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 September 30, 1996

                                       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 September 30, 1996, the registrant had outstanding  135,998,932  shares of
Class A common stock and 548,903,285 shares of common stock.


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                                     PAGE 2

                 MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                                    FORM 10-Q

                    For The Quarter Ended September 30, 1996



                                      INDEX


                                                                       Page No.
                                                                       --------

PART I:  FINANCIAL INFORMATION

        ITEM 1:  FINANCIAL STATEMENTS

            Income Statements for the three and nine months ended
            September 30, 1996 and 1995                                       3

            Balance Sheets as of September 30, 1996 and December 31, 1995   4-5

            Statements of Cash Flows for the nine months ended
            September 30, 1996 and 1995                                       6

            Statement of Stockholders' Equity for the nine months
            ended September 30, 1996                                          7

            Notes to Interim Condensed Consolidated Financial
            Statements                                                     8-10

        ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS            11-23


PART II:  OTHER INFORMATION


        ITEM 6:  EXHIBITS AND REPORTS ON FORM 8-K                            24


SIGNATURE                                                                    25

EXHIBIT INDEX                                                                26



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                                     PAGE 3
PART I.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

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

                                    Three Months Ended        Nine Months Ended
                                         September 30,            September 30,
                                     -----------------        -----------------
                                         1996     1995            1996     1995
                                       ------   ------          ------   ------
REVENUE                                $4,685   $3,862         $13,741  $11,128
                                       ------   ------          ------   ------
OPERATING EXPENSES
  Cost of services                      2,370    2,001           7,056    5,741
  Sales, operations and general         1,304    1,283           3,718    3,298
  Depreciation                            430      328           1,223      973
  Asset write-down                          -      520               -      520
                                       ------   ------          ------   ------
TOTAL OPERATING EXPENSES                4,104    4,132          11,997   10,532
                                       ------   ------          ------   ------
INCOME (LOSS) FROM OPERATIONS             581     (270)          1,744      596

Interest expense                          (51)     (35)           (153)    (109)
Interest income                             7       36              27      131
Equity in income (losses) of
  affiliated companies                    (28)    (116)           (128)    (163)
Other income (expense), net                (1)      (2)             (1)     (23)
                                       ------   ------          ------   ------
INCOME (LOSS) BEFORE INCOME TAXES AND
  TRUST DISTRIBUTIONS                     508     (387)          1,489      432

Income tax (provision) benefit           (189)     147            (570)    (168)

Distributions on Trust preferred
  securities                               15        -              20        -
                                       ------   ------          ------   ------
NET INCOME (LOSS)                      $  304   $ (240)        $   899  $   264
                                       ======   ======          ======   ======
EARNINGS (LOSS) PER COMMON AND
  COMMON EQUIVALENT SHARES             $  .44   $ (.35)        $  1.29  $   .38

Weighted average number of shares
  of common stock and common stock
  equivalents outstanding                 691      688             695      686

Dividends declared per common share    $    -   $    -         $  .025  $  .025

See accompanying Notes to Interim Condensed Consolidated Financial Statements.


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                                     PAGE 4

                 MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
                                 BALANCE SHEETS
                                   (unaudited)

                                               September 30,        December 31,
                                                   1996                 1995
                                               -----------          -----------
                                                          (In millions)
ASSETS

CURRENT ASSETS
  Cash and cash equivalents                          $ 250              $   471
  Marketable securities                                130                  373
  Receivables, net of allowance for
    uncollectibles of $265 and $260 million          3,331                2,912
  Other assets                                         944                  749
                                                   -------              -------
   TOTAL CURRENT ASSETS                              4,655                4,505
                                                   -------              -------

PROPERTY AND EQUIPMENT, net                         11,658               10,309

OTHER ASSETS
  Noncurrent marketable securities                      67                    -
  Other assets and deferred charges, net               948                  511
  Investment in affiliates                             399                  495
  Investment in News Corp.                           1,350                1,000
  Goodwill, net                                      2,432                2,481
                                                   -------              -------
   TOTAL OTHER ASSETS                                5,196                4,487
                                                   -------              -------
   TOTAL ASSETS                                    $21,509              $19,301
                                                   =======              =======









See accompanying Notes to Interim Condensed Consolidated Financial Statements.


