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

                                   FORM 10-QSB

(Mark One)

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

             For the quarterly period ended September 30, 1997

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

                 For the transition period from ___ to ___

                         COMMISSION FILE NUMBER 33-97876

                            ILLUMINET HOLDINGS, INC.
        (Exact name of small business issuer as specified in its charter)

        Delaware                                              36-4042177
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                            Identification No.)


4501 Intelco Loop, Lacey, Washington                              98503
(Address of principal executive office)                         (Zip code)


                                 (360) 493-6000
                (Issuer's telephone number, including area code)

Check whether the issuer:  (1) filed all reports required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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 past 90 days. Yes \X\   No \_\


At September 30, 1997,  5,330,027  shares of common  stock,  $0.01 per share par
value, and 2,460 shares of Series A convertible preferred stock, $0.01 per share
par value, were outstanding.

Transitional Small Business Disclosure Format (check one):  Yes \_\  No \X\



<PAGE>



                           ILLUMINET HOLDINGS, INC.

                      INDEX TO 10-QSB FOR THE QUARTERLY
                       PERIOD ENDED SEPTEMBER 30, 1997


                                                                      Page

PART I:  FINANCIAL INFORMATION

ITEM 1:  FINANCIAL STATEMENTS

  Illuminet Holdings, Inc. Consolidated Balance Sheet -
     September 30, 1997                                                2

  Illuminet Holdings, Inc. Consolidated Statements of Income -
     Nine months and three months ended September 30, 1997 and 1996    4

  Illuminet Holdings, Inc. Consolidated Statements of Cash Flows -
     Nine months ended September 30, 1997 and 1996                     5

  Notes to Consolidated Financial Statements - September 30, 1997      6

ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS
   OR PLAN OF OPERATIONS                                               8

PART II:  OTHER INFORMATION

ITEM 1:  LEGAL PROCEEDINGS                                            15

ITEM 2:  CHANGES IN SECURITIES                                        15

ITEM 3:  DEFAULTS UPON SENIOR SECURITIES                              15

ITEM 4:  SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS          15

ITEM 5:  OTHER INFORMATION                                            15

ITEM 6:  EXHIBITS AND REPORTS ON FORM 8-K                             15

SIGNATURES                                                            16




<PAGE>





                                    PART I
                            FINANCIAL INFORMATION



ITEM 1:  FINANCIAL STATEMENTS

                           ILLUMINET HOLDINGS, INC.

                          Consolidated Balance Sheet



           ASSETS                                    September 30, 1997
           ------                                    ------------------
Current assets:
   Cash and cash equivalents                            $10,788,694
   Accounts receivable, less allowance
     for doubtful accounts of $839,000                   27,917,659
   Prepaid expenses and other                               523,287
                                                         ----------
     Total current assets                                39,229,640
                                                         ----------
Property and equipment:
   Land                                                     911,765
   Building and leasehold improvements                    6,918,014
   Equipment and furniture                                2,736,443
   Network assets                                        29,384,516
   Capitalized network costs                              8,242,658
   Computer hardware and software                        18,130,362
                                                         ----------
                                                         66,323,758

   Less:  Accumulated depreciation and amortization      31,139,237
                                                         ----------
     Total property and equipment                        35,184,521
                                                         ----------

Computer software product costs, less
   accumulated amortization of $1,083,000                 1,775,960
Other assets, net of accumulated
   amortization of $96,975                                2,678,926
                                                         ----------
Total assets                                            $78,869,047
                                                         ==========


    See accompanying notes to consolidated financial statements.

                                     2


<PAGE>





                           ILLUMINET HOLDINGS, INC.

