UNITED STATES

              SECURITIES AND EXCHANGE COMMISSION
    
                    Washington, D.C. 20549

                          FORM 10-Q

                          (Mark One)

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

        For the quarterly period ended June 30, 1998

                                      or

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

        For the transition period from           to

                         Commission File Number 0-6547

                         MCI COMMUNICATIONS CORPORATION

             (Exact name of registrant as specified in its charter)

       Delaware                                                     52-0886267
 (State or other jurisdiction of                                 (IRS Employer
  incorporation or organization)                            Identification No.)

          1801 Pennsylvania Avenue, N.W., Washington, D.C. 20006
           (Address of principal executive offices) (Zip Code)

  Registrant's telephone number, including area code (202) 872-1600

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 (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

As of June 30, 1998, the registrant had outstanding  135,998,932  shares of
Class A common stock and 598,071,828  shares of common stock.


<PAGE>

<TABLE>
<CAPTION>


                                    
                 MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                                    FORM 10-Q

                       For The Quarter Ended June 30, 1998



                                      INDEX


                                                                                                                            Page No.
                                                                                                                            --------

PART I:  FINANCIAL INFORMATION

        ITEM 1:  FINANCIAL STATEMENTS

            <S>                                                                                                                 <C>
            Income Statements for the three and six months ended
            June 30, 1998 and 1997                                                                                                 3

            Balance Sheets as of June 30, 1998 and December 31, 1997                                                             4-5

            Statements of Cash Flows for the six months ended
            June 30, 1998 and 1997                                                                                                 6

            Statement of Stockholders' Equity for the six months
            ended June 30, 1998                                                                                                    7

            Notes to Interim Condensed Consolidated Financial
            Statements                                                                                                          8-13

        ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                                                 14-23

        ITEM 3:  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                       24

PART II:  OTHER INFORMATION                                                                                                       
        ITEM 6:  EXHIBITS AND REPORTS ON FORM 8-K                                                                                 25


SIGNATURE                                                                                                                         26

EXHIBIT INDEX                                                                                                                     27

</TABLE>

<PAGE>



PART I.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

                 MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
                                INCOME STATEMENTS
                     (In millions, except per share amounts)

<TABLE>
<CAPTION>


                                                                       Three Months Ended                        Six Months Ended
                                                                            June 30,                                 June 30,
                                                                       -------------------                      -----------------
                                                                   1998             1997                    1998              1997
                                                                 ------           ------                  ------            ------
<S>                                                              <C>              <C>                    <C>                <C>   
REVENUE                                                          $5,370           $4,843                 $10,658            $9,726
                                                                 ------           ------                  ------            ------
OPERATING EXPENSES
  Cost of services                                                2,839            2,547                   5,722             5,072
  Sales, operations and general                                   1,554            1,265                   3,058             2,584
  Depreciation                                                      621              479                   1,311               932
                                                                 ------           ------                  ------            ------
TOTAL OPERATING EXPENSES                                          5,014            4,291                  10,091             8,588
                                                                 ------           ------                  ------            ------
INCOME FROM OPERATIONS                                              356              552                     567             1,138

Interest expense                                                    (54)             (58)                   (106)             (116)
Interest income                                                      12                4                      16                10
Equity in income (losses) of
  affiliated companies                                              (23)             (24)                    (47)              (61)
Other income (expense), net                                          38               (4)                     77                (7)
                                                                 ------           ------                  ------            ------
INCOME BEFORE INCOME TAXES AND
  TRUST DISTRIBUTIONS                                               329              470                     507               964

Income tax provision                                                119              175                     181               359

Distributions on subsidiary Trust mandatorily
  redeemable preferred securities                                    15               15                      30                30
                                                                 ------           ------                  ------            ------
NET INCOME                                                       $  195           $  280                  $  296            $  575
                                                                 ======           ======                  ======            ======

BASIC EARNINGS PER COMMON SHARE                                  $  .27           $  .41                  $  .41            $  .84
DILUTED EARNINGS PER COMMON SHARE                                   .26              .40                     .40               .82

Weighted average number of common shares                            729              689                     722               688
Weighted average number of common shares
  assuming dilution                                                 745              708                     737               705
Dividends declared per common share                              $ .025           $ .025                  $ .025            $ .025

See accompanying Notes to Interim Condensed Consolidated Financial Statements.
</TABLE>

<PAGE>



<TABLE>
<CAPTION>

                 MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
                                 BALANCE SHEETS
                                  (In millions)

                                                                                             June 30,                December 31,
                                                                                               1998                      1997
                                                                                            -----------               -----------
ASSETS

CURRENT ASSETS
<S>                                                                                                <C>                       <C>    
  Cash and cash equivalents                                                                        $ 1,126                   $   261
  Receivables, net of allowance for
    uncollectibles of $426 and $372 million                                                          3,325                     3,576
  Other current assets                                                                                 983                     1,423
                                                                                                   -------                   -------
   TOTAL CURRENT ASSETS                                                                              5,434                     5,260
                                                                                                   -------                   -------

PROPERTY AND EQUIPMENT, net                                                                         14,140                    13,868

OTHER ASSETS
Investment in affiliates                                                                               636                       653
Investment in DBS                                                                                    1,064                     1,043
Investment in News Corp.                                                                             1,350                     1,350
Other assets and deferred charges, net                                                               1,054                       991
Goodwill, net                                                                                        2,308                     2,345
                                                                                                   -------                   -------
   TOTAL OTHER ASSETS                                                                                6,412                     6,382
                                                                                                   -------                   -------
   TOTAL ASSETS                                                                                    $25,986                   $25,510
                                                                                                   =======                   =======









See accompanying Notes to Interim Condensed Consolidated Financial Statements.


<PAGE>




                 MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
                                 BALANCE SHEETS
                                  (In millions)
                                                                                             June 30,                December 31,
                                                                                               1998                      1997
                                                                                            -----------               -----------

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts payable                                                                                 $ 1,075                    $1,321
  Accrued telecommunications expense                                                                 2,564                     2,416
  Other accrued liabilities                                                                          2,562                     2,248
  Long-term debt due within one year                                                                   742                     2,111
                                                                                                   -------                   -------
   TOTAL CURRENT LIABILITIES                                                                         6,943                     8,096
                                                                                                   -------                   -------
NONCURRENT LIABILITIES
  Long-term debt                                                                                     3,938                     3,276
  Deferred taxes and other                                                                           2,167                     2,077
                                                                                                   -------                   -------
   TOTAL NONCURRENT LIABILITIES                                                                      6,105                     5,353
                                                                                                   -------                   -------
COMMITMENTS AND CONTINGENT LIABILITIES

COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED
   SECURITIES OF SUBSIDIARY TRUST HOLDING SOLELY
   JUNIOR SUBORDINATED DEFERRABLE INTEREST
   DEBENTURES OF THE COMPANY                                                                           750                       750

STOCKHOLDERS' EQUITY
  Class A common stock, $.10 par value,
    authorized 500 million shares, issued
    136 million shares                                                                                  14                        14
  Common stock, $.10 par value, authorized
    2 billion shares, issued
    598 million shares                                                                                  60                        60
  Additional paid in capital                                                                         6,489                     6,343
  Retained earnings                                                                                  5,623                     5,345
  Accumulated other comprehensive income                                                                 2                        19
  Treasury stock, at cost,
    0 million and 22 million shares                                                                      -                     (470)
                                                                                                   -------                   -------
   TOTAL STOCKHOLDERS' EQUITY                                                                       12,188                    11,311
                                                                                                   -------                   -------
   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                      $25,986                   $25,510
                                                                                                   =======                   =======