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                                     PAGE 5

                 MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
                                 BALANCE SHEETS
                                   (unaudited)
                                               September 30,        December 31,
                                                  1996                  1995
                                               -----------          -----------
                                                         (In millions)
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts payable                               $     895              $   706
  Accrued telecommunications expense                 1,977                1,936
  Other accrued liabilities                          1,768                1,728
  Long-term debt due within one year                   439                  500
                                                   -------              -------
   TOTAL CURRENT LIABILITIES                         5,079                4,870
                                                   -------              -------
NONCURRENT LIABILITIES
  Long-term debt                                     3,722                3,444
  Deferred taxes and other                           1,629                1,385
                                                   -------              -------
   TOTAL NONCURRENT LIABILITIES                      5,351                4,829
                                                   -------              -------
COMPANY OBLIGATED MANDATORILY REDEEMABLE
  PREFERRED SECURITIES OF SUBSIDIARY TRUST
  HOLDING SOLELY JUNIOR SUBORDINATED
  DEFERRABLE INTEREST DEBENTURES OF THE COMPANY        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
    593 million shares                                  60                   60
  Additional paid in capital                         6,366                6,405
  Retained earnings                                  4,945                4,063
  Treasury stock, at cost,
    44 and 43 million shares                        (1,056)                (940)
                                                   -------              -------
   TOTAL STOCKHOLDERS' EQUITY                       10,329                9,602
                                                   -------              -------
   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY      $21,509              $19,301
                                                   =======              =======


See accompanying Notes to Interim Condensed Consolidated Financial Statements.


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                                     PAGE 6

                 MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
                            STATEMENTS OF CASH FLOWS
                                   (unaudited)
                                                           Nine Months Ended
                                                              September 30,
                                                         ----------------------
                                                           1996           1995
                                                         -------        -------
                                                              (In millions)
OPERATING ACTIVITIES
  Receipts from customers                                $13,267        $10,705
  Payments to suppliers and employees                    (10,457)        (8,476)
  Taxes paid                                                (620)          (261)
  Interest paid                                             (163)          (120)
  Interest received                                           28            151
                                                          ------         ------
       CASH FROM OPERATING ACTIVITIES                      2,055          1,999
                                                          ------         ------
INVESTING ACTIVITIES
  Capital expenditures for property and equipment        (2,423)         (2,261)
  Purchases, maturities and sales of
    marketable securities, net                              176           1,371
  Investment in News Corp.                                 (350)         (1,000)
  Investment in DBS                                        (268)              -
  Investment in affiliates                                  (32)           (145)
  Acquisition of businesses, net of cash acquired           (24)           (194)
  Other, net                                                 (8)             11
                                                         ------          ------
       CASH USED FOR INVESTING ACTIVITIES                (2,929)         (2,218)
                                                         ------          ------
       NET CASH FLOW BEFORE FINANCING ACTIVITIES           (874)           (219)
                                                         ------          ------
FINANCING ACTIVITIES
  Issuance (payment) of Debentures and other debt, net      492            (105)
  Commercial paper and bank credit facility
    activity, net                                          (368)              -
  Issuance of Trust preferred securities, net               726               -
  Issuance of common stock for employee plans               342             202
  Purchase of treasury stock                               (522)           (285)
  Payment of dividends on common stock and
      Class A common stock                                  (17)            (16)
                                                         ------          ------
       CASH FROM (USED FOR) FINANCING ACTIVITIES            653            (204)
                                                         ------          ------
Net decrease in cash and cash equivalents                  (221)           (423)
Cash and cash equivalents - beginning balance               471           1,429
                                                         ------          ------
Cash and cash equivalents - ending balance               $  250          $1,006
                                                         ======          ======
Reconciliation of net income to cash from 
 operating activities:
Net income                                                $ 899            $264
Adjustments to net income:
  Depreciation and amortization                           1,267           1,012
  Asset write-down                                            -             520
  Equity in (income) losses of affiliated companies         127             162
  Deferred income tax provision                             192              51
Net change in operating activity accounts
 other than cash and cash equivalents:
  Receivables                                              (419)           (456)
  Operating accounts payable                                122             173
  Other operating activity accounts                        (133)            273
                                                         ------          ------
Cash from operating activities                           $2,055          $1,999
                                                         ======          ======
See accompanying Notes to Interim Condensed Consolidated Financial Statements.


