FORM 10-Q

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


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


                 For the Quarterly Period Ended: March 31, 1998

                                       or

              [ ] Transition Report Pursuant to Section 13 or 15(d)
                     Of the Securities Exchange Act of 1934

                         Commission File Number: 0-16479
       

                         PEOPLES TELEPHONE COMPANY, INC.
                         -------------------------------
             (Exact name of registrant as specified in its charter)


                      NEW YORK                             13-2626435 
                      --------                             ----------
            (State or other jurisdiction of             (I.R.S. Employer
             incorporation or organization)                I.D. No.) 

                 2300 NORTHWEST 89TH PLACE, MIAMI, FLORIDA 33172
               (Address of principal executive offices) (Zip Code)
 
                                 (305) 593-9667
                                 --------------
              (Registrant's telephone number, including area code)

                              --------------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes X No

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest  practicable  date. Common Stock, $.01 Par Value,
outstanding at May 5, 1998: 16,212,434 shares.


<PAGE>
<TABLE>
<CAPTION>
Part I.  FINANCIAL INFORMATION
Item 1.  FINANCIAL STATEMENTS

                         PEOPLES TELEPHONE COMPANY, INC.
                           CONSOLIDATED BALANCE SHEET
                      (in thousands, except per share data)

                                                                      March 31,    December 31,
              Assets                                                    1998           1997    
                                                                      ---------    -----------    
<S>                                                                  <C>          <C>
                                                                     (Unaudited)
Current assets:
  Cash and cash equivalents .......................................   $   3,939    $  22,834
  Restricted cash .................................................         920          920
  Accounts receivable, net of allowance for doubtful accounts
     of $5,117 in 1998 and $4,936 in 1997 .........................      17,742       17,061
  Inventory .......................................................       2,386        2,125
  Prepaid expenses  and other current assets ......................       2,501        2,631
                                                                      ---------    -----------    
      Total current assets ........................................      27,488       45,571

Property and equipment, net .......................................      50,951       48,237
Location contracts, net ...........................................      23,624       23,936
Intangible assets, net ............................................         815          824
Goodwill, net .....................................................       9,358        4,084
Deferred income taxes .............................................       3,407        3,407
Other assets, net .................................................       5,277        5,258
                                                                      ---------    -----------    
     Total assets .................................................   $ 120,920    $ 131,317
                                                                      =========    ===========
           Liabilities and Shareholders' Equity

Current liabilities:
  Notes payable and current maturities of long-term debt ..........   $     362    $     634
  Current portion of obligations under capital leases .............         470          536
  Accounts payable and accrued expenses ...........................      19,307       22,722
  Accrued interest payable ........................................       2,541        5,702
  Income and other taxes payable ..................................       3,021        2,844
                                                                      ---------    -----------    
     Total current liabilities ....................................      25,701       32,438

Notes payable and long-term debt ..................................     100,000      100,000
Obligations under capital leases ..................................         500          275
                                                                      ---------    -----------    
     Total liabilities ............................................     126,201      132,713
                                                                      ---------    -----------    
Commitments and contingencies .....................................        --           --   

Redeemable Preferred Stock:
  Cumulative convertible preferred stock; Series C, $.01 par
       value; 160 shares authorized; 150 shares issued and
       outstanding, $100 per share liquidation value ..............      13,751       13,711
  Preferred stock dividends payable ...............................       2,835        2,573
                                                                      ---------    -----------    
      Total preferred stock .......................................      16,586       16,284
                                                                      ---------    -----------    
Common shareholders' deficit:
  Preferred stock; $.01 par value; 4,240 shares authorized;  none
     issued and outstanding .......................................        --           --   
  Convertible preferred stock; Series B, $.01 par value;
    600 shares  authorized; none issued and outstanding ...........        --           --   
  Common stock; $.01 par value; 75,000 shares authorized;
      16,212 shares in 1998 and 16,209 shares  in 1997 issued
      and  outstanding ............................................         162          162
  Capital in excess of par value ..................................      58,996       59,291
  Accumulated deficit .............................................     (79,128)     (75,108)
  Accumulated other comprehensive loss ............................      (1,897)      (2,025)
                                                                      ---------    -----------    
     Total common shareholders' deficit ...........................     (21,867)     (17,680)
                                                                      ---------    -----------    
     Total liabilities less shareholders' deficit .................   $ 120,920    $ 131,317
                                                                      =========    ===========
</TABLE>

