to pay down principal of the Revolver.

      On June 30, 1998, Galaxy sold all of its cable television  systems located
in  central  Georgia,   representing   approximately   5,200  subscribers,   for
approximately $6,120,000, or approximately $1,177 per subscriber, and recorded a
loss on sale of approximately $196,000.

      On August 20, 1998,  Galaxy sold 25 cable television  systems,  13 systems
located in Iowa and 12 systems located in Missouri,  representing  approximately
3,972  subscribers,  for  approximately  $3,178,000,  or approximately  $800 per
subscriber, and recorded a loss on sale of approximately $1,300,000. Galaxy used
the proceeds from this sale to pay down principal of the Revolver.

                                       9
<PAGE>

       On August 31, 1998, Galaxy sold nine cable television  systems located in
Southwest   Georgia,   representing   approximately   2,246   subscribers,   for
approximately $2,760,000, or approximately $1,225 per subscriber, and recorded a
loss on sale of approximately $390,000.  Galaxy used the proceeds from this sale
to pay down principal of the Revolver.

      On August 31, 1998,  Galaxy sold 23 cable television  systems,  14 systems
located in Illinois  and nine in  Nebraska,  representing  approximately  3,450,
subscribers for approximately  $2,758,000, or approximately $800 per subscriber,
and  recorded  a loss on sale  of  approximately  $1,200,000.  Galaxy  used  the
proceeds from this sale to pay down principal of the Revolver.

8.   COMMITMENTS AND CONTINGENCIES

YEAR 2000

      The year 2000 ("Y2K") issue concerns the inability of information  systems
to properly recognize and process  date-sensitive  information beyond January 1,
2000.

      Many of Galaxy's systems are Y2K compliant.  During 1998, Galaxy has put a
program in place  designed to bring  information  systems and software  into Y2K
compliance  in  time  to  minimize  any  significant   detrimental   effects  on
operations. The program covers information systems infrastructure, financial and
administrative  systems,  process  control  and cable  television  systems.  Our
program  recognizes that date sensitive  systems may fail at different points in
time  depending  on their  function.  Galaxy is  utilizing  internal  personnel,
contract  programmers  and vendors to identify Y2K issues,  modify code and test
the modifications.  In some cases,  non-compliant  software and hardware will be
replaced.  The steps Galaxy has taken in this  program  include (1) planning and
awareness,  (2)  identification  of where  failures  may occur,  (3)  resolution
including repair,  upgrade,  etc. and (4) deployment of compliant  systems.  The
first  two  steps,   planning  and  awareness  and  identification  are  largely
completed.

      Galaxy  classifies  as critical  those  suppliers  of products or services
consumed on an ongoing  basis that, if  interrupted,  would  materially  disrupt
Galaxy's  ability to conduct  operations.  Those suppliers  include  programming
suppliers and utility  companies.  Galaxy is conducting on site reviews of these
suppliers for purposes of assessing  their Y2K plans and their  progress  toward
implementation.

                                       10
<PAGE>

      Galaxy  expects  the  total  incremental  cost  of  the  Y2K  issue  to be
approximately  $100,000. This estimated cost does not include any normal ongoing
costs for computer  hardware or software that would be replaced even without the
presence  of the Y2K issue.  The  majority  of these  costs are  expected  to be
incurred during 1999.

      Galaxy will begin  preparing  contingency  plans relating  specifically to
identified Y2K risks, and cost estimates of these plans during the first half of
1999. Once developed,  Y2K contingency  plans and related cost estimates will be
continually refined as additional information becomes available.

      Despite  Galaxy's  efforts  in  solving  the Y2K  issue,  there  can be no
assurance that partial or total systems  interruptions or the costs necessary to
update  hardware  and  software  would not have a material  adverse  effect upon
Galaxy's  business,  financial  condition,  results of  operations  and business
prospects.

     Litigation

     The Partnership is subject to various legal and administrative  proceedings
in the ordinary course of business.  Management believes the outcome of any such
proceedings  will  not  have a  material  adverse  effect  on the  Partnership's
consolidated financial position, results of operations or cash flows.



                                       11
<PAGE>


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

      RECENT DEVELOPMENTS

      On January 15, 1998,  Galaxy sold its cable television  systems located in
Wyoming  and Idaho  (the  "Wyoming  Sale"),  representing  approximately  4,000,
subscribers for $4.9 million,  or $1,225 per subscriber,  and recorded a gain on
sale of approximately  $695,000.  Galaxy used the proceeds from the Wyoming Sale
to pay down principal of the Revolver.

