AMENDMENT NO. 1


      This   Amendment  No.  1  entered  into  as  of  October  21,  1996  (this
"Amendment") by and among GALAXY TELECOM, L.P. ("GTLP"),  GALAXY TELECOM CAPITAL
CORP.  ("Capital  Corp."),  and together with GTLP,  the  ("Borrower"),  and the
financial institutions party to the Amended and Restated Loan Agreement referred
to below (the "Lenders"),  and FLEET NATIONAL BANK ("Fleet"), a national banking
association  organized  under the laws of the United States of America  having a
principal place of business at 111 Westminster Street, Providence,  Rhode Island
02903,  as agent for itself and the other  Lenders  (the  "Agent").  Capitalized
terms used but not otherwise  expressly  defined  herein shall have the meanings
assigned  thereto in the Amended and Restated  Loan  Agreement  (as such term is
defined below).

PRELIMINARY STATEMENTS:

      WHEREAS,  the  Borrower,  the Lenders and the Agent have  entered  into an
Amended and Restated  Loan  Agreement  dated as of September 28, 1995 (the "Loan
Agreement").  Capitalized  terms used herein and no otherwise defined shall have
the meanings specified in the Loan Agreement;

      WHEREAS, the Borrower has requested that the Lenders amend certain
provisions of the Loan Agreement;

      NOW, THEREFORE,  in consideration of the mutual covenants herein contained
and good and  valuable  consideration,  the  receipt  and  adequacy of which are
hereby acknowledged, the parties hereto hereby agree as follows:

      1.  Amendment.  The parties hereto agree that the Loan Agreement is
hereby amended as follows:

      (a) The  definition of "Revolving  Commitment"  in Section 1.1 of the Loan
      Agreement is hereby amended by deleting the figure "58,500,000"  appearing
      therein and substituting therefor the figure "68,000,000."

      (b) Section 2.7.3 of the Loan  Agreement is hereby amended by deleting the
      date  "December 31, 1996"  appearing in the third and eighth lines thereof
      and substituting therefor the date "December 1, 1996".

      (c) The table in Section 5.2.17 of the Loan Agreement is hereby amended by
      deleting the figure  "$11,500,000" for the fiscal year ending December 31,
      1996 and substituting therefor the figure "16,000,000".

      2. This  Amendment is subject to the provisions of Section 9.5 of the Loan
Agreement,  and shall become effective, as of the date first above written, upon
the satisfaction of the following conditions precedent:

      (a)   receipt by the Agent of counterparts  of this Amendment  executed by
            the  Borrowers  and the  Lenders,  and  counterparts  of the Consent
            appended hereto executed by the Guarantors;

      (b)   payment by the Borrowers to the Agent of an amendment fee of
            $16,000, to be distributed by the Agent pro rata to the Lenders;

      (c)   receipt by the Agent of Amendments  to each of the  Revolving  Notes
            executed by the Borrowers and the respective Lender in the amount of
            their respective new Commitments;

                                       18
<PAGE>

      (d)   a certificate of the secretary or an assistant secretary of the
            Borrowers with respect to resolutions of their respective Boards
            of Directors authorizing the execution and delivery of this
            Amendment, authorizing the borrowings and other transactions
            contemplated under the Agreement, identifying the officer(s)
            authorized to execute, deliver and take all other actions
            required under this Amendment, or the Agreement, and confirming
            that each of the Borrowers' organizational documents previously
            delivered and certified to the Agent have not been amended,
            substituted, rescinded or otherwise modified in any way since the
            date of said prior certification;

      (e)   an opinion of legal counsel to the Borrowers as to due  organization
            and good  standing,  due  authorization  of this  Amendment  and the
            transactions contemplated hereby,  enforceability of this Amendment,
            the existence of no conflicts with laws or other agreements, and the
            satisfaction  or payment of all  necessary  recording,  documentary,
            filing or other fees; and

      (f)   such other items or documents as may be required by the Agent or
            the Lenders.

      3. This  Amendment  shall be governed by and construed in accordance  with
the laws of the Commonwealth of  Massachusetts.  All parts of the Loan Agreement
not affected by this Amendment are hereby ratified and affirmed in all respects,
provided  that if any  provision  of the Loan  Agreement  shall  conflict  or be
inconsistent  with this  Amendment,  the terms of this Amendment shall supersede
and prevail.  Upon and after the date of this  Amendment  all  references to the
Loan Agreement in that document,  or in any Financing Documents,  shall mean the
Loan  Agreement as amended by this  Amendment.  Except as expressly  provided in
this  Amendment,  the execution and delivery of this Amendment does not and will
not amend,  modify or supplement any provision of, or constitute a consent to or
a waiver of any  noncompliance  with the provisions of the Loan Agreement,  and,
except as  specifically  provided in this  Amendment,  the Loan Agreement  shall
remain in full force and effect.

      4. This  Amendment  may be executed in one or more  counterparts,  each of
which when so executed and  delivered  shall be deemed to be an original and all
of  which  taken  together  shall  constitute  but one and the  same  agreement.
Delivery of an executed  counterpart  of a signature  page to this  Amendment by
telecopier shall be effective as delivery of a manually executed  counterpart of
this Amendment.

      IN WITNESS WHEREOF,  the parties hereto have executed this Amendment as of
the day and year first above written, under seal.

                                       BORROWERS:

                                       GALAXY TELECOM, L.P.

                                       By:  Galaxy Telecom, Inc., its general
                                            partner


                                       By:        /s/ J. Keith Davidson
                                          Name:  J. Keith Davidson
                                          Title:  EVP & CFO

                                       GALAXY TELECOM CAPITAL CORP.


                                       By:       /s/ J. Keith Davidson
                                          Name:  J. Keith Davidson
                                          Title:  EVP & CFO


                                       19
<PAGE>

                                      LENDERS:

                                       FLEET NATIONAL BANK, as Agent and
                                       as a Lender


                                       By:        /s/ Jeffrey J. McLaughlin
                                          Name:
                                          Title:  SVP

                                       INTERNATIONALE NEDERLANDEN
                                       (U.S.) CAPITAL CORPORATION


                                       By:        /s/ James G. Turino
                                          Name:  James G. Turino
                                          Title:  Vice President

                                       STATE STREET BANK AND TRUST
                                       COMPANY


                                       By:          /s/ James C. Gregg
                                          Name:  James C. Gregg
                                          Title:  Vice President

                                       UNION BANK


                                       By:         /s/ B. Adam Trout
                                          Name:  B. Adam Trout
                                          Title:  Asst. Vice President

                                       20