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


                                       2
<PAGE>
<TABLE>
<CAPTION>
                         PEOPLES TELEPHONE COMPANY, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                (unaudited, in thousands, except per share data)


                                                     For the three months ended
                                                              March 31,
                                                     --------------------------
                                                        1998            1997 
                                                     ----------      ----------
<S>                                                 <C>             <C>
Revenues:
  Coin calls .....................................   $   19,253      $   17,940
  Non-coin calls .................................        8,641          10,111
                                                     ----------      ----------
     Total revenues ..............................       27,894          28,051

Costs and expenses:
  Telephone charges ..............................        7,298           7,413
  Commissions ....................................        7,829           7,566
  Field service and collection ...................        5,077           4,746
  Depreciation and amortization ..................        5,478           5,256
  Selling, general and administrative ............        3,002           2,935
                                                     ----------      ----------
      Total costs and expenses ...................       28,684          27,916
                                                     ----------      ----------
  Operating (loss) income ........................         (790)            135

Other (income) and expenses:
   Interest expense, net .........................        3,230           3,348
                                                     ----------      ----------
Loss from continuing operations 
  before income taxes ............................       (4,020)         (3,213)
Income taxes .....................................         --              --   
                                                     ----------      ----------
Loss from continuing operations ..................       (4,020)         (3,213)

Loss from discontinued operations ................         --              (685)
                                                     ----------      ----------
Net loss .........................................   $   (4,020)     $   (3,898)
                                                     ==========      ==========
Earnings per share (basic and diluted):
   Loss from continuing operations ...............   $    (0.27)     $    (0.22)
   Loss from discontinued operations .............         --             (0.04)
                                                     ----------      ----------
     Net loss ....................................   $    (0.27)     $    (0.26)
                                                     ==========      ==========
Weighted average common shares outstanding .......       16,212          16,195
                                                     ==========      ==========
</TABLE>

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


                                       3
<PAGE>
<TABLE>
<CAPTION>
                         PEOPLES TELEPHONE COMPANY, INC.
                      STATEMENTS OF CONSOLIDATED CASH FLOWS
                            (unaudited, in thousands)

                                                                For the three months ended
                                                                         March 31,
                                                                --------------------------
                                                                  1998             1997
                                                                ---------        ---------
<S>                                                            <C>              <C>
Cash flows from operating activities
 Net loss ..................................................    $ (4,020)        $ (3,898)
 Adjustments to reconcile net loss to net cash used in
     operating activities:
 Depreciation and amortization .............................       5,478            5,256
 Amortization of deferred financing costs ..................         196              285
 Changes in operating assets and liabilities:
     Accounts receivable ...................................        (681)          (5,162)
     Inventory .............................................          11               48
     Prepaid expenses and other current assets .............         130              (53)
     Other assets ..........................................         (87)          (1,107)
     Accounts payable and accrued expenses .................      (3,415)           1,909
     Accrued interest payable ..............................      (3,161)          (3,065)
     Income and other taxes payable ........................         177             (420)
     Net effect of discontinued operations and assets
       held for sale .......................................         --               578
                                                                ---------        ---------
 Net cash used in operating activities .....................      (5,372)          (5,629)

Cash flows from investing activities
 Property and equipment additions ..........................        (786)            (418)
 Proceeds from sale of assets ..............................         --               233
 Payments for acquisition of Indiana Telcom assets .........     (11,317)             --   
 Payments for certain contracts ............................        (913)          (1,658)
                                                                ---------        ---------
 Net cash used in  investing activities ....................     (13,016)          (1,843)

Cash flows from financing activities
 Principal payments on long-term debt ......................        (272)            (149)
 Principal payments under capital lease obligations ........        (242)            (352)
 Debt issuance costs .......................................         --              (218)
 Exercise of stock options and warrants ....................           7                2
                                                                ---------        ---------
 Net cash used in financing activities .....................        (507)            (717)
                                                                ---------        ---------
 Net decrease in cash and cash equivalents .................     (18,895)          (8,189)
 Cash and cash equivalents at beginning of period ..........      22,834           12,556
                                                                ---------        ---------
 Cash and cash equivalents at end of period ................    $  3,939         $  4,367
                                                                =========        =========