      On February 1, 1998,  Galaxy sold its cable  television  system located in
Hooper,  Nebraska,  representing 242 subscribers for approximately  $262,000, or
approximately $1,080 per subscriber.  Galaxy used the proceeds from this sale to
pay down principal of the Revolver.

      On March 31, 1998,  Galaxy sold two cable  television  systems  located in
Olathe,  Kansas and  Independence,  Missouri,  representing  250 subscribers for
approximately  $190,000,  or approximately $760 per subscriber.  Galaxy used the
proceeds from this sale to pay down principal of the Revolver.

      On March 31, 1998, Galaxy sold six cable television systems located in and
around Ottawa County,  Kansas,  representing 752 subscribers,  for approximately
$623,000,  or approximately $830 per subscriber,  and recorded a loss on sale of
approximately $860,000.

                                       12
<PAGE>

      On March 31, 1998, Galaxy purchased one cable television system located in
Brooks  and  Colquitt  Counties  in  Georgia,   representing  approximately  300
subscribers, for approximately $141,000, or approximately $470 per subscriber.

      On March 31,  1998,  Galaxy  traded  four  systems  located  in and around
Sheridan County,  Nebraska,  representing 853 subscribers for one system located
in Jefferson County, Colorado, representing approximately 800 subscribers.

       On April 30, 1998, Galaxy sold seven cable television  systems located in
and around Lincoln County, Kansas,  representing  approximately 500 subscribers,
for approximately  $395,000,  or approximately $790 per subscriber.  Galaxy used
the proceeds from this sale to pay down principal of the Revolver.

      On June 30,  1998,  Galaxy  sold one cable  television  system  located in
Goessel,  Kansas,  representing  approximately 100 subscribers for approximately
$110,000, or approximately $1,100 per subscriber.  Galaxy used the proceeds from
this sale to pay down principal of the Revolver.

      On June 30, 1998, Galaxy sold all of its cable television  systems located
in  central  Georgia,   representing   approximately   5,200  subscribers,   for
approximately $6,120,000, or approximately $1,177 per subscriber, and recorded a
loss on sale of approximately $196,000.

      On August 20, 1998,  Galaxy sold 25 cable television  systems,  13 systems
located in Iowa and 12 systems located in Missouri,  representing  approximately
3,972  subscribers,  for  approximately  $3,178,000,  or approximately  $800 per
subscriber, and recorded a loss on sale of approximately $1,400,000. Galaxy used
the proceeds from this sale to pay down principal of the Revolver.

       On August 31, 1998, Galaxy sold nine cable television  systems located in
Southwest   Georgia,   representing   approximately   2,246   subscribers,   for
approximately $2,760,000, or approximately $1,225 per subscriber, and recorded a
loss on sale of approximately $390,000.  Galaxy used the proceeds from this sale
to pay down principal of the Revolver.

      On August 31, 1998,  Galaxy sold 23 cable television  systems,  14 systems
located in Illinois  and nine in  Nebraska,  representing  approximately  3,450,
subscribers for approximately  $2,758,000, or approximately $800 per subscriber,
and  recorded  a loss on sale  of  approximately  $1,200,000.  Galaxy  used  the
proceeds from this sale to pay down principal of the Revolver.


                                       13
<PAGE>

      RESULTS OF OPERATIONS

      The following  table sets forth the  percentage  relationship  of selected
income statement items as a percentage of revenues for the three months and nine
months ended  September 30, 1998 and  September  30, 1997.  Amounts shown are in
thousands.

<TABLE>
<CAPTION>
                                       For the three months ended September 30,      For the nine months ended September 30,
                                       ---------------------------------------     ---------------------------------------
                                               1998                  1997                   1998                  1997
                                        -----------------    ------------------     ------------------    -----------------
                                         Amount       %        Amount       %        Amount       %        Amount       %
                                        --------    -----     --------    -----     --------    -----     --------    -----
<S>                                     <C>         <C>       <C>         <C>       <C>         <C>       <C>         <C>   
Revenues                                $ 16,852    100.0%    $ 17,362    100.0%    $ 51,655    100.0%    $ 51,333    100.0%
                                        --------    -----     --------    -----     --------    -----     --------    -----
Operating expenses:
  System operations                        7,925     47.0%       8,069     46.5%      24,120     46.7%      23,420     45.6%
  Selling, general and administrative      2,069     12.3%       2,190     12.6%       6,255     12.1%       5,980
                                                                                                                       11.7%
  Management fees to affiliate               762      4.5%         781      4.5%       2,326      4.5%       2,310      4.5%
  Depreciation and amortization            6,010     35.7%       6,198     35.7%      18,357     35.5%      18,474     36.0%
                                        --------    -----     --------    -----     --------    -----     --------    -----
Total operating expenses                  16,766     99.5%      17,238     99.3%      51,058     98.8%      50,184     97.8%
                                        --------    -----     --------    -----     --------    -----     --------    -----
Operating income                              86      0.5%         124      0.7%         597      1.2%       1,149      2.2%

