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 June 30, 1997

                                     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: 0-28668


      ________________________________________________________________

                      TELCO COMMUNICATIONS GROUP, INC.
           (Exact name of registrant as specified in its charter)
      ________________________________________________________________


       Virginia                                          54-1674283
(State or other jurisdiction of             I.R.S. Employer Identification No.)
 incorporation or organization)       

4219 Lafayette Center Drive, Chantilly, Virginia         20151-1209
(Address of principal executive offices)                 (Zip Code)

Registrant's telephone number, including area code:  (703) 631-5600

Indicate by check mark whether the registrant (1) had filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.  Yes X No ___
                                            
The number of outstanding  shares of the registrant' Common Stock, no par value,
was 33,130,942 on August 1, 1997.



                               Exhibit Index on Page 17

<PAGE>
                  TELCO COMMUNICATIONS GROUP, INC.

                              FORM 10-Q

                 For the Quarter Ended June 30, 1997

                          Table of Contents



                                                                 Page
PART I -  FINANCIAL INFORMATION                                 Number

Item 1.  Financial Statements

         Consolidated Balance Sheets as of
          December 31, 1996 and June 30, 1997                      3
        
         Consolidated Statements of Income 
          for the three months and six months
          ended June 30, 1997 and 1996                             4

         Consolidated Statement of Shareholders'
           Equity for the six months ended 
           June 30, 1997 and the year ended                        5
           December 31, 1996
 
         Consolidated Statements of Cash Flows 
           for the six months ended 
           June 30, 1997 and 1996                                  6

         Notes to Consolidated Financial Statements                7


Item 2.    Management's Discussion and Analysis of Financial
           Condition and Results of Operations                    10


PART II -  OTHER INFORMATION  

 
Item 1-6.                                                         16

Signatures                                                        19

 
<PAGE>

PART I.       FINANCIAL INFORMATION
 
    ITEM 1.   Financial Statements
<TABLE>
<CAPTION>
                TELCO COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                                (unaudited)
                      (in thousands, except share data)

 
                                                December 31,      June 30, 
                                                   1996             1997
       <S>                                         <C>                <C>    
       ASSETS
    
       CURRENT ASSETS
         Cash and cash equivalents               $ 25,373             13,233
         Accounts receivable, trade(net of         89,114            107,640
           allowances of $7,972 and
           $5,807, respectively)                                                             
       Prepaid income taxes                         2,394                 --
         Deferred tax asset                           357                898
         Other                                      8,947             10,242
                                            ---------------     ----------------
           Total current assets                   126,185            132,013
                                            ---------------     ----------------

       PROPERTY, PLANT AND EQUIPMENT
         Leasehold improvements                     2,189              2,405
         Network equipment                         34,749            178,924
         Office furniture and equipment             5,474              7,858
         Network facilities under
           development                              7,375             19,097
         Less accumulated depreciation            (10,121)           (15,516)
                                            ---------------     ----------------
                                                   39,666            192,768
                                            ---------------     ----------------

       OTHER ASSETS
          Goodwill                                 43,663             42,803
          Deferred tax asset                           --              2,383
          Other assets                              1,082              3,756
                                            ---------------     ----------------
                                                   44,745             48,942
                                            ===============     ================
           Total assets                       $   210,596         $  373,723
                                               
                                            ===============     ================

       LIABILITES AND SHAREHOLDERS' EQUITY

       CURRENT LIABILITIES
         Capital lease obligation, 
           current portion                     $      681                681
         Current portion of 
           long-term debt                             ---              6,250                                      
         Excise taxes payable                       3,103              3,342
         Accounts payable                          21,062             23,772
         Accrued network access                    21,450             28,211
           and transmission expense
         Other accrued expenses                    12,670             14,235
         Income taxes payable                          --              5,584
         Deferred revenue                              --              3,916
         Deferred taxes payable current             1,225              1,225
                                          ---------------      ---------------
            Total current liabilities              60,191             87,216
                                          ---------------      ---------------

       LONG TERM LIABILITIES                                                  
         Long-term debt                               --             112,750
         Capital lease obligations,                2,620               2,371
           less current portion
         Deferred revenue                             --               6,522
         Deferred taxes                            2,065               2,977
                                          ---------------     ----------------
           Total long term liabilities             4,685             124,620
                                          ---------------     ----------------
<PAGE>

       COMMITMENTS AND CONTINGENCIES (NOTE 7)

       SHAREHOLDERS' EQUITY
         Common stock (no par, 150,000,000                            
           shares authorized 32,754,869 and
           33,130,942 shares outstanding)      111,309              111,985
          
         Preferred stock (15,000,000 shares         --                   --
           authorized, unissued)
         Accumulated deficit                    (1,247)              (1,247)
         Unrealized gain on marketable              10                   61
           securities, net of tax
         Retained earnings                      35,648               51,088
                                         ---------------     ----------------
           Total Shareholders' Equity          145,720              161,887
                                         ---------------     ----------------
           Total Liabilities and
              Shareholders' Equity         $   210,596              373,723
                                         ===============     ================
</TABLE>
              See accompanying notes to Consolidated Financial Statements.
<PAGE>

<TABLE>
<CAPTION>
         TELCO COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF INCOME
                            (unaudited)
               (in thousands, except per share data)


                    Three months ended June 30,     Six months ended June 30, 

                           1996        1997            1996            1997
<S>                 <C>            <C>            <C>              <C>
Revenues, net        $  104,078   $ 138,774      $  196,006    $    261,627    
Cost of services         60,802      79,649         115,532         152,068 
            
                    -----------   ----------     ------------    -------------
      Gross margin       43,276      59,125          80,474         109,559
                    -----------   ----------     ------------    -------------

Operating expenses:
  Selling, general
  and administrative    31,539       39,396          59,402          76,566
                                                                    
  Depreciation and
  amortization           1,872        3,649           3,305           6,263
                                                               
                     -----------   -----------     -----------   --------------
  Total operating
     expenses          33,411        43,045          62,707          82,829
                                                              
                     -----------   -----------     -----------    -------------

Operating income                                                
                        9,865        16,080          17,767          26,730
                     -----------   -----------     -----------    -------------