                    Consolidated Balance Sheet, Continued




LIABILITIES AND SHAREHOLDERS' EQUITY                 September 30, 1997
------------------------------------                 ------------------
Current liabilities:
   Trade accounts payable                              $ 6,553,790
   Accrued expenses                                      2,322,747
   Due to customers                                     20,981,477
   Current portion of long-term debt                     2,268,758
                                                        ----------
     Total current liabilities                          32,126,772
                                                        ----------

Long-term debt, less current portion                    18,751,336
                                                        ----------
Shareholders' equity:
   Illuminet Holdings, Inc. Series A Convertible Preferred
     Stock, par value $.01 per share, authorized 4,416
     shares, issued and outstanding 2,460                       25
   Illuminet Holdings, Inc. Preferred Stock, par value $.01
     per share, authorized 95,584 shares, none issued
     or outstanding                                              -
   Illuminet Holdings, Inc. Common Stock, par value $.01
     per share, authorized 12,000,000 shares, issued and
     outstanding 5,330,027                                  53,300
   Additional paid-in capital                           11,295,565
   Retained earnings                                    16,642,049
                                                        ----------
     Total shareholders' equity                         27,990,939
                                                        ----------
Total liabilities and shareholders' equity             $78,869,047
                                                        ==========


         See accompanying notes to consolidated financial statements.

                                     3


<PAGE>





                           ILLUMINET HOLDINGS, INC.

                      Consolidated Statements of Income



                             Three Months Ended           Nine Months Ended
                                September 30,               September 30,
                              1997         1996          1997         1996
                              ----         ----          ----         ----

Revenues                  $14,454,941   $11,464,336  $38,840,032   $27,827,910
                           ----------    ----------   ----------    ----------
Expenses:
   Operating                3,307,890     2,600,475    9,221,910     7,233,698
   Selling, general
     and administrative     2,504,615     2,188,914    7,211,516     6,160,592
   Depreciation and
     amortization           1,562,177     1,670,436    4,656,918     4,367,816
   Network operating
     expenses               4,361,778     2,625,708   11,147,604     6,480,217
   Corporate realignment            -             -            -       350,067
                           ----------    ----------   ----------    ----------
Total expenses             11,736,460     9,085,533   32,237,948    24,592,390
                           ----------    ----------   ----------    ----------

Operating income            2,718,481     2,378,803    6,602,084     3,235,520

Interest income               190,192       121,542      451,129       331,399
Interest expense             (400,236)     (362,688)  (1,161,066)    (920,765)
                           ----------    ----------   ----------    ----------
Income before income
   taxes                    2,508,437     2,137,657    5,892,147     2,646,154

Income tax expense             52,531             -      120,205             -
                           ----------    ----------   ----------    ----------
Net income                $ 2,455,906   $ 2,137,657  $ 5,771,942 $   2,646,154
                           ==========    ==========   ==========    ==========
Weighted average
   common shares            5,287,478     5,161,152    5,278,504     4,847,019
                           ==========    ==========   ==========    ==========
Primary earnings per
   common share           $       .46   $      0.41  $      1.09   $      0.55
                           ==========    ==========   ==========    ==========
Fully diluted earnings
   per common share       $       .40   $      0.38  $       .96   $      0.55
                           ==========    ==========   ==========    ==========





         See accompanying notes to consolidated financial statements.

                                     4


<PAGE>





<PAGE>  
                           ILLUMINET HOLDINGS, INC.

                    Consolidated Statements of Cash Flows

                                                         Nine Months Ended
                                                           September 30,
                                                        1997           1996
                                                        ----           ----

Cash flows from operating activities:

   Cash received from customers                    $128,325,872   $114,617,300
   Interest received                                    443,528        332,479
   Cash paid to customers, suppliers
     and employees                                 (120,169,277)  (103,139,122)
   Income taxes paid                                   (196,500)           -
   Income tax refund                                          -        173,795
   Interest paid                                     (1,485,389)    (1,034,555)
                                                    -----------    -----------
     Net cash provided by operating activities        6,918,234     10,949,897
                                                    -----------    -----------

Cash flows from investing activities:

   Cash acquired in acquisition of Independent
     Telecommunications Network, Inc.                         -        613,086
   Investment in Authentix, Inc.                              -       (650,000)
   Capital expenditures                              (7,143,545)    (4,623,228)
                                                    -----------    -----------
     Net cash used by investing activities           (7,143,545)    (4,660,142)
                                                    -----------    -----------
Cash flows from financing activities:

   Principal payments on notes payable               (1,364,343)      (881,400)
   Payments to dissenting stockholders                 (136,159)    (1,198,695)
                                                    -----------    -----------
     Net cash used by financing activities           (1,500,502)    (2,080,095)
                                                    -----------    -----------

Net increase(decrease)in cash and cash equivalents   (1,725,813)     4,209,660

Cash and cash equivalents at:

   Beginning of year                                 12,514,507      6,992,206
                                                    -----------    -----------
   End of period                                   $ 10,788,694   $ 11,201,866
                                                    ===========    ===========



         See accompanying notes to consolidated financial statements.