  Interest expense                        (5,115)   (30.3%)     (5,286)   (30.5%)    (15,663)   (30.4%)    (15,636)   (30.4%)
  Other income (expense)                  (3,319)   (19.7%)       (129)    (0.7%)     (3,711)    (7.2%)       (291)    (0.6%)
                                        --------    -----     --------    -----     --------    -----     --------    -----
Net loss                                $ (8,348)   (49.5%)   $ (5,291)   (30.5%)   $(18,777)   (36.4%)   $(14,778)   (28.8%)
                                        ========    =====     ========    =====     ========    =====     ========    =====
</TABLE>


      The following table sets forth demographic  information as of December 31,
1997, March 31, 1998, June 30, 1998 and September 30, 1998.

                         December 31,   March 31,     June 30,    September 30,
                            1997(1)       1998(1)     1998 (1)        1998
                           --------      --------     --------      --------
 Homes Passed               298,984       292,112      286,196        259,012
 Basic Subscribers          177,296       170,967      168,386        152,395
 Basic Penetration          59.30%        58.53%       58.84%         58.84%
 Revenue per Subscriber     $32.85        $33.79       $34.32         $35.62
 
 Premium Subscribers        84,252        82,477       80,355         72,185
 Premium Penetration        47.52%        48.24%       47.72%         47.37%

(1) Includes the  demographic  information of the Central  Georgia  systems sold
    effective June 30, 1998.

      Galaxy generated revenues in the amount of $16,852,423 and $51,655,423 for
the three-month and nine-month  periods ended September 30, 1998,  respectively.
For the  three-month  and nine-month  periods ended  September 30, 1997,  Galaxy
generated  revenues in the amount of $17,362,684 and $51,333,357,  respectively.
Galaxy  was able to realize  additional  revenue by  increasing  basic  rates in
certain  systems,  offset by the sale of some systems as described  above.  As a
result,  average  revenues per  subscriber  increased  from $32.85 for the three
months ended  September 30, 1997, to $35.62 for the three months ended September
30, 1998.

                                       14
<PAGE>

      For the three months ended September 30, 1998 and 1997,  system  operating
expenses,   consisting  of  subscriber   costs,   technician  costs  and  system
maintenance costs, were $7,925,228 and $8,069,528, respectively. As a percentage
of  revenues,  these  expenses  increased  from 46.5% for the three months ended
September  30, 1997,  to 47.0% in the  comparable  period of 1998.  For the nine
months  ended  September  30,  1998 and 1997,  system  operating  expenses  were
$24,120,258  and  $23,420,184,  respectively,  and, as a percentage of revenues,
increased  from 45.6% for the nine months ended  September 30, 1997, to 46.7% in
the comparable  period of 1998. The increase in these expenses was primarily the
result of increased  programming costs to Galaxy,  offset by decreases primarily
in direct technician labor and bad debt expense.

      Selling,  general and administrative  expenses, which include office rents
and  maintenance,   marketing  costs  and  corporate  expenses,  decreased  from
$2,189,666  to  $2,069,006  for the three months ended  September  30, 1998,  as
compared to the three  months  ended  September  30, 1997,  and  increased  from
$5,980,386  to  $6,254,961  for the nine months ended  September  30,  1998,  as
compared to the nine months ended September 30, 1997. For the three-month period
ended  September  30, these  expenses  decreased as a percentage of revenue from
12.6% in 1997, to 12.3% in 1998. This decrease was  attributable to an effort to
control costs associated with local service and call center operations.  For the
nine-month  period ended  September 30, these  expenses  increased from 11.7% in
1997, to 12.1% in 1998, due to a decrease in the amount of  reimbursements  from
programmers,  primarily  in the first  quarter of 1998 as  compared to the first
quarter of 1997.