Interest expense        1,122         2,910           2,188           3,073
                        
Other income              105           548             117           1,168
                                    

Income taxes            3,542         5,138           6,676           9,385
                        

Minority interest         120            --             554              --
                         
                     ===========   ===========    ============    ============
Net income          $   5,186      $  8,580        $  8,466        $ 15,440
                     ===========   ===========    ============    ============
                                                                            
Net income per      $    0.18      $   0.25        $   0.30        $   0.45
common and common                                                                 
equivalent share

Average common and 
common equivalent                                                        
shares                 28,345        34,550          28,345          34,392


           See accompanying notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
        TELCO COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
          CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
 For the six months ended June 30, 1997 and the year ended December 31, 1996
                          (unaudited)
                         (in thousands)

                                        Accumulated       
                                          Deficit                        
                                       Remaining Upon               Unrealized
                                       Termination of                Gain on
                             Common     S-Corporation   Retained    Securities
                              Stock       Election      Earnings   Held for Sale
                            ---------  --------------  ----------  -------------
<S>                           <C>       <C>            <C>           <C>

BALANCE DECEMBER 31, 1995     $  896     $ (1,247)      $12,771             --

Issuance of common shares     59,912           --            --             --
Loans to option holders         (584)          --            --             --
Purchase of subsidiary        47,725           --            --             --
Proceeds from exercise 
  of options                     840           --            --             --
Tax benefit from net           2,520           --            --             --
  warrant activity
Change in unrealized gain on      --           --            --             10
 securities available for sale                                                                                  
                                                                          
Net income                        --           --        22,877             --
                            --------     ---------    ----------     ----------
BALANCE DECEMBER 31, 1996    111,309       (1,247)       35,648             10                                        

Proceeds from exercise
  of options                     676           --            --             --
Change in unrealized gain
  on securities available         --           --            --             51
  for sale
Net income                        --           --        15,440             --
                           ==========    ==========    =========    ==========     
   
                           $ 111,985     $ (1,247)     $ 51,088         $   61              
                           ==========    ==========    =========    ==========


</TABLE>


                See accompanying notes to Consolidated Financial Statements.


<PAGE>
<TABLE>
<CAPTION>
                         TELCO COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
                               CONSOLIDATED STATEMENTS OF CASH FLOWS
                                            (unaudited)
                                          (in thousands)


                                               For the six months ended June 30,

                                                  1996                  1997
  <S>                                         <C>                  <C>

  Cash Flows From (Used For) Operations:
  Net income                                   $   8,466           $    15,440

  Adjustments to reconcile net income to net
  cash from (used for) operating activities:
     Depreciation and amortization                 3,294                 6,263
     Minority interest                               554                    --
     Loss on disposal of fixed assets                 --                     8
     Deferred income taxes                           604                (2,012)
  Changes in current assets and liabilities:
     Trade accounts receivable                   (26,601)              (18,526)
     Prepaid and other assets                     (2,944)               (1,524)
     Accounts payable                              1,100                 2,710
     Accrued expenses                             10,122                 8,565
     Deferred income                                  --                10,438
     Income taxes payable                            230                 5,584
                                               ------------      --------------
         Net cash from (used for) operating
         activities                               (5,175)               26,946
                                               ------------      --------------
                                                                      
  Cash Flows From (Used For) 
    Investing Activities:
  Purchase of equipment                           (2,776)             (187,539)
  Proceeds from sale of equipment                     --                29,026
  Investments, net of cash acquired                 (344)                   --
                                               ------------      --------------
        Net cash used for                         (3,120)             (158,513)
         investing activities                  ------------      --------------

  Cash Flows From (Used For) 
    Financing Activities:
  Proceeds from the line of credit                16,374               161,000
  Payments on line of credit                          --               (42,000)
  Payments on capital leases                      (1,516)                 (249)
  Proceeds from exercise of options                   --                   676
                                             ------------      ----------------
       Net cash from financing activities         14,858               119,427
                                             ------------      ----------------
   
  Increase (decrease) in cash                      6,563               (12,140)
  Cash, beginning of the period                      937                25,373
                                             ------------      ----------------

  Cash, end of the period                      $   7,500            $   13,233
                                             ============      ================
</TABLE>

             See accompanying notes to Consolidated Financial Statements.


<PAGE>


                       TELCO COMMUNICATIONS GROUP, INC.

                   Notes to Consolidated Financial Statements
                                 (unaudited)



NOTE 1.   PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

The interim consolidated financial statements included herein have been prepared
by Telco Communications Group, Inc. (the "Company"),  without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission ("SEC"). All
adjustments have been made to the accompanying  interim  consolidated  financial
statements which are, in the opinion of the Company's management,  necessary for
a fair presentation of the Company's financial  position,  operating results and
cash flows for the periods presented.  All adjustments are of a normal recurring
nature.  Certain information footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting  principles
have been omitted pursuant to the SEC's rules and regulations. It is recommended
that these interim consolidated financial statements be read in conjunction with
the  consolidated  financial  statements and the notes thereto  contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.

The results of  operations  for the three  months and six months  ended June 30,
1997 are not  necessarily  indicative of the results to be expected for the full
year.


NOTE 2.     STATEMENT OF CASH FLOWS

Cash payments and non-cash  activities for the six months ended June 30, were as
follows:
                                                 1996                    1997

Cash payments for income taxes              $  5,919,814           $   5,786,423
Cash payments for interest                  $  2,177,545           $   2,928,601

Non cash investing and financing activities:

   Assets acquired in connection
     with acquisitions                      $ 16,640,421  
   Liabilities assumed in connection
      with acquisitions                     $ 15,697,563
   Common stock issued in connection
       with acquisitions                    $        120  

Capital lease obligations incurred          $  3,083,516  


NOTE 3.     CHANGE IN ACCOUNTING STANDARD

In February 1997, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting  Standards No. 128 "Earnings Per Share". This new standard
requires dual  presentation  of basic and diluted  earnings per share ("EPS") on
the  face  of the  earnings  statement  and  requires  a  reconciliation  of the
numerators  and  denominators  of  basic  and  diluted  EPS  calculations.  This
statement  will be effective for the Company's  1997 fiscal year.  The Company's
current EPS  calculation  conforms to the diluted EPS. Basic EPS is not expected
to be materially different from diluted EPS since potential common shares in the
form of stock options are not materially dilutive.

