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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q


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

                  For the quarterly period ended March 31, 1997

                                       OR

                ( ) TRANSITION REPORT UNDER SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                           Commission File No. 1-10588


                                INTELLICALL, INC.
             (Exact name of registrant as specified in its charter)

           Delaware                                      75-1993841
(State or other jurisdiction of          (I.R.S. Employer Identification number)
 incorporation or organization)

                            2155 Chenault, Suite 410
                              Carrollton, TX 75006
                    (Address of Principal Executive Offices)

                                 (972) 416-0022
              (Registrant's telephone number, including area code)


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

         Yes   X                                                       No

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

                                                                Outstanding at
               Class                                              May 12,1997
Common Stock $.01 par value                                        9,292,931
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<PAGE>




INDEX

INTELLICALL, INC.

Part I.    Financial Information

  Item 1.  Consolidated Financial Statements

           Consolidated Balance Sheets at March 31, 1997
           (Unaudited) and December 31, 1996..................................1

           Consolidated  Statements of  Operations  for each of the three
           month periods ended March 31, 1997 and 1996
           (Unaudited)........................................................2

           Consolidated  Statements  of Cash  Flows for each of the three
           month periods ended March 31, 1997 and 1996
           (Unaudited)........................................................3

           Notes to Consolidated Financial Statements.........................4

  Item 2.  Management's Discussion and Analysis of Financial Condition and
           Results of Operations..............................................9

Part II.   Other Information

  Item 6.  Exhibits and Reports on Form 8-K..................................13

Signatures...................................................................14











<PAGE>



Part I.  Financial Information
     Item 1.  Consolidated Financial Statements

INTELLICALL, INC.
       CONSOLIDATED BALANCE SHEETS
       (in thousands, except share amounts)
<TABLE>
<CAPTION>
                                                March 31, 1997      December 31, 1996
                                                --------------      -----------------
                                                 (Unaudited)
<S>                                                <C>                  <C>   
ASSETS
Current assets:
      Restricted cash                              $     17             $     15
      Cash and cash equivalents                       2,421                2,271
      Receivables, net                               20,935               22,499
      Inventories                                     8,394                7,902
      Other current assets                            1,538                1,684
                                                   --------             --------

      Total current assets                           33,305               34,371

Fixed assets, net                                     1,999                1,964
Notes receivable, net                                 1,422                  992
Intangible assets, net                                  906                  928
Capitalized software costs, net                       4,824                4,904
Other assets, net                                     2,336                2,095
                                                   --------             --------
                                                   $ 44,792              $45,254
                                                    =======              =======

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
      Accounts payable                              $  7,189           $   6,064
      Dealer payable                                   3,670               3,737
      Deferred debit card revenue                        815               1,028
      Accrued liabilities                              1,396               1,451
      Current portion of long-term debt                   85                  85
                                                   ---------            --------

      Total current liabilities                       13,155              12,365

Long-term debt                                        18,454              19,312
Deferred revenue                                         244                 595
Other liabilities                                        200                 200
Minority Interest                                        132                 113
                                                    --------            --------

      Total liabilities                               32,185              32,585
                                                    --------            --------

Stockholders' equity:
  Preferred stock, $.01 par value; 1,000,000
      shares authorized; none issued                      --                  --
  Common stock, $.01 par value; 20,000,000
      shares authorized; 9,317,839 and 8,646,278
      shares issued, respectively                         93                  87
  Additional capital                                  53,260              51,602
  Less common stock in treasury, at cost;
      24,908 shares                                     (258)               (258)
  Accumulated deficit                                (40,488)            (38,762)
                                                    --------             -------
      Total stockholders' equity                      12,607              12,669
                                                    --------             -------
                                                    $ 44,792            $ 45,254
                                                    ========            =========

See notes to consolidated financial statements.
</TABLE>

                                      - 1 -

<PAGE>



INTELLICALL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                     THREE MONTHS ENDED
                                                          MARCH 31,
                                                1997                    1996
                                                ----                    ----
<S>                                          <C>                     <C>  
Revenues and sales:
         Service revenues                    $  19,882               $  12,979
         Equipment sales                         3,272                   4,251
                                               -------                 -------
                                                23,154                  17,230
                                               -------                 -------

