U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-Q

     [X]  Quarterly report under to Section 13 or 15(d) of the Securities
          Exchange Act of 1934

                      For the quarterly period ended March 31, 1999

     [_]  Transition report under to Section 13 or 15(d) of the Securities
          Exchange Act of 1934

                       For the transitional period from to

                         Commission File Number 0-24622


                          TELSCAPE INTERNATIONAL, INC.
        (Exact name of Small Business Issuer as specified in its charter)


                  TEXAS                                        75-2433637
       (State or other jurisdiction of                      (I.R.S. Employer
       incorporation or organization)                     identification number)


              2700 POST OAK BLVD., SUITE 1000, HOUSTON, TEXAS 77056
               (Address of principal executive offices) (Zip Code)

          Issuer's telephone number including area code -- 713/968-0968

        ----------------------------------------------------------------
               (Former name, former address and former fiscal year
                         if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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 [ ]

      6,546,201 shares of Registrant's common stock ($.001 Par Value) were
      outstanding as of May 14, 1999.
<PAGE>
                         Telscape International, Inc.
                              Table of Contents
                                  Form 10-Q
                                March 31, 1999


                                                                            PAGE

PART I.     FINANCIAL INFORMATION

     Item 1. Financial Statements

            Condensed Consolidated Balance Sheets As of December 31, 1998 
            and March 31, 1999 (unaudited)                                    1
            Unaudited Condensed Consolidated Statements of Operations -
            For the Three Months Ended  March 31, 1998 and 1999               2

            Unaudited Condensed Consolidated Statements of Cash Flows -
            For the Three Months Ended March 31, 1998 and 1999                3

            Notes to Unaudited Condensed Consolidated Financial Statements    5

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

      Item 3. Quantitative and Qualitative Disclosures about Market Risk     18

PART II.    OTHER INFORMATION

      Item 3. Legal Proceedings                                              19

      Item 6. Exhibits and Reports on Form 8-K                               19

            (a)   Exhibits

            (b)   Reports on Form 8-K

      Signatures                                                             20

<PAGE>
                  TELSCAPE INTERNATIONAL, INC AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                     ASSETS
<TABLE>
<CAPTION>
                                                              December 31,    March 31,
                                                                 1998           1999
                                                             ------------    ------------
<S>                                                          <C>             <C>         
CURRENT ASSETS:                                                              (unaudited)
  Cash and cash equivalents ..............................   $  9,631,000    $  6,102,000
  Accounts receivable, less allowance for doubtful
    accounts of and $275,000 and $327,000 (unaudited),
    respectively .........................................     14,387,000      11,553,000
  Inventories ............................................      4,581,000       5,327,000
  Prepaid expenses and other .............................      3,519,000       4,964,000
  Deferred income taxes ..................................        628,000         571,000
                                                             ------------    ------------
   Total current assets ..................................     32,746,000      28,517,000

PROPERTY AND EQUIPMENT, net of accumulated
  depreciation ...........................................     14,576,000      17,156,000
GOODWILL AND OTHER INTANGIBLES, net of accumulated
  amortization ...........................................     31,416,000      30,818,000
OTHER ASSETS .............................................      1,593,000       3,195,000
                                                             ------------    ------------
              Total assets ...............................   $ 80,331,000    $ 79,686,000
                                                             ============    ============
                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable .......................................   $ 22,090,000    $ 19,834,000
  Accrued expenses .......................................     10,182,000      11,861,000
  Current portion of notes payable and capital
    lease obligations ....................................      2,714,000       2,466,000
  Convertible debentures .................................      4,996,000       4,998,000
                                                             ------------    ------------
   Total current liabilities .............................     39,982,000      39,159,000

NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS ..............      1,488,000       2,584,000
CONVERTIBLE SUBORDINATED DEBENTURES ......................      3,935,000       3,942,000
MINORITY INTERESTS .......................................           --              --
COMMITMENTS AND CONTINGENCIES ............................           --              --
SERIES B NON-VOTING PREFERRED STOCK, $.001 par value,
 380,000 and 0 shares, respectively, authorized issued
 and outstanding, mandatorily redeemable as certain
 performance measures were achieved ......................           --              --
STOCKHOLDERS' EQUITY:
  Preferred stock, $.001 par value, 5,000,000
    shares authorized; without defined preference rights .           --              --
  Series A preferred stock, $.001 par value,
    1,000,000 shares authorized ..........................           --              --
  Common stock, $.001 par value, 25,000,000 shares
    authorized;
  4,104,027 and 4,667,548 issued, respectively ...........          6,000           6,000
  Additional paid-in capital .............................     39,398,000      41,548,000
  Accumulated deficit ....................................     (3,881,000)     (6,745,000)
  Treasury stock .........................................       (480,000)       (480,000)
  Capital subscriptions receivable .......................       (117,000)       (328,000)
                                                             ------------    ------------
   Total stockholders' equity ............................     34,926,000      34,001,000
                                                             ------------    ------------
         Total liabilities and stockholders'eqity ........   $ 80,331,000    $ 79,686,000
                                                             ============    ============
</TABLE>
  The accompanying notes are an integral part of these financial statements.

                                       1
<PAGE>
                  TELSCAPE INTERNATIONAL, INC. AND SUBSIDIARIES
            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                                        Three Months Ended
                                                            March 31,
                                                   ----------------------------
                                                       1998            1999
                                                   ------------    ------------
REVENUES .......................................   $ 33,399,000    $ 27,019,000
COST OF REVENUES ...............................     28,334,000      24,104,000
                                                   ------------    ------------
GROSS PROFIT ...................................      5,065,000       2,915,000
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ...      2,277,000       4,222,000
                                                   ------------    ------------
OPERATING INCOME (LOSS) BEFORE DEPRECIATION
  AND AMORTIZATION .............................      2,788,000      (1,307,000)
DEPRECIATION AND AMORTIZATION ..................        569,000       1,378,000
                                                   ------------    ------------
OPERATING INCOME (LOSS) ........................      2,219,000      (2,685,000)

OTHER INCOME (EXPENSE):
  Interest income ..............................         37,000          71,000
  Interest expense .............................        (93,000)       (952,000)
  Foreign exchange gain (loss) .................       (122,000)        (60,000)
  Other, net ...................................         48,000        (214,000)
                                                   ------------    ------------
      Total other income (expense), net ........       (130,000)     (1,155,000)
                                                   ------------    ------------
INCOME (LOSS) BEFORE INCOME TAXES AND
  MINORITY INTERESTS ...........................      2,089,000      (3,840,000)
INCOME TAX BENEFIT (EXPENSE) ...................       (963,000)        976,000
                                                   ------------    ------------
INCOME (LOSS) BEFORE MINORITY INTERESTS ........      1,126,000      (2,864,000)
MINORITY INTERESTS IN SUBSIDIARIES .............        (12,000)           --
                                                   ============    ============
NET INCOME (LOSS) ..............................   $  1,114,000    $ (2,864,000)
                                                   ============    ============
EARNINGS (LOSS) PER SHARE:
  Basic ........................................   $       0.25    $      (0.47)
  Diluted (1) ..................................   $       0.15             N/A
WEIGHTED AVERAGE SHARES OUTSTANDING:
  Basic ........................................      4,371,464       6,064,701
  Diluted(1) ...................................      7,779,177             N/A

(1) Inclusion of additional shares under a diluted analysis for the three months
ended March 31, 1999 is inappropriate due to the anti-dilutive effect

    The accompanying notes are an integral part of these financial statements.

                                       2
<PAGE>
                  TELSCAPE INTERNATIONAL, INC. AND SUBSIDIARIES
            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                    Three Months Ended March 31,
                                                     --------------------------
                                                         1998           1999
                                                     -----------    -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss) ..............................   $ 1,114,000    $(2,864,000)
  Adjustments to reconcile net income (loss) to
    net cash provided by operating activities:
  Provision for doubtful accounts ................        15,000         52,000
  Depreciation and amortization ..................       569,000      1,378,000
  Deferred income tax (benefit) expense ..........       355,000     (1,251,000)
  Imputed interest on non-interest bearing
    notes payable ................................        71,000         48,000
  Minority interest in subsidiaries' income
    (loss) .......................................        12,000           --
  Equity in income from unconsolidated
    subsidiary ...................................          --           34,000
  Changes in assets and liabilities:
    Accounts receivable ..........................       (44,000)     2,781,000
    Inventories ..................................     1,207,000       (746,000)
    Prepaid and other assets .....................    (1,267,000)    (1,801,000)
    Accounts payable .............................     1,880,000       (734,000)
    Deferred revenue .............................    (1,997,000)       842,000
    Accrued liabilities ..........................    (1,289,000)       837,000
                                                     -----------    -----------
Net cash provided by (used in) operating
  activities .....................................       626,000     (1,424,000)
                                                     -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property and equipment ............    (3,642,000)    (3,250,000)
  Acquisition of MSN, net of cash acquired .......    (2,325,000)          --
                                                     -----------    -----------
Net cash used in investing activities ............    (5,967,000)    (3,250,000)
                                                     -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Payments on capital lease obligations ..........       (26,000)       (12,000)
  Payments on notes payable ......................      (300,000)      (494,000)
  Purchase of treasury shares ....................       (78,000)          --
  Borrowings on line of credit ...................       694,000           --
  Payments on line of credit .....................          --         (288,000)
  Proceeds from sales of common stock ............          --        1,939,000
  Proceeds from warrants and options exercised ...     3,199,000           --
                                                     -----------    -----------
Net cash provided by financing activities ........     3,489,000      1,145,000
                                                     -----------    -----------
Net decrease in cash and cash equivalents ........    (1,852,000)    (3,529,000)
                                                     -----------    -----------
Cash and cash equivalents at beginning of
  period .........................................     4,734,000      9,631,000
                                                     -----------    -----------
Cash and cash equivalents at end of period .......   $ 2,882,000    $ 6,102,000
                                                     ===========    ===========

    The accompanying notes are an integral part of these financial statements.