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                                     PAGE 7

                 MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (unaudited)



                                                               Treas.     Total
                          Class A           Addit'l            Stock,    Stock-
                           Common   Common  Paid in Retained     at    holders'
                            Stock    Stock  Capital Earnings    Cost     Equity
                           ------   ------  ------- --------  -------   -------
                                           (In millions)
Balance at
December 31, 1995          $   14   $   60   $6,405   $4,063   $ (940)   $9,602

Common stock issued
  for employee stock
  and benefit plans
  (19 million shares)           -        -      (39)       -      415       376

Net income                      -        -        -      899        -       899

Common stock dividends          -        -        -      (17)       -       (17)

Treasury stock
  purchased
  (20 million shares)           -        -        -        -     (531)     (531)
                            -----    -----   ------   ------  -------   -------
Balance at
  September 30, 1996          $14      $60   $6,366   $4,945  $(1,056)  $10,329
                            =====    =====   ======   ======  =======   =======









See accompanying Notes to Interim Condensed Consolidated Financial Statements.


<PAGE>


                                     PAGE 8

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

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.  Certain prior
year  information  has been  reclassified  to  conform  to the  current  quarter
presentation.  Certain information and footnote disclosures normally included in
financial  statements  prepared in accordance with generally accepted accounting
principles  have  been  condensed  or  omitted  pursuant  to 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, 1995.

NOTE 2. NEWS CORP. ALLIANCE

In May 1996,  the  company  invested  an  additional  $350  million  in The News
Corporation Limited (News Corp.).  Under certain  circumstances,  News Corp. has
the right  until  August  2000 to  require  the  company  to make an  additional
investment  of up to an  aggregate of $650 million on the same terms and for the
same consideration as the company's initial investment. The company accounts for
its investment under the cost method.

In January 1996, the company won the last national  direct  broadcast  satellite
(DBS) license with a bid of $682  million.  The company has paid $136 million of
the license  fee as of  September  30,  1996.  The  company  expects the Federal
Communications  Commission  (FCC) to issue an Order  granting  the post  auction
application and awarding the license  conditioned upon payment of the balance of
the bid.  The company  expects the  issuance of the Order and the payment of the
balance to occur prior to the end of this year. The company and News Corp.  have
agreed to form a joint  venture,  in which the company  anticipates  owning less
than a 20%  interest,  to  provide  digital  satellite  services  to  homes  and
businesses beginning in late 1997.

NOTE 3. LONG-TERM DEBT

During the nine months ended  September 30, 1996,  the company issued two series
of debt under its $1 billion shelf  registration.  On June 24, 1996, the company
issued $500 million aggregate principal amount of 7 1/8% Debentures due June 15,
2027 and on August 9, 1996, the company issued $300 million aggregate


<PAGE>


                                     PAGE 9

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

principal  amount of 6.95% Senior Notes due August 15, 2006. As of September 30,
1996, $200 million was available for issuance under the shelf registrations. The
proceeds of the issuances were used for general  corporate  purposes,  including
the repayment of short-term  borrowings  under the  company's  commercial  paper
program.  On  September  30,  1996,  the  company  filed a new $1 billion  shelf
registration  that,  together with the $200 million available under the prior $1
billion shelf  registration,  will allow the company to issue up to $1.2 billion
aggregate  principal  amount of debt  securities  with a range of  maturities at
either fixed or variable rates.

On  September  26,  1996,  the  company  entered  into a  revolving  credit loan
agreement  with  several  parties,  under  which the company may borrow up to $2
billion.  This  agreement  expires in September 2001 and replaces the $2 billion
revolving credit loan agreement of July 1994.  There are no amounts  outstanding
under this credit facility at September 30, 1996.

NOTE 4. COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
SUBSIDIARY TRUST HOLDING SOLELY JUNIOR SUBORDINATED DEFERRABLE INTEREST
DEBENTURES OF THE COMPANY

On May 29, 1996, MCI Capital I, a wholly-owned Delaware statutory business trust
(Trust),  issued  $750  million  of 8%  Cumulative  Quarterly  Income  Preferred
Securities,  Series A (preferred securities) due June 30, 2026. The Trust exists
for the sole  purpose of issuing the  preferred  securities  and  investing  the
proceeds in the company's 8% Junior Subordinated Deferrable Interest Debentures,
Series A  (Subordinated  Debt  Securities) due June 30, 2026, the only assets of
the Trust.  The proceeds from the issuance of the  Subordinated  Debt Securities
were used for general corporate purposes.