Cost of revenues and sales:
         Service revenues                       17,887                  11,131
         Equipment sales                         3,617                   3,669
                                               -------                 -------
                                                21,504                  14,800
                                               -------                 -------

Gross profit
         Service revenues                        1,995                   1,848
         Equipment sales                          (345)                    582
                                                ------                 -------
                                                 1,650                   2,430

Selling, general and administrative expenses     2,630                   2,536
Provision for doubtful accounts                    104                      81
Research and development expenses                  119                     140
                                               -------                 -------

Operating loss                                  (1,203)                   (327)

Interest income                                     96                     101
Interest expense                                  (600)                   (772)
Minority interest                                  (19)                     --
                                               -------                 -------

Net loss                                    $   (1,726)              $    (998)
                                            ==========               =========

Net loss per common and common 
     equivalent share                       $    (.19)               $    (.13)
                                            ---------                ---------

Weighted average number of common and common
equivalent shares outstanding                   9,001                   7,684
                                            =========                ========


See notes to consolidated financial statements.
</TABLE>

                                      - 2 -

<PAGE>



INTELLICALL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)

<TABLE>
<CAPTION>
                                                                              THREE MONTHS ENDED
                                                                                 MARCH 31,
                                                                          1997                   1996                              
                                                                          ----                   ----                             
<S>                                                                   <C>                     <C>  
Operating Activities:
   Net loss                                                           $  (1,726)              $   (998)

   Adjustments  to  reconcile  net loss to 
     net cash  provided by operating activities:
     Depreciation and amortization                                          992                    966
     Provision for doubtful accounts                                        104                     81
     Provision for inventory                                                 --                     18
     Minority interest in income of ILD                                      19                     --

     Changes in operating assets and liabilities:
       Restricted cash                                                       (2)                   482
       Receivables                                                        1,150                   (189)
       Inventories                                                         (492)                  (297)
       Other current assets                                                 125                   (536)
       License fee receivable                                                59                    218
       Investment in sales type leases                                       70                    353
       Notes receivable                                                    (263)                   635
       Accounts payable                                                   1,058                    745
       Accrued liabilities                                                 (268)                  (145)
       Deferred revenues                                                   (351)                   (87)
       Other                                                                121                   (719)
                                                                        -------                -------

Net cash provided by operating activities                                   596                    527

Investing activities:
         Purchase of equipment                                             (250)                  (180)
         Capitalized software                                              (475)                  (500)
                                                                        -------                ------- 

Net cash used in investing activities                                      (725)                  (680)

Financing activities:
         Proceeds from borrowings on long-term debt                          66                     --
         Principal payments on long-term debt                               (21)                  (129)
         Proceeds from issuance of stock under stock option plans           234                     17
                                                                        -------                -------

Net cash provided by (used in) financing activities                         279                   (112)

Net increase (decrease) in cash and cash equivalents                        150                   (265)
Cash and cash equivalents at beginning of period                          2,271                    613
                                                                        -------                -------

Cash and cash equivalents at end of period                            $   2,421              $     348
                                                                      =========              =========

Supplemental cash flow information:
         Interest paid                                                $    323               $     507
                                                                      ========               =========

Supplemental non cash information:
         Conversion of debt to equity                                 $    945               $      --
                                                                      ========               =========

See notes to consolidated financial statements.
</TABLE>

                                      - 3 -

<PAGE>


                                INTELLICALL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE 1 - CERTAIN ACCOUNTING POLICIES

     Basis of Presentation.  The accompanying  consolidated financial statements
of  Intellicall,  Inc. (the "Company") have been prepared in accordance with the
requirements of Form 10-Q and do not include all disclosures  normally  required
by generally  accepted  accounting  principles or those  normally made in annual
reports on Form 10-K. In management's  opinion, all adjustments  necessary for a
fair  presentation  of the results of operations for the periods shown have been
made and are of a normal and recurring nature.

     The results of  operations  for the three months ended March 31, 1997,  are
not necessarily  indicative of the results of operations for the full year 1997.
The consolidated  financial statements herein should be read in conjunction with
the  consolidated  financial  statements  and  notes  thereto  included  in  the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.