                                       3
<PAGE>
                  TELSCAPE INTERNATIONAL, INC. AND SUBSIDIARIES
            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                          Three Months Ended 
                                                                March 31,
                                                         -----------------------
                                                            1998         1999
                                                         ----------   ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Interest paid ......................................   $   10,000   $  227,000
  Income taxes paid: .................................   $  339,000   $   48,000
NON-CASH TRANSACTIONS:

Issuance of common stock and promissory notes
  in connection with acquisition of MSN:
   Promissory Notes ..................................   $  672,000   $     --
   Common Stock ......................................      880,000         --

Financing of equipment purchased through
   notes payable .....................................         --      1,604,000

    The accompanying notes are an integral part of these financial statements.

                                       4
<PAGE>
                           TELSCAPE INTERNATIONAL, INC.
          NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

NOTE 1 - FINANCIAL STATEMENTS

   The accompanying unaudited condensed consolidated financial statements
include the accounts of Telscape International, Inc. and its subsidiaries
(collectively, the "Company"). The unaudited condensed consolidated financial
statements of the Company for the three months ended March 31, 1998 and March
31, 1999 have been prepared without an audit pursuant to the rules and
regulations of the Securities and Exchange Commission. They do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments, which consist of normal recurring adjustments, considered necessary
to present fairly the financial position, results of operations and cash flows
for all periods presented have been made. Operating results for the three months
ended March 31, 1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999. For further information, refer
to the consolidated financial statements and footnotes included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1998.

MANAGEMENT'S ESTIMATES AND ASSUMPTIONS

   The accompanying financial statements are prepared in conformity with
generally accepted accounting principles which require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reported period. The Company reviews all significant estimates
affecting the financial statements on a recurring basis and records the effect
of any necessary adjustments prior to their issuance. The actual results could
differ from those estimates.

CONCENTRATION OF RISK - MEXICO

   The devaluation of the Mexican peso in late 1994 caused Mexico to experience
an economic crisis characterized by exchange rate instability, increased
inflation, high domestic interest rates, reduced consumer purchasing power and
high unemployment. Consequently, the Mexican government has exercised, and
continues to exercise, significant influence over the Mexican economy.
Accordingly, Mexican governmental actions could have a significant effect on
Mexican companies, including the Company's customers, and overall market
conditions.

   The Company's foreign currency risk is mitigated in Mexico due to the fact
that many of the Company's customers are multinational firms that pay in U.S.
dollars. In addition, most of the customers that do pay in pesos pay at the spot
exchange rate in effect at the time of payment as opposed to the exchange rate
at the time the receivable is created. Nevertheless, significant adverse effects
from any downturns in the Mexican economy could result in an adverse effect on
the Company's operations. The Company also has a significant amount of its
payables denominated in pesos which exposes the Company to exchange rate risk.
During the first quarter of 1999, the peso exchange rate to the U.S. dollar
strengthened, resulting in the Company incurring higher costs in its
international long distance segment.

NEW ACCOUNTING STANDARDS

   SFAS No. 133, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES,"
requires companies to recognize all derivatives contracts as either assets or
liabilities in the balance sheet and to measure them at fair value. If certain
conditions are met, a derivative may be specifically designated as a hedge, the
objective of which is to match the timing of gain or loss recognition on the
hedging derivative with the recognition of (i) the changes in the fair value of
the hedged asset or liability that are attributable to the hedged risk or (ii)
the earnings effect of the hedged forecasted transaction. For a derivative not
designated as a hedging instrument, 

                                       5
<PAGE>
the gain or loss is recognized in income in the period of change. SFAS No. 133
is effective for all fiscal quarters of fiscal years beginning after June 15,
1999.

   Historically, the Company has not entered into derivatives contracts either
to hedge existing risks or for speculative purposes. The Company does not expect
adoption of the new standard to have a material effect on its financial
statements.

   SOP 98-5, "REPORTING ON THE COSTS OF START-UP ACTIVITIES," requires all
start-up and organizational costs to be expensed as incurred. It also requires
all remaining historically capitalized amounts of these costs existing at the
date of adoption to be expensed and reported as the cumulative effect of a
change in accounting principles. SOP 98-5 is effective for all fiscal years
beginning after December 31, 1998. The adoption of SOP 98-5 did not have a
material effect on its financial statements.

   SFAS No. 135, "RESCISSION OF FINANCIAL ACCOUNTING STANDARDS BOARD NO. 75
("SFAS NO. 75") AND TECHNICAL CORRECTIONS," rescinds SFAS No. 75 and amends
Statement of Financial Accounting Standards Board No. 35. SFAS No. 135 also
amends other existing authoritative literature to make various technical
corrections, clarify meanings, or describe applicability under changed
conditions. SFAS No. 135 is effective for financial statements issued for fiscal
years ending after February 15, 1999. The Company believes that the adoption of
SFAS No. 135 will not have a material effect on its financial statements.

NOTE 2 - EARNINGS (LOSS) PER SHARE

   Earnings (loss) per share is calculated as follows:
<TABLE>
<CAPTION>
                                                           For the Three Months
                                                              Ended March 31,
                                                        -------------------------
                                                            1998         1999
                                                        -----------   -----------
<S>                                                     <C>           <C>         
BASIC
  Net income (loss) as reported .....................   $ 1,114,000   $(2,864,000)
  Weighted average common shares outstanding ........     4,371,464     6,064,701
  Basic earnings (loss) per share ...................   $      0.25   $     (0.47)

DILUTED
  Net income (loss) as reported .....................   $ 1,114,000   $(2,864,000)
  Interest expense on convertible debt ..............        21,000          --
  Net income (loss) applicable to common stockholders   $ 1,135,000   $(2,864,000)
  Weighted average common shares outstanding ........     4,371,464     6,064,701
  Weighted average diluted potential common shares
    outstanding .....................................     3,407,713     2,151,928
  Weight average common and dilutive potential common
    shares outstanding ..............................     7,779,177     8,216,629
  Diluted earnings (loss) per share .................   $      0.15   $     (0.35)
</TABLE>
   Diluted EPS for the three months ended March 31, 1999 was not disclosed on
the Unaudited Condensed Consolidated Statement of Operations as the effect is
anti-dilutive. Certain performance based warrants issued in connection with the
Company's acquisitions vest upon the achievement of certain operating
performance measures. In accordance with SFAS 128, these contingently issuable
shares are included in the calculation of diluted EPS when all the necessary
conditions were met. If all the necessary conditions have not been satisfied by
the end of the period, the number of contingently issuable shares that would
have been issued if the reporting period was the end of the contingency period
are included in the calculation as if those shares were issued at the beginning
of that period. For year-to-date calculations, contingent shares are weighted
for the interim periods in which they are included in the computation of diluted
EPS. At March 31, 1998 and March 31, 1999, there were 500,000 and 0 performance
based warrants, respectively, which had not vested which were not included in
the calculation of diluted EPS. Additionally, 17,000 and 589,000 options and
warrants outstanding at March 31, 1998 and 1999, respectively, were not included
in the calculation of diluted EPS as 

                                       6
<PAGE>
their exercise prices were greater than the average market price of the
Company's common stock during the period and inclusion of these securities in
the calculation would result in an anti-dilutive effect.