In June 1997,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial Accounting Standards No. 130, "Reporting  Comprehensive  Income". This
statement  establishes  standards for the reporting and display of comprehensive
income and its components in a full set of general-purpose financial statements.
The effect of adopting the new standard is not expected to be significant as the
Company does not currently  have material  items of other  comprehensive  income
disclosed  outside of the statement of operations.  The standard will be adopted
for the Company's 1998 fiscal year.

Also in June 1997, the Financial  Accounting Standards Board issued Statement of
Financial  Accounting  Standards  No.  131,  "Disclosures  about  Segments of an
Enterprise  and Related  Information".  The statement  requires  enterprises  to
report  financial and  descriptive  information  about its reportable  operating
segments,  products and  services,  countries  and major  customers,  as well as
reconciliations of segment financial information to corresponding amounts in the
general purpose financial  statements.  The Company anticipates that its pending
transaction with Excel Communications,  Inc. may ultimately affect its decisions
regarding the nature of  reportable  operating  segments,  products and customer
classes when the statement is adopted in the 1998 fiscal year (see Note 6).

NOTE 4.     LONG-TERM AND OTHER DEBT

On April 15,  1997,  the  Company's  existing  credit  facility  was  amended to
increase  the  maximum  amount  available  for  borrowing  to $200  million,  in
conjunction with the Company's  acquisition of certain voice network assets (the
"New Credit Facility").  Borrowings under the New Credit Facility are subject to
various financial convenants and ratios.


NOTE 5.     NETWORK AND PROPERTY ACQUISITIONS

On April 15, 1997, the Company purchased the voice network assets of Advantis, a
data  and  voice  network   partnership  of  International   Business   Machines
Corporation and Sears,  Roebuck and Co., for $170 million. The purchase includes
long-term  service rights to  approximately  100,000 network miles of DS-3 fiber
optic  capacity  (under a  long-term  right to use  agreement),  Nortel  DMS 250
switches and other ancillary  network  equipment in five switch locations and 17
other locations. The Company borrowed $146 million under its New Credit Facility
(see Note 4) to finance the transaction.  On June 24, 1997, the Company sold for
$38 million the Nortel DMS 250 switches and associated equipment acquired in the
Advantis  transaction  located in the five switch sites,  including a multi-year
lease for a portion of its fiber optic capacity.

On June 10, 1997,  the Company  acquired  real  property for $6.4  million.  The
property will be used for expansion purposes.


NOTE 6.     PROPOSED MERGER

On June 5,  1997,  the  Company  entered  into a  merger  agreement  with  Excel
Communications,  Inc. ("Excel"). Under the terms of the agreement, each share of
Telco's  common stock will be exchanged  for $15.00 of cash and 0.7595 shares of
common stock in a newly formed holding company, and each share of Excel's common
stock will be  exchanged  for one share of the new holding  company.  The merger
will be  accounted  for as a purchase  of Telco by Excel and is  expected  to be
completed  by  year-end,  subject to the  approval by the  shareholders  of each
company, the approval of the Federal Communications Commission and various state
authorities and other customary conditions.


NOTE 7.     COMMITMENTS AND CONTINGENCIES

The Company is a party from time to time to litigation in the ordinary course of
business  including  employment  related  litigation.   No  provision  has  been
reflected in the  accompanying  financial  statements for any litigation.  Based
upon information  presently available,  management believes the final deposition
of these items will not have an adverse  material  effect on  operations  or the
financial position of the Company. For additional discussion,  see Part II Other
Information, Item 1. Legal Proceedings.

During 1996, the Company entered into employment and consulting  agreements with
certain  members of  management.  The  agreements  provide for the  employees to
receive amounts not less than specified base annual  salaries  through the terms
of the  agreements,  which  have  terms  of one to five  years.  Certain  of the
contracts also include non-competition  covenants and options to purchase shares
of the Company's common stock.


<PAGE>
 
ITEM 2.           Management's Discussion and Analysis of  Financial
                  Condition and Results of Operations


FORWARD LOOKING INFORMATION

Statements in this report concerning future results, performance,  achievements,
expectations or trends, if any, are forward-looking statements.  Actual results,
performance,  achievements,  events or trends could differ materially from those
expressed or implied by such forward-looking statements as a result of known and
unknown risks,  uncertainties  and other factors including those described below
and those  identified in the Company's  other  filings with the  Securities  and
Exchange Commission.

INTRODUCTION

Telco Communications Group, Inc. and its wholly owned subsidiaries (collectively
"Telco" or the  "Company")  is a rapidly  growing  facilities-based  provider of
domestic  and  international   long  distance   telecommunication   services  to
residential,  commercial  and  wholesale  customers  in the United  States.  The
majority of the Company's current revenues are generated by customers  accessing
the Telco  network by dialing a unique five digit  Carrier  Identification  Code
("CIC") before  dialing the number they are calling.  Using a CIC Code to access
the  Company's  network is known as "dial  around" or "casual  calling"  because
customers  can use the  Company's  services at any time without  changing  their
existing   presubscribed   long  distance  carrier.   The  Company  markets  its
residential long distance  services  through  marketing  subsidiaries  under two
brands,  each with a unique CIC Code:  Dial & Save (CIC Code 10457) and the Long
Distance  Wholesale  Club  ("LDWC")  (CIC Code  10297),  and prices its services
primarily  at a discount to the basic "1 plus" rates  offered by the three major
long distance  carriers:  AT&T,  MCI and Sprint.  During June 1997,  the Company
provided long distance services to approximately 2.0 million customers (switched
access  lines)  in 48 states  and the  District  of  Columbia.  All dial  around
operations are conducted  through  marketing  subsidiaries  that are referred to
collectively as the Consumer  Division.  Consumer  Division  revenues were $99.2
million  for  the  three  months  ended  June  30,  1997,   and   accounted  for
approximately 71.5% of total revenues.