                                     5


<PAGE>



(1)  BASIS OF PRESENTATION

The consolidated financial statements of Illuminet Holdings,  Inc.(formerly USTN
Holdings,  Inc.), and its wholly-owned subsidiary Illuminet,  Inc.,(collectively
referred to as  "ILLUMINET")  presented  in this Form 10-QSB are  unaudited  and
reflect,  in the opinion of  management,  all  adjustments  (consisting  only of
normal recurring  adjustments)  necessary for a fair presentation of ILLUMINET's
financial position, results of its operations and its cash flows for each period
presented.  Certain  information and footnote  disclosures  normally included in
financial  statements  prepared in accordance with generally accepted accounting
principles have been condensed or omitted  pursuant to the rules and regulations
of  the  Securities  and  Exchange  Commission.   ILLUMINET  believes  that  the
disclosures made are adequate to make the information  presented not misleading.
The results of the  interim  periods are not  necessarily  indicative  of future
results.  These consolidated  financial statements should be read in conjunction
with the  consolidated  financial  statements and the notes thereto  included in
ILLUMINET's latest annual report on FORM 10-KSB.

(2)  EARNINGS PER COMMON SHARE

Earnings  per share is  computed  using the  weighted  average  number of common
shares and dilutive  common share  equivalents  outstanding  during each period.
Other potentially dilutive securities include Illuminet Holdings,  Inc. Series A
Preferred Stock and convertible  redeemable  subordinated  debentures,  which if
dilutive, are included in the calculation of fully diluted earnings per share.

In February 1997, the Financial  Accounting Standards Board issued Statement No.
128, "Earnings Per Share", which is required to be adopted on December 31, 1997.
At that time,  ILLUMINET will be required to change the method currently used to
compute  earnings  per share and to  restate  all prior  periods.  The impact of
Statement 128 on the calculation of primary and fully diluted earnings per share
for the nine month and three month periods ended  September 30, 1997 and 1996 is
not expected to be material.

(3)  ACQUISITION

ILLUMINET  was  incorporated  for the  purpose of  effecting  the merger of U.S.
Intelco  Holdings,  Inc.  ("U.S.  Intelco") and  Independent  Telecommunications
Network,   Inc.  ("ITN")  that  was  consummated  effective  February  23,  1996
("Merger").  The Merger was accounted for as a purchase business  combination in
accordance  with generally  accepted  accounting  principles  with U.S.  Intelco
designated  as the  acquiring  company.  The  results  of ITN's  operations  are
included in the consolidated financial statements prospectively from the date of
the Merger.


<PAGE>






Assuming  that the  acquisition  of ITN had  taken  place on  January  1,  1996,
unaudited pro forma results of operations  from  continuing  operations  for the
nine months ended September 30, 1996 would have been as follows:

     Revenues                                       $31,637,137
                                                     ==========
     Net income                                     $ 2,559,674
                                                     ==========
     Income per common share                        $      0.50
                                                     ==========






<PAGE>


ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

BASIS OF PRESENTATION

Illuminet  Holdings,  Inc. (formerly USTN Holdings,  Inc.), and its wholly-owned
subsidiary  Illuminet,  Inc.,  (collectively  referred to as  "ILLUMINET")  were
incorporated in the State of Delaware on August 2, 1995, to effect the merger of
U.S. Intelco Holdings, Inc. ("U.S. Intelco") and Independent  Telecommunications
Network,  Inc. ("ITN"). In accordance with terms of the merger, U.S. Intelco and
ITN merged with and into USTN Services,  Inc. ("USTN  Services") on February 23,
1996 (the "Merger").  USTN Services  subsequently changed its name to Illuminet,
Inc. The Merger was accounted for as a purchase  business  combination with U.S.
Intelco designated as the acquiring company. The results of ITN's operations are
included in the consolidated financial statements prospectively from the date of
the Merger. The pro forma information presented in this Management's  Discussion
and Analysis or Plan of  Operations  reflects the  combined  activities  of U.S.
Intelco and ITN as if the Merger had occurred effective January 1, 1996.