NOTE 3 - NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS

   The Company's notes payable and capital lease obligations consist of the
following:

                                                       December 31,   March 31, 
                                                          1998           1999
                                                       ------------   ----------
Deere Park Convertible Subordinated Debentures,
 bearing interest at 8%, discount of $65,000 and
 $ 58,000, respectively, convertible into
 Common Stock, maturing three years from closing ...   $  3,935,000   $3,942,000

Gordon Brothers Convertible Debentures, bearing 
 interest at 8%, unamortized discount of $4,000 
 and $2,000, respectively, convertible into 
 Common Stock, maturing on May 29, 1999, secured 
 by substantially all assets of Interlink 
 Communications, Inc. and stock of Telereunion, 
 Inc., repaid in May of 1999, see discussion below..      4,996,000    4,998,000

Non-interest bearing promissory notes, imputed 
 interest at 10%, unamortized discount of $228,000 
 and $ 204,000, respectively, issued in connection 
 with Integracion acquisition, maturing at various 
 dates  through January 1, 2001.....................      1,713,000    1,341,000

Promissory note issued to repurchase common stock,
 payable in six semi-annual installments through 
 May 20, 2000, and bearing interest at 6% , secured
 by common shares repurchased.......................        150,000      150,000

Capital lease obligation payable in monthly
 installments of $5,413 including principal and
 interest,  maturing June 30,  2002, secured by 
 equipment..........................................        177,000      167,000

Capital lease obligation payable in monthly
 installments of $867 including principal and interest
 maturing December 1, 2003, secured by furniture....         44,000       42,000

Non-interest bearing promissory note, imputed 
 interest at 10%, unamortized discount of $49,000
 and $29,000, respectively, issued in connection
 with MSN acquisition, payable in eight equal 
 quarterly installments beginning  April, 1998......        430,000      346,000

Revolving credit facility maturing July 31, 1999 
 bearing interest at prime plus 1%, secured by 
 accounts receivable................................      1,688,000    1,400,000

Promissory notes, interest at 10.62%, payable in 
 36 equal monthly installments of $52,234 including 
 principal and interest, maturing April 1, 2002,
 secured by equipment...............................           --      1,604,000
                                                       ------------   ----------
Total notes payable and capital leases                   13,133,000   13,990,000

Current portion                                           7,710,000    7,464,000
                                                       ------------   ----------
Long term portion                                      $  5,423,000   $6,526,000
                                                       ============   ==========

   The annual maturity of the debt indicated above for the five years following
December 31, 1998 are $7,710,000 in 1999, $619,000 in 2000, $4,756,000 in 2001,
$38,000 in 2002 and 10,000 in 2003.

   On January 11, 1999, the Company signed a financing arrangement with a
finance company which provides for funding of equipment purchases of up to $7.0
million dollars through December 31, 1999. The financing is structured as loans
maturing four years from funding at interest rates 500 basis points above the 5

                                       7
<PAGE>
year Federal Reserve Treasury Constant Maturity Rate. The Company has drawn
approximately $4.5 million under this facility through May 14, 1999, of which
$2.5 million resulted in refinancing equipment which was previously financed
through an operating lease.

   The Company has selected Lucent Technologies, Inc. ("Lucent") to engineer,
furnish and install the Mexican Network. In addition, the Company received a
commitment from Lucent to provide the Company with up to $40 million of long
term financing, which includes $34 million towards the purchase of Lucent
products and services (including construction of the Mexican Network) and $6
million for repayment of the Company's current obligations. The Company will
incur commissions, commitment fees and other costs in connection with this
facility.

   On May 7, 1999, the Company issued $6,850,000 in Senior Notes (the "Senior
Notes") maturing in May 2000. E. Scott Crist, CEO of the Company, is a holder of
$1.0 million of the Senior Notes. The Senior Notes are subject to optional
prepayment provisions allowing the Company to prepay a portion or all of the
outstanding principal amount without premium or penalty. The Senior Notes bear
interest at 8% from May through November 7, 1999. Thereafter, the interest rate
increases by 1 percent for each month after November 7, 1999. The Company also
issued to the holders of the Senior Notes a total of 256,247 warrants with an
exercise price of $6.68 per share and a term of three years. In the event that
the Senior Notes are not paid by November 7, 1999, then the holders will be
issued an additional 256,247 warrants. The proceeds from the Senior Notes were
utilized to repay the entire principal amount of the Gordon Brothers Convertible
Debentures plus $1.1 million in exit fees.

   In May 1999, the Company also repaid $1.0 million of the Deere Park
Convertible Subordinated Debentures. In connection therewith, the Company paid
an exit fee of $120,000.

NOTE 4 - SEGMENT INFORMATION

   The Company has three reportable segments: international long distance,
value-added services and satellite teleport services. The Company provides
international long distance services to customers in the United States.
Satellite teleport services are provided to customers in the United States and
Latin America. Value-added services are performed in Mexico. The Company
measures segment profit as earnings before interest, depreciation, amortization
of intangibles, other income and taxes (EBITDA).

   Revenues, operating information and identifiable assets by business segment
are as follows:


                                                      Three Months Ended
                                                           March 31,
                                                 ------------------------------
                                                     1998              1999
                                                 ------------      ------------
Revenues
     Long distance services ................     $ 25,719,000      $ 21,208,000
     Value-added services ..................        7,680,000         3,910,000
     Satellite teleport services ...........             --           1,901,000
                                                 ------------      ------------
Total revenues .............................     $ 33,399,000      $ 27,019,000

                                       8
<PAGE>
Operating income (loss) before
interest, depreciation and
amortization
     Long distance services ................        2,375,000           (14,000)
     Value-added services ..................          729,000          (475,000)
     Satellite teleport services ...........             --            (158,000)
     Corporate and other ...................         (316,000)         (660,000)
                                                 ------------      ------------
Total operating income (loss)
before interest, depreciation
and amortization ...........................     $  2,788,000      $ (1,307,000)
     Depreciation ..........................          151,000           752,000
     Amortization of intangibles ...........          418,000           626,000
                                                 ------------      ------------
Operating income (loss) as
reported on the Statement of
Operations .................................     $  2,219,000      $ (2,685,000)

Capital Expenditures
     Long distance services ................     $  3,510,000      $  2,967,000
     Value-added services ..................          132,000            36,000
     Satellite teleport services ...........             --             224,000
     Corporate and other ...................             --              23,000
                                                 ------------      ------------
        Total capital expenditures .........     $  3,642,000      $  3,250,000
                                                 ------------      ------------
Identifiable assets ---
     Long distance services ................     $ 16,133,000      $ 25,917,000
     Value-added services ..................       15,569,000        22,137,000
     Satellite teleport services ...........             --          10,345,000
     Corporate and other ...................       16,238,000        21,287,000
                                                 ------------      ------------
        Total identifiable assets ..........     $ 47,940,000      $ 79,686,000
                                                 ------------      ------------

      Information concerning principal geographic areas is as follows:

                                                      Three Months Ended
                                                           March 31,
                                                 -------------------------------
                                                     1998               1999
                                                 -----------         -----------
Revenues
     United States .....................         $25,719,000         $22,606,000
     Mexico ............................           7,680,000           3,910,000
     Latin America .....................                --               503,000
                                                 -----------         -----------
Total revenues .........................         $33,399,000         $27,019,000
                                                 -----------         -----------
Fixed assets, net of
accumulated depreciation
     United States .....................           1,211,000           9,545,000
     Mexico ............................           2,988,000           5,523,000
     Latin America .....................           1,145,000           2,088,000
                                                 -----------         -----------
Total fixed assets .....................         $ 5,344,000         $17,156,000
                                                 -----------         -----------
                                       9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

   The statements contained in this Quarterly Report on Form 10-Q that are not
historical facts are "forward-looking statements" (as such term is defined in
the Private Securities Litigation Reform Act of 1995), which can be identified
by the use of forward-looking terminology such as "believes," "expects," "may,"
"estimates," "will," "should," "plans" or "anticipates" or the negative thereof
or other variations thereon or comparable terminology, or by discussions of
strategy. Such statements include, but are not limited to, statements under the
captions "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and elsewhere in this Quarterly Report on Form 10-Q as to
the Company's plans to implement its growth strategy, improve its financial
performance, expand its infrastructure, develop new products and services,
expand its sales force, expand its customer base and enter international
markets. In addition, from time to time, the Company or its representatives have
made or may make forward-looking statements, orally or in writing. Furthermore,
such forward-looking statements may be included in, but are not limited to,
various filings made by the Company with the Securities and Exchange Commission
(the "Commission"), or press releases or oral statements made by or with the
approval of an authorized executive officer of the Company.