To increase its volume of call traffic,  Telco has been  marketing long distance
telecommunications products utilizing its daytime network capacity to commercial
and carrier customers through its Commercial Sales Division ("CSD"). Because the
Company's existing customer base is primarily residential, the majority of calls
are handled during off-peak  evening and weekend  periods.  As of June 30, 1997,
CSD had opened 31 sales offices and employed  approximately 400 sales personnel.
For the three months ended June 30, 1997,  CSD  revenues,  which  includes  both
switched and private line revenues from commercial and wholesale customers, were
$38.9 million, or approximately 28.0% of total revenues.

The Company bills its Consumer Division customers through local exchange carrier
("LEC") billing and collection  agreements which enable the Company to place its
charges on the monthly local phone bills of its casual  calling  customers.  The
Company has agreements with LECs,  including all of the regional  Bell-operating
companies,  that cover the vast  majority of the  switched  access  lines in the
United States. The Company believes that these billing arrangements are the most
effective mechanism for billing the Company's residential customers,  because of
the  convenience  to its customers of receiving one bill for both local and long
distance service and the benefits  derived from the LECs' extensive  collections
infrastructure.  The  Company's  billing  information  systems and  services are
provided by Tel Labs, Inc. ("Tel Labs"),  a  telecommunications  billing company
started in 1991 by Telco's  Chairman of the Board and acquired by the Company in
August 1996. Tel Labs revenues from third parties were $0.7 million,  or 0.5% of
total revenues, for the three months ended June 30, 1997.

The Company's  switch-based  network currently consists of six DSC DEX 600S, 600
and 600E  switches  located  in  Washington,  D.C.;  Fort  Lauderdale,  Florida;
Davenport, Iowa; Chattanooga,  Tennessee;  Austin, Texas; and Las Vegas, Nevada.
Additionally,  the Company is currently  installing a DEX 600E switch in the New
York City  metropolitan  area and has taken  receipt  of an eighth  switch to be
installed later in 1997 in a yet undetermined location.

On April 15, 1997,  the Company  completed its  acquisition of the voice network
assets of Advantis for $170 million.  The Advantis assets include  approximately
100,000  network miles of DS-3 fiber optic capacity  (under a long term right to
use agreement), Nortel DMS 250 switches and other ancillary network equipment in
22 locations  (including five switch site  locations).  The Company has received
commitments to lease portions of the network to third party customers under long
term agreements ("private line revenue").  The remaining capacity will either be
leased to third parties or be integrated  into the  Company's  existing  network
consisting of leased fiber optic capacity and owned switches.  On June 24, 1997,
the Company  sold for $38 million,  the Nortel DMS 250  switches and  associated
equipment acquired in the Advantis  transaction located in the five switch sites
and a multi-year lease for a portion of its fiber optic capacity.

On June 5,  1997,  the  Company  entered  into a  merger  agreement  with  Excel
Communications,  Inc. ("Excel"). Under the terms of the agreement, each share of
Telco's  common stock will be exchanged  for $15.00 of cash and 0.7595 shares of
common stock in a newly formed holding company, and each share of Excel's common
stock will be  exchanged  for one share of the new holding  company.  The merger
will be  accounted  for as a purchase  of Telco by Excel and is  expected  to be
completed  by  year-end,  subject to the  approval by the  shareholders  of each
company, the approval of the Federal Communications Commission and various state
authorities and other customary conditions.

Future  issues  affecting the  Company's  operations  for 1997 and beyond are as
follows:

Competitive  Factors.  The Company  has  observed  new  entrants  and  increased
competition  in the Company's  dial around segment as well as an increase in the
number of promotional,  discounted  calling plans available to all long distance
consumers.  Additionally,  AT&T has  recently  reduced  its  basic  rates to its
residential customers which will likely result in a decline in the Company's per
minute revenue from its Consumer Division customer base.

Regulatory  Changes.  The operations of the Company will continue to be affected
by the ongoing  events  associated  with the 1996  Telecommunications  Act. Such
events  include  access charge reform which could change  existing  transmission
costs for both the Company and other long distance  companies,  the entry by the
Regional Bell  Operating  Companies into the long distance  marketplace  and the
ability of long distance companies like Telco to begin marketing local telephone
services.

In conjunction with upcoming local competition,  incumbent local phone companies
are not  likely to provide  billing  services  for  customers  presubscribed  to
competitive  local phone companies.  This would force the Company to either bill
the customer  directly,  enter into a billing and collection  agreement with new
local phone companies or seek other alternatives.

Additionally, the Federal Communications Commission has mandated that by January
1, 1998, all telecommunications  companies must migrate from their existing five
digit CIC codes (10+XXX) to seven digit CIC codes (10+10+XXX). This will require
a change in the dialing patterns of the Consumer Division  customers in order to
utilize  the  Company's   services,   and  the  Company   intends  to  integrate
re-education  materials  into its marketing  activities for the remainder of the
year.

Availability of Transmission  Facilities.  The Company has observed a tightening
market in the  availability  of leased  fiber optic  facilities  connecting  the
Company's  switches.  The  Company  leases  these  facilities  under  multi-year
contracts  primarily  from three major  vendors,  and to date,  has been able to
secure the  necessary  facilities.  Although the Advantis  voice  network  asset
acquisition has provided the Company with a significant  amount of captive fiber
optic  capacity,  the Company will  continue to lease  additional  capacity from
third party providers.

Expansion  of the  Commercial  Sales  Division.  The costs  associated  with the
Company's  Commercial  Sales  Division are expected to reduce the  Company's net
income at least  through  1997.  The Company  expects  that the  revenue  growth
associated  with this division will represent a material  portion of the overall
growth of the Company.

Consummation  of  the  Excel  Transaction.   The  Company  recently  executed  a
definitive  merger agreement with Excel and the transaction is expected to close
by year-end.  There can be no assurance that this transaction will eventually be
completed or that the anticipated benefits of the merger will be realized.