See accompanying Notes to Interim Condensed Consolidated Financial Statements.
</TABLE>


<PAGE>

<TABLE>
<CAPTION>
                 MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
                            STATEMENTS OF CASH FLOWS
                                  (In millions)

                                                                                                           Six Months Ended
                                                                                                               June 30,
                                                                                                       -------------------------
                                                                                                      1998                      1997
                                                                                                    ------                    ------
OPERATING ACTIVITIES
<S>                                                                                                <C>                       <C>   
  Receipts from customers                                                                          $10,892                   $9,311
  Payments to suppliers and employees                                                               (8,533)                  (7,499)
  Taxes paid, net                                                                                      (56)                    (167)
  Interest paid                                                                                        (99)                    (115)
  Interest received                                                                                      8                        5
                                                                                                    ------                   ------
       CASH FROM OPERATING ACTIVITIES                                                                2,212                    1,535
                                                                                                    ------                   ------
INVESTING ACTIVITIES
  Capital expenditures for property and equipment                                                   (1,500)                  (1,710)
  Proceeds from sales and maturities of marketable securities
    and other investments, net                                                                          40                       91
  Investment in Direct Broadcast Satellite                                                             (34)                    (127)
  Investment in affiliates                                                                             (44)                     (42)
  Other, net                                                                                           418                       35
                                                                                                    ------                   ------
       CASH USED FOR INVESTING ACTIVITIES                                                           (1,120)                  (1,753)
                                                                                                    ------                   ------
       NET CASH FLOW BEFORE FINANCING ACTIVITIES                                                     1,092                     (218)
                                                                                                    ------                   ------
FINANCING ACTIVITIES
  Issuance of Senior Notes                                                                           1,172                        -
  Payment of Senior Notes and other debt                                                              (124)                    (160)
  Commercial paper and bank credit facility activity, net                                           (1,806)                     135
  Issuance of common stock for employee plans                                                          579                      251
  Purchase of treasury stock                                                                             -                      (93)
  Distributions paid on Trust mandatorily redeemable
   preferred securities                                                                                (30)                     (30)
  Payment of dividends on common stock and
    class A common stock                                                                               (18)                     (17)
                                                                                                    ------                   ------
       CASH FROM (USED FOR) FINANCING ACTIVITIES                                                      (227)                      86
                                                                                                    ------                   ------
Net increase (decrease) in cash and cash equivalents                                                   865                     (132)
Cash and cash equivalents - beginning balance                                                          261                      187
                                                                                                    ------                   ------
Cash and cash equivalents - ending balance                                                          $1,126                    $  55
                                                                                                    ======                   ======
Reconciliation of net income to cash from operating activities:
Net income                                                                                          $  296                   $  575
Adjustments to net income:
  Depreciation and amortization                                                                      1,338                      953
  Equity in (income) losses of affiliated companies                                                     47                       61
  Deferred income tax provision                                                                         86                       34
Net change in operating activity accounts other than cash and cash equivalents:
  Receivables                                                                                          251                     (190)
  Operating accounts payable and accrued liabilities                                                   (51)                    (204)
  Other operating activity accounts                                                                    245                      306
                                                                                                    ------                   ------
Cash from operating activities                                                                     $ 2,212                   $1,535
                                                                                                    ======                   ======
    See accompanying Notes to Interim Condensed Consolidated Financial Statements.
</TABLE>

<PAGE>


<TABLE>
<CAPTION>
                 MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                  (In millions)





                                                                                             Accumulated
                                 Class A                      Addit'l                              Other       Treasury
                                  Common       Common         Paid in       Retained       Comprehensive          Stock        Total
                                   Stock        Stock         Capital       Earnings              Income        at Cost       Equity
                                   -------------------------------------------------------------------------------------------------

Balance at
<S>                               <C>            <C>          <C>            <C>                    <C>         <C>         <C>    
 December 31, 1997                 $14            $60          $6,343         $5,345                 $19         $(470)      $11,311

Common stock issued
 for employee stock
 and benefit plans &
 other activity
 (22 million shares)                 -              -             146              -                   -            470          616

Common stock dividends               -              -               -            (18)                  -              -         (18)

Comprehensive income
 Net income                          -              -               -            296                   -              -            -
 Change in other
  comprehensive income               -              -               -              -                 (17)             -            -
Total other
  comprehensive income               -              -               -              -                   -              -          279

Balance at
 June 30, 1998                       $14          $60          $6,489         $5,623                $  2           $  -      $12,188
                                     ===============================================================================================




</TABLE>


See accompanying Notes to Interim Condensed Consolidated Financial Statements.

<PAGE>


                 MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
          NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1. GENERAL

The accompanying  unaudited interim condensed  consolidated financial statements
have  been  prepared  in  accordance  with  the  rules  and  regulations  of the
Securities and Exchange  Commission  (SEC). The interim  condensed  consolidated
financial  statements  include the consolidated  accounts of MCI  Communications
Corporation and its majority-owned subsidiaries (collectively, the company) with
all  significant  intercompany   transactions  eliminated.  In  the  opinion  of
management,  all adjustments  (consisting only of normal recurring  adjustments)
necessary for a fair statement of the financial position,  results of operations
and cash flows for the interim periods presented have been made. The preparation
of the financial statements includes estimates that are used when accounting for
revenue, including long-term customer contracts and allowances for uncollectible
receivables,  investments,  telecommunications expense, depreciation,  including
asset write-downs and amortization,  reorganization  accruals,  employee benefit
plans and taxes.  Actual  results  could  differ from those  estimates.  Certain
information and footnote  disclosures  normally included in financial statements
prepared in accordance with generally accepted accounting principles (GAAP) have
been  condensed  or omitted  pursuant to such SEC rules and  regulations.  These
financial  statements  should be read in conjunction  with the company's  Annual
Report on Form 10-K for the year ended December 31, 1997.

NOTE 2. MCI WORLDCOM MERGER AGREEMENT

On November 9, 1997,  the company  entered into an Agreement  and Plan of Merger
(the MCI WorldCom Merger Agreement) with WorldCom,  Inc.  (WorldCom),  a Georgia
corporation, and TC Investments Corp. (Merger Sub), a Delaware corporation and a
wholly-owned  subsidiary  of WorldCom,  pursuant to which the company will merge
with and into  Merger  Sub (the  Merger).  As a result of the  Merger,  (a) each
outstanding  share of the  company's  common  stock,  par value  $.10 per share,
(other than shares owned by WorldCom or Merger Sub or held by the company)  will
be converted into the right to receive that number of shares of WorldCom  common
stock,  par value $.01 per share,  equal to the quotient  determined by dividing
$51.00 by the average of the high and low sale prices of WorldCom  common  stock
as reported on the Nasdaq National Market on each of the 20 consecutive  trading
days ending with the third trading day immediately  preceding the effective time
of the Merger (the Exchange  Ratio),  provided that the Exchange Ratio shall not
be less than 1.2439 or greater than 1.7586;  and (b) each  outstanding  share of
the company's  Class A common stock shall be converted into the right to receive
$51.00 in cash, without interest thereon. On March 11, 1998, the stockholders of
the company and shareholders of WorldCom  approved the Merger.  On July 8, 1998,
and July 15, 1998, the European  Commission and the United States  Department of
Justice (DOJ) approved the merger, respectively, subsequently conditional to the
company's agreement to sell its public Internet services business. The Merger is
also subject to the approval of the Federal Communications  Commission (FCC) and
various  state  regulatory  agencies,  approvals  which the  company  expects to
receive in the summer of 1998. The Merger will be accounted for as a purchase in
accordance with GAAP.