   Management wishes to caution the reader that the forward-looking statements
referred to above and contained in this Quarterly Report on Form 10-Q regarding
matters that are not historical facts involve and are based on numerous
assumptions and predictions about future conditions that could prove not to be
accurate. No assurance can be given that the future results will be achieved;
actual events, transactions or results may differ materially as a result of
risks facing the Company. Such risks include, but are not limited to, the
effectiveness of management's strategies and decisions, changes in business
conditions, changes in the telecommunications industry and the general economy,
competition, changes in service offerings and risks associated with the
Company's limited operating history, entry into developing markets, managing
rapid growth, international operations, dependence on effective information
systems, ability to consummate acquisitions or enter into joint ventures with
companies on terms acceptable to the Company and development of its network, as
well as regulatory developments any of which could cause actual results to vary
materially from the future results indicated, expressed or implied, in such
forward-looking statements. No assurance can be given that these are all of the
factors that could cause actual results to vary materially from the
forward-looking statements. Statements with respect to acquisitions and
continued trends are forward-looking and involve risks and uncertainties.
Furthermore, the Company has significant operations in Mexico, subjecting the
Company to certain political and commercial risk. The Company undertakes no
obligation and does not intend to update, revise or otherwise publicly release
the result of any revisions to these forward-looking statements that may be made
to reflect future events or circumstances.

                                     OUTLOOK

   The quarter ended March 31, 1999 furthered the Company's objectives of moving
closer to the customer and enhancing its facilities. Management has been
focusing on the expansion of its retail prepaid calling card brand,
TELEFIESTA(R), as the wholesale long distance business has come under increasing
competitive pressure and contracting margins. As pricing pressures have affected
the international long distance revenues, management has elected to dedicate its
network assets to supporting its retail business due to management's belief that
the retail business has greater long term value. Consequently, management was
not willing to accept wholesale minutes at a loss for the sake of revenues.
Total cards shipped in the first quarter of 1999 were 3.1 million as compared to
2.5 million in the first quarter of 1998, or a 23% increase. The Company also
has been placing greater emphasis on higher margin, recurring revenue business
in its value-added services business in Mexico.

   REVENUES. In the first quarter of 1999, the Company's revenue mix changed
with the retail international long distance constituting a greater percentage of
the Company's international long distance revenues and overall revenues. The
Company expects that retail international long distance, principally through
prepaid calling cards sold in the U.S. and ultimately in Mexico, will contribute
an increasing proportion of its revenues.

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<PAGE>
   The Company provides value-added and systems integration services to private
and public sector customers in Mexico. Revenues are derived from providing
value-added services and the sale of equipment. Overall revenues from this
business declined from the first quarter of 1998 to the first quarter of 1999
but gross margin percentage improved from 30% to 37%. The revenues in this line
of business are subject to economic conditions in Mexico. Revenues in the first
quarter 1999 have softened as a result of weakening economic conditions in
Mexico and due to the Company's decision to eliminate sales of low margin
equipment sales to certain distributors and increase efforts on higher margin,
value-added services.

   With its acquisition of INTERLINK in the second quarter of 1998, the Company
also provides satellite teleport services including voice, video and data
transport services including fractional and full T-1 data broadcast, dedicated
circuits and private line up-link and down-link services Bandwidth-on-Demand,
ISDN videoconferencing and Internet-through-satellite services to the U.S. and
Latin America.

   GROSS PROFIT. The Company experienced pressure on its international long
distance business gross profit percentage and contribution, particularly in its
wholesale business, but experienced an improvement in the gross margin
percentage in its Mexican value-added services business. The Company has not
been able to reduce its termination costs as quickly as prices have declined in
the international long distance business and has relied partially on certain
lower margin outsourcing arrangements to support its prepaid calling cards. The
Company expects that it will be able to lower costs in its international long
distance business as it moves more traffic onto its own prepaid switching
platforms and ultimately upon the completion of its own long distance network in
Mexico. The Company's focus on higher margin business in Mexico is expected to
improve the gross profit percentage for the value added services business in
Mexico.

   OPERATING EXPENSES. With the selection of Lucent Technologies, Inc. to
engineer, furnish and install the Company's long distance network in Mexico, the
Company is moving into a period of significant investment in facilities and
human resources. As a result, the Company expects operating expenses to continue
to increase.

                              RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998

   REVENUES decreased from $33,399,000 in 1998 to $27,019,000 in 1999. This
decrease of $6,380,000, or 19.1%, was due principally to the weakened economic
conditions in Mexico, the Company's decision to reduce sales to distributors of
low margin equipment in Mexico and a decline in the Company's international long
distance revenues. These declines were offset by an increase in revenues from
the Company's outsourcing contracts in Mexico and the incremental sales of the
Company's INTERLINK subsidiary, which was acquired in May 1998. As a result,
value-added services revenues in Mexico decreased $3,770,000 from $7,680,000 in
1998 to $3,910,000 in 1999. Wholesale international long distance revenues
decreased $3,187,000 from $7,581,000 in 1998 to $4,394,000 in 1999. Retail
international long distance revenues decreased $1,324,000 from $18,138,000 in
1998 to $16,814,000 in 1999. These decreases in revenues were offset by
INTERLINK's revenues of $1,901,000. The comparison of retail international long
distance revenues is adversely affected by the accounting treatment which was
accorded the recognition of prepaid calling card revenues during the first
quarter of 1998. Due to the commercial means by which the Company was selling
its prepaid calling cards, revenues were recognized at the time of shipment as
opposed to when the card is used as is the case for revenues recognized during
the first quarter of 1999. In terms of shipments of cards, the Company
experienced an increase of 23%.

   COST OF REVENUES decreased from $28,334,000 in 1998 to $24,104,000 in 1999,
or $4,230,000. The 14.9% decrease in cost of revenues was due principally to the
incremental decrease of revenues offset by the increased costs associated with
the international long distance services. This decrease in cost of revenues was
also offset by the incremental cost of revenues associated with the acquisition
of INTERLINK. The cost of revenues as a percentage of revenues increased from
84.8% to 89.2%, or 4.4%, due principally to the higher cost of

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revenues as a percentage of revenues associated with the Company's international
long distance services. This increase was offset partially by the decrease in
cost of revenues as a percentage of revenues associated with the value added
services business in Mexico.

   SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A") increased from
$2,277,000 in 1998 to $4,222,000 in 1999, or $1,945,000. The 85.4% increase in
SG&A was due to the incremental SG&A related to the acquisition of INTERLINK,
the overhead necessary to support the growth in the Company's call center
operations, increased staffing at existing operations to meet the additional
resource requirements associated with these operations and the increased
staffing associated with the Mexican network build out.

   Overall SG&A as a percentage of revenues increased from 6.8% to 15.6%, or
8.8%, due to the factors stated above.

   DEPRECIATION AND AMORTIZATION increased from $569,000 in 1998 to $1,378,000
in 1999, or $809,000. This increase is due to an increase in goodwill
amortization associated with the acquisitions of Telereunion, MSN and INTERLINK.
In addition, depreciation increased as a result of the Company's continuing
expansion of its communications network, which includes purchases of switches
and other telecommunications equipment and facilities. The Company expects
depreciation expense to increase as it continues to expand its
telecommunications network.

   INTEREST INCOME (EXPENSE), NET increased from ($56,000) in 1998 to ($881,000)
in 1999, or ($825,000). This increase was mainly due to an increase in the
Company's level of borrowings, including notes issued in connection with the
Integracion and MSN acquisitions, and the Deere Park Convertible Debentures and
Gordon Brothers Convertible Debentures issued in connection with the INTERLINK
acquisition.

   The Gordon Brothers Convertible Debentures provide for an "exit fee" which
was paid at the time of the repayment of the Gordon Brothers Convertible
Debentures in May 1999. The Company paid an "exit fee" of $1.1 million of which
$470,000 was accrued during the three months ended March 31, 1999. In addition,
the Company repaid $1.0 million of the Deere Park Convertible Subordinated
Debentures in May 1999. The Company paid an "exit fee" of $120,000 of which
$90,000 was accrued during the three months ended March 31, 1999.

   OTHER INCOME (EXPENSE) increased from $(74,000) in 1998 to $(274,000) in
1999, or $(200,000). The Company recognized a foreign exchange loss of $60,000
in the first quarter of 1999 as compared to a foreign exchange gain of $122,000
in the first quarter of 1998.

   INCOME TAX BENEFIT (EXPENSE) changed from an income tax expense of $(963,000)
in 1998 to an income tax benefit of $976,000 in 1999. The Company's overall
effective tax benefit for the three months ended March 31, 1999, was 25% which
reflect the tax benefits recognized on the losses realized offset by permanent
items, the most significant of which is the non deductible nature of goodwill
amortization.

   NET INCOME (LOSS). The Company experienced net income of $1,114,000 in 1998
as compared to a net loss of $(2,864,000) in 1999 due to a combination of the
factors discussed above.