Holders  of the  preferred  securities  are  entitled  to  receive  preferential
cumulative cash distributions from the Trust, on a quarterly basis, provided the
company has not elected to defer the payment of interest due on the Subordinated
Debt  Securities to the Trust.  The company may elect this deferral from time to
time, provided that the period of each such deferral does not exceed five years.
The preferred  securities  are subject to mandatory  redemption,  in whole or in
part, upon repayment of the Subordinated  Debt Securities at maturity or earlier
in an amount equal to the amount of  Subordinated  Debt  Securities  maturing or
being repaid.  In addition,  in the event the company  terminates the Trust, the
Subordinated  Debt  Securities  will be  distributed  to the then holders of the
preferred securities of the Trust.




<PAGE>


                                     PAGE 10

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

In  connection  with the  issuance  of the  preferred  securities,  the  company
executed a Trust Agreement,  an Indenture,  a Guarantee Agreement and an Expense
Agreement.   These   agreements,   taken  together  with  the  issuance  of  the
Subordinated Debt Securities,  constitute a full,  irrevocable and unconditional
guarantee by the company of all of the Trust's  obligations  under the preferred
securities  (the  Guarantee).  The  Guarantee  Agreement  covers  payment of the
preferred  securities'  quarterly  distributions  and  payments  on  maturity or
redemption of the preferred  securities,  but only in each case to the extent of
funds held by the Trust.  If the company does not make interest  payments on the
Subordinated Debt Securities held by the Trust, the Trust will have insufficient
funds to pay such  distributions.  The  obligations  of the  company  under  the
Guarantee and the  Subordinated  Debt  Securities are  subordinate and junior in
right of payment to all senior debt of the company.

NOTE 5.  1995 SPECIAL CHARGE FOR REORGANIZATION

Other  accrued  liabilities  at September  30, 1996 include  approximately  $115
million related to the  reorganization  accrual recorded in the third quarter of
1995. The remaining accrual  primarily  consists of lease obligations for excess
facilities,  contract  termination  costs and accrued  legal and other  business
costs.

NOTE 6.  SUBSEQUENT EVENT

On November 3, 1996,  the company  entered into an Agreement  and Plan of Merger
with British Telecommunications, plc (BT), a public limited company incorporated
under the laws of England and Wales,  and  Tadworth  Corporation  (Tadworth),  a
Delaware corporation and a wholly-owned  subsidiary of BT, pursuant to which the
company  will  merge with and into  Tadworth  (the  Merger).  As a result of the
Merger, each outstanding share of the company's common stock, par value $.10 per
share  (other than shares held in the  treasury of the company or owned by BT or
Tadworth  or any  persons  who shall have  properly  exercised  their  rights to
appraisal  under  Delaware  law),  will be  converted  into the right to receive
(i).54 American  Depository  Share (ADS) of BT, each  representing  ten ordinary
shares of 25 pence each of BT (with cash being paid in lieu of fractional ADSs),
and (ii) $6.00 in cash. The combined  company will be named Concert plc and will
operate  under the BT and MCI brand  names in the United  Kingdom and the United
States, respectively.

Consummation  of the  Merger is subject to  certain  conditions,  including  the
approval  of  the  Merger  and  the  transactions  contemplated  thereby  by the
stockholders of the company and BT and receipt of required regulatory approvals.
It is expected that the merger will be accounted  for under the purchase  method
of accounting.


<PAGE>


                                     PAGE 11
PART I.
ITEM 2.
                 MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
         FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995

GENERAL
-------
The following  discussion and analysis  provides  information  which  management
believes  is  relevant  to an  assessment  and  understanding  of the  company's
consolidated  results of operations  and  financial  condition.  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, 1995.

The company operates  primarily in a single industry segment,  the long distance
telecommunications   industry  (core   business).   Through   acquisitions   and
investments  in ventures  and  alliances,  the company has expanded its business
into certain developing markets. Provided below is a discussion of the company's
consolidated results, along with additional information about the company's core
business and its ventures and developing markets (VDM) businesses.