The  company  and  WorldCom  have  certain   interconnection  or  other  service
agreements  at  prevailing   market  rates  in  the  ordinary  course  of  their
businesses.  For the three and six  months  ended  June 30,  1998,  the  company
recognized revenue of approximately $214 million and $402 million, respectively,
for services provided by the company under these agreements.  In addition,  cost
of  services  during the same  period for  services  provided  by  WorldCom  was
approximately $18 million and $34 million, respectively,  under such agreements.
As of June 30, 1998, amounts due from WorldCom,  which were included in accounts
receivable, totaled approximately $225 million.

NOTE 3. COMPREHENSIVE INCOME

On January 1, 1998,  the  company  adopted  Statement  of  Financial  Accounting
Standards (SFAS) No. 130, "Reporting  Comprehensive Income". Total comprehensive
income is reported in the  statement  of  stockholders'  equity and includes net
income,  unrealized  gains and losses on  marketable  securities,  net of tax, a
reclassification  adjustment  associated  with  gains  and  losses  realized  on
marketable   securities  in  net  income,  net  of  tax,  and  foreign  currency
translation adjustments.

NOTE 4. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In July, 1998, the Financial  Accounting  Standards Board (FASB) issued SFAS No.
133, "Accounting for Derivative  Instruments and Hedging Activities",  that will
be effective  for the  company's  year ending  December 31, 2000.  Management is
currently  evaluating  the impact of the adoption of the  statement and believes
there will not be a material impact to the company's  financial  statements.  In
April 1998,  the  American  Institute of Certified  Public  Accountants  (AICPA)
issued  Statement  of  Position  No.  (SOP) 98-1,  "Accounting  for the Costs of
Computer  Software  Developed  or  Obtained  for  Internal  Use,"  which will be
effective  for the  company's  year ending  December  31,  1999.  Management  is
currently  analyzing the impact of the adoption of the  statement,  which may be
material to the company's financial  statements taken as a whole. The AICPA also
issued SOP No. 98-5, "Reporting on the Costs of Start-up Activities," which will
be effective for the  company's  year ending  December 31, 1999.  The company is
currently evaluating the effects of this statement, however; management believes
its  adoption  will  not  have a  material  impact  on the  company's  financial
statements taken as a whole. In 1997, the FASB issued SFAS No. 131,  "Disclosure
about Segments of an Enterprise and Related Information," that will be effective
for the  company's  year ending  December  31,  1998.  The company is  currently
evaluating the effects and believes that the adoption of this statement will not
have a material impact on the company's financial statements taken as a whole.

NOTE 5.  DEBT

On April 22, 1998, the company issued $500 million aggregate principal amount of
6.50%  Senior  Notes due April 15,  2010 and $700  million  aggregate  principal
amount of 6.125% Callable/Redeemable Notes due April 15, 2012. The proceeds from
the  issuance  will  be used  for  general  corporate  purposes,  including  the
repayment of short-term borrowings under the company's commercial paper program.

On April 28, 1998, the company extended its $4 billion  revolving line of credit
loan  agreement  with  several  financial  institutions.  Borrowings  under this
agreement  mature on the earlier of April 26, 1999 or on the closing date of the
Merger.

NOTE 6. 1997 REORGANIZATION EFFORTS

In the second half of 1997, the company completed a comprehensive  review of its
product and service  offerings.  As a result of this review, the company decided
to exit and restructure several business customer contracts, consolidate certain
operating   centers  and   streamline  or   discontinue   certain   non-core  or
under-performing  Information  Technology (IT) operations and reorganize certain
operations or eliminate  certain  product or service  offerings  within its core
business.  For the year ended  December  31,  1997,  the company  recorded  $361
million  in its costs of  services  to  reflect  costs and  provisions  to exit,
restructure  or settle  several  business  customer  contracts and cease certain
product and service offerings.  The company also recorded $282 million in sales,
operations  and general  expense  primarily for  reorganization  efforts,  which
included  approximately  $103 million of severance  associated  with a workforce
alignment and $93 million of obligations  and penalties  associated  with lease,
vendor and customer contracts.  The remainder represented other costs associated
with the company's business reorganization and certain legal costs.

Through June 30, 1998, the company  expended  approximately  $447 million of the
accrued  costs  related to the above items,  with the majority of the  remaining
$196 million to be expended during the remainder of 1998. The remaining accrual,
which is included  in other  accrued  liabilities  on the  accompanying  balance
sheet, was primarily comprised of severance,  lease obligations and customer and
vendor contract  termination and commitment costs and certain legal costs.  Cash
expenditures for these  obligations will continue to be funded through cash from
operations.  As  a  result  of  the  workforce  alignment  associated  with  its
reorganization  efforts,  the  company  expected  to  reduce  its  workforce  by
approximately 4,500 employees,  of whom approximately 3,500 had left the company
by June 30, 1998.  The  remaining  employees are expected to leave by the end of
1998.

NOTE 7. DIRECT BROADCAST SATELLITE (DBS) VENTURE

In May 1997, the company and The News  Corporation  Limited (News Corp.) entered
into an  agreement to form a joint  venture (DBS  Venture) in which both parties
would contribute their respective DBS assets and cash. In exchange,  the company
would  receive a 19.9%  interest in the new venture.  In  addition,  the parties
agreed that the company's funding obligation to the DBS Venture would be limited
to $440 million. The agreement also provided that the parties would seek a third
party to acquire their  combined  interests in this DBS business.  In June 1997,
the company and News Corp.  entered into an agreement with  Primestar  Partners,
L.P. (Primestar) for the sale and transfer of the company's and News Corp.'s DBS
assets   other  than  two  of  the  four  DBS  Venture   satellites   (Primestar
Transaction).  In March  1998,  the  parties  sold their  interest in one of the
remaining  satellites  and  are  pursuing  the  disposition  of the  other.  The
Primestar  Transaction  is  part  of a  larger  transaction  that  involves  the
consolidation  of Primestar and TCI Satellite  Entertainment,  Inc. into a newly
formed entity (New Primestar) that was completed in April 1998.  Concurrent with
the consummation of the Primestar Transaction or upon the approval by the FCC of
the transfer of the orbital slot to the DBS Venture or another third party,  the
company will acquire  preferred  shares in a subsidiary of News Corp. for a face
amount equal to the  company's  cost of obtaining  the FCC license plus interest
thereon.  Under the terms of the  Primestar  Transaction,  the company will also
receive  from New  Primestar  consideration  in the  form of cash  and  interest
bearing  non-voting  New Primestar  securities  for its share of the DBS Venture
assets  transferred to New Primestar.  On May 12, 1998 the Department of Justice
filed suit in the U.S.  District  Court for the District of Columbia  seeking to
enjoin the completion of the Primestar Transaction.


<PAGE>



NOTE 8.  EARNINGS PER SHARE

Earnings per share (EPS) are  calculated  in  accordance  with SFAS No. 128. The
following is a  reconciliation  of the  numerators and the  denominators  of the
basic  and  diluted  per  share  computations  (in  millions,  except  per share
amounts):
<TABLE>
<CAPTION>
                                                     Three Months Ended                         Six Months Ended
                                                       June 30,                                         June 30,
                                                 1998              1997                      1998             1997
                                                 -----------------------------------------------------------------
Basic:

<S>                                              <C>               <C>                       <C>               <C> 
Net income                                       $195              $280                      $296              $575
Weighted average common
  shares outstanding                              729               689                       722               688
                                                -----------------------                     -----------------------


Basic EPS                                       $0.27             $0.41                     $0.41             $0.84
                                                =======================                     =======================


Diluted:

Net income                                       $195              $280                      $296              $575
Weighted average common
  shares outstanding                              729               689                       722               688
                                                -----------------------                     -----------------------

Effect of dilutive securities:

Shares of common stock issuable
  upon the assumed exercise of
  common stock equivalents                         62                84                        62                84
Shares of common stock assumed
  repurchase for treasury                         (46)              (65)                      (47)              (67)
                                                ------------------------                    ------------------------

Weighted average common
  shares outstanding assuming
  dilution                                        745               708                       737               705
                                                -----------------------                     -----------------------

Diluted EPS                                     $0.26             $0.40                     $0.40             $0.82
                                                =======================                     =======================
</TABLE>


NOTE 9. CONTINGENCIES

The  company,  in the  normal  course  of  business,  is a party to a number  of
lawsuits and  regulatory  and other  proceedings  and has included  accrued loss
contingencies  in other accrued  liabilities  for certain of these matters.  The
company does not expect that the results in these lawsuits and proceedings  will
have a  material  adverse  effect  on the  consolidated  financial  position  or
operations of the company.