     Statement  Presentation.  Certain prior year amounts have been reclassified
to conform to current year presentation.

     Software  Development  Costs. The Company  capitalizes costs related to the
development  of certain  software  products.  In  accordance  with  Statement of
Financial  Accounting  Standards  No. 86,  capitalization  of costs  begins when
technological  feasibility  has been  established  and ends when the  product is
available  for  general  release to  customers.  Amortization  is computed on an
individual  product basis based on the products'  estimated  economic life using
the straight line method, not to exceed four years.

     The amounts of software  development costs capitalized in the first quarter
of 1997 and 1996 were $475,000 and $500,000,  respectively. The Company recorded
$555,000  and  $380,000 of software  amortization  expense for the three  months
ended March 31, 1997 and 1996, respectively.

     Cash  and  Cash  Equivalents.  For  purposes  of  the  balance  sheets  and
statements of cash flows,  cash and cash equivalents  include  short-term liquid
investments purchased with remaining maturities of three months or less.

     Earnings per Share:  In February 1997, the Financial  Accounting  Standards
Board issued FAS No. 128, Earnings per Share ("FAS 128"), which is effective for
financial  statements  issued  for  periods  ending  after  December  15,  1997,
including interim periods.  Effective  December 31, 1997, the Company will adopt
FAS 128, which establishes standards

                                      - 4 -

<PAGE>


                                INTELLICALL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




for  computing  and  presenting  earnings  per share (EPS).  The  statement
requires  dual  presentation  of basic and diluted EPS on the face of the income
statement  for  entities  with  complex   capital   structures  and  requires  a
reconciliation  of the numerator and denominator of the basic EPS computation to
the numerator and denominator of the diluted EPS computation. Basic EPS excludes
the effect of  potentially  dilutive  securities  while diluted EPS reflects the
potential  dilution that would occur if  securities or other  contracts to issue
common  stock were  exercised,  converted  into or resulted  in the  issuance of
common  stock that then  shared in the  earnings  of the  entity.  For the three
months ended March 31, 1997 and 1996,  calculated basic and diluted earnings per
share equals earnings per share shown on the face of the consolidated statements
of operations.

     Other.  The allowance  for doubtful  accounts was $3.3 million at March 31,
1997, and $3.2 million at December 31, 1996.




                                      - 5 -

<PAGE>


                                INTELLICALL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE 2 - LONG-TERM DEBT AND LINE OF CREDIT

     As of March 31, 1997 and December 31, 1996, the Company's debt consisted of
the following (in thousands):
<TABLE>
<CAPTION>
                                                                         March 31,         December 31,
                                                                           1997                1996
                                                                           ----                ----
<S>                                                                     <C>                <C>
Intellicall, Inc.
         8% Convertible subordinated notes, due 2000                    $   3,215          $    4,160
         8% Convertible subordinated notes, due 2001                        5,000               5,000
         Convertible subordinated note, due 1999                            1,000               1,000
         Asset-based note collateralized by certain assets, due 1999        6,928               6,862
         Installment note, due 1998                                            92                 113
                                                                         --------            --------
                                                                           16,235              17,135
         Less unamortized debt discount                                      (626)               (660)
                                                                         --------            --------
                                                                           15,609              16,475
                                                                         --------            --------
ILD Communications, Inc.
         Senior secured debt, due 2001                                      2,000               2,000
         Convertible subordinated notes, due 2001                           1,000               1,000
                                                                          -------            --------
                                                                            3,000               3,000
         Less unamortized debt discount                                       (70)                (78)
                                                                          -------            --------
                                                                            2,930               2,922
                                                                          -------            --------

              Total debt                                                   18,539              19,397

         Less: Current portion of long-term debt                              (85)                (85)
                                                                          -------            --------
              Total long-term debt                                      $  18,454          $   19,312
                                                                        =========          ==========
</TABLE>


     On February 15, 1994 the Company issued a $1.0 million, 10.0%, convertible,
subordinated note to T.J. Berthel Investments,  L.P., which controls 8.9% of the
Company's  outstanding common stock. Interest is payable quarterly and commenced
March 31, 1994. The entire  principal amount matures on March 31, 1999. The note
may be converted by the holder into 160,000 shares of the Company's common stock
at any time.