RESULTS OF OPERATIONS

Nine months Ended September 30, 1997 and 1996

REVENUES.  The following table summarizes ILLUMINET's services and the effect of
the Merger on ILLUMINET revenues:


                                                               Change
                              1997         1996             $          %
                              ----         ----            ---        ---
Billing-and-collection
 services                 $ 5,107,064   $ 6,371,354  $(1,264,290)   (20%)
Data base services          6,586,817     5,504,887    1,081,930     20%
Network usage measurement   2,548,200       521,632    2,026,568    389%
Other services                107,013       723,058     (616,045)   (85%)
                           ----------    ----------   ----------     ---
                           14,349,094    13,120,931    1,228,163      9%
                           ----------    ----------   ----------     ---
Services acquired by Merger:
---------------------------
Intelligent network
 services                  20,486,351    15,799,884    4,686,467     30%
Wireless services           4,004,587     2,716,322    1,288,265     47%
                           ----------    ----------   ----------     ---
                           24,490,938    18,516,206    5,974,732     32%
                           ----------    ----------   ----------     ---
Pro forma revenue          38,840,032    31,637,137    7,202,895     23%
Financial statement
 reporting adjustment
 for operations prior
 to the Merger                      -    (3,809,227)   3,809,227    100%
                           ----------    ----------   ----------     ---
Revenues per statements
 of income                $38,840,032   $27,827,910  $11,012,122     40%
                           ==========    ==========   ==========     ===



Billing-and-collection  services  revenues  for 1997  decreased  primarily  as a
result of a $1,356,429, or 26%, decrease in clearinghouse product line revenues.
This  decrease  reflects a fourth  quarter  1996 price  decrease  offset by a 9%
increase  in messages  processed  from 49.7  million in 1996 to 54.3  million in
1997,  due to the  addition of a large  customer in the second  quarter of 1996.
Although  clearinghouse  volumes in 1997 are higher than in 1996,  revenues  are
expected to remain below 1996 levels due to the price decrease described above.

Data base  services  revenues  increased,  primarily  reflecting  an increase in
Calling Name Delivery  ("CNAM") product line revenues.  CNAM revenues  increased
$1,057,765,  or 271%,  in 1997,  reflecting  growing  market  acceptance  of the
service  introduced in 1995.  CNAM queries  increased  147% from 81.6 million in
1996 to 201.5 million in 1997.

Network usage  measurement  revenues  derived from the sale of  ILLUMINET's  SS7
network  traffic  tracking  and  measurement   software   products   AMAT7(R)and
CDR7(R)increased in 1997 due to finalization of sales during the period. Network
usage  measurement  product  sales have a long sales cycle with each  individual
sale normally contributing significant revenue to the product line.

Other  services  revenues   decreased   primarily  due  to  the  termination  of
ILLUMINET's  contract  to  provide  voice  messaging  services  for the State of
Washington in September,  1996. Voice messaging contributed revenues of $548,520
for the 1996 period.

Intelligent  network services revenues for 1997 increased  primarily as a result
of a  $2,979,560,  or 90%,  increase  in trunk  signaling  and  related  service
revenues,  reflecting new customer  growth.  Network  connectivity  product line
revenues increased $2,022,063, or 35%, from growth in chargeable customer links.
Offsetting the revenue growth in these product lines,  LIDB switch and transport
revenues  decreased  $586,157,  or 19%, in 1997 due to lower  query  volumes and
reduced prices brought on by competition.

Wireless  services  revenue  increased  primarily  due to a  $958,163,  or  39%,
increase  in 1997 in  cellular  switch  and  transport  revenues.  The  increase
reflects  customer growth and increased  utilization of the network with message
volumes increasing 91% from 872.9 million for the 1996 period to 1,666.2 million
for the comparable 1997 period.