On November 4, 1996, and thereafter, and on August 25, 1997, and thereafter, the
company  and all of its  directors,  including  the two  directors  who are also
executive  officers of the company  and the three  directors  elected by British
Telecommunications  plc  (BT),  were  named  as  defendants  in a  total  of  15
complaints filed in the Court of Chancery in the State of Delaware. BT was named
as a defendant in 13 of the  complaints.  The complaints were brought by alleged
stockholders  of the company,  individually  and purportedly as class actions on
behalf of all other  stockholders  of the company.  In general,  the  complaints
allege that the company's  directors breached their fiduciary duty in connection
with the MCI BT Merger  Agreement,  that BT aided and abetted those  breaches of
duty, that BT owes fiduciary duties to the other stockholders of the company and
that it breached  those duties in connection  with the MCI BT Merger  Agreement.
The complaints seek damages and injunctive and other relief.

On or about October 8, 1997, all of the company's  directors,  including the two
directors who are also executive officers of the company and the three directors
elected by BT,  were named as  defendants  in a purported  derivative  complaint
filed in the  Court  of  Chancery  in the  State of  Delaware.  BT and  Tadworth
Corporation  were  also  named as  defendants,  and the  company  was named as a
nominal  defendant.  The plaintiff,  derivatively  and on behalf of the company,
alleges  breach of  fiduciary  duty by the  company's  directors  and aiding and
abetting  those  breaches  of duty by BT in  connection  with the MCI BT  Merger
Agreement and WorldCom's  exchange offer. The complaint seeks injunctive relief,
damages and other relief.

One of the  purported  stockholder  class actions  pending in Delaware  Chancery
Court has been amended and plaintiffs in four of the other purported stockholder
class  actions have moved to amend their  complaints to name WorldCom and Merger
Sub,  as  additional  defendants.  They  generally  allege  that the  defendants
breached their fiduciary duty to stockholders in connection with the Merger, the
agreement to pay a termination  fee to WorldCom,  and allege  discrimination  in
favor of BT in connection with the Merger.  They seek,  inter alia,  damages and
injunctive relief  prohibiting the consummation of the Merger and the payment of
the inducement fee to BT.

Three complaints were filed in the federal  district court in Washington,  D.C.,
as class  actions on behalf of purchasers  of the  company's  shares.  The three
cases  were  consolidated  on  April  1,  1998.  On or about  May 8,  1998,  the
plaintiffs in all three cases filed a consolidated  amended complaint  alleging,
on behalf of purchasers of the company's shares between July 11, 1997 and August
21, 1997, inclusive,  that the company and certain of its officers and directors
failed to disclose material  information  about the company,  including that the
company  was  renegotiating  the  terms  of the MCI BT  Merger  Agreement  dated
November 3, 1996. The  consolidated  amended  complaint  seeks damages and other
relief.  The  company  and the  other  defendants  have  moved  to  dismiss  the
consolidated amended complaint.

On May 7, 1998, GTE Corporation and three of its subsidiaries  filed suit in the
U.S.  District  Court for the  District  of  Columbia  against  the  company and
WorldCom.  The complaint alleges that the pending merger between the company and
WorldCom would have the effect of substantially lessening competition or tending
to create a monopoly,  and thereby  violate  section 7 of the Clayton Act,  with
respect to the markets for Internet backbone services,  facilities to extend the
reach of the Internet backbone,  wholesale and retail long-distance services and
international   calling  services.   The  complaint  requests   declaratory  and
injunctive  relief.  At a scheduling  conference on July 10, 1998,  the District
Court set a trial date of May 10, 1999.

The  company  believes  that all of the  complaints  are  without  merit and the
company  presently  does not expect that the above  actions will have a material
adverse effect on the consolidated  financial  position or results of operations
of the company.

NOTE 10.  SUBSEQUENT EVENTS

Divesture of the Public Internet Services Business

On July 15,  1998,  the  company  announced  that it had  entered  into a letter
agreement  (Letter  Agreement)  with Cable & Wireless  plc (Cable & Wireless) to
sell its  public  Internet  services  business  for $1.75  billion.  The  Letter
Agreement  supersedes  the  letter of intent  between  the  company  and Cable &
Wireless to sell MCI's Internet  backbone  services business which was announced
on May 28,  1998.  The  completion  of the  transaction  is  subject  to certain
conditions precedent,  including the satisfaction of the conditions precedent to
the Merger,  which  include the approval by the FCC of the Merger.  Either party
may terminate the Letter  Agreement if the sale is not  consummated  by December
31, 1998.

Investment in Embratel

On July 29, 1998,  the company  acquired,  through its  wholly-owned  subsidiary
Startel  Participacoes  Ltda., for approximately  $2.3 billion,  a 51.79% voting
interest and a 19.26% economic interest in Embratel Participacoes S.A., Brazil's
only facilities-based  national communications provider. The purchase price will
be paid in installments of which $916 million was paid on July 29, 1998 with the
remainder to be paid prior to July 29, 2000.

Sale of Investment in Concert CS

On August 7, 1998, the company entered into an agreement with BT, Concert CS and
WorldCom  addressing  various  aspects of certain  agreements and  relationships
among the parties.  The agreement is conditioned  upon the resolution of certain
operational  matters  between the company and Concert CS. Under the terms of the
agreement  the company  has agreed to sell to BT its  interest in Concert CS for
$1.013 billion immediately after consummation of the Merger.




<PAGE>


                 MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
PART I.
ITEM 2.


GENERAL
-------
The following  discussion  and analysis  provides  information  that  management
believes is relevant to an  assessment  and  understanding  of the  consolidated
results of operations and financial condition of MCI Communications  Corporation
and its subsidiaries (collectively,  the company). The discussion should be read
in conjunction with the interim condensed  consolidated financial statements and
notes  thereto and the  company's  Annual Report on Form 10-K for the year ended
December 31, 1997.

MERGER AGREEMENT WITH WORLDCOM, INC.
------------------------------------
On November 9, 1997,  the company  entered into an Agreement  and Plan of Merger
(the MCI WorldCom Merger Agreement) with WorldCom,  Inc.  (WorldCom),  a Georgia
corporation, and TC Investments Corp. (Merger Sub), a Delaware corporation and a
wholly-owned  subsidiary  of WorldCom,  pursuant to which the company will merge
with and into  Merger  Sub (the  Merger).  As a result of the  Merger,  (a) each
outstanding  share of the  company's  common  stock,  par value  $.10 per share,
(other than shares owned by WorldCom or Merger Sub or held by the company)  will
be converted into the right to receive that number of shares of WorldCom  common
stock,  par value $.01 per share,  equal to the quotient  determined by dividing
$51.00 by the average of the high and low sale prices of WorldCom  common  stock
as reported on the Nasdaq National Market on each of the 20 consecutive  trading
days ending with the third trading day immediately  preceding the effective time
of the Merger (the Exchange  Ratio),  provided that the Exchange Ratio shall not
be less than 1.2439 or greater than 1.7586;  and (b) each  outstanding  share of
the company's  Class A common stock shall be converted into the right to receive
$51.00 in cash, without interest thereon.