                         LIQUIDITY AND CAPITAL RESOURCES

   Net cash provided by (used in) operating activities was $626,000 and
$(1,423,000) for the three months ended March 31, 1998 and March 31, 1999,
respectively. The decrease in net cash provided by operations in 1999 as
compared to 1998 was due primarily to decreased revenues and the resulting
decreased gross profits and earnings before depreciation and amortization. In
addition, the Company's working capital position was impacted by increases in
inventory and other assets and a decrease in accounts payable, offset by a
decrease in accounts receivable.

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<PAGE>
   Net cash used in investing activities was $(5,967,000) and $(3,250,000) for
the three months ended March 31, 1998 and March 31, 1999, respectively. For the
three months ended March 31, 1998, the Company expended approximately $3.6
million on purchases of, or deposits on, property and equipment as part of the
Company's network expansion strategy. In addition, the Company acquired MSN for
$2.3 million, net of cash acquired. For the three months ended March 31, 1999,
the Company expended approximately $3.3 million on purchases of property and
equipment as part of the Company's network expansion strategy.

   Net cash provided by (used in) financing activities was $3,489,000 and
$1,144,000 for the three months ended March 31, 1998 and March 31, 1999,
respectively. During the three months ended March 31, 1999, the Company realized
approximately $1.9 million (net of commissions) from the sale of Common Stock.
The Company also made payments of $494,000 on its notes payable and $288,000 on
the line of credit.

   As of March 31, 1999, the Company had cash and cash equivalents of $6,102,000
and negative working capital of $10,642,000.

   In the fourth quarter of 1998, the Company signed a financing arrangement
with a finance company, which provides for funding of equipment purchases of up
to $6.0 million through May 1999. The financing is structured as loans maturing
three years from funding at interest rates 550 basis points above the Federal
Reserve Treasury Constant Maturity Rate. The Company has drawn approximately
$2.0 million in the first quarter of 1999 under this facility.

   On January 11, 1999, the Company signed a financing arrangement with a
finance company, which provides for funding of equipment purchases of up to $7.0
million dollars through December 31, 1999. The financing is structured as loans
maturing four years from funding at interest rates 500 basis points above the 5
year Federal Reserve Treasury Constant Maturity Rate. The Company has drawn
approximately $4.5 million under this facility through May 14, 1999, of which
$2.5 million resulted in refinancing equipment which was previously financed
through an operating lease.

   In the fourth quarter of 1998, the Company entered into a stock purchase
agreement with third parties (the "Stock Purchase Commitment"), which allows the
Company to sell at the Company's option (subject to certain conditions
precedent), up to $5.0 million of the Company's Common Stock. The sale price of
the Common Stock is equal to the average of the previous 5 days closing prices
less a 20% discount. The Company sold 250,000 shares of Common Stock realizing
approximately $1.3 million (net commissions) in the fourth quarter of 1998.
These shares were sold on December 18, 1998, and may not be re-sold by the
purchasers for nine months from such date. In the first quarter of 1999, the
Company sold an additional 296,296 shares of Common Stock, realizing
approximately $1.9 million (net of commissions). These shares were sold on March
15, 1999, and may not be re-sold by the purchasers until July 31, 1999. The
Company has $1.5 million available under the Stock Purchase Commitment, which
expires in June 1999.

   The Company has selected Lucent to engineer, furnish and install the Mexican
Network. In addition, the Company received a commitment from Lucent to provide
the Company with up to $40 million of long term financing, which includes $34
million towards the purchase of Lucent products and services (including
construction of the Mexican Network) and $6 million for repayment of the
Company's current debt obligations.

   On May 7, 1999, the Company issued $6,850,000 in Senior Notes maturing in May
2000. E. Scott Crist, CEO of the Company, is a holder of $1.0 million of the
Senior Notes. The Senior Notes are subject to optional prepayment provisions
allowing the Company to prepay a portion or all of the outstanding principal
amount without premium or penalty. The Senior Notes bear interest at 8% from May
through November 7, 1999. Thereafter, the interest rate increases by 1 percent
for each month after November 7, 1999. The Company also issued to the holders of
the Senior Notes a total of 256,247 warrants with an exercise price of $6.68 per
share and a term of three years. In the event that the Senior Notes are not paid
by November 7, 1999, then the holders

                                       13
<PAGE>
will be issued an additional 256,247 warrants. The proceeds from the Senior
Bridge Notes were utilized to repay the entire principal amount of the Gordon
Brothers Convertible Debentures plus $1.1 million in exit fees.

   In May 1999, the Company also repaid $1.0 million of the Deere Park
Convertible Subordinated Debentures. In connection therewith, the Company paid
an exit fee of $120,000. In addition, Deere Park agreed to extend the fixed
conversion price of $15 per share on the debentures until June 11, 1999.

   The Company's debt at March 31, 1999 totaled $14.0 million resulting in a
debt to equity ratio of 41% as compared to $13.1 million and 38%, respectively,
as of December 31, 1998 and $3.2 million and 14%, respectively, as of December
31, 1997. The new commitment from Lucent will result in long term financing
arrangements, which will significantly increase the Company's leverage. The
Company will need to generate substantial cash flow from operations to satisfy
its principal and interest obligations under these financing arrangements. If
the Company does not generate the cash flow from operations to meet its
principal and interest obligations under these financing arrangements, then the
Company's business and results of operations could be materially adversely
affected.

   The Company estimates that there are an additional $4.5 million in
expenditures related to the Mexican Network which will not be funded through the
Lucent Facility and are expected to be funded over the course of the
installation of the Mexican Network. The Company also anticipates an additional
$11.5 million in capital expenditures to expand its network facilities during
the fiscal 1999 year. The Lucent Facility provides for funding of up to $6
million for repayment of debt obligations. The Company will incur commissions,
commitment fees and other costs in connection with this facility. The Company
does not expect that cash flow from operations will be sufficient to meet these
capital expenditure and debt repayment requirements when they are due.

   In the first quarter of 1999, the Company incurred losses and had negative
cash flow from operations. The Company intends to finance its growth, principal
and interest obligations under existing debt obligations, and additional capital
investments required for its planned facility expansion through cash flow from
operations, vendor financing and the sale of debt or equity securities (or a
combination of both). There can be no assurance that the Company will be able to
generate cash from operations to fund its operations or to fund its capital
expenditures or that the Company will be able to obtain additional financing on
commercially reasonable terms, if at all. If necessary funds are not available,
the Company's business and results of operations and the future expansion of its
business could be materially adversely affected.

RECENT ACCOUNTING PRONOUNCEMENTS

   SFAS No. 133, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES,"
requires companies to recognize all derivatives contracts as either assets or
liabilities in the balance sheet and to measure them at fair value. If certain
conditions are met, a derivative may be specifically designated as a hedge, the
objective of which is to match the timing of gain or loss recognition on the
hedging derivative with the recognition of (i) the changes in the fair value of
the hedged asset or liability that are attributable to the hedged risk or (ii)
the earnings effect of the hedged forecasted transaction. For a derivative not
designated as a hedging instrument, the gain or loss is recognized in income in
the period of change. SFAS No. 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999.

   Historically, the Company has not entered into derivatives contracts either
to hedge existing risks or for speculative purposes. The Company does not expect
adoption of the new standard to have a material effect on its financial
statements.

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<PAGE>
   SOP 98-5, "REPORTING ON THE COSTS OF START-UP ACTIVITIES," requires all
start-up and organizational costs to be expensed as incurred. It also requires
all remaining historically capitalized amounts of these costs existing at the
date of adoption to be expensed and reported as the cumulative effect of a
change in accounting principles. SOP 98-5 is effective for all fiscal years
beginning after December 31, 1998. The adoption of SOP 98-5 did not have a
material effect on its financial statements.

   SFAS No. 135, "RESCISSION OF FINANCIAL ACCOUNTING STANDARDS BOARD NO. 75
("SFAS NO. 75") AND TECHNICAL CORRECTIONS," rescinds SFAS No. 75 and amends
Statement of Financial Accounting Standards Board No. 35. SFAS No. 135 also
amends other existing authoritative literature to make various technical
corrections, clarify meanings, or describe applicability under changed
conditions. SFAS No. 135 is effective for financial statements issued for fiscal
years ending after February 15, 1999. The Company believes that the adoption of
SFAS No. 135 will not have a material effect on its financial statements.

                                  UNCERTAINTIES

   The Company continues to face many risks and uncertainties, including general
and specific market economic risks. The exploitation of the opportunities
presented by the Mexican market are expected to require substantial capital. To
the extent the Company's Mexican subsidiaries do not have a positive net cash
flow from its operations in 1998, it can be expected that the Company would have
to fund any shortfalls from its working capital. In addition, any capital
expenditures needed to expand the operations of the Mexican subsidiaries would
likely be funded out of the working capital of the parent corporation. Any such
fundings would reduce the funds available to finance and expand the Company's
strategy to compete in the international long distance services business. Also,
any economic crises in Mexico could result in the need to fund any cash flow
shortfalls of the Company's Mexican subsidiaries.