</TABLE>

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

                                       4
<PAGE>
                         PEOPLES TELEPHONE COMPANY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        MARCH 31, 1998 AND MARCH 31, 1997
                                   (unaudited)

NOTE 1 - UNAUDITED INTERIM INFORMATION
 
The  accompanying  interim  consolidated  financial  data for Peoples  Telephone
Company, Inc. (the "Company") and subsidiaries,  are unaudited;  however, in the
opinion of management,  the interim data include all adjustments necessary for a
fair  presentation  of the results for the interim  periods.  The preparation of
financial statements in conformity with generally accepted accounting principles
requires  management to make estimates and assumptions  that affect the reported
amounts of assets and  liabilities  at the date of the financial  statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.

The  results of  operations  for the three  months  ended March 31, 1998 are not
necessarily  indicative  of the  results  to be  expected  for the  year  ending
December 31, 1998.

The  interim  unaudited  consolidated  financial  statements  should  be read in
conjunction with the audited consolidated financial statements and notes thereto
for the year ended  December 31, 1997 as set forth in the Company's  1997 Annual
Report on Form 10-K.

NOTE 2 - INVESTMENTS AND OTHER COMPREHENSIVE LOSS

Investments in debt and equity  securities are accounted for in accordance  with
Statement of Financial Accounting Standards No. 115 ("SFAS 115"), Accounting for
Certain Investments in Debt and Equity Securities.  The Company's  investment in
Global  Telecommunications  Solutions,  Inc. ("GTS") is classified as "available
for sale," and reported at fair value with  unrealized  gains or losses,  net of
tax,  recorded as a separate  component of Shareholders'  Equity.  The Company's
investment in GTS common stock at March 31, 1998 was approximately $1.3 million,
net of approximately $1.9 million of unrealized losses.

As of January 1, 1998,  the Company  adopted SFAS 130,  Reporting  Comprehensive
Income.  SFAS 130  establishes  new  rules  for the  reporting  and  display  of
comprehensive  income and its components;  however, the adoption of SFAS 130 had
no impact on the Company's net loss or shareholders'  deficit. SFAS 130 requires
unrealized  gains or  losses  on the  Company's  available-for-sale  securities,
which, prior to adoption,  were reported separately in shareholders' deficit, to
be included in other comprehensive  income. Prior year financial statements have
been reclassified to conform to the requirements of SFAS 130.


                                       5
<PAGE>
<TABLE>
<CAPTION>

                         PEOPLES TELEPHONE COMPANY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        MARCH 31, 1998 AND MARCH 31, 1997
                                   (unaudited)


The components of the comprehensive loss are as follows:

                                                          For the three months
                                                             ended March 31,
                                                          ---------------------
                                                            1998         1997  
                                                          --------     --------
<S>                                                       <C>          <C>     
Net loss .............................................    $ (4,020)    $(3,898)
Unrealized gain on investment, net of income taxes ...         128         128
                                                          --------     --------
Comprehensive loss ...................................    $ (3,892)    $(3,770)
                                                          ========     ========
</TABLE>

NOTE 3 - EARNINGS PER SHARE

For the quarters  ended March 31, 1998 and 1997,  the treasury  stock method was
used to determine  the  dilutive  effect of the options and warrants on earnings
per  share  data.  The  following  table  summarizes  the loss  from  continuing
operations  and the weighted  average number of shares  outstanding  used in the
computation  of  earnings  per common   in  accordance  with the  Financial
Accounting Standards Board's Statement No. 128, Earnings Per Share.

<TABLE>
<CAPTION>
                                                          For the three months
                                                             ended March 31,
                                                          ---------------------
                                                            1998         1997  
                                                          --------     --------
<S>                                                       <C>         <C>      
Net loss from continuing operations ...................   $ (4,020)   $ (3,213)
 Deduct:
 Cumulative preferred stock  dividend  requirement ....       (262)       (262)
 Preferred stock issuance cost  accretion .............        (39)        (39)
                                                          --------     --------

 Net loss applicable to common  shareholders ..........   $ (4,321)   $ (3,514)
                                                          ========    ========

 Weighted average common  shares outstanding ..........     16,212      16,195
                                                          ========    ========
 Basic and diluted loss  per share ....................   $  (0.27)   $  (0.22)
                                                          ========    ========
</TABLE>

Diluted loss per share is equal to basic loss per share since the  conversion of
preferred  shares and the exercise of outstanding  options and warrants would be
anti-dilutive for all periods presented.