<PAGE>
RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED
JUNE 30, 1996

Revenues. Revenues increased 33%, or $34.7 million, from $104.1 million, for the
three  months  ended June 30, 1996 to $138.8  million for the three months ended
June 30, 1997.  The increase in revenue was due to an increase in per minute and
other revenues generated by the Company's  Commercial Sales Division offset by a
slight  decline in the  revenues  from the Consumer  Division.  Revenues for the
Consumer Division for the three months ended June 30, 1997 were $99.2 million, a
decrease of $1.0  million,  or 1%,  versus  $100.2  million for the three months
ended June 30, 1996. Consumer Division revenues,  primarily attributable to dial
around  customers,  were  largely  the  result of  Consumer  Division  marketing
activities  for the three months ended June 30, 1997 combined with the carryover
customer base from March 31, 1997 and prior periods. The decline in the Consumer
Division revenues resulted from LDWC products which generated approximately $2.9
million  less in revenue for the three  months  ended June 30, 1997 than for the
three  months  ended  June  30,  1996.  In early  1997,  the  Consumer  Division
reformulated the base LDWC dial around offering into a fee-based,  flat rate per
minute product, and the results to date have been less than anticipated.

CSD  generated  revenues of $38.9  million for the three  months  ended June 30,
1997, which includes per minute and private line revenue from direct, dealer and
wholesale  customers.  Prior to the  formation of CSD in June 1996,  the Company
generated  wholesale  carrier  revenues which totaled $3.9 million for the three
months ended June 30, 1996. The Company  generated  $17.0 million in CSD revenue
during the three  months  ended March 31,  1997.  Revenues for CSD for the three
months ended June 30, 1997 represent an 897% and 129% increase  versus the three
month periods ended June 30, 1996 and March 31, 1997, respectively.  This growth
is attributable to the significant increase in the number of sales personnel and
other  marketing  efforts of CSD since its  formation.  This total also includes
approximately  $8.3 million in private line and other revenue as a result of the
Advantis  voice  network  acquisition.  Also  included in revenues for the three
months  ended June 30, 1997 was $0.7  million  from Tel Labs,  which the Company
acquired  concurrently  with the  completion  of the  Company's  initial  public
offering ("IPO") in August 1996.

Overall, billed minutes of use ("MOUs") increased 43% from 703.1 million for the
three months  ended June 30, 1996 to 1,007.4  million for the three months ended
June 30,  1997.  The  Company's  revenue per MOU was $0.129 for the three months
ended June 30, 1997  (excluding  private line and Tel Labs revenue),  a decrease
from $0.148 for the three months ended June 30, 1996. This decrease is due to an
increasing  contribution of lower revenue per minute products  including carrier
products and  commercial  products  such as 800/888  service and  dedicated  T-1
service.  During the three  months  ended June 30,  1997  compared  to the three
months  ended June 30, 1996,  the  Company's  offsets to revenues  declined as a
percentage of revenue due to both  increased  carrier  revenue which has a lower
corresponding bad debt accrual percentage,  and favorable trends in LEC holdback
percentages for the Consumer  Division,  while the overall  aggregate  amount of
revenue offsets increased due to the increased revenues.

Cost of Services.  Cost of services increased 31%, or $18.9 million,  from $60.8
million for the three months ended June 30, 1996 to $79.7  million for the three
months ended June 30, 1997.  Approximately $19.1 million of the cost of services
increase was due to the recurring  costs related to increased MOUs, $1.2 million
of the increase was the result of increased facilities lease expense as a result
of the Company's expansion of its transmission  network, and $0.3 million of the
increase was the result of the  inclusion of Tel Labs' cost of services,  all of
which was offset by a $1.7  million  reduction  in  installation  expenses.  The
reduction in the cost of services per MOU from $0.086 for the three months ended
June 30, 1996 to $0.079 for the three months ended June 30, 1997 was largely the
result of an increased percentage of on-net traffic,  other network efficiencies
and an increasing  percentage  of dedicated  products that have lower LEC access
costs per MOU.

Gross Margin.  Gross margin increased 37%, or $15.8 million,  from $43.3 million
for the three months  ended June 30, 1996 to $59.1  million for the three months
ended June 30, 1997 due to the  reasons  discussed  above.  As a  percentage  of
revenues,  gross margin increased from 41.6% for the three months ended June 30,
1996 to 42.6% for the three months ended June 30, 1997.

Selling, General and Administrative Expense. Selling, general and administrative
expense increased 25%, or $7.9 million,  from $31.5 million for the three months
ended June 30, 1996 to $39.4  million for the three  months ended June 30, 1997.
Approximately  $10.3  million of this  increase was  attributable  to the direct
expenses of CSD which  generated  negligible  expenses  during the three  months
ended June 30, 1996. The offsetting  decrease of approximately  $2.4 million for
the three  months  ended  June 30,  1997  consisted  of  increased  general  and
administrative  expense,  and reduced costs  associated  with Consumer  Division
marketing  expenses,  LEC billing  expenses and  customer  service  costs.  As a
percentage of revenues,  selling,  general and administrative  expense decreased
from  30.3%  for the three  months  ended  June 30,  1996 to 28.4% for the three
months ended June 30, 1997.

Depreciation and  Amortization  Expense.  Depreciation and amortization  expense
increased  by $1.7 million from $1.9 million for the three months ended June 30,
1996 to $3.6  million for the three  months  ended June 30,  1997.  Depreciation
expense  increases  were  primarily  related to the  expansion of the  Company's
switch  network,  and goodwill and other  amortization  expense  increases  were
associated  with the  acquisition of the Advantis  assets and the acquisition of
the remaining 44.4% of LDWC and Tel Labs.

Interest Expense.  Interest  expense,  net of other income,  primarily  interest
income, increased $1.4 million from $1.0 million for the three months ended June
30, 1996 to $2.4 million in interest expense for the three months ended June 30,
1997.  This  increase  was due to the  increased  leverage  resulting  from  the
acquisition  of the Advantis  assets  partially  offset by the proceeds from the
Company's  August  1996 IPO which  were used to repay  substantially  all of the
Company's indebtedness combined with free cash flow generated since that time.

Net income.  Net income  increased  $3.4 million from $5.2 million for the three
months  ended June 30, 1996 to $8.6  million for the three months ended June 30,
1997.

SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED
JUNE 30, 1996

Revenues. Revenues increased 33%, or $65.6 million, from $196.0 million, for the
six months  ended June 30, 1996 to $261.6  million for the six months ended June
30, 1997. The increase in revenue was due to an increase in per minute and other
revenues   generated  by  both  the  Company's  Consumer  and  Commercial  Sales
Divisions.  Revenues for the Consumer Division for the six months ended June 30,
1997 were $204.6 million,  an increase of $15.5 million,  or 8.2%, versus $189.1
million  for the six  months  ended June 30,  1996.  Consumer  Division  growth,
primarily  attributable  to dial  around  revenues,  was  largely  the result of
Consumer  Division  marketing  activities for the six months ended June 30, 1997
combined  with the  carryover  customer  base from  December  31, 1996 and prior
periods.

CSD generated  revenues of $55.9 million for the six months ended June 30, 1997,
which  includes per minute and private  line  revenue  from  direct,  dealer and
wholesale  customers.  Prior to the  formation of CSD in June 1996,  the Company
generated  wholesale  carrier  revenues  which  totaled $6.9 million for the six
months ended June 30, 1996. The Company  generated $26.3 million in CSD revenues
during the six months  ended  March 31,  1997.  The  revenue for CSD for the six
months ended June 30, 1997  represents a 709% and 112%  increase  versus the six
month periods ended June 30, 1996 and March 31, 1997, respectively.  This growth
is attributable to the significant increase in the number of sales personnel and
other  marketing  efforts of CSD since its formation.  Also included in revenues
for the six months ended June 30, 1997 was $1.1 million from Tel Labs, which the
Company acquired concurrently with the completion of the Company's IPO in August
1996.

Overall,  billed minutes of use ("MOUs")  increased 42% from 1,356.2 million for
the six months  ended June 30, 1996 to 1,929.6  million for the six months ended
June 30, 1997. The Company's revenue per MOU was $0.131 for the six months ended
June 30, 1997 (excluding  private line revenue),  a decrease from $0.145 for the
six months ended June 30, 1996. This decrease is due to an increasing percentage
of lower revenue per minute products  including  carrier products and commercial
products  such as 800/888  service and  dedicated  T-1  service.  During the six
months ended June 30, 1997  compared to the six months ended June 30, 1996,  the
Company's offsets to revenues declined both in the aggregate and as a percentage
of revenue due to both increased carrier revenue which has a lower corresponding
bad debt accrual  percentage,  and favorable trends in LEC holdback  percentages
for the Consumer Division.

Cost of Services.  Cost of services increased 32%, or $36.6 million, from $115.5
million  for the six months  ended June 30,  1996 to $152.1  million for the six
months ended June 30, 1997.  Approximately $34.5 million of the cost of services
increase was due to the recurring  costs related to increased MOUs, $3.8 million
of the increase was the result of increased facilities lease expense as a result
of the Company's expansion of its transmission  network, and $0.6 million of the
increase was the result of the  inclusion of Tel Labs' cost of services,  all of
which was offset by a $2.3  million  reduction  in  installation  expenses.  The
reduction  in the cost of services  per MOU from $0.085 for the six months ended
June 30,  1996 to $0.079 for the six months  ended June 30, 1997 was largely the
result of an increased percentage of on-net traffic,  other network efficiencies
and an increasing  percentage  of dedicated  products that have lower LEC access
costs per MOU.

Gross Margin.  Gross margin increased 36%, or $29.1 million,  from $80.5 million
for the six months  ended  June 30,  1997 to $109.6  million  for the six months
ended June 30, 1997 due to the  reasons  discussed  above.  As a  percentage  of
revenues,  gross margin  increased  from 41.1% for the six months ended June 30,
1996 to 41.9% for the six months ended June 30, 1997.

Selling, General and Administrative Expense. Selling, general and administrative
expense  increased 29%, or $17.2 million,  from $59.4 million for the six months
ended June 30,  1996 to $76.6  million for the six months  ended June 30,  1997.
Approximately  $19.2  million of this  increase was  attributable  to the direct
expenses of CSD which generated  negligible expenses during the six months ended
June 30, 1996. The offsetting decrease of approximately $2.0 million for the six
months ended June 30, 1997  consisted of  increased  general and  administrative
expense, and reduced costs associated with Consumer Division marketing expenses,
LEC billing  expenses and customer  service costs.  As a percentage of revenues,
selling,  general and  administrative  expense  decreased from 30.3% for the six
months ended June 30, 1996 to 29.3% for the six months ended June 30, 1997.

Depreciation and  Amortization  Expense.  Depreciation and amortization  expense
increased  by $3.0  million  from $3.3 million for the six months ended June 30,
1996 to $6.3  million  for the six  months  ended  June 30,  1997.  Depreciation
expense  increases  were  primarily  related to the  expansion of the  Company's
switch  network,  and goodwill and other  amortization  expense  increases  were
associated  with the  acquisition of the Advantis  assets and the acquisition of
the remaining 44.4% of LDWC and Tel Labs.

Interest Expense.  Interest  expense,  net of other income,  primarily  interest
income,  decreased  $0.1 million from $2.0 million for the six months ended June
30, 1996 to $1.9  million in interest  expense for the six months ended June 30,
1997.  This slight  decrease was due to the use of proceeds  from the  Company's
August  1996 IPO which  were used to repay  substantially  all of the  Company's
indebtedness  combined with free cash flow generated since that time,  offset by
the increased leverage resulting from the April 1997 acquisition of the Advantis
assets.

Net income.  Net income  increased  $6.9  million  from $8.5 million for the six
months  ended June 30, 1996 to $15.4  million for the six months  ended June 30,
1997.

LIQUIDITY AND CAPITAL RESOURCES

The Company conducts its operations through its direct and indirect wholly owned
subsidiaries.  There are no  restrictions  on the  movement  of cash  within the
consolidated group and the Company's discussion of its liquidity is based on the
consolidated  group.  The Company  measures its liquidity  based on cash flow as
reported in its Consolidated Statements of Cash Flows.

On August 9, 1996 the Company sold  4,681,000  Common  Shares (of which  825,000
shares  were sold on  August  26,  1996 in  conjunction  with the  underwriters'
exercise  of the  over-allotment  option) in its IPO.  The net  proceeds  to the
Company  (after  expenses)  of  approximately  $60.0  million were used to repay
existing  indebtedness,  including capital lease obligations and the outstanding
balance on the  Company's  existing  credit  facility.  The  remaining  proceeds
coupled with the Company's cash and borrowing capacity under the credit facility
were used to fund  working  capital  and  capital  expenditures  and for general
corporate purposes.