Forward-looking Statements May Prove Inaccurate
The  company  has  made  certain  forward-looking   statements  in  Management's
Discussion   and  Analysis   that  are  subject  to  risks  and   uncertainties.
Forward-looking  statements include  information  concerning the possible future
results of operations of the company,  its communication  services,  information
technology and other services,  the possible future results of operations of the
company and MCI WorldCom after the Merger and statements  preceded by,  followed
by, or that  include  the words  believes,  expects,  anticipates,  intends,  or
similar expressions.  For those statements, the company claims the protection of
the  safe-harbor  for  forward-looking   statements  contained  in  the  Private
Securities  Litigation  Reform  Act of 1995.  The reader is  cautioned  that the
following  important  factors,  among  others,  in addition  to those  contained
elsewhere in Management's  Discussion and Analysis,  could adversely  affect the
future  results  of  the  company,  its  communication   services,   information
technology  and other services and the company and MCI WorldCom after the Merger
and could cause  those  results to differ  materially  from the  statements  and
information  expressed  in  the  forward-looking  statements:  material  adverse
changes in the economic  conditions in the markets served by the company and MCI
WorldCom;  a  significant  delay in the expected  closing of the Merger;  future
regulatory  actions and conditions in the company's  operating areas,  including
the ability of the company to  implement  its local  strategy  and obtain  local
facilities at competitive rates and resulting  changes in the  implementation of
its local strategy; and the ability to pass on additional charges imposed by the
Federal Communications Commission (FCC); competition from others in the U.S. and
international  long-distance  markets,  including the entry of the regional Bell
operating companies (RBOCs) and other companies in the long-distance  markets in
the U.S.; the cost of the company's year 2000 compliance efforts; and the effect
of future technological changes on its business.



On March 11, 1998, the  stockholders of the company and shareholders of WorldCom
approved the Merger. On July 8, 1998, and July 15, 1998, the European Commission
and the United  States (U.S.)  Department of Justice (DOJ)  approved the merger,
respectively,  subsequently  conditional to the company's  agreement to sell its
public Internet services business. The Merger is also subject to the approval of
the  Federal  Communications  Commission  (FCC)  and  various  state  regulatory
agencies,  approvals which the company expects to receive in the summer of 1998.
The Merger will be  accounted  for as a purchase in  accordance  with  generally
accepted accounting principles. The company believes that the Merger will create
a fully integrated global communications company that will be well positioned to
take advantage of growth opportunities in the global  telecommunications  market
by   providing  a  complete   range  of  local,   long-distance,   Internet  and
international communications services.

DIVESTURE OF THE PUBLIC INTERNET SERVICES BUSINESS

On July 15,  1998,  the  company  announced  that it had  entered  into a letter
agreement  (Letter  Agreement)  with Cable & Wireless  plc (Cable & Wireless) to
sell its  public  Internet  services  business  for $1.75  billion.  The  Letter
Agreement  supersedes  the  letter of intent  between  the  company  and Cable &
Wireless to sell MCI's Internet  backbone  services business which was announced
on May 28,  1998.  The  completion  of the  transaction  is  subject  to certain
conditions precedent,  including the satisfaction of the conditions precedent to
the Merger,  which  include the approval by the FCC of the Merger.  Either party
may terminate the Letter  Agreement if the sale is not  consummated  by December
31, 1998.

TELECOMMUNICATIONS REGULATORY ENVIRONMENT
-----------------------------------------

In 1998, the company began incurring  per-line charges  resulting from the FCC's
Access Reform Order and certain new universal  service support  obligation costs
resulting from the FCC's Universal Service Order.  Under the Access Reform Order
adopted by the FCC in May 1997,  interstate  access charges were restructured to
shift more costs  directly to end users.  The Access  Reform  Order also reduced
per-minute charges long-distance  carriers pay and created new flat-rate charges
to long distance  carriers based on the number of  pre-subscribed  customers the
carrier has and subscriber  lines held by the  customers.  In 1997, the FCC also
adopted the Universal  Service Order which created new universal service support
obligations for telecommunications  services for schools and libraries and rural
health care  facilities.  Despite  rate  reductions  associated  with the Access
Reform  Order  that  went  into  effect  January  1,  1998,  cost  of  providing
telecommunications services for the first half of 1998 increased compared to the
first half of 1997.

In 1998,  the company also  recalibrated  and will continue to  recalibrate  its
rates to  ensure it is  collecting  amounts  necessary  to pay  incumbent  local
exchange company (ILEC) per-minute and per-line access charges and the universal
service  obligations  imposed directly on the company.  During the first half of
1998, the company had experienced collection  difficulties on such charges which
led to an increase in its allowance for  uncollectibles.  Certain  provisions of
the Access Reform Order,  Price Cap Order,  and Universal  Service Order are now
under review by various  U.S.  Courts of Appeal.  In  addition,  the company has
renewed its requests that the FCC itself  revisit access reform and mandate that
access charges decrease to cost. On August 6, 1998, the FCC began proceedings in
which it has proposed to reform its international  settlements  policy.  Through
that  policy  the FCC  regulates  the fees that  U.S.  carriers  pay to  foreign
carriers  for the  termination  of  international  calls  from the U.S.  The FCC
proposed to remove  constraints  under that policy  that  restrict  the kinds of
arrangements  the U.S.  carriers may enter into with foreign carriers located in
World Trade Organization member countries.

CONSOLIDATED RESULTS OF OPERATIONS
----------------------------------

The company operates predominantly in the communications services industry which
includes a broad range of long-distance,  local and wireless  telecommunications
services.  Long-distance telecommunications services comprise a wide spectrum of
domestic and  international  voice and data  services,  including  long-distance
telephone,  electronic  messaging,  teleconferencing and data communications and
Internet  services.  The  company  also  provides  information  technology  (IT)
services which include equipment deployment,  consulting and systems integration
and outsourcing  services.  The following  discusses the company's  consolidated
results of operations for the three and six months ended June 30, 1998 and 1997,
respectively.

REVENUE
For the three and six months ended June 30, 1998,  revenue  increased  10.9% and
9.6% to $5,370 million and $10,658  million,  respectively,  from the comparable
periods  in  1997.   Communications  services  revenue,  which  includes  voice,
messaging,  data and Internet, grew 10.6% and 9.5% compared to traffic growth of
12.3% and 13.0% for the three and six months ended June 30, 1998,  respectively,
from the  comparable  periods  in 1997.  The  variance  in the growth of revenue
versus traffic of (1.7%) and (3.5%)  reflects the growth in IntraLata  services,
and  ongoing  levels  of  industry  pricing  competition.  IT  services  revenue
increased 11.3% and 15.2% to $464 million and $949 million for the three and six
months  ended  June 30,  1998,  respectively,  from the  comparable  prior  year
periods,  as a result of  growth  in the  systems  integration  and  outsourcing
businesses.
<TABLE>
<CAPTION>

The following provides  supplemental  detail for communications  services and IT
services revenue:

                                                   Three Months Ended                           Six Months Ended

                                                                  Percent                                     Percent
June 30,                                   1998           1997     Change                1998         1997     Change
---------------------------------------------------------------------------------------------------------------------
(In millions)