NOTE 4 - LONG-TERM DEBT
 
During March 1997,  the Company  executed an amendment to the Fourth Amended and
Restated Loan and Security Agreement (the "Credit Facility") which increased the
Company's  Credit Facility with  Creditanstalt-Bankverein  from $10.0 million to
$20.0  million.  The  interest  rate on  balances  outstanding  under the Credit
Facility  varies  based  upon the  leverage  ratio  maintained  by the  Company.
Outstanding  principal  balances  are due in full in the year 2000.  Interest is
payable  monthly for loans based on the prime rate and quarterly for loans based
on the LIBOR rate.  A  commitment  fee of 1/2 of 1% is charged on the  aggregate
daily available  balance of the Credit Facility.  The Credit Facility is secured
by  substantially  all of the Company's  assets and contains  certain  covenants
which,  among other  things,  require the Company to maintain  certain cash flow
levels and  interest  coverage  ratios and places  certain  restrictions  on the
payment of  dividends.  At March 31, 1998,  the Company had no amounts  borrowed
under the Credit Facility.


                                       6
<PAGE>

                         PEOPLES TELEPHONE COMPANY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        MARCH 31, 1998 AND MARCH 31, 1997
                                   (unaudited)

NOTE 5 - INCOME TAXES

For the three  months  ended  March 31,  1998 and March 31,  1997,  the  Company
recorded  deferred  tax assets and deferred tax asset  valuation  allowances  of
approximately  $1.5 million.  Valuation  allowances  were provided to reduce the
deferred tax assets to a level which, more likely than not, will be realized.

NOTE 6 - LOSS FROM DISCONTINUED OPERATIONS

In the last quarter of 1997, the Company sold the operating assets of its inmate
telephone division.  The accompanying  Statement of Income and Statement of Cash
Flows for the first  quarter  ended March 31, 1997 have been restated to present
results of the former inmate telephone division as discontinued  operations.  In
the three months ended March 31, 1997, the Company reported  approximately  $0.7
million loss from discontinued operations.

NOTE 7 - ACQUISITION

On January 12, 1998, the Company acquired the operating assets of Indiana Telcom
Corporation  for  approximately  $11.3  million  in cash.  The  acquisition  was
accounted for as a purchase, and, accordingly,  the purchase price was allocated
to the assets  acquired and  liabilities  assumed  based on appraisals  and
other estimates of their underlying fair values.  The allocation of the purchase
price is preliminary, pending finalization of appraisal and other estimates. The
excess of the purchase price over the fair value of net assets  acquired of $5.6
million was recorded as goodwill and is being amortized over 5 years.




                                       7
<PAGE>

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

     The following  discussion and analysis compares the quarter ended March 31,
1998 to the quarter ended March 31, 1997 and should be read in conjunction  with
the consolidated  financial  statements and notes thereto appearing elsewhere in
this Form 10-Q and in  conjunction  with  Management's  Discussion  and Analysis
appearing in the Company's Form 10-K for the year ended December 31, 1997.

     Statements in Management's Discussion and Analysis relating to matters that
are not historical facts are forward-looking  statements.  Such  forward-looking
statements  involve  known and unknown  risks,  uncertainties  and other factors
which may cause the  actual  results,  performance  or  achievements  of Peoples
Telephone  Company,  Inc. to be materially  different  from any future  results,
performance  or  achievements  expressed  or  implied  by  such  forward-looking
statements.  Such  known and  unknown  risks,  uncertainties  and other  factors
include,  but are not  limited  to, the  following:  the impact of  competition,
especially in a deregulated environment (including the ability of the Company to
implement higher  market-based  rates for local coin calls),  uncertainties with
respect to the implementation and effect of the  Telecommunications Act of 1996,
including any new rule-making by the Federal Communications  Commission (FCC) or
litigation which may seek to modify or overturn the FCC orders implementing such
act or portions thereof, the ongoing ability of the Company to deploy its public
pay  phones in  favorable  locations,  the  Company's  ability  to  continue  to
implement operational improvements and the ability of the Company to efficiently
integrate acquisitions of other telephone companies. Such factors and others are
set forth more fully in the  Company's  1997 Annual  Report on Form 10-K and the
consolidated financial statements and notes there to appearing elsewhere in this
Form 10-Q.