      For the three months ended September 30, 1998 and 1997,  depreciation  and
amortization expense was $6,010,057,  or 35.7% of revenues,  and $6,198,209,  or
35.7% of revenues,  respectively.  For the nine months ended  September 30, 1998
and 1997,  depreciation  and amortization  expense was $18,357,303,  or 35.5% of
revenues,  and  $18,473,534,  or 36.0% of  revenues,  respectively.  The  slight
decrease in  depreciation  and  amortization  expense for the nine months  ended
September 30, 1998, was  attributable to the sale of cable  television  systems,
offset by an increase in fixed assets from purchases.

                                       15
<PAGE>

      For the three months ended September 30, 1998 and 1997,  interest  expense
was $5,115,239 and $5,285,888, respectively. For the nine months ended September
30,  1998  and  1997,   interest   expense  was  $15,663,033  and   $15,635,671,
respectively.  During the first nine months of 1998,  Galaxy paid $22.6  million
towards the principal of the Revolving Credit  Facility,  of which $14.8 million
was paid on or after June 30, 1998.  For the three months  ended  September  30,
1998 and 1997,  gain (loss) on sale of assets was a net loss of $3,262,273 and a
net gain of $48,489,  respectively. For the nine months ended September 30, 1998
and 1997,  gain (loss) on sale of assets was a net loss of $3,674,393  and a net
loss of $93,955,  respectively.  This  increase in net loss on sale of assets is
due to the losses incurred on the sale of systems discussed above. For the three
months ended September 30, 1998 and 1997, other income (expense), which includes
interest income and other  expenses,  was a net expense of $56,973 and $177,714,
respectively.  For the nine months  ended  September  30,  1998 and 1997,  other
income (expense) was a net expense of $193,649 and $197,809, respectively. These
decreases in net expenses were mainly due to an increase in interest income.

      The  Partnership  pays no income  taxes,  although  it is required to file
federal and state income tax returns for informational purposes only. All income
or loss "flows  through" to the partners of the  Partnership as specified in the
Partnership's limited partnership agreement.

      LIQUIDITY AND CAPITAL RESOURCES

      As of  September  30,  1998,  Galaxy  had  $1,628,576  in  cash  and  cash
equivalents.  As of such date,  total  liabilities  less long-term debt exceeded
cash and cash  equivalents  and  subscriber  receivable,  net of  allowance  for
doubtful  accounts,  by  $13,866,437.  Galaxy  expects  to fund this  deficiency
through its operating cash flows, proceeds from system sales and the Revolver.

      Galaxy  generated  earnings  before  interest  expense,  depreciation  and
amortization  expense and other extraordinary  items of $6,096,430,  or 36.2% of
operating  revenues,  and $6,322,169,  or 36.4% of operating  revenues,  for the
three months ended September 30, 1998 and 1997,  respectively,  and $18,954,324,
or 36.7% of operating revenues, and $19,622,668, or 38.2% of operating revenues,
for the nine months ended September 30, 1998 and 1997, respectively.

      Galaxy  had  aggregate  long-term  indebtedness  of  approximately  $163.5
million (net of  unamortized  discount of  $420,000)  as of September  30, 1998,
representing $120 million of 12.375% Senior  Subordinated Notes due in 2005 (the
"Notes"), $41.1 million of the Revolver and $2.8 million of other bank debt. The
Revolver,  which  has  been  periodically  amended,  with the  latest  amendment
occurring in August,  1998, allows the Partnership to borrow up to $55.9 million
until June 1999 when the outstanding balance converts to a term loan.  Principal
payments  are due in  installments  of 18  percent of the  converted  balance on
September 30, 1999, 4 percent of the converted  balance on December 31, 1999 and


                                       16
<PAGE>

in subsequent quarterly  installments  escalating annually from 16 percent to 30
percent of the converted  balance  through  December 2002. Net proceeds from any
system sale will be used to reduce the commitment  available under the Revolver.
The Revolver  requires  Galaxy to maintain  compliance  with  certain  financial
ratios and other covenants.  The financial covenants in the Revolver could limit
Galaxy's  ability to borrow  under the  Revolver.  Galaxy  presently  intends to
utilize the  Revolver to fund  capital  expenditures,  working  capital and make
small acquisitions of additional cable systems.