<S>                                     <C>            <C>           <C>              <C>          <C>          <C> 
Voice & Messaging                       $ 3,934        $ 3,654       7.7%             $ 7,829      $ 7,367      6.3%
Data & Internet                           1,001            809      23.7%               1,944        1,561     24.5%
Information Technology                      464            417      11.3%                 949          824     15.2%
Eliminations & Other                        (29)           (37)     21.6%                 (64)         (26)       NM
                                         --------------------------------               ----------------------------

Total Revenue                           $ 5,370        $ 4,843      10.9%             $10,658      $ 9,726      9.6%
                                        =================================             ==============================


NM =  Not meaningful
</TABLE>

Voice and  messaging  services  include  traditional  switched  services such as
domestic and international inbound and outbound services and local, call centers
and wireless services. Voice and messaging revenue increased by $280 million and
$462 million to $3,934  million and $7,829  million for the three and six months
ended June 30, 1998,  respectively,  over the  comparable  periods in 1997.  The
revenue increase were primarily the results of growth in the mass markets, local
services  expansion,  and  increases in certain  commercial  business  services,
partially  offset by the continued  de-emphasis  of wholesale  carrier  customer
sales. In the mass markets,  revenue and volume increased  primarily as a result
of growth in the company's  transactional  brands, such as 1-800-Collect(R)  and
10-10-321(R),  and pre-subscribed  services,  such as 5-Cent SundaysSM.  For the
three and six months ended June 30, 1998, the company's  continuing  strategy to
retain and focus on  high-value  customers  resulted in a reduction  of customer
churn. In business  markets,  commercial  services revenue and volume increased,
led by inbound,  teleconferencing  and prepaid  card  services.  Local  services
revenue  increased  by  approximately  70% and 77% for the three and six  months
ended June 30, 1998,  respectively,  from the comparable  periods in 1997.  This
increase  in revenue is  primarily  the result of the  expansion  of  facilities
based,  switched  services  to a total of 31  markets  as of June 30,  1998,  an
increase of 6 markets since June 30, 1997.  Local services are provided to both
business and residential customers.

Data and Internet services include all domestic and international  private line,
virtual data,  managed services and Internet access services.  Data and Internet
revenue  increased by $192 million and $383 million to $1,001 million and $1,944
million for the three and six months ended June 30, 1998, respectively, from the
comparable  periods in 1997. The increase was primarily due to increased  demand
for integrated  data and Internet  services.  For the three and six months ended
June 30, 1998,  data revenue  increased by $159 million and $314 million to $912
million and $1,722 million, respectively, in comparison to prior year's periods.
This increase is primarily  the result of growth in virtual data,  international
private line and managed services. Internet revenue for the three and six months
ended June 30, 1998, increased by $33 million and $69 million to $89 million and
$172 million, respectively, over the comparable periods in 1997. As announced on
July 15,  1998,  the  company  has agreed to sell its public  Internet  services
business to Cable & Wireless for $1.75 billion  simultaneous with the completion
of the Merger.  (See Divesture of the Public Internet  Services Business on page
15.)

IT services, which consist solely of the operations of MCI Systemhouse, includes
equipment  deployment,   consulting  and  systems  integration  and  outsourcing
services.  IT revenue increased 11.3% and 15.2% to $464 million and $949 million
for the  three  and six  months  ended  June 30,  1998,  respectively,  over the
comparable  periods  in 1997.  IT  services  revenue  growth  was the  result of
increases in systems integration and outsourcing  business  predominately driven
by contract wins in late 1997,  offset by a decline in revenue from discontinued
service lines.  Excluding the impact of revenue from service lines  discontinued
during the first half of 1998,  revenue for the three and six months  ended June
30, 1998 was $444 million and $889  million,  respectively,  an increase of 21%
and 24.3%, respectively, in comparison to the same periods in 1997.

COST OF SERVICES
Cost of  services  consists  of  telecommunications  expense  and costs of other
products and  services.  Telecommunications  expense is  primarily  comprised of
access  fees  paid  to  local  exchange  carriers  and  other  domestic  service
providers,  and  payments  made to foreign  telephone  companies  (international
settlements)  to complete  calls made to foreign  countries from the U.S. by the
company's  customers.  Cost of services  for the three and six months ended June
30,  1998  increased  11.5% and  12.8% to $2,839  million  and  $5,722  million,
respectively,  from the  comparable  prior year  periods.  Cost of services as a
percentage  of revenue  was 52.9% and 53.7%,  from 52.6% and 52.1% for the three
and six months  ended June 30,  1998,  and 1997,  respectively.  The expense and
percentage  of  revenue   increases  in  1998  were  primarily  the  results  of
consolidated  revenue  growth and increases in direct  operating  expense in the
company's  local  service  and IT  businesses  revenue  mix.  Telecommunications
expense as a percentage of  communication  services  revenue  decreased to 47.9%
from 48.7% for the three  months ended June 30,  1998,  and 1997,  respectively.
This decrease was due to favorable domestic and international telecommunications
interconnections  rates, and more efficient  network usage;  partially offset by
prescribed  line and universal  service  support  obligations and a reduction in
revenue rates as a result of competitive pricing.  Telecommunications expense as
a percentage of communication services revenue increased to 49.0% from 48.5% for
the six months  ended June 30,  1998,  and 1997,  respectively.  The increase of
telecommunications  expense as a  percentage  of  communications  revenue is the
result of a reduction  in revenue  rates due to  competitive  pricing,  required
compensation  to  payphone  owners and  implementation  of  prescribed  line and
universal  service  support  obligations.  The increase was partially  offset by
lower domestic and international telecommunications  interconnections rates, and
more efficient network usage.

SALES, OPERATIONS AND GENERAL EXPENSE
Sales,  operations  and  general  expense  increased  22.8%  and 18.3% to $1,554
million  and $3,058  million for the three and six months  ended June 30,  1998,
respectively,  in  comparison  to the same periods in 1997.  As a percentage  of
revenue,  sales,  operations and general  expense  increased to 28.9% and 28.7%,
from 26.1% and 26.6% for the three and six months ended June 30, 1998, and 1997,
respectively.  The  increases  for the three and six months  ended June 30, 1998
were the result of increased  human resource and support costs  associated  with
business growth primarily in local and information and technology services, year
2000 efforts and pre-merger  retention  bonuses.  In connection  with the Merger
Agreement,  pre-merger  retention  bonus  pools were  established  to retain key
executives and employees of the company. For the three and six months ended June
30,  1998,  the  company  recorded  compensation  costs of $32  million  and $67
million, respectively, under these retention bonus programs. The company expects
to recognize  additional  compensation costs of approximately $60 million in the
last half of 1998 and  approximately  $50 million in 1999 under these  programs.
However,  all unpaid  amounts  under these  retention  pools will be paid on the
closing date of the Merger if earlier than the  scheduled  pay-out date at which
time any  unrecognized  compensation  costs would be accelerated and expensed by
the company.

DEPRECIATION EXPENSE
Depreciation expense increased $142 million and $379 million to $621 million and
$1,311  million for the three and six months ended June 30, 1998,  respectively,
from the  comparable  prior year  periods.  Approximately  $58  million and $195
million of these  increases  resulted from  additional  depreciation  expense on
equipment  disposed  of during  the three and six months  ended  June 30,  1998,
respectively,  that was identified for  disposition in connection  with an asset
disposition  plan adopted in the fourth quarter of 1997. The remaining  increase
in  depreciation  expense  represents  the  depreciation  impact of property and
equipment  additions  placed  into  service  partially  offset by the  impact of
equipment disposals.


INTEREST EXPENSE
Interest  expense  decreased  $4 million  and $10  million for the three and six
months ended June 30, 1998, respectively,  from the same periods in 1997, due to
lower average total debt balances and interest rates.