     On December 29, 1995 the Company completed the sale of $7.5 million of 8.0%
convertible  subordinated notes, due December 31, 2000, to Banca Del Gottardo in
Lugano,  Switzerland.  The notes were issued with  warrants to purchase  300,000
shares of the Company's  Common Stock $.01 par value (the "Common  Stock").  The
notes are convertible  into 1,785,714  shares of the Company's Common Stock at a
price of $4.20 per share. As of March 31, 1997, $4.3

                                      - 6 -

<PAGE>


                                INTELLICALL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




million of the Banca Del Gottardo Notes were converted into 1,020,232  shares of
the Company's Common Stock. Interest is payable semi-annually and commenced June
30, 1996.

     On  May  10,  1996  a  majority-owned   subsidiary  of  the  Company,   ILD
Communications,  Inc.  ("ILD")  completed  the  sale of $1.0  million  of  10.0%
convertible  subordinated notes, due May 10, 2001, to Triad-ILD  Partners,  L.P.
and  Morris   Telecommunications,   LLC  in  the  amounts  of  $666,666.67   and
$333,333.33,  respectively.  The notes can be  converted  at the rate of one (1)
share of common stock of ILD for each $90.00 of  principal  then due the holder.
Also issued with the notes was a warrant to purchase  6,000 shares at $90.00 per
share. Interest is paid quarterly.

     On May 10,  1996 ILD  issued  Secured  Promissory  Notes  in the  aggregate
principal amount of $2.0 million with warrants to purchase an aggregate of 7,239
shares  of ILD  common  stock at a price  of $0.01  per  share.  Sirrom  Capital
Corporation  purchased  a note in the  original  amount of $1.5  million  with a
warrant  to  purchase  5,429  shares of common  stock and Reedy  River  Ventures
Limited  Partnership  purchased a note in the original amount of $500,000 with a
warrant to purchase  1,810 shares of common stock at a price of $0.01 per share.
The notes are  payable  on May 10,  2001 and bear  interest  at 13.5%  annually.
Interest is paid quarterly.

     On November 22, 1996 the Company completed the sale of $5.0 million of 8.0%
convertible  subordinated notes, due November 22, 2001, to Banca Del Gottardo in
Lugano,  Switzerland.  The notes were issued with  warrants to purchase  200,000
shares  of the  Company's  Common  Stock at  $5.00  per  share.  The  notes  are
convertible  into one million shares of the Company's Common Stock at a price of
$5.00 per share. Interest is payable semi-annually beginning May 1997.

     On November 22, 1996 the Company entered into a Loan and Security Agreement
(the "Loan Agreement") with Finova Capital  Corporation  ("Finova")  pursuant to
which Finova agreed to loan the Company up to $12,000,000  (the "Loan") based on
an available  borrowing  base.  The borrowing  base  consists  primarily of call
traffic and trade equipment receivables,  and inventory,  subject to eligibility
requirements  determined by Finova. Amounts loaned subject to the borrowing base
are determined by percentages established in the Loan Agreement,  but are within
the  discretion  of Finova.  Such  percentages  are  subject to change  based on
experience  and  Finova's   expectations   regarding  future  collectibility  of
receivables and usage of inventory.

     The Loan is  evidenced  by a Secured  Revolving  Credit  Note (the  "Note")
payable to the order of Finova.  Borrowings  under the Loan bear interest at the
rate of prime plus 1.75%.

                                      - 7 -

<PAGE>


                                INTELLICALL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




The interest rate may be decreased  prospectively  by up to 0.5% based on future
profitability of the Company. The Company used the proceeds from the Finova Loan
and Gottardo  Notes (net of placement  fees of $509,406) to repay the  remaining
balance of its Series A Notes due to Nomura Holding  America,  Inc in the amount
of $12.7  million.  Also the Loan has an unused line fee equal to one quarter of
one percent  (0.25%) per annum of the unused portion of the Total Facility and a
facility fee equal to one-half of one percent (0.50%) per annum of the amount of
the  Total  Facility  payable  on the first  anniversary  of the  Agreement  and
annually thereafter.