        As of  September  30,  1998,  Galaxy had $114.8  million in systems  and
equipment  consisting of $104.4  million of cable  television  systems and $10.4
million of  vehicles,  equipment,  buildings  and office  equipment,  all net of
accumulated  depreciation.  Galaxy had capital  expenditures of $7.8 million for
the nine months ended  September 30, 1998.  For the nine months ended  September
30,  1997,  Galaxy had capital  expenditures  of $13.6  million.  These  capital
expenditures  were  financed  mainly  through the  Revolver  and cash flows from
operations.  During 1998,  Galaxy's capital  expenditures were primarily used to
add  channels,  eliminate  headends by  interconnecting  adjacent  systems  with
fiber-optic  cable, and construct  wide-area  networks for distance learning and
data services.

      Galaxy  provided  net  cash by  operating  activities  of  $3,230,049  and
$8,894,237 for the nine months ended September 30, 1998 and 1997,  respectively,
a decrease in net cash  provided by operating  activities  of  $5,664,188.  This
reduction is mainly due to the sale of cable systems during 1998.

      Galaxy  provided net cash by investing  activities of $12,422,799  for the
nine months ended September 30, 1998, and used net cash by investing  activities
of $13,042,395  for the nine months ended September 30, 1997, an increase in net
cash provided by investing  activities of  $25,465,194.  This increase is mainly
due to an increase in  proceeds  from sale of assets and a reduction  in capital
expenditures.

      Galaxy used net cash by financing  activities of $16,427,370  for the nine
months ended  September 30, 1998, and provided net cash by financing  activities
of  $7,320,005  for the nine months ended  September 30, 1997, a decrease in net
cash provided by investing  activities of $23,747,375.  This decrease was mainly
due to the payment of principal.

      Historically,  Galaxy's  cash flows have been  sufficient to meet its debt
service,  working capital and capital expenditure  requirements.  Galaxy expects
that it will be able to meet its short-term and long-term  requirements for debt
service,  working  capital and  capital  expenditures  and to fund future  cable
system  acquisitions  through its  operating  cash flows,  borrowings  under the
Revolver,  proceeds  from sales of non-core  assets and its access to additional
capital in the public and private debt markets.

                                       17
<PAGE>

      For information on the impact of recent accounting pronouncements see Note
2 to the consolidated financial statements appearing elsewhere herein.

YEAR 2000

      The year 2000 ("Y2K") issue concerns the inability of information  systems
to properly recognize and process  date-sensitive  information beyond January 1,
2000.

      Many of Galaxy's systems are Y2K compliant.  During 1998, Galaxy has put a
program in place  designed to bring  information  systems and software  into Y2K
compliance  in  time  to  minimize  any  significant   detrimental   effects  on
operations. The program covers information systems infrastructure, financial and
administrative  systems,  process  control  and cable  television  systems.  Our
program  recognizes that date sensitive  systems may fail at different points in
time  depending  on their  function.  Galaxy is  utilizing  internal  personnel,
contract  programmers  and vendors to identify Y2K issues,  modify code and test
the modifications.  In some cases,  non-compliant  software and hardware will be
replaced.  The steps Galaxy has taken in this  program  include (1) planning and
awareness,  (2)  identification  of where  failures  may occur,  (3)  resolution
including repair,  upgrade,  etc. and (4) deployment of compliant  systems.  The
first  two  steps,   planning  and  awareness  and  identification  are  largely
completed.

      Galaxy  classifies  as critical  those  suppliers  of products or services
consumed on an ongoing  basis that, if  interrupted,  would  materially  disrupt
Galaxy's  ability to conduct  operations.  Those suppliers  include  programming
suppliers and utility  companies.  Galaxy is conducting on site reviews of these
suppliers for purposes of assessing  their Y2K plans and their  progress  toward
implementation.

      Galaxy  expects  the  total  incremental  cost  of  the  Y2K  issue  to be
approximately  $100,000. This estimated cost does not include any normal ongoing
costs for computer  hardware or software that would be replaced even without the
presence  of the Y2K issue.  The  majority  of these  costs are  expected  to be
incurred during 1999.

      Galaxy will begin  preparing  contingency  plans relating  specifically to
identified Y2K risks, and cost estimates of these plans during the first half of
1999. Once developed,  Y2K contingency  plans and related cost estimates will be
continually refined as additional information becomes available.