Overview

     On January 12, 1998, the Company  acquired the operating  assets of Indiana
Telcom  Corporation for  approximately  $11.3 million in cash. This  transaction
added  approximately  2,600 public pay telephones,  located primarily in Indiana
and adjacent  midwestern states, and was largely financed with the proceeds from
the sale of the Company's inmate division in December 1997.
  
Revenues
 
     The Company  primarily  derives its revenues from coin and non-coin  calls.
Coin revenue is generated exclusively from calls made by depositing coins in the
Company's public pay telephones.  Coin revenue  represented  approximately 69.0%
and 64.0% of total  revenues  for the  quarters  ended  March 31, 1998 and 1997,
respectively.  Coin revenue  increased  7.3% to $19.3 million during the quarter
ended March 31, 1998, compared to the same period in 1997. The Company's average
installed public pay telephone base was  approximately  42,400 phones and 38,400
phones for the three month periods ended March 31, 1998 and 1997,  respectively.
Coin revenue on a per phone basis  decreased by 2.8% for the quarter ended March
31, 1998,  as compared to the same period in 1997.  The decrease in coin revenue
on a per phone  basis is  primarily  attributable  to the higher  than  expected
call-suppression  resulting from the implementation of higher market-based local
calling rates following local coin rate  deregulation.  Management  believes the
magnitude  of the  call  suppression  should  decrease  as the  public  payphone
consumer becomes accustomed to the market-based local coin rates, although there
can be no  assurances  that this will occur.  The Company also believes that the
decrease  is  the  result  of,  among  other  things,  the  increased  usage  of
alternative  methods  of  calling  such as prepaid  calling  cards and  wireless
technologies and the operation of more public pay telephones in closer proximity
to the Company's telephones.

     On November  8, 1996,  the Federal  Communications  Commission  (the "FCC")
issued its final order on reconsideration (the "Initial Payphone Order") setting
forth  and  affirming  regulations  implementing  Section  276  of  the  Federal
Telecommunications  Act of 1996,  previously  issued on September 20, 1996.  The


                                       8
<PAGE>


Initial Payphone Order initially mandated compensation for access code and 1-800
subscriber  calls  ("Dial-Around  Compensation")  at a flat rate of  $45.85  per
payphone  per month (an assumed  131 calls  multiplied  by $0.35 per call).  The
Company recorded  Dial-Around  Compensation at this rate in the first quarter of
1997.  On October 9, 1997,  in response  to the remand of certain  issues by the
U.S. Court of Appeals for the District of Columbia,  the FCC released its Second
Report and Order (the "Remand  Order")  which  established  a rate of $0.284 per
call for per call  compensation  from October 7, 1997 forward.  The Remand Order
tentatively  concluded  that  the  same  $0.284  per  call  rate  should  govern
compensation obligations during the period from November 7, 1996 through October
6, 1997 and that the allocation method between  long-distance  carriers would be
determined in a separate order. The Company recorded the net effect of this rate
change as a  Provision  for  Dial-Around  Compensation  Adjustment  in the third
quarter of 1997.  For the period from November 7, 1996 through  October 6, 1997,
the  Company  has  collected   approximately  $9.9  million  from  carriers  for
Dial-Around  Compensation.  At March 31, 1998, the Company's accounts receivable
include   approximately   $6.5  million  of  accrued   revenue  for  Dial-Around
Compensation from this period which will be billed after final resolution of the
allocation  obligations  of the IXCs as  determined  by the FCC. See "Business -
Public  Pay  Telephone   Industry   Overview",   "Business  -  Regulation"   and
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations -- Provision for Dial-Around  Compensation  Adjustment"  appearing in
the Company's Form 10-K for the year ended December 31, 1997 for a more complete
discussion.

     Non-coin  revenue is derived from  calling  card calls,  credit card calls,
collect calls and third-party  billed calls placed from the Company's public pay
telephones.  The  Company  currently  uses AT&T and Sprint to act as its primary
national  operator  service  providers.  When the call is completed  through the
third-party operator service provider, the Company records as revenue the amount
it receives from the third-party  operator  service  provider which represents a
negotiated percentage of the total amount the caller pays for the call.