     The initial term of the Loan Agreement is three years at which time, unless
extended,  all  amounts  then  outstanding  must be repaid.  The Loan  Agreement
contains prepayment  penalties in the event it is terminated prior to expiration
of its initial  term.  The Loan is secured by first and prior liens and security
interests encumbering substantially all of the assets of the Company,  including
inventory,  equipment, accounts receivable, general intangibles,  trademarks and
tradenames.  The Loan  Agreement  contains  various  restrictions  (including  a
prohibition   against  the  payment  of   dividends,   limitations   on  capital
expenditures,  and restrictions on investments) and financial ratio  maintenance
requirements (including minimum working capital and net worth requirements).  As
of March 31, 1997 the Company was in compliance with all required covenants.


NOTE 3 - INVENTORY

     As of March  31,  1997 and  December  31,  1996,  the  Company's  inventory
consisted of the following (in thousands):
                                              March 31,         December 31,
                                                1997               1996
                                                ----               ----

         Raw materials                      $     3,551         $    4,850
         Work-in-process                          2,614                511
         Finished goods                           2,229              2,541
                                               --------           --------
              Total inventory               $     8,394         $    7,902
                                            ===========         ==========




                                      - 8 -

<PAGE>


                                INTELLICALL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE 4 - LITIGATION

     In April 1997,  U.S. Long Distance,  Inc.  ("USLDI") filed a Second Amended
Complaint against the Company. The case is pending in the United States District
Court for the Western District in San Antonio, Texas. The complaint seeks actual
damages of $4.0 million, exemplary damages, attorney's fees and interest for the
Company's  alleged  tortious  interference  of USLDI's  existing and prospective
contractual  relationships with PhoneTel Technologies,  Inc.  ("PhoneTel").  The
Second  Amended   Complaint   alleges  the  Company  and  its  then  subsidiary,
Intellicall Operator Services, Inc. interfered with USLDI's existing contractual
relationship  with  PhoneTel,  another  defendant,  when  PhoneTel  executed  an
operator  services  agreement with the Company and its  subsidiary.  The Company
intends to vigorously  contest the  allegations  contained in the Second Amended
Complaint.




                                      - 9 -

<PAGE>



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

Forward-Looking Statements - Cautionary Statements

     This Form 10-Q contains  certain  "forward-looking  statements"  within the
meaning  of  Section  27A of  the  Securities  Act  of  1933,  as  amended  (the
"Securities  Act"),  and Section 21E of the Securities  Exchange Act of 1934, as
amended (the "Exchange Act"). Specifically, all statements other than statements
of historical  facts included in this report  regarding the Company's  financial
position,  business  strategy  and plans and  objectives  of  management  of the
Company   for  future   operations   are   forward-looking   statements.   These
forward-looking statements are based on the beliefs of the Company's management,
as well  as  assumptions  made by and  information  currently  available  to the
Company's  management.  When  used  in  this  report,  the  words  "anticipate,"
"believe,"  "estimate,"  "expect,"  and "intend" and words or phrases of similar
import,  as they relate to the Company or Company  management,  are  intended to
identify forward-looking statements. Such statements reflect the current view of
the  Company  with   respect  to  future   events  and  are  subject  to  risks,
uncertainties  and  assumptions  related to various factors  including,  without
limitation,   competitive  factors,   general  economic   conditions,   customer
relations,   relationships   with  vendors,   the  interest  rate   environment,
governmental regulation and supervision,  seasonality, product introductions and
acceptance, technological change, changes in industry practices described herein
(the "cautionary statements") and one-time events. Although the Company believes
that   expectations  are  reasonable,   it  can  give  no  assurance  that  such
expectations will prove to be correct.  Based upon changing  conditions,  should
any one or more of these  risks or  uncertainties  materialize,  or  should  any
underlying assumptions prove incorrect,  actual results may vary materially from
those  described  herein  as  anticipated,   believed,  estimated,  expected  or
intended.   All   subsequent   written  and  oral   forward-looking   statements
attributable  to the  Company  or persons  acting on its  behalf  are  expressly
qualified in their entirety by the applicable cautionary statements.