EXPENSES.  The following table summarizes ILLUMINET's expenses and the effect of
the Merger on ILLUMINET expenses: 

                                                              Change
                              1997         1996             $         %
                              ----         ----            ---       ---
Operating                 $ 9,221,910   $ 7,589,499  $ 1,632,411     22%
Selling, general
 and administrative         7,211,516     6,998,285      213,231      3%
Depreciation and
 amortization               4,656,918     4,816,765     (159,847)    (3%)
Network operating          11,147,604     8,185,646    2,961,958     36%
Corporate realignment               -       700,875     (700,875)  (100%)
                           ----------    ----------   ----------     ---
Pro forma expenses         32,237,948    28,291,070    3,946,878     14%
Financial statement
 reporting adjustment
 for operations prior
 to the Merger                      -    (3,698,680)   3,698,680    100%
                           ----------    ----------   ----------     ---
Expenses per statements
 of income                $32,237,948   $24,592,390  $ 7,645,558     31%
                           ==========    ==========   ==========     ===

ILLUMINET's  primary costs are network operating  expenses,  which are primarily
comprised of leased  network  connectivity  charges  incurred to  establish  and
maintain  customer  connectivity  to the  company's  Signaling  System 7 ("SS7")
network, followed by personnel costs, depreciation and amortization of hardware,
software and facilities assets, and software maintenance expenses.

Operating  expenses increased in 1997 primarily to support the increased use and
expansion of  Illuminet's  SS7 network.  The  increase was  comprised  mainly of
higher personnel  expenses related to new positions,  and increased  maintenance
costs for new hardware and software.

Selling,  general and administrative  expenses increased from 1996 levels due to
higher personnel  expenses related to new positions,  increased travel expenses,
and new  marketing  material  costs  related to  increased  sales and  marketing
efforts.

Depreciation and amortization expenses were comparable for 1996 and 1997 but are
expected to increase with the placing into service of new network equipment.

Network   operating   expenses   increased  due  to  increased   leased  network
connectivity,  link, and LATA access charges  incurred to support  increased use
and expansion of, and customer connectivity to, the SS7 network.

Corporate   realignment  expenses  were  comprised  primarily  of  non-recurring
Merger-related severance expenses incurred in the first quarter of 1996.

INTEREST INCOME/INTEREST EXPENSE. Interest income increased by $119,730, or 36%,
from  $331,399 for the 1996 period to $451,129 for the  comparable  1997 period.
This increase  resulted  primarily  from an increase in available  cash balances
over the two periods resulting from the Merger.

On a pro forma  basis,  interest  income  increased by  $102,325,  or 29%,  from
$348,804 for the 1996 period to $451,129 for the 1997 period.

Interest expense increased  $240,301,  or 26%, from $920,765 for the 1996 period
to $1,161,066 for the comparable 1997 period.  The increase  reflects two months
of combined  interest  expense  resulting from the Merger and a higher aggregate
outstanding  debt  balance  resulting  from an  additional  loan  for a total of
approximately $2.7 million obtained from Rural Telephone Finance  Cooperative in
December, 1996.

On a pro forma  basis,  interest  expense was  comparable  for the 1996 and 1997
periods.

INCOME TAXES.  ILLUMINET has Federal income tax net operating loss carryforwards
available  to offset  future  taxable  income for  Federal  income tax  purposes
totaling  $20,964,492.  These carryforwards  expire in various amounts from 2006
through  2011.   ILLUMINET's   ability  to  utilize  such  net  operating   loss
carryforwards is dependent on ILLUMINET's ability to generate sufficient taxable
income from its  operations.  The current  1997 tax  provision  is  comprised of
Federal  alternative minimum taxes which cannot be completely offset by tax loss
carryforwards.



EARNINGS

ILLUMINET's net income  increased  $3,125,788,  or 118%, from $2,646,154 for the
nine months ended  September  30, 1996, to $5,771,942  for the  comparable  1997
period.   This  increase   primarily  reflects  an  increase  in  network  usage
measurement  revenues,  the effect of non-recurring  corporate realignment costs
incurred during the 1996 period,  and the impact of the post-Merger  operational
efficiencies that have reduced costs as a percentage of revenues.