   As in any recently deregulated market, drastic changes and adjustments of
regulations or changes in government policies may occur from time to time that
will directly affect the Company. The Company's competitive position in the
telecommunications services and long distance markets depends heavily on the
license granted by the Mexican government. Should this permit be revoked for
whatever reason, the Company would be severely impaired or unable to provide
many of its telecommunications services. In addition, the Company relies on
other carriers to complete the transmission of certain telecommunications
services. To the extent that any of these carriers was to no longer do business
with the Company, the Company would either have to find an alternate source or
not be able to provide those services.

   The international long distance market, although large and rapidly growing,
is also very competitive. The Company competes in this market with companies
that have greater experience and substantially greater resources, both financial
and otherwise. In addition, the Company faces certain additional risks in
competing in this market, including changes in U.S. and foreign government
regulations and telecommunications standards, dependence on strategic partners,
tariffs, taxes and other trade barriers, the potential for nationalization and
economic downturns and political instability in foreign countries. In addition,
the Company could be adversely affected by a reversal in the trend toward
deregulation of telecommunication markets. The Company will be increasingly
exposed to these risks as the Company expands its presence in this market. The
Company's growth in this business is dependent on its ability to expand its
capacity through investments in additional facilities or entering into
termination arrangements with other carriers. There can be no assurance that the
Company will be successful in raising the capital required to fund the
additional facilities or to enter into such arrangements with other carriers, in
which case the Company's operations, the future growth in this business and the
ability to compete effectively against competitors with significantly more
resources could be materially adversely affected.

   The prepaid phone card market represents a new market for the Company. While
the former owners of MSN are currently officers of the Company and continue to
actively manage the prepaid phone card operations, this is a rapidly growing and
very competitive market. As with international long distance services, the

                                       15
<PAGE>
Company will compete in this market with companies that have greater experience
and have substantially greater resources. In addition, the prepaid phone card
industry is subject to extensive U.S. federal and state regulation including the
imposition of various excise taxes and fees, including the "Universal Service
Fund". As with the wholesale international long distance business, the Company's
growth in this business is dependent on its ability to expand its capacity
through investments in additional facilities or entering in partnering
arrangements for outsourcing the telecommunications services related to calls
initiated on the prepaid phone cards it serves. There can be no assurance that
the Company will be successful in raising the capital required to fund the
additional facilities, or in obtaining such partnering arrangements, in which
case the Company's operations, the future growth in this business and the
ability to compete effectively against competitors with significantly more
resources could be materially adversely affected.

   The Company is also pursuing a strategy of growth through selective
acquisitions. However, there can be no assurance that any acquisition will be
completed, that attractive candidates will be identified in the future, that the
Company will be successful in raising the capital to fund such acquisitions, or
that, if completed, any acquisition will be beneficial to the Company.

                              FOREIGN CURRENCY RISK

   The general economic conditions of Mexico are greatly affected by the
fluctuations in exchange rates and inflation. The Company's foreign currency
risk is mitigated in Mexico due to the fact that many of the Company's customers
are multinational firms that transact and pay in U.S. dollars. In addition, most
of the customers that do pay in pesos pay at the spot exchange rate in effect at
the time of payment as opposed to the exchange rate at the time the receivable
is created. The Company's functional currency in Mexico is the U.S. dollar
because the majority of its transactions are in such currency. However, from
time to time the Company transacts in the local currency and thus faces foreign
currency risk with respect to these transactions. U.S.-originated calls will be
paid in U.S. dollars; however, the Company also expects to derive a certain
portion of its revenues from calls originated outside of the U.S. thus exposing
the Company to additional exchange rate risk. In addition, the Company pays its
termination partners in Latin America in their respective local currencies,
exposing the Company to additional exchange rate risk. The Company may choose to
limit its exposure to foreign currency risk through the purchase of forward
foreign exchange contracts or similar hedging strategies. There can be no
assurance that any foreign currency hedging strategy would be successful in
avoiding exchange-related losses.

   The Company does not currently hedge against the risk of foreign exchange
rate fluctuations. See further discussion in Item 3 - Quantitative and
Qualitative Disclosures about Market Risk.

                                 YEAR 2000 PLANS

   A significant percentage of the software that runs most of the computers in
the United States relies on two-digit, rather than four-digit, date codes to
define the applicable year, resulting in date-sensitive software having the
potential inability to interpret date codes properly, misreading "00" for the
year 1900 instead of the year 2000.

   This could result in a system failure or miscalculations causing disruptions
of operations, including, without limitation, a temporary inability to process
transactions, send invoices or engage in similar normal business activities,
which could have material adverse operational and financial consequences.

STATE OF READINESS

   The Company has initiated a comprehensive program to identify, evaluate and
address issues associated with the ability of its information and
non-information technology systems (collectively, "Systems") to properly
recognize the Year 2000 (the "Year 2000 Readiness Program") in order to avoid
interruption of the operation of these Systems and a material adverse effect on
the Company's business, financial position and results of operation as a result
of the century change. The Company has empowered a "Y2K Committee" to manage the

                                       16
<PAGE>
Year 2000 Readiness Program. The Y2K Committee shall also review the Year 2000
compliance efforts of the Company's key vendors and customers and shall
regularly report to and be controlled by the Board of Directors.

   Each of the information technology software programs that the Company
currently uses has either been certified by its respective vendor as Year 2000
compliant or will be replaced with software that is so certified prior to
September 1, 1999. The Company intends to conduct comprehensive tests of all of
its software programs for Year 2000 compliance as part of its Year 2000
Readiness Program. An integral part of the Company's non-information technology
systems, its telecommunications switches, however, may not currently be Year
2000 compliant. The respective vendors of The Company's switches are in the
process of reviewing their switches for Year 2000 readiness. However, there can
be no assurance that such switches are Year 2000 compliant and that The Company
will not experience switch related problems in Year 2000. In addition to other
reasons, the production of accurate and timely customer invoices depends upon
the generation of accurate and timely underlying data by The Company's switches.
The Company does not believe that its other non-information technology systems
will be affected by the Year 2000, but will not know definitively until The
Company tests and evaluates such equipment during the first half of 1999. The
Company believes that all Year 2000 compliance initial testing and any necessary
conversions will be completed by July 1999.

   The Company's computer systems interface with the computers and technology of
many different domestic and international telecommunications companies on a
daily basis. If one of these telecommunication companies should fail or suffer
an adverse effect from a Year 2000 problem, the Company's customers could
experience impairment of services. The Company considers the Year 2000 readiness
of its international customers and vendors of particular importance given the
general concern that the computer systems abroad may not be as prepared as those
in domestic operations to handle the century change. As part of its Year 2000
Readiness Program, The Company intends to contact its key vendors and customers
to ascertain whether the systems used by such third parties are Year 2000
compliant. COSTS

   The Company has not incurred any costs to date to reprogram, replace and test
its Systems for Year 2000 compliance. The Company believes that the costs
associated with its Year 2000 compliance efforts will be incurred during 1999.
The Company is still estimating the costs of the efforts but doesn't expect that
these costs will be significant over the life of the project; though such
expenditures may increase materially following testing of non-information
technology systems and evaluation of the Year 2000 compliance status of integral
third party vendors and customers. Costs incurred in connection with The
Company's Year 2000 compliance efforts will be expensed as incurred, unless new
systems are purchased that should be capitalized in accordance with generally
accepted accounting principals.

   The Company currently anticipates that its Systems will be Year 2000
compliant before January 1, 2000, though no assurances can be given that The
Company's compliance testing will not detect unanticipated Year 2000 compliance
problems that prevent such Year 2000 compliance. Furthermore, a system failure
by any of The Company's significant customers or vendors could have a material
adverse effect on The Company's operations. Because The Company does not yet
know the Year 2000 compliance status of integral third parties, it is currently
unable to assess the likelihood or the risk to The Company of third party system
failures.

RISKS

   The Company believes that a disruption in the operation of its networks,
billing system and financial and accounting systems and/or an inability to
access interconnections with other telecommunications carriers, are the major
risks associated with the inability of its Systems to process Year 2000 data
correctly. The failure of The Company to correct a material Year 2000 problem
could cause an interruption or failure of certain of the Company's normal
business functions or operations and could have a material adverse effect on the
Company's business, financial position and results of operations. In addition,
there could also be a material adverse effect on the Company's business,
financial position and results of operations if the systems of other companies
on 

                                       17
<PAGE>
whose services the Company depends, or with whom the Company's Systems
interface, are not Year 2000 compliant.