Financial Condition

Liquidity and Capital Resources

     During the three months ended March 31, 1997 the Company generated $596,000
of cash from operations including changes in assets and liabilities. The Company
invested  $250,000 in capital  equipment  and  $475,000 in software  and product
development.  Borrowings  under the Company's  asset based note  agreement  with
Finova increased  $66,000.  The net result of such changes described above was a
$150,000 increase in cash and cash equivalents.

     The net effect of  changes  in  operating  assets  and  liabilities  was an
increase in cash of $1.2 million.  The primary  factors  affecting these changes
were a decrease  in accounts  receivable  of $1.15  million,  and an increase in
accounts  payable  of $1.0  million  during  the first  quarter of 1997 from the
balance due at December  31, 1996.  The  reduction  in accounts  receivable  was
principally the result of the seasonal decline in call traffic revenues from the
fourth  quarter of 1996 to the first  quarter of 1997.  An increase in inventory
balances and a


                                     - 10 -

<PAGE>



decline in certain accrued  expenses and deferred  revenue  partially offset the
changes in accounts receivable and accounts payable.

     The  outstanding  balance under the Company's 8%  convertible  subordinated
notes,  due 2000 declined  $945,000 from the conversion into common stock by the
holders of such amount of the notes.  Such  conversion had no effect on the cash
position of the Company.

     Absent the changes in operating  assets and  liabilities  and proceeds from
financing  activities,  the  Company  showed  a  decline  in  cash  balances  of
approximately  $1.3 million for the first quarter of 1997. The Company's  future
liquidity will depend on spending levels,  working capital turnover,  the volume
and timing of equipment sales and gross margins. There can be no assurances that
the Company's efforts to maintain or enhance liquidity will be successful,  and,
under  certain  circumstances,   the  Company  may  be  required  to  limit  its
operations,  dispose of certain assets,  consider the sale of additional equity,
or take other actions as considered necessary.


Results of Operations

     Service  Revenues.  Service  revenues for the first quarter ended March 31,
1997 increased $6.9 million to $19.9 million,  compared to $13.0 million for the
same  period in 1996.  The table below  provides a detailed  analysis of service
revenues by type for the quarters ended March 31, 1997 and 1996.

                                                         Three Months Ended
                                                              March 31,
                                                        1997             1996
                                                        ----             ----

     Call traffic revenue........................     $11,057            $9,022
     Long-distance resale........................       1,108               824
     Operator services...........................       6,330             2,335
     Prepaid calling services....................       1,387               798
                                                      -------           -------
                                                      $19,882           $12,979
                                                      =======           =======

     Call traffic revenues were $2.0 million higher in the first quarter of 1997
compared to the first quarter of 1996. The increase  reflects a higher number of
pay  telephones   utilizing  the  "Intelli*Star"   automated  operator  services
technology  from 57,669 to 61,986 and an increase in the volume of call revenues
processed under the Company's  "Jail*Star"  inmate services  program.  Partially
offsetting  increases from the higher base of reporting  phones was a decline in
the number of calls processed per payphone.

     Long-distance revenues were $284,000 higher in the three months ended March
31, 1997 compared to the three months ended March 31, 1996.  The revenue  growth
resulted from a greater number of customers purchasing long-distance services in
1997.

     Operator service revenues increased $4.0 million for the three months ended
March 31, 1997 compared to the same three month period in 1996.  The addition of
a significant new

                                     - 11 -

<PAGE>



customer  in April of 1996  resulted  in revenue of $1.9  million  for the three
months  ended March 31,  1997.  On April 1, 1996 the Company  entered into a new
operating  arrangement with its third party operator service  provider.  The new
agreement  contractually  changes  the  methods  by which the  Company  receives
payment for call traffic and pays for services  rendered.  Based on the terms of
the new contract,  beginning April 1, 1996 the Company began recording  operator
services call traffic at its gross amount,  and recording the costs for services
provided as cost of sales. The Company believes the new contractual arrangements
warrant  the gross  presentation  of  revenues.  The effect of the change on the
first  quarter  of 1997 was to  increase  reported  revenue  approximately  $2.5
million.

     Gross  profits  from  services  were $2.0  million or 10.0% of the  related
revenues for the three months ended March 31, 1997.  Percentage gross profits in
1996 were 14.2% of related revenues.  The decline in gross profit percentages is
primarily  the result of the higher  number of inmate  services  customers  upon
which the Company earns a lower profit  margin.  In addition,  the change in the
arrangement  for  operator  services  caused a decline  in  percentage  profits,
although absolute values remained consistent.