On a pro forma basis, ILLUMINET's net income increased $3,212,268, or 125%, from
$2,559,674  for the nine months ended  September 30, 1996, to $5,771,942 for the
comparable 1997 period primarily  resulting from positive revenue trends and the
completion of the Merger in 1996.

ILLUMINET believes that it will continue to have positive earnings in the future
through new product and  customer  diversification  and  expansion  into related
telecommunications markets. ILLUMINET anticipates that increased expenditures in
the  development  of services and products  will  continue over the next several
years.  While it is anticipated  that the existing primary services and products
will continue to be profitable,  overall  profitability  in the immediate future
could be negatively impacted by delays in obtaining new product revenues coupled
with  related  increases  in new  product  start-up  costs.  A general  downward
pressure on price caused by increased  competition  may also  negatively  impact
profitability.

Three Months Ended September 30, 1997 and 1996

REVENUES.  The following table summarizes revenues for ILLUMINET's services:

                                                               Change
                              1997         1996             $          %
                              ----         ----            ---        ---
Billing-and-collection
 services                 $ 1,477,697   $ 2,148,910    $(671,213)   (31%)
Data base services          2,436,313     1,974,693      461,620     23%
Network usage measurement     851,495       521,632      329,863     63%
Other services                 20,626       180,237     (159,611)   (89%)
                           ----------    ----------    ---------     ---
                            4,786,131     4,825,472      (39,341)    (1%)
                           ----------    ----------    ---------     ---
Services acquired by Merger:
---------------------------
Intelligent network
 services                   8,003,876     5,408,223    2,595,653     48%
Wireless services           1,664,934     1,230,641      434,293     35%
                           ----------    ----------    ---------     ---
                            9,668,810     6,638,864    3,029,946     46%
                           ----------    ----------    ---------     ---
Revenues per statements
 of income                $14,454,941   $11,464,336   $2,990,605     26%
                           ==========    ==========    =========     ===

Billing-and-collection  services  revenues  for 1997  decreased  primarily  as a
result of a $702,445,  or 39%, decrease in clearinghouse  product line revenues.
This decrease reflects a fourth quarter 1996 price decrease.  Messages processed
were comparable for the two periods.

Data base services revenues increased,  reflecting an increase in CNAM revenues.
CNAM revenues increased  $484,707,  or 241%, in 1997,  reflecting growing market
acceptance of the service  introduced in 1995. CNAM queries  increased 134% from
34.1 million in 1996 to 79.7 million in 1997.

Network usage  measurement  revenues  derived from the sale of  ILLUMINET's  SS7
network  traffic  tracking  and  measurement   software   products   AMAT7(R)and
CDR7(R)increased in 1997 due to finalization of sales during the period. Network
usage measurement  product sales have long sales cycle with each individual sale
normally contributing significant revenue to the product line.

Other  services  revenues   decreased   primarily  due  to  the  termination  of
ILLUMINET's  contract  to  provide  voice  messaging  services  for the State of
Washington in September,  1996. Voice messaging contributed revenues of $134,815
for the 1996 period.

Intelligent  network services revenues for 1997 increased  primarily as a result
of a  $1,329,018,  or 113%,  increase in trunk  signaling  and  related  service
revenues,  reflecting new customer  growth.  Network  connectivity  product line
revenues increased $1,472,171, or 78%, from growth in chargeable customer links.

Wireless  services  revenue  increased  primarily  due to a  $247,947,  or  24%,
increase  in 1997 in  cellular  switch  and  transport  revenues.  The  increase
reflects  customer growth and increased  utilization of the network with message
volumes  increasing  79% from 399.9 million for the 1996 period to 714.8 million
for the comparable 1997 period.