Since  commencing  operations in 1993, the Company has experienced  rapid growth
requiring substantial  investments in working capital,  capital expenditures and
mail  marketing  expenses.  Additionally,  start-up  costs  associated  with the
formation of CSD are expected to reduce the Company's consolidated net income at
least through 1997.

In December 1996, the Company  entered into a credit  facility for borrowings up
to $100  million,  which was later  amended  in April  1997 to $200  million  in
connection  with the Company's  acquisition of certain voice network assets from
Advantis ("the New Credit  Facility").  Borrowings under the New Credit Facility
are subject to various financial covenants and ratios including a Total Leverage
Ratio,  Interest Coverage Ratio, Current Ratio, Pro Forma Debt Service Ratio and
Fixed Charge Ratio. The interest rate on the New Credit Facility is based on the
prevailing Total Leverage Ratio and ranges on a Eurodollar (LIBOR) option from a
spread of 0.75% to 2.00%,  and on a Base (Prime) Rate option from a spread of 0%
to 1.00%.  No scheduled  principal  payments on the New Credit  Facility are due
until June 30, 1998 and the New Credit Facility expires on March 31, 2002.

Borrowings  under the New Credit  Facility on the April 15, 1997 closing date of
the Advantis voice network acquisition totaled  approximately $146 million which
resulted  in an  initial  spread of 1.75% for  LIBOR  and 0.75% for  Prime.  The
remaining  purchase  price and other  transaction-related  expenses  were funded
using a portion of the Company's  existing  cash. On June 24, 1997,  the Company
sold the Nortel  switches  and  associated  equipment  acquired in the  Advantis
transaction  located in the five switch sites for $38 million.  Also included in
the sale was a  multi-year  lease for certain  portions of the  Company's  fiber
optic  capacity.  The  proceeds  from  the sale  were  used to  reduce  existing
indebtedness.

Net cash from operating  activities increased $32.1 million from $5.2 million in
cash used for  operating  activities  for the six months  ended June 30, 1996 to
$26.9 million in cash provided by operating  activities for the six months ended
June 30,  1997.  The  increase was largely the result of increases in net income
and depreciation  and  amortization  expense combined with a smaller increase in
working  capital  accounts  primarily  attributable  to an  increase in deferred
income. Net cash used for investing  activities  increased $155.4 million,  from
$3.1  million for the six months  ended June 30, 1997 to $158.5  million for the
six months ended June 30, 1997.  Net cash from  financing  activities  increased
$104.5  million  from $14.9  million  for the six months  ended June 30, 1996 to
$119.4  million for the six months  ended June 30,  1997.  Both  increases  were
primarily  the  result of the  acquisition  and  related  funding of the line of
credit to finance the purchase of the Advantis  assets  partially  offset by the
cash proceeds generated by the sale of the equipment in the five Advantis switch
sites.

Management  believes that cash flow from operations and existing facilities will
provide  sufficient  liquidity  to  enable it to meet its  currently  forseeable
working capital and capital expenditure requirements.
<PAGE>

PART II. OTHER INFORMATION

 ITEM 1.       LEGAL PROCEEDINGS

In December 1996,  Telco and LDWC became involved in a civil action,  AT&T Corp.
v. Telco Communications Group, Inc. and Long Distance Wholesale Club, pending in
the  United  States  District  Court for the  District  of New  Jersey.  In this
litigation,  AT&T claims that certain LDWC advertisements stating that consumers
can save up to 50% off AT&T's basic rates are false and misleading under federal
and state law. AT&T seeks treble damages,  statutory  attorneys' fees and costs,
and an injunction.  The Company denies the allegations in this litigation and is
vigorously  defending against them, including that all disclosures are contained
clearly in LDWC's  advertisements  and that it is possible for  consumers in the
United States to place calls that will achieve up to a 50% savings.  Further the
Company filed a separate complaint against AT&T (which has now been consolidated
with this litigation) and also asserted  additional  counterclaims  against AT&T
based on AT&T's  advertising  which the Company  believes  contains a variety of
misleading  and deceptive  statements.  If AT&T  prevails,  the Company could be
found liable for damages and an injunction might be issued against future use of
specific LDWC advertisements.

On December  31, 1996,  An Apple A Day,  Inc.  ("Apple")  filed suit against the
Company in the United States District Court for the Eastern District of Missouri
alleging  trademark  and  tradename  infringement,   unfair  competition,  false
designation  of origin,  federal  trademark  dilution,  trade dress dilution and
violations of Missouri  common law.  According to the  complaint,  Apple holds a
Dial  and Save  service  mark  for  telephone  order  services  in the  field of
electronic equipment and uses that mark in the State of Missouri.  Apple alleges
that the Company's  use of a Dial & Save logo and  tradename in connection  with
its sale to consumers of long distance  service  infringes  Apple's mark.  Apple
seeks an injunction  against the  Company's  further use of the Dial & Save logo
and name,  disgorgement of all profits made from use of the Dial & Save logo and
name,  damages for  preparation  and  distribution  of  corrective  advertising,
damages for loss of sales,  loss of goodwill and damage to reputation,  trebling
of damages  and payment of  attorney's  fees and costs.  The Company  denies the
allegations and is vigorously  defending against them, including on the grounds,
among others, that there is no competitive proximity of the electronic equipment
that Apple sells and the long  distance  service that the Company  offers and no
likelihood  of, or actual,  confusion  regarding  the seller,  and therefore the
source,  of each. If the Company is found to have infringed Apple's mark, and/or
to have liability for Apple's other claims, then it may be found liable to Apple
in whole,  or in part,  for  damages  of the  nature  sought by Apple and may be
enjoined from using a Dial & Save service mark.

In related  litigation,  on April 15, 1997, the Company filed suit against Apple
and two (2)  individuals  in the United  States  District  Court for the Eastern
District of Virginia. The suit includes claims for defamation, and conspiracy to
harm the  Company's  business,  in violation of the statutory and common laws of
Virginia, and for tortious interference with contractual  relationships and with
reasonable business  expectations,  in violation of the common laws of Virginia.
The Company seeks an injunction  barring the  defendants  from making or causing
others to make further  false and  defamatory  statements  about the Company and
seeks  compensatory  and  exemplary  damages  for  wrongful  diminution  of  the
Company's reputation and goodwill,  for tortious interference with the Company's
business  and for  defamation,  as well as payment of the  Company's  litigation
costs and expenses.  The court has entered a preliminary  injunction prohibiting
the defendants from directly or indirectly  making  defamatory  statements about
the Company.  The defendants have not yet filed their respective  answers to the
Company's complaint in this litigation.