   Based upon risk assessment work conducted thus far, the Company believes that
the most reasonably likely worst case scenario of the failure by the Company, or
any integral third party, to resolve Year 2000 issues would be an inability by
the Company (i) to provide telecommunications services to the Company's
customers, (ii) to route and deliver telephone calls originating from or
terminating with other telecommunications carriers for an indeterminable period
of time and (iii) to timely and accurately bill customers. Such worst case
scenario could have a material adverse affect on The Company's business, results
of operations and liquidity. These failures could also result in a loss of
customers due to service interruptions and billing errors, substantial claims by
customers and increased expenses associated with Year 2000 litigation,
stabilization of operations and executing mitigation and contingency plans.
While the Company believes that it is taking appropriate measures to mitigate
these risks, there can be no assurance that such measures will be successful.

CONTINGENCY PLAN

   At this time, The Company does not have a contingency plan. The Company
intends to develop contingency plans to handle Year 2000 system failures
experienced by its Systems and to handle any necessary interactions with the
computers and technology of any integral non-complying third party. This plan is
expected to be completed by September 1, 1999.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

   The Company is subject to financial market risks, including interest rate
risk and foreign currency exchange risk. During the first quarter of 1999, there
were no material changes in financial market risks except for the changes in the
Mexican peso exchange rate to the U.S. dollar as described below.

                           FOREIGN CURRENCY EXCHANGE RISK

   The Company conducts a significant amount of its operations in countries
outside the United States. The Company's foreign currency exchange risk includes
the following:

   In the past years, the Mexican economy has had periods of exchange rate
instability and peso devaluation. The Company's value-added services business is
conducted in Mexico. The majority of the Company's revenues in the value-added
services business are contracted in dollars or in pesos indexed to the dollar at
the time of settlement. The products and services the Company sells in the
value-added services business line are generally imported from the U.S. or other
countries and are payable in dollars. The Company's remaining operating costs in
this segment are generally paid in pesos. The Company's major outsourcing
contracts with the U.S. Embassy and the Ministry of Foreign Affairs generate
revenues which are collected in pesos and costs which are paid in pesos.

   In the satellite teleport services business segment, the Company generally
collects its revenues in U.S. dollars and pays for its costs to provide these
services in U.S. dollars

   In the international long distance business segment, the Company sells it
services to customers in the U.S. and thus its revenues are collected in U.S.
dollars. The Company's costs of providing these services are paid to vendors
both in the U.S. and in Mexico or other Latin American countries. A significant
portion of its costs to provide these services are structured under operating
agreements with carriers in Mexico under which the costs historically have been
settled in pesos. The Company has entered into new, additional agreements with
carriers in Mexico which will provide it with additional termination capacity in
Mexico in 1999. These new arrangements provide for settlement in U.S. dollars.
In periods in which the peso devaluates, this results in a cost reduction to the
Company as it generally extends short credit terms to its customers and has
received extended credit terms from its vendors. In periods when the peso
appreciates, this results in a cost increase to the Company. Over the last
several years, the peso has experienced devaluations in the exchange rates to
the U.S. dollar. In the first quarter of 1999, the peso exchange rate
strengthened from over 10 to 1 to 9.5 to 1 resulting in an increase in the
Company's cost. Due to limited credit availability, the Company has not
historically hedged its peso costs. In the future as the Company's operations in
Mexico increase, the Company's peso denominated transactions may increase
causing the Company to enter into hedging activities as credit availability
allows.

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PART II.    OTHER INFORMATION

ITEM 3. LEGAL PROCEEDINGS

TELSCAPE INTERNATIONAL, INC., TELEREUNION S.A. DE C.V. AND TELEREUNION
INTERNATIONAL S.A. V. MASTEC, INC. AND ACIETEL MEXICANA, S.A. DE C.V.

   In May 1999, Telscape International, Inc., Telereunion S.A. de C.V. and
Telereunion International S.A. (collectively, the "Company") filed a lawsuit
against Mastec, Inc. and Acietel Mexicana, S.A. de C.V. (collectively, the
"Defendants"). The Company has filed a complaint for breach of contract,
negligent misrepresentation and promissory estoppel arising out of an
unconditional commitment letter executed by the Defendants pursuant to which the
Defendants committed to provide the Plaintiffs with financing in the amount of
$17.5 million. The Company has prayed for relief to include damages in the
amount of no less than $10.0 million plus attorney's fees and costs. The lawsuit
is pending in the U.S. District Court for the Southern District of Texas.

ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K

      (a) Exhibits. See Index to Exhibits on page 21.

      (b)   Reports on Form 8-K: NONE

                                       19
<PAGE>
                                   SIGNATURES

      In accordance with the requirements of the Exchange Act, the issuer has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                          Telscape International, Inc.
                                          (Registrant)


Date: May 15, 1999                        By: /s/ E. SCOTT CRIST
                                          E. Scott Crist
                                          CEO and Principal Executive Officer



Date: May 15, 1999                        By: /s/ TODD M. BINET
                                          Todd M. Binet
                                          President, CFO 
                                          Principal Financial Officer


Date: May 15, 1999                        By: /s/ JESSE MORRIS
                                          Jesse Morris
                                          Vice President of Finance, Controller
                                          Principal Accounting Officer


                                       20
<PAGE>
                                INDEX OF EXHIBITS

EXHIBIT NO.                       DESCRIPTION

  1.1       -     Form of Underwriting Agreement between the Company, BT Alex.
                  Brown Incorporated and Lehman Brother Inc. (Incorporated
                  herein by reference to Exhibit 1.1 to the Company's
                  Registration Statement No. 333-60271)

  3.1       -     Articles of Incorporation of the Registrant, as amended (filed
                  as Exhibit 3.1 to the Company's Registration Statement No.
                  33-80542-D and incorporated herein by reference)

  3.2       -     Bylaws of the Registrant, as amended (filed as Exhibit 3.2 to
                  the Company's Registration Statement No. 33-80542-D and
                  incorporated herein by reference)

  3.3       -     Articles of Incorporation of Polish Microwave, Inc. (filed as
                  Exhibit 3.3 to the Company's Registration Statement No.
                  33-80542-D and incorporated herein by reference)

  3.4       -     Bylaws of Polish Microwave, Inc. (filed as Exhibit 3.4 to the
                  Company's Registration Statement No. 33-80542-D and
                  incorporated herein by reference)

  3.5       -     Contract of Limited Liability Company of DTS/ZWUT (filed as
                  Exhibit 3.5 to the Company's Registration Statement No.
                  33-80542-D and incorporated herein by reference)

  4.1       -     Form of Certificate evidencing Common Stock (filed as Exhibit
                  4.1 to the Company's Registration Statement No. 33-80542-D and
                  incorporated herein by reference)

  4.2       -     Form of Warrant Agreement between American Stock Transfer &
                  Trust Company and the Company (filed as Exhibit 4.2 to the
                  Company's Registration Statement No. 33-80542-D and
                  incorporated herein by reference)

  4.3       -     Form of Warrant Certificate evidencing the Warrants (filed as
                  Exhibit 4.3 to the Company's Registration Statement No.
                  33-80542-D and incorporated herein by reference)

  4.4       -     Form of Statement of the establishment of the Series B
                  non-voting, nonparticipating Preferred Stock (filed as Exhibit
                  4.1 to the Company's Report on Form 10-QSB for the quarter
                  ended March 31, 1996 and incorporated herein by reference)

 10.1       -     Form of Representative's Warrants (filed as Exhibit 10.8 to
                  the Company's Registration Statement No. 33-80542-D and
                  incorporated herein by reference)

 10.2       -     Warrant Agreement between the Company and S.P. Krishna Murthy
                  (filed as Exhibit 10.13 to the Company's Report on Form 10-KSB
                  for the year ended December 31, 1995 and incorporated herein
                  by reference)

 10.3       -     Form of Series A Common Stock Warrant (filed as Exhibit 10.4
                  to the Company's Report on Form 10-QSB for the quarter ended
                  March 31, 1996 and incorporated herein by reference)

 10.4       -     Form of Series B Common Stock Warrant (filed as Exhibit 10.5
                  to the Company's Report on Form 10-QSB for the quarter ended
                  March 31, 1996 and incorporated herein by reference)

 10.5       -     Form of Employment Agreement for Manuel Landa, Ricardo Orea
                  Gudino and Oscar Garcia Mora (filed as Exhibit 10.6 to the
                  Company's Report on Form 10-QSB for the quarter ended March
                  31, 1996 and incorporated herein by reference)

 10.6       -     Form of Non-Qualified Stock Option Certificate and Agreement,
                  as amended, for Manuel Landa, Ricardo Orea Gudino and Oscar
                  Garcia Mora (filed as Exhibit 10.7 to the Company's Report on
                  Form 10-QSB for the quarter ended March 31, 1996 and
                  incorporated herein by reference)