EXPENSES. The following table summarizes ILLUMINET's expenses:
                                                               Change
                              1997         1996             $         %
                              ----         ----            ---       ---
Operating                 $ 3,307,890    $2,600,475   $  707,415     27%
Selling, general
 and administrative         2,504,615     2,188,914      315,701     14%
Depreciation and
 amortization               1,562,177     1,670,436     (108,259)    (6%)
Network operating           4,361,778     2,625,708    1,736,070     66%
                           ----------     ---------    ---------     ---
Expenses per statements
 of income                $11,736,460    $9,085,533   $2,650,927     29%
                           ==========     =========    =========     ===


Operating  expenses  increased  primarily  to  support  the  increased  use  and
expansion of  Illuminet's  SS7 network.  The increase was comprised of increased
personnel expenses related to new positions, and increased maintenance costs for
new hardware and software.

Selling,  general and administrative  expenses increased from 1996 levels due to
higher personnel  expenses related to new positions,  increased travel expenses,
and new  marketing  material  costs  related to  increased  sales and  marketing
efforts.

Depreciation and amortization expenses were comparable for 1996 and 1997 but are
expected to increase with the placing into service of new network equipment.

Network   operating   expenses   increased  due  to  increased   leased  network
connectivity,  link, and LATA access charges  incurred to support  increased use
and expansion of, and customer connectivity to, the SS7 network.

INTEREST INCOME/INTEREST EXPENSE.  Interest income increased by $68,650, or 56%,
from $121,542 for the three months ended September 30, 1996, to $190,192 for the
comparable  1997 period.  This increase  resulted  primarily from an increase in
available cash balances over the two periods resulting from the Merger.

Interest expense increased  $37,548,  or 10%, from $362,688 for the three months
ended September 30, 1996 to $400,236 for the 1997 period.  The increase reflects
a higher aggregate  outstanding  debt balance  resulting from an additional loan
for a total of approximately  $2.7 million obtained from Rural Telephone Finance
Cooperative in December, 1996.

EARNINGS

ILLUMINET's net income increased $318,249, or 15%, from $2,137,657 for the three
months ended  September 30, 1996, to $2,455,906 for the comparable  1997 period.
This  increase  primarily  reflects  an increase  in network  usage  measurement
revenues, and the impact of the post-Merger  operational  efficiencies that have
reduced costs as a percentage of revenues.

FORWARD LOOKING INFORMATION

ILLUMINET is including the following cautionary statement to make applicable and
take  advantage of the new "safe harbor"  provisions  of the Private  Securities
Litigation  Reform Act of 1995 for any  forward-looking  statement made by or on
behalf of, ILLUMINET.  The factors  identified in this cautionary  statement are
important factors (but not necessarily all of the important  factors) that could
cause  actual  results  to  differ   materially  from  those  expressed  in  any
forward-looking statement made by, or on behalf of, ILLUMINET.

Where any such forward-looking statement includes a statement of the assumptions
or basis underlying such  forward-looking  statement,  ILLUMINET  cautions that,
while it believes such  assumptions  or basis to be reasonable and makes them in
good faith,  assumed facts or basis almost always vary from actual results,  and
the  differences  between  assumed  facts or basis  and  actual  results  can be
material,  depending  upon  the  circumstances.  Where,  in any  forward-looking
statement,  ILLUMINET, or its management,  expresses an expectation or belief as
to future  results,  such  expectation  or belief is expressed in good faith and
believed to have a  reasonable  basis,  but there can be no  assurance  that the
statement of expectation or belief will result or be achieved or accomplished.

Taking into account the  foregoing,  the following  are  identified as important
factors  that  could  cause  actual  results  to differ  materially  from  those
expressed in any forward-looking statement made by, or on behalf of, ILLUMINET:

a) Future  operating  results  will be  affected by the costs of  continuing  to
develop and expand  ILLUMINET's  business  which may be higher than  ILLUMINET's
expectations,  and ILLUMINET may be required to raise  additional  capital or to
borrow  funds to  complete  such  activities.  There  can be no  assurance  that
additional  funding  will be  available  if  such  funding  requirements  exceed
existing financing arrangements.

b) ILLUMINET's advanced data base, billing and collection,  and network services
are offered  directly by other  companies or groups of companies,  many of which
are  significantly  larger and better financed than ILLUMINET.  Future operating
results  will be  affected  by  ILLUMINET's  ability  to adjust  to  competitive
pressures impacting ILLUMINET's market acceptance or prices.

c)  Many  of  ILLUMINET's  customers  are  regulated  directly  by  the  Federal
Communications Commission or other state public utility commissions.  Changes in
regulations,   or  in  interpretation  of  existing   regulations,   may  affect
ILLUMINET's current or planned product and service offerings.

d) ILLUMINET's SS7 network traffic  tracking and measurement  software  products
were developed under ILLUMINET's patents in the United States and Canada. Future
operating results are subject to unforeseen events such as the cost, or failure,
to defend the validity of such patents.