On May 8, 1995, the Company,  and its subsidiary,  Dial & Save of Nevada,  Inc.,
filed  suit  against  Central  Telephone  Company-Nevada,  d/b/a  Sprint/Central
Telephone  Company-Nevada,  a division of the Central Telephone Company ("CTC"),
Sprint,  Inc., et al, in the District  Court of Clark County,  Nevada.  The suit
includes  claims for breach of  contract,  promissory  and  equitable  estoppel,
unfair trade  practices  and breach of the duty of good faith and fair  dealing,
all in violation of the laws of Nevada.  The Company and its subsidiary  seek an
order for temporary  injunctive  relief  preventing  the defendant  from denying
possession of certain  commercial  real property in Las Vegas to the Company and
its  subsidiary  and  compelling the defendant to execute and honor a commercial
real  property  lease with the  Company,  as well as  compensatory  and punitive
damages, attorneys fees and costs.

In related litigation, on May 5, 1995, CTC filed suit against the Company in the
United  States  District  Court for the  District of Nevada.  The suit  includes
claims for negligent and/or malicious omission or concealment of material facts,
conversion  of personal  property  and  trespass to chattel in  violation of the
common laws of Nevada,  in connection with certain  commercial real property and
telecommunications  facilities owned by the plaintiff in Las Vegas,  Nevada. The
plaintiff  seeks damages and a declaratory  judgment  specifying  the respective
rights of the plaintiff and the Company  regarding  occupancy of the  commercial
real property and use of the  telecommunications  facilities  in Las Vegas,  and
requiring the Company to present any complaint  against the plaintiff to the FCC
prior to bringing any court action. The Company denies the allegations,  intends
to defend vigorously against them and has filed the suit described above against
the plaintiff.

On March 14, 1997,  Frontier  Corporation and Frontier  Communication  Services,
Inc. filed suit against the Company,  and three (3) of the Company's  employees,
in the United  States  District  Court for the  Southern  District  of  Indiana,
alleging breach of contract,  tortious  interference with contractual  relations
and tortious  interference with prospective  economic relations.  The plaintiffs
allege that three (3) of the Company's employees,  who formerly were employed by
the  plaintiffs,  left  the  employ  of  plaintiffs,  joined  the  Company,  and
thereafter  solicited  on  behalf  of  the  Company  plaintiffs'  employees  and
customers,  in breach of  written  agreements  between  the  plaintiffs  and the
employees,  and in violation of the common laws. The plaintiffs also allege that
the Company breached a written  agreement between the Company and the plaintiffs
in which the Company agreed not to allow  solicitation of plaintiffs'  employees
or  customers  by the  Company's  employees  who were  formerly  employed by the
plaintiffs.  The  plaintiffs  seek an injunction  preventing the Company and the
three (3) employees from breaching  their  respective  written  agreements  with
plaintiffs  and  preventing the Company from aiding or abetting the employees in
breach of the employees' written  agreements with the plaintiffs;  an accounting
and  disgorgement  of all profits made by the Company and the employees  arising
from the breach of the written  agreements  with the  plaintiffs;  a declaratory
judgment  that the Company and the  employees  have  breached  their  respective
written  agreements with the plaintiffs and have tortiously  interfered with the
plaintiffs' existing contractual and prospective economic relations; damages for
breach of contract and interference  with plaintiffs'  existing  contractual and
prospective  economic  relations;  and payment of attorneys' fees and costs. The
court has  entered a  preliminary  injunction  prohibiting  one of the  employee
defendants  from  performing  certain limited acts in violation of her agreement
with  Frontier,  and requiring the other  defendants to take certain  actions to
enable and ensure her  compliance.  The Company has filed an answer  denying the
allegations against it, and is vigorously defending the action.

ITEM 2.       CHANGES 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.       EXHIBITS AND REPORTS ON FORM 8-K

     A.   Exhibits

          See Exhibit Index on page 20.

     B.   Reports on Form 8-K

     Form 8-K dated April 15, 1997  announcing  the Company's  completion of the
     transaction to acquire the voice network assets of Advantis ("Advantis"), a
     partnership  formed by  International  Business  Machines  Corp. and Sears,
     Roebuck and Co., for approximately $170 million.
 
     Form 8-K dated June 5, 1997,  announcing  that the Company had entered into
     an Agreement  and Plan of Merger dated as of June 5, 1997 pursuant to which
     the  Company  and EXCEL  Communications,  Inc.  ("EXCEL")  would merge into
     separate newly formed wholly owned  subsidiaries of New RES, Inc., itself a
     newly formed  corporation  wholly owned by EXCEL,  with each of the Company
     and EXCEL as the surviving corporations.

     Form 8-K dated June 24, 1997,  announcing  the Company's sale to Intermedia
     Communications,  Inc. of certain  switch  assets and  associated  equipment
     acquired by the Company in  connection  with the  purchase of the  Advantis
     voice network assets in April of 1997.

 <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, in the City of Chantilly, State of
     Virginia, on August 13, 1997.

                  Telco Communications Group, Inc.


                  By: /s/ Donald A. Burns
                      ------------------------------------------------------
                      Donald A. Burns, President & Chief Executive Officer
 

                  By: /s/ Nicholas A. Merrick
                      ------------------------------------------------------
                      Nicholas A. Merrick, Chief Financial Officer


                  By: /s/ Janet D. Anastasi
                      ------------------------------------------------------
                      Janet D. Anastasi, Chief Accounting Officer


<PAGE>
                        TELCO COMMUNICATIONS GROUP, INC.

                                  EXHIBIT INDEX

Exhibit
No.                  Description                               
--------             --------------------------------------------

11.1                 Computation of Earnings Per Common and
                     Common Equivalent Share

27.1                 Financial Data Schedule
<PAGE>