INTEREST INCOME
Interest income increased $8 million and $6 million for the three and six months
ended  June  30,  1998,  respectively,  from the same  periods  in 1997,  due to
increased cash balances.

EQUITY IN INCOME (LOSSES) OF AFFILIATES
Equity in income (losses) of affiliates  decreased $1 million and $14 million to
($23)  million  and ($47)  million  for the three and six months  ended June 30,
1998,  respectively,  from the comparable  periods in 1997. The decrease for the
six month period is primarily the result of a reduction in the  company's  share
of  operating  losses of ICS  Communications,  Inc.  and Concert  Communications
Company (Concert CS).

OTHER INCOME (EXPENSE), NET
Other  income,  net,  was $38 million and $77 million an increase of $42 million
and $84  million  for the three and six months  ended June 30,  1998,  and 1997,
respectively.  For the three months ended June 30, 1998,  the increase  from the
comparable  period in 1997 was the result of recognized  gains of  approximately
$43  million  related to the sales of  certain  non-core  holdings.  For the six
months ended June 30, 1998, the increase from the comparable  period in 1997 was
primarily the result of the aforementioned gains and a $51 million realized gain
resulting  from  the  company's  exchange  of  a  marketable  equity  securities
investment in Brooks Fiber Properties,  Inc. which occurred in the first quarter
of 1998.

INCOME TAX PROVISION
The provision for income taxes decreased by $56 million and $178 million to $119
million  and $181  million  for the three and six months  ended  June 30,  1998,
respectively,  from the comparable periods in 1997. The decreases are the result
of the 1998  reduction  in pre-tax  income.  The  company's  effective  tax rate
approximated 38% for each period.

NET INCOME
Net income  decreased  $85  million  and $279  million to $195  million and $296
million for the three and six months ended June 30, 1998, respectively, from the
same  periods  during  1997.  The  decrease  in net income for the three and six
months  ended June 30, 1998 are the result of  increases  in  operating  expense
associated with, and in response to, growth and competitive  initiatives as well
as the  additional  depreciation  expense  for  equipment  subject  to the asset
disposition plan adopted in 1997 offset by the increase in other income, net and
the lower provision for income taxes.

GLOBAL AND OTHER ALLIANCES

CONCERT CS
During the first quarter of 1998, the company invested $8 million in Concert CS,
its 24.9% owned international  services venture with British  Telecommunications
plc,  (BT).  For the  three and six  months  ended  June 30,  1998,  Concert  CS
distributor  revenue  amounted to  approximately  $232 million and $444 million,
respectively.  The company's  share of Concert CS losses  reported in accordance
with U.S.  GAAP was $(2)  million and $(5)  million for the three and six months
ended June 30, 1998, respectively.  BT has agreed to exercise its call option to
acquire the company's  shares in Concert CS immediately  following the effective
time of the Merger.

On August 7, 1998,  the company  entered into an agreement  with BT, Concert CS
and WorldCom  addressing various aspects of certain agreements and relationships
among the parties.  The agreement is conditioned  upon the resolution of certain
operational  matters  between the company and Concert CS. Under the terms of the
agreement  the company  has agreed to sell to BT its  interest in Concert CS for
$1.013 billion immediately after consummation of the Merger. The company will be
a distributor of Concert CS services on a nonexclusive basis to customers in the
U.S. for a period of at least two years and as many as five years following BT's
exercise of its call option.

TELEFONICA de ESPANA S.A. ALLIANCE (Telefonica)
In April  1997,  the company  formed a strategic  alliance  with  Telefonica  to
explore  opportunities in Latin America's  telecommunications  market.  In March
1998, the company and Telefonica expanded the scope of their alliance to include
WorldCom and to pursue certain activities in the Americas and Europe.

AVANTEL S.A. de C.V (Avantel)
During the first half of 1998,  the company  funded an additional $37 million in
Avantel,  a 44.5% owned business venture with Grupo Financiero  Banamex-Accival.
At June 30,  1998,  Avantel  has  approximately  a 10% share in the  addressable
Mexico long-distance market. The company's share of Avantel's losses reported in
accordance  with U.S. GAAP was $(23) million and $(43) million for the three and
six months ended June 30, 1998,  respectively.  The company  expects  Avantel to
continue  to  generate  operating  losses as Avantel  expands  its  service  and
customer bases in Mexico's telecommunications market.

INVESTMENT in EMBRATEL
On July 29, 1998,  the company  acquired,  through its  wholly-owned  subsidiary
Startel  Participacoes  Ltda., for approximately  $2.3 billion,  a 51.79% voting
interest and a 19.26% economic interest in Embratel Participacoes S.A., Brazil's
only facilities-based  national communications provider. The purchase price will
be paid in installments of which $916 million was paid on July 29, 1998 with the
remainder to be paid prior to July 29, 2000.

DIRECT BROADCAST SATELLITE (DBS) VENTURE
In May 1997, the company and The News  Corporation  Limited (News Corp.) entered
into an  agreement to form a joint  venture (DBS  Venture) in which both parties
would contribute their respective DBS assets and cash. In exchange,  the company
would  receive a 19.9%  interest in the new venture.  In  addition,  the parties
agreed that the company's funding obligation to the DBS Venture would be limited
to $440 million. The agreement also provided that the parties would seek a third
party to acquire their  combined  interests in this DBS business.  In June 1997,
the company and News Corp.  entered into an agreement with  Primestar  Partners,
L.P. (Primestar) for the sale and transfer of the company's and News Corp.'s DBS
assets   other  than  two  of  the  four  DBS  Venture   satellites   (Primestar
Transaction).  In March  1998,  the  parties  sold their  interest in one of the
remaining  satellites  and  are  pursuing  the  disposition  of the  other.  The
Primestar  Transaction  is  part  of a  larger  transaction  that  involves  the
consolidation  of Primestar and TCI Satellite  Entertainment,  Inc. into a newly
formed entity (New Primestar) that was completed in April 1998.  Concurrent with
the consummation of the Primestar Transaction or upon the approval by the FCC of
the transfer of the orbital slot to the DBS Venture or another third party,  the
company will acquire  preferred  shares in a subsidiary of News Corp. for a face
amount equal to the  company's  cost of obtaining  the FCC license plus interest
thereon.  Under the terms of the  Primestar  Transaction,  the company will also
receive  from New  Primestar  consideration  in the  form of cash  and  interest
bearing  non-voting  New Primestar  securities  for its share of the DBS Venture
assets  transferred to New Primestar.  On May 12, 1998 the Department of Justice
filed suit in the U.S.  District  Court for the District of Columbia  seeking to
enjoin the completion of the Primestar Transaction.

YEAR 2000 EFFORTS

The  company  continues  to  evaluate  and  upgrade  its  computer  systems  and
applications  for the year 2000. The company's  objective is to target year 2000
compliance  for  all  of its  major  systems,  including  network  and  customer
interfacing systems, on or before March 31, 1999. All other systems are targeted
for  compliance by June 1999.  The company is currently  testing the systems and
applications  that have been  corrected  or  reprogrammed  to date for year 2000
compliance.

As part of its year 2000 plan,  the  company is  seeking  confirmation  from its
domestic  and  foreign   interconnecting   carriers  and  major  communications
equipment  vendors  (Primary  Vendors) that they are developing and implementing
plans to become  year 2000  compliant.  Confirmations  received to date from its
Primary  Vendors  have  indicated  that such  respondents  are in the process of
implementing  remediation  procedures to ensure that their computer  systems are
year 2000  compliant  by December  31,  1999.  The  company has already  started
testing  with some of its Primary  Vendors and expects to have  started  testing
with all of its Primary Vendors by the second quarter of 1999.