 10.7       -     Form of Series A Common Stock Warrant dated May 17, 1996
                  between the Company and Manuel Landa, Ricardo Orea Gudino,
                  Oscar Garcia Mora and Christopher Efird (filed as Exhibit 10.1
                  to the Company's Report on Form 8-K dated June 3, 1996 and
                  incorporated herein by reference)

                                       21
<PAGE>
 10.8       -     Employment Agreement for E. Scott Crist (filed as Exhibit 10.1
                  to the Company's Report on Form 10-QSB for the quarter ended
                  September 30, 1996 and incorporated herein by reference)

 10.9       -     Employment agreement for Todd Binet (filed as Exhibit 10.29 to
                  the Company's Report on Form 10-KSB for the year ended
                  December 31, 1996 and incorporated herein by reference)

 10.10      -     Form of Promissory Note dated July 1, 1997, between
                  Telereunion and Jose Luis Apan Wong, Raul de la Parra Zavala
                  and Alejandro Apan Wong (filed as Exhibit 10.4 to the
                  Company's Current Report on Form 8-K dated August 5, 1997 and
                  incorporated herein by reference)

 10.11      -     Form of Common Stock Warrant dated July 1, 1997, between the
                  Company and Jose Luis Apan Wong, Raul de la Parra Zavala and
                  Alejandro Apan Wong (filed as Exhibit 10.4 to the Company's
                  Current Report on Form 8-K dated August 5, 1997 and
                  incorporated herein by reference)

 10.12      -     Stock Purchase Agreement dated July 1, 1997, by and among
                  the Company, Telscape USA, Inc., Telereunion and Jose Luis
                  Apan Wong, Raul de la Parra Zavala and Alejandro Apan Wong
                  (filed as Exhibit 10.4 to the Company's Current Report on Form
                  8-K dated August 5, 1997 and incorporated herein by reference)

 10.13      -     Stock Purchase Agreement dated October 1, 1997, by and among
                  Telscape USA, Inc., Telereunion, Inc. and Jose Martin Pena
                  Nunez, Carlos Joaquin De Lara Y Campos, Jorge Pena Nunez,
                  Martha Teresita Martin Del Campo Gutierrez (filed as Exhibit
                  10.1 to the Company's Current Report on Form 8-K dated October
                  15, 1997 and incorporated herein by reference)

 10.14      -     Stock Purchase Agreement dated January 22, 1998, by and among
                  the Company; MSN Communications, Inc.; Stuart Newman and
                  Michael Newman, together with Form of Promissory Note dated
                  January 23, 1998 in the principal amount of $375,000 payable
                  to Stuart Newman attached as Exhibit B-1 and Form of
                  Promissory Note dated January 23, 1998 in the principal amount
                  of $375,000 payable to Michael Newman attached as Exhibit B-2
                  (filed as Exhibit 10.1 to the Company's Current Report on Form
                  8-K dated February 6, 1998 and incorporated herein by
                  reference)

 10.15      -     Stock Purchase Agreement dated May 18, 1998, by and among
                  Telscape International, Inc., California Microwave, Inc. and
                  California Microwave Services Divisions, Inc. together with a
                  Form of Supply Agreement between California Microwave, Inc.
                  and California Microwave Services Division, Inc. as Exhibit B
                  (Incorporated herein by reference to Exhibit 10.1 to the
                  Company's Current Report on Form 8-K dated June 9, 1998)

 10.16      -     Securities Purchase Agreement between Deere Park Capital
                  Management, LLC and Telscape International, Inc. dated as of
                  May 1, 1998; Registration Rights Agreement dated as of May 1,
                  1998 between Telscape International, Inc. and Deere Park
                  Capital Management, LLC; Form of Convertible Debenture for
                  $3,000,000 dated May 1, 1998; Form of Stock Purchase Warrant
                  to Purchase 8,952 shares of Common Stock of Telscape
                  International, Inc. dated May 12, 1998 (all filed as Exhibit
                  4.4 to the Company's Report on Form 10Q for the quarter ended
                  March 31, 1998 and incorporated herein by reference)

 10.17      -     Form of Convertible Debenture in the principal amount of
                  $1,000,000 between Deere Park Capital Management, LLC and
                  Telscape International, Inc. dated as of May 28, 1998 and a
                  form of Stock Purchase Warrant to Purchase 2,427 shares of
                  Common Stock of Telscape International, Inc. dated May 28,
                  1998 (Incorporated herein by reference to Exhibit 10.3 to the
                  Company's Current Report on Form 8-K dated June 9, 1998)

 10.18      -     Securities Purchase Agreement dated May 29, 1998 by and
                  between Telscape International, Inc. and Gordon Brothers
                  Capital, LLC; together with a Form of Convertible Debenture in
                  the principal amount of $5,000,000 payable to Gordon Brothers
                  Capital, LLC attached as Exhibit A; a Form of Stock Purchase
                  Warrant for Gordon Brothers, LLC for 12,136 shares of Common
                  Stock of Telscape International, Inc. attached as Exhibit B;
                  and a Registration Rights Agreement by and between Gordon

                                       22
<PAGE>
                  Brothers Capital, LLC and Telscape International, Inc.
                  attached as Exhibit C (Incorporated herein by reference to
                  Exhibit 10.4 to the Company's Current Report on Form 8-K dated
                  June 9, 1998)

 10.19      -     Equity Purchase Agreement by and between INTERLINK
                  Communications Holding Co., Inc. and each of Telscape
                  International, Inc., E. Russell Hardy, Stephen Strohman, Monty
                  J. Moore, and Salvador Giblas dated as of May 19, 1998
                  (Incorporated herein by reference to Exhibit 10.5 to the
                  Company's Current Report on Form 8-K dated June 9, 1998)

 10.20      -     Form of Employment Agreement by and between California
                  Microwave Services Division, Inc. and E. Russell Hardy dated
                  as of May 18, 1998 (Incorporated herein by reference to
                  Exhibit 10.6 to the Company's Current Report on Form 8-K dated
                  June 9, 1998)

 10.21      -     Form of Employment Agreement by and between California
                  Microwave Services Division, Inc. and Stephen Strohman dated
                  as of May 18, 1998 (Incorporated herein by reference to
                  Exhibit 10.7 to the Company's Current Report on Form 8-K dated
                  June 9, 1998)

 10.22      -     Form of Employment Agreement by and between California
                  Microwave Services Division, Inc. and Monty J. Moore dated as
                  of May 18, 1998 (Incorporated herein by reference to Exhibit
                  10.8 to the Company's Current Report on Form 8-K dated June 9,
                  1998)

 10.23      -     Form of Consulting Agreement by and between California
                  Microwave Services Division, Inc. and Salvador Giblas dated as
                  of May 18, 1998 (Incorporated herein by reference to Exhibit
                  10.9 to the Company's Current Report on Form 8-K dated June 9,
                  1998)

 10.24      -     Loan Agreement between Telscape USA, Inc. and MSN
                  Communications, Inc. and Southwest Bank of Texas dated May 19,
                  1998 (Incorporated herein by reference to Exhibit 10.24 to the
                  Company's Registration Statement No. 333-60271)

 10.25      -     Outside Directors Stock Option Plan of the Polish Telephones
                  and Microwave Corporation (Incorporated herein by reference to
                  Exhibit 10.24 to the Company's Registration Statement No.
                  333-60271)

 10.26      -     Form of Financing Agreement by and between the Company and
                  Newbridge Financial Services Networks dated as of December 7,
                  1998 (Incorporated herein by reference to Exhibit 10.26 to the
                  Company's Report on Form 10-K for the year ended December 31,
                  1998)

 10.27      -     Form of Financing Agreement by and between the Company and
                  NTFC Capital Corporation dated as of January 11, 1999
                  (Incorporated herein by reference to Exhibit 10.27 to the
                  Company's Report on Form 10-K for the year ended December 31,
                  1998)

 10.28      -     Form of Securities Purchase Agreement by and between the
                  Company and Kendu Partners and MDNH Partners, L.P. dated as of
                  December 18, 1998, and Exhibit B to this agreement
                  representing the Form of Registration Rights Agreement
                  (Incorporated herein by reference to Exhibit 10.28 to the
                  Company's Report on Form 10-K for the year ended December 31,
                  1998)

*10.29      -     Form of Securities Purchase Agreement by and between Telscape
                  International, Inc., INTERLINK Communications, Inc. and
                  Cahill, Warnock, Strategic Partners Fund, L.P. dated as of May
                  5, 1999, Exhibit A representing the form of the Increasing
                  Rate Secured Promissory Note, Exhibit B representing the form
                  of Warrant, and Exhibit C representing the Security Agreement.

*27.1       -     Financial Data Schedule 1999

  ----------------
 * Filed herewith

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