     Equipment Sales.  The Company's  equipment sales were $3.3 million and $4.3
million in the three  months  ended March 31, 1997 and 1996,  respectively.  The
following  table presents an analysis of sales to the Company's  primary markets
(in thousands):

                                                       Three Months Ended
                                                            March 31,
                                                     1997               1996
                                                     ----               ----

     Independent payphone providers..........     $ 3,245              $ 3,087
     International...........................          17                  867
     Regulated...............................          10                  297
                                                  -------              -------
       Total equipment sales.................     $ 3,272              $ 4,251
                                                  =======              =======

     The  decline  in  equipment  sales  is  principally  attributable  to lower
international  shipments  in the first  quarter  of 1997  compared  to the first
quarter  of 1996  partially  offset  by  higher  sales to  independent  payphone
providers.   The  improvement  in  independent  payphone  provider  sales  is  a
reflection  of  customer  acceptance  of  AstraTel  2,  the  Company's  recently
introduced line- powered phone.

     Gross loss from equipment  sales was $345,000  (10.5% of related sales) for
the three  months ended March 31, 1997 as compared to a gross profit of $582,000
(13.7% of related sales) for the three months ended March 31, 1996. The negative
gross  margin is  attributable  to low sales  volume and high  sales  discounts.
Compared  with the first  quarter of 1996,  the  deterioration  in gross  margin
resulted from an unfavorable sales mix, the decline in sales volume, an increase
in software  amortization  expense and lower prices  obtained  from sales of the
Company's older product lines.

     Selling,  General  and  Administrative   Expenses.   Selling,  general  and
administrative  expenses increased  approximately  $94,000, for the three months
ended March 31, 1997 from the same period ended March 31, 1996. Selling, general
and administrative expenses of growth

                                     - 12 -

<PAGE>



segments of the Company's  business,  principally  ILD and prepaid  calling
services rose by $159,000. Other SG&A expenses declined by $65,000.

     Research  and  Development  Expenses.   Gross  spending  for  research  and
development  decreased  $46,000 for the three months  ended March 31,  1997,  as
compared to the same period in 1996. In the first  quarter of 1997,  the Company
capitalized  software  development  costs of $475,000 as compared to $500,000 in
the first quarter of 1996.

     Provision  for Doubtful  Accounts.  During the quarter ended March 31, 1997
the Company  reserved  $104,000 for doubtful  accounts as compared to $81,000 in
the same quarter in 1996.

Part II.         Other Information

Item 1.          Legal Proceedings

     In April 1997,  U.S. Long Distance,  Inc.  ("USLDI") filed a Second Amended
Complaint against the Company. The case is pending in the United States District
Court for the Western District in San Antonio, Texas. The complaint seeks actual
damages of $4.0 million, exemplary damages, attorney's fees and interest for the
Company's  alleged  tortious  interference  of USLDI's  existing and prospective
contractual  relationships with PhoneTel Technologies,  Inc.  ("PhoneTel").  The
Second  Amended   Complaint   alleges  the  Company  and  its  then  subsidiary,
Intellicall Operator Services, Inc. interfered with USLDI's existing contractual
relationship  with  PhoneTel,  another  defendant,  when  PhoneTel  executed  an
operator  services  agreement with the Company and its  subsidiary.  The Company
intends to vigorously  contest the  allegations  contained in the Second Amended
Complaint.

Item 6.           Exhibits and Reports on Form 8-K

        (a)      Exhibits: None

        (b)      Reports on Form 8-K:  None.




                                     - 13 -

<PAGE>


Signatures

        Pursuant to the requirements of the Securities  Exchange Act of 1934, as
amended,  the  Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.


                                                              INTELLICALL, INC.



                                                            /s/ William O. Hunt
                                           Chairman of the Board, President and
                                                        Chief Executive Officer



                                                          /s/ Michael H. Barnes
                                          Senior Vice President Corporate Staff
                                                    and Chief Financial Officer
                                                  (principal financial officer)



Date:   May 15, 1997

                                     - 14 -