     The  Company is  continuing  to  experience  a shift in call  traffic  from
operator  service  calls,  for which the Company  receives a  percentage  of the
revenue  generated  by those  calls,  to access code calls for which the Company
receives a flat rate per phone or per call Dial-Around  Compensation amount. Due
to aggressive advertising campaigns by long-distance companies promoting the use
of access code calls, the Company believes that the decrease in non-coin revenue
due to the changes in call traffic  patterns is likely to  continue.  Subject to
possible changes resulting from the appeal of the Remand Order,  these decreases
in non-coin  revenue are currently being offset to some extent by changes in the
amount of compensation due to the Company for access code calls as well as (800)
subscriber  calls, as required under the Remand Order. The Remand Order mandates
Dial-Around  Compensation  to public pay  telephone  providers for both types of
calls at a rate of $0.284 per call beginning October 7, 1997.

     Non-coin  revenue  represented  approximately  31.0 % and  36.0%  of  total
revenues for the quarters ended March 31, 1998 and 1997,  respectively.  For the
quarter ended March 31, 1998,  revenues from non-coin calls decreased  14.5%, to
approximately  $8.6 million,  compared to the quarter ended March 31, 1997. This
decrease was primary  attributable to the decrease in the compensation  rate for
dial-around calls as a result of the  implementation of the Remand Order.  After
adjusting for the rate change for Dial-Around  Compensation from $0.35 to $0.284
per call,  1997's first quarter  non-coin  revenues would have been $1.0 million
lower.  Using these adjusted figures,  non-coin revenues in the first quarter of
1998 would have been $0.5 million,  or approximately  5.0%, lower than the first
quarter of 1997.

Operating Expenses
 
     Operating  expenses include telephone charges,  commissions,  field service
and  collection  expenses  and  selling,  general and  administrative  expenses.
Telephone  charges consist of local line charges paid to Local Exchange Carriers
which  include  the costs of basic  service and  transport  of local coin calls,
long-distance transmission charges and network costs and billing, collection and
validation costs. Commissions represent payments to property owners for revenues
generated by the Company's telephones located on their properties. Field service
and collection  expenses  represent the costs of servicing and  maintaining  the
telephones on an ongoing basis, costs of collecting coin from the telephones and
other related operational costs.  Selling,  general and administrative  expenses
primarily  consist of payroll and related  costs,  legal and other  professional
fees, promotion and advertising expenses,  property,  gross receipts and certain



                                       9
<PAGE>

other taxes,  corporate  travel and  entertainment  and various other  expenses.
Total operating  expenses were  approximately  83.2% and 80.8% of total revenues
for the quarters ended March 31, 1998 and 1997, respectively.

     Telephone  charges decreased as a percentage of total revenues to 26.2% for
the quarter ended March 31, 1998, compared to 26.4% for the same period in 1997.
The Company continues to experience  decreased  telephone charges as a result of
regulatory changes and competition within the local/intraLATA service market.

     Commissions  as a percentage  of total  revenues for the three months ended
March 31, 1998  increased  to  approximately  28.1% as compared to 27.0% for the
same period of the prior year.  The increase in  commissions  as a percentage of
revenues for the three months was primarily attributable to increased commission
rates for new and renewed contracts.

     Field service and  collection  expenses as a percentage  of total  revenues
from  continuing  operations were 18.2% and 16.9% for the first quarters of 1998
and  1997,  respectively.   Field  service  and  collection  expenses  increased
approximately  7.0%, to  approximately  $5.1  million,  for the first quarter of
1998,  as compared  to the same  period in 1997.  This  increase  was  primarily
attributable to the increase in the average number of installed  payphone and to
additional  costs incurred for the addition of certain key operations  employees
who are needed to implement  certain  initiatives  which are intended to achieve
further operational  efficiencies.  Selling, general and administrative expenses
were  consistent  at  approximately  $3.0 million and $2.9 million for the first
quarter of 1998 and 1997, respectively.