                                       18
<PAGE>

      Despite  Galaxy's  efforts  in  solving  the Y2K  issue,  there  can be no
assurance that partial or total systems  interruptions or the costs necessary to
update  hardware  and  software  would not have a material  adverse  effect upon
Galaxy's  business,  financial  condition,  results of  operations  and business
prospects.

      SAFE HARBOR UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

      The statements  contained in this Form 10-Q relating to Galaxy's operating
results, and plans and objectives of management for future operations, including
plans or  objectives  relating to Galaxy's  products  and  services,  constitute
forward  looking  statements  within  the  meaning  of  the  Private  Securities
Litigation  Reform Act of 1995.  Actual results of Galaxy may differ  materially
from those in the forward looking  statements and may be affected by a number of
factors including the receipt of regulatory  approvals,  the success of Galaxy's
implementation of digital technology,  subscriber equipment availability,  tower
space  availability,  and the absence of interference,  as well as other factors
contained herein and in Galaxy's securities filings.

      Galaxy's future revenues and profitability are difficult to predict due to
a variety of risks and  uncertainties,  including  (i) business  conditions  and
growth in Galaxy's existing  markets,  (ii) the successful launch of systems and
technologies in new and existing markets,  (iii) Galaxy's existing  indebtedness
and the need for additional  financing to fund subscriber  growth and system and
technological  development,   (iv)  government  regulation,   including  Federal
Communications  Commission  regulations,  (v)  Galaxy's  dependence  on  channel
leases,  (vi) the  successful  integration  of  future  acquisitions  and  (vii)
numerous competitive factors,  including alternative methods of distributing and
receiving video transmissions.

      Galaxy expects to continue its subscriber  growth within existing  systems
and launch additional  systems.  Moderate  increases in revenues and subscribers
are anticipated in 1998; however,  the rate of increase cannot be estimated with
precision or certainty. Galaxy believes that general and administrative expenses
and depreciation  and amortization  expense will continue to increase to support
overall growth.

      Because of the foregoing uncertainties affecting Galaxy's future operating
results, past performance should not be considered to be a reliable indicator of
future performance, and investors should not use historical results or trends as
determinative   of  Galaxy's   future   performance.   In   addition,   Galaxy's
participation in a developing  industry  employing  rapidly changing  technology
could  result  in  significant  volatility  in the  market  value of the  Senior
Subordinated Notes.

                                       19
<PAGE>

      In addition to the matters noted above,  certain other  statements made in
this Form 10-Q are forward  looking.  Such statements are based on an assessment
of a variety of factors,  contingencies  and  uncertainties  deemed  relevant by
management,  including technological changes,  competitive products and services
and management  issues. As a result, the actual results realized by Galaxy could
differ materially from the statements made herein. Readers of this Form 10-Q are
cautioned not to place undue reliance on the forward looking  statements made in
this Form 10-Q or in Galaxy's other securities filings.

Item 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.


                                       20
<PAGE>

PART II.  OTHER INFORMATION

Items 1 through 5.

None.

Item 6.   Exhibits and Reports on Form 8-K

(a)         Exhibits.  The following exhibits are included or incorporated by
            reference below.

            10.           Amendment   No.  5  the  Amended  and  Restated   Loan
                          Agreement dated September 8, 1998 by and among Galaxy,
                          Galaxy  Telecom  Capital  Corp.,  Fleet National Bank,
                          State  Street  Bank  and  Trust  Company,   The  First
                          National Bank of Chicago and Union Ban

            27.           Financial Data Schedule

(b)         Reports of Form 8-K.  No  reports on Form 8-K were filed  during the
            quarter ended September 30, 1998.


                                       21
<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 thereunto duly authorized.



                              GALAXY TELECOM, L.P.
                            BY: Galaxy Telecom, Inc.
                               as General Partner




Date: November 16, 1998           /s/ J. Keith Davidson
                                ----------------------------------
                                BY:   J. Keith Davidson
                                      Vice President-Finance
                                     (Principal Financial Officer)


                                       22
<PAGE>

                                   EXHIBIT INDEX

Exhibit Number                         Description   
--------------               ----------------------------------

10                        Amendment   No.  5  the  Amended  and  Restated   Loan
                          Agreement dated September 8, 1998 by and among Galaxy,
                          Galaxy  Telecom  Capital  Corp.,  Fleet National Bank,
                          State  Street  Bank  and  Trust  Company,   The  First
                          National Bank of Chicago and Union Bank.

27                        Financial Data Schedule



                                       23