LIQUIDITY AND CAPITAL RESOURCES

ILLUMINET  relies on a combination of cash generated from  operations,  debt and
equity  to  fund  service  development  and  expansion  activities.   Currently,
ILLUMINET's operating activities are generating positive cash flows. However, as
ILLUMINET   broadens  its  services  and  products  to  those  requiring  larger
investments   coupled  with  longer  periods  before  subsequent   revenues  are
generated,  ILLUMINET believes there may be increased pressure on cash generated
from operations.  ILLUMINET  anticipates  continued high levels of investment in
the  development  of new services and  products  over the next several  years as
ILLUMINET  processes  increased volumes relating to its network,  data base, and
billing-and-collection services, and broadens its product base to keep pace with
changing markets and customer needs.

ILLUMINET's  working  capital  (current  assets minus current  liabilities)  was
$7,102,868  as of  September  30,  1997.  ILLUMINET's  cash and cash  equivalent
balances included  $4,682,000 required as working capital to service ILLUMINET's
clearinghouse  customers.  Such funds are  received  and  disbursed on a monthly
basis.  The  increase  in  working  capital of  $2,440,642  from  $4,662,226  at
September 30, 1996,  reflects the increase in accounts receivable from increased
revenue  and  ILLUMINET's  growing  volumes in the  clearinghouse  program,  and
reductions in liabilities  assumed in the Merger.  These  positive  changes were
offset by  increased  payables  related  to  ILLUMINET's  growing  clearinghouse
program, and the increased current portion of long-term debt. ILLUMINET believes
that its  existing  cash  balances,  funds  generated  from its  operations  and
borrowings  available under its existing credit agreements will be sufficient to
meet existing  capital  expenditure  and working capital needs for the immediate
future.

ILLUMINET's expenditures for property and equipment were $7,143,545 for the nine
months ended  September 30, 1997.  Expenditures  for property and equipment were
primarily for network equipment.

At September 30, 1997,  ILLUMINET had a secured line of credit expiring  August,
2001, with RTFC that permits ILLUMINET to borrow up to $7,300,000, not to exceed
80% of accounts receivable.  There were no borrowings against the line of credit
at  September  30, 1997.  Additionally  at September  30,  1997,  ILLUMINET  had
$5,188,007  of unused  loan  facilities  established  or  committed  with  RTFC,
maturing in the years 2000 and 2001.


<PAGE>





                                   PART II
                              OTHER INFORMATION

ITEM 1:  LEGAL PROCEEDINGS
            None

ITEM 2:  CHANGES IN SECURITIES
            None

ITEM 3:  DEFAULTS UPON SENIOR SECURITIES
            Not applicable

ITEM 4:  SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
            None

ITEM 5:  OTHER INFORMATION
            None

ITEM 6:  EXHIBITS AND REPORTS ON FORM 8-K
         (a) EXHIBITS REQUIRED TO BE FILED BY ITEM 601
             OF REGULATION S-B
             Exhibit 11 - Computation of Earnings Per Share
             Exhibit 27 - Financial Data Schedule

         (b) REPORTS ON FORM 8-K
             No  reports on Form 8-K were filed  during  the three  months ended
             September 30, 1997.



<PAGE>





                                  SIGNATURES

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

                                    ILLUMINET HOLDINGS, INC.



Date:  November 7, 1997             By:  /s/ Daniel E. Weiss        
                                         -----------------------------------
                                    Daniel E. Weiss, Vice President - Finance
                                    and Treasurer
                                    (Principal Accounting Officer)