Depreciation and Amortization
 
     Depreciation is based on the cost of the telephones,  booths, pedestals and
other enclosures,  related installation costs and line  interconnection  charges
and is calculated  on a  straight-line  method using a ten-year  useful life for
public pay  telephones.  Amortization  is primarily  based on acquisition  costs
including location  contracts,  goodwill and  non-competition  provisions and is
calculated on a straight-line  method using estimated  useful lives ranging from
three to twenty years.  Depreciation and amortization  increased to $5.5 million
for the quarter  ended  March 31,  1998,  compared to $5.3  million for the same
period  in 1997,  primarily  due to  additional  depreciation  and  amortization
expense  related to the Indiana Telcom  acquisition  and to the renewal costs of
location contracts.

Interest Expense
 
     For the first  quarter of 1998,  interest  expense was  approximately  $3.2
million which is relatively consistent with interest expense in the same quarter
in 1997.

Benefit from Income Taxes
 
     The Company currently records valuation allowances for 100% of the deferred
tax assets generated from operating  losses.  The Company recorded  deferred tax
assets and deferred tax asset valuation allowances of approximately $1.5 million
for the three months ended March 31, 1998 and 1997.

Net Loss

     Net loss for the three months ended March 31, 1998 was  approximately  $4.0
million  as  compared  to $3.9  million  for the first  quarter  of 1997.  After
adjusting for the rate change for Dial-Around Compensation, 1997's first quarter
net loss would have been approximately $0.8 million greater. Using this adjusted
figure  for  comparison,  the net loss for the first  quarter of 1998 would have
been approximately $0.7 million, or 14.7%, lower than the first quarter of 1997.



                                       10
<PAGE>

Earnings Before Interest, Taxes, Depreciation and Amortization

     EBITDA is not presented as an alternative to operating results or cash flow
from  operations  as  determined  by Generally  Accepted  Accounting  Principles
("GAAP"), but rather to provide additional information related to the ability of
the Company to meet current  trade  obligations  and debt service  requirements.
EBITDA  should not be  considered  in  isolation  from,  or  construed as having
greater  importance than, GAAP operating income or cash flows from operations as
a measure of an entity's performance.

     EBITDA from continuing  operations was  approximately  $4.7 million for the
quarter  ended March 31,  1998,  compared to $5.4 million for the same period in
1997. After adjusting for the rate change for Dial-Around  Compensation,  1997's
first quarter  EBITDA would have been  approximately  $4.6  million.  Using this
adjusted  figure,  EBITDA  for  the  first  quarter  of  1998  would  have  been
approximately $0.1 million, or 2.5%, higher than the first quarter of 1997.

Liquidity and Capital Resources
 
     During the first  quarter of 1998,  the  Company  continued  to finance its
operations  from current and prior  period  operating  cash flow.  For the three
months  ended  March 31,  1998,  the  Company's  operating  cash flow was $(5.4)
million compared to $(5.6) million for the same period in 1997.
 
     The Company's net working capital was  approximately  $1.8 million,  with a
current ratio of 1.1 to 1.0, at March 31, 1998. This compares with a net working
capital of $13.1 million at December 31, 1997. $11.3 million of cash was used in
January, 1998 to acquire the assets of Indiana Telcom Corporation.

     Based upon current  expectations,  the Company believes that cash flow from
operations, together with amounts which may be borrowed under the amended credit
facility,  will be  adequate  for it to meet its working  capital  requirements,
pursue its business  strategy and service its obligations with respect to its 12
1/4% Senior Notes,  although there can be no assurances  that it will be able to
do so. The  preceding  forward  looking  information  is subject to a variety of
factors and uncertainties,  including the impact of competition on the Company's
operations, the ultimate implementation and effect of the Telecommunications Act
of 1996,  and the  ongoing  ability  of the  Company  to  deploy  its  phones in
favorable locations and to continue to implement operational improvements.



                                       11
<PAGE>

Part II  OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K
  
(a) Exhibits:

Exhibit        Description
-------        -----------
27             Financial Data Schedule

(b) Reports on Form 8-K:

    None


                                       12
<PAGE>
                                    SIGNATURE

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


                                  PEOPLES TELEPHONE COMPANY, INC.
                                  Registrant


Date:  May 14, 1998               /s/ William A. Baum
                                  William A. Baum           
                                  On behalf of the registrant and as 
                                  Chief Financial Officer


                                       13

<PAGE>

                                 EXHIBIT INDEX


     Exhibits

     27        Financial Data Schedule (for SEC use only)


                                       14