In addition, the company is developing a contingency plan to deal with potential
year 2000 related  business  interruptions  that may occur on January 1, 2000 or
thereafter.  The company believes this plan will be ready for  implementation in
early 1999 and it is anticipated that contingency plan testing will begin during
the first quarter of 1999.

To achieve its year 2000 compliance plan, the company is utilizing both internal
and external resources to identify,  correct or reprogram,  and test its systems
for year 2000 compliance. The company expects to incur internal labor as well as
consulting  and  other  expenses  related  to   infrastructure   and  facilities
enhancements  necessary  to prepare  its  systems  for the year 2000.  The costs
incurred  by  the  company  for  the  six  months   ended  June  30,  1998  were
approximately  $52 million and are  included  in sales,  operations  and general
expense and were consistent with the planned  expenditures  for the period.  The
company expects to incur approximately $350 million in expenses in the last half
of 1998 and 1999 to support its  compliance  initiatives.  Although  the company
expects its systems to be year 2000 compliant on or before December 31, 1999, it
cannot predict the outcome or the success of its year 2000 joint testing program
or the year 2000 compliance programs of the Primary Vendors,  nor can it predict
the impact on its financial  condition or results of operations,  if any, in the
event that such joint testing  compliance  objectives  and year 2000  compliance
programs of its Primary Vendors are not successful.



<PAGE>


FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
----------------------------------------------------

CASH FLOWS
-------------------

Cash from operating  activities  increased by $677 million to $2,212 million for
the six months  ended June 30, 1998  compared  to the six months  ended June 30,
1997.  Receipts from customers  increased by $1,581 million due primarily to the
increase in revenue and improved  collection  experience.  Payments to suppliers
and employees  increased by $1,034 million as a result of increases in operating
expenses and the timing of the related payments. Taxes and interest paid for the
six months ended June 30, 1998 declined from the year ago period  primarily as a
result of lower income taxes and interest expenses, and income tax refunds. Cash
used for investing activities decreased by $633 million for the six months ended
June 30, 1998  compared to the six months ended June 30, 1997.  The decrease was
the result of lower  expenditures  for property and equipment and investments in
DBS and affiliates of $301 million.  These investing activities were offset by a
$383 million increase in other investing activities, net primarily the result of
$360 million of proceeds received from a sale-lease back transaction offset by a
reduction in proceeds received from marketable securities and other investments,
net of $51 million.  Cash from operating activities and financing activities was
used to support the company's investing activities for the six months ended June
30, 1998.

Cash used for financing  activities  was ($227) million for the six months ended
June 30, 1998  compared to net cash proceeds  from  financing  activities of $86
million for the six months ended June 30, 1997. During the six months ended June
30, 1998, the company was able to repay approximately $1.8 billion in commercial
paper and other debt balances.  These balances were repaid in-part from proceeds
raised from issuances of common stock to support  employee  benefit programs and
proceeds from debt issuances of $500 million aggregate principal amount of 6.50%
Senior   Notes  and  $700   million   aggregate   principal   amount  of  6.125%
Callable/Redeemable  notes  issued in April  1998.  Other  financing  activities
included distributions paid on Trust mandatorily redeemable preferred securities
of $30  million  and  dividend  payments  of $18  million.  Cash from  financing
activities  for the six months  ended June 30,  1997  consisted  of  payments of
Senior  Notes  and  other  debt of $160  million,  distributions  paid on  Trust
mandatorily  redeemable  preferred  securities  of  $30  million,  and  dividend
payments  of $17  million  offset by net  commercial  paper  borrowings  of $135
million and issuances of common stock to support  employer  benefit programs net
of treasury share repurchases of $158 million.

CAPITAL RESOURCES AND LIQUIDITY
-------------------------------------------------------

For the six  months  ended  June  30,  1998,  the  company  funded  its  capital
expenditures  and other investment  activities  through cash from operations and
other  financing  activities.  The company  expects net capital  expenditures of
approximately  $3.1  billion  for 1998 and  expects  to fund a  majority  of the
expenditures with cash from operations. The company has a $4 billion bank credit
facility that supports the company's commercial paper program and may be used to
fund   short-term   fluctuations   in  working   capital  and  other   corporate
requirements. In April 1998, this facility was extended until the earlier of the
consummation  of the Merger or April 26, 1999.  In April 1998,  the company also
issued $500 million  aggregate  principal amount of 6.50% Senior Notes due April
15,   2010   and   $700   million   aggregate   principal   amount   of   6.125%
Callable/Redeemable  Notes due  April 15,  2012  under  its $1.2  billion  shelf
registration.  The  proceeds  from these  issuances were used to repay  maturing
commercial paper balances and for other general corporate purposes.  After these
issuances,  there  were no  amounts  available  for  issuance  under  the  shelf
registration.  Upon  issuance  of the $500  million  Senior  Notes,  the company
terminated  an interest  rate swap which had been  designated as a hedge against
adverse  market  interest  rate  changes.  The swap had a negative fair value of
approximately  $27  million  at the  time  of the  transaction  which  is  being
amortized  over the life of the  Senior  Notes.  On July  29,  1998 the  company
invested  approximately $916 million for its interest in Embratel  Participacoes
S.A. This was funded with cash from operations.  The company believes it will be
able to meet its current and long-term  liquidity and capital  requirements from
cash from operating activities, its commercial paper program and other investing
activities.



<PAGE>



                 MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
                                    FORM 10-Q


PART I.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



The company  believes  its market  risk  exposure  with regard to its  financial
instruments  is limited to changes in interest  rates  primarily in the U.S. The
company believe its market risk exposure is not material.  At June 30, 1998, the
company had no amounts of variable rate debt outstanding.



<PAGE>


                 MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
                                    FORM 10-Q

PART II. OTHER INFORMATION

ITEM 6:  EXHIBITS AND REPORTS ON FORM 8-K

a)Exhibits

Exhibit No.                Description
-----------                -----------
<TABLE>
<CAPTION>
        <S>                <C>                                                                                 
        10(a)              Share Purchase Agreement for Common Shares issued by Embratel   
                           Participacoes S.A. with the option of scheduled payments.

         12                Computation of Ratio of Earnings to Fixed Charges.

         27(a)             Financial Data Schedule as of June 30, 1998.

         27(b)             Financial Data Schedule as of June 30, 1997.

         27(c)             Financial Data Schedule as of September 30, 1997.

         99(a)             Capitalization Schedule as of June 30, 1998.

b)Reports on Form 8-K

For the three months ended June 30, 1998, the company filed two Current  Reports
on Form 8-K on April 27, 1998,and May 29, 1998, (amended July 22, 1998).

</TABLE>







<PAGE>




                 MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
                                    FORM 10-Q



                                    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.


                                        MCI COMMUNICATIONS CORPORATION




Date:  August 14, 1998                       Signed:      /s/ David M. Case
                                                       -----------------------
                                                          David M. Case
                                                  Vice President and Controller






<PAGE>


                 MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
                                    FORM 10-Q
                                  EXHIBIT INDEX



Exhibit No.                Description
-----------                -----------
<TABLE>
<CAPTION>

        <S>                  <C>                                                                                 
        10(a)                Share Purchase Agreement for Common Shares issued by Embratel 
                             Participacoes S.A.with the option of scheduled payments.

         12                    Computation of Ratio of Earnings to Fixed Charges.

         27(a)                 Financial Data Schedule as of June 30, 1998.

         27(b)                 Financial Data Schedule as of June 30, 1997.

         27(c)                 Financial Data Schedule as of September 30, 1997.

         99(a)                 Capitalization Schedule as of June 30, 1998.

</TABLE>