RECENT DEVELOPMENTS
--------------------

On November 3, 1996,  the company  entered into an Agreement  and Plan of Merger
with British Telecommunications, plc (BT), a public limited company incorporated
under the laws of England and Wales,  and  Tadworth  Corporation  (Tadworth),  a
Delaware corporation and a wholly-owned subsidiary of BT, pursuant to which the
company  will  merge with and into  Tadworth  (the  Merger).  As a result of the
Merger, each outstanding share of the company's common stock, par value $.10 per
share  (other than shares held in the  treasury of the company or owned by BT or
Tadworth  or any  persons  who shall have  properly  exercised  their  rights to
appraisal  under  Delaware  law),  will be  converted  into the right to receive
(i).54 American  Depository  Share (ADS) of BT, each  representing  ten ordinary
shares of 25 pence each of BT (with cash being paid in lieu of fractional ADSs),
and (ii) $6.00 in cash. The combined  company will be named Concert plc and will
operate  under the BT and MCI brand  names in the United  Kingdom and the United
States, respectively.

Consummation  of the  Merger is subject to  certain  conditions,  including  the
approval  of  the  Merger  and  the  transactions  contemplated  thereby  by the
stockholders of the company and BT and receipt of required regulatory approvals.
It is expected that the merger will be accounted  for under the purchase  method
of accounting.


<PAGE>


                                     PAGE 12

                 MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
         FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995

CONSOLIDATED RESULTS
--------------------
Consolidated  revenues  for the three and nine months ended  September  30, 1996
increased 21% and 24% to $4.7 billion and $13.7 billion, respectively,  from the
comparable  periods in 1995.  As further  explained  below under "Core  Business
Results", the company's long distance  telecommunications service revenue growth
accounted for approximately 53% and 54% of the total  year-over-year  growth for
the three and nine months ended  September  30, 1996.  The  remaining  growth is
primarily due to the company's  entrance into the information  technology market
through the acquisition of SHL Systemhouse,  Inc. (Systemhouse) in November 1995
and into the cellular  market and the expansion of its paging  services  through
the acquisition of Nationwide Cellular, Inc. (Nationwide) in September 1995.

As reported,  income from  operations  increased $851 million and $1,148 million
for the three and nine months ended September 30, 1996, respectively.  Operating
margins were 12.4% and 12.7% during  these  periods  versus (7)% and 5.4% in the
comparable  periods of 1995.  Net income  during the three and nine months ended
September 30, 1996 was $304 million and $899 million, respectively, versus a net
loss of $240 million and net income of $264 million  reported in the  comparable
periods of 1995, respectively. Reflected in these period-over-period comparisons
is the impact of an $831 million  pre-tax  special  charge ($518 million or $.75
per share,  after tax)  recorded in the third  quarter of 1995.  This charge was
comprised of a pre-tax operating charge of $736 million, which included an asset
write-down of $520 million and a $216 million  charge in sales,  operations  and
general  expenses  for  reorganization  costs.  The charge  also  included a $95
million pre-tax charge relating to certain of the company's equity investments.

Excluding  the 1995  special  charges,  the  company's  comparative  income  and
earnings results were as follows:  Income from operations  increased 25% and 31%
for the three and nine months ended September 30, 1996,  respectively,  from the
comparable  periods in 1995. This growth was predominantly in the core business.
The company's VDM businesses  reported  operating losses during these periods in
1996 of $(32) million and $(80) million,  respectively.  Consolidated  operating
margins for the three and nine months ended September 30, 1996 improved to 12.4%
and 12.7% from 12.1% and 12% for the same  periods  in 1995,  respectively.  Net
income increased 11% and 15%  year-over-year for the three and nine months ended
September 30, 1996, respectively. Core business net income increased 27% and 34%
year-over-year  for  the  three  and  nine  months  ended  September  30,  1996,
respectively,  while the company's VDM  businesses  for the same periods in 1996
reported net losses of $(73) million and $(225)

<PAGE>


                                     PAGE 13

                 MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
         FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995



million,  respectively,  which losses  include the  company's  equity in the net
results of affiliated companies.  Third quarter earnings per share increased 10%
from the  year-ago  quarter to $.44 per share and the 1996 nine months  earnings
per share increased 13% from the first nine months of 1995 to $1.29 per share.

Cost of services  increased  18% and 23%  year-over-year  for the three and nine
months  ended  September  30,  1996,  respectively.  Cost of services  primarily
consists of telecommunications  expense and other costs of products and services
associated with the VDM businesses. Other costs of products and services include
equipment,  software and information  technology services costs. As a percentage
of  revenue,  cost of services  decreased  to 50.6% for the three  months  ended
September  30,  1996 from 51.8% for the same period in 1995.  On a  year-to-date
basis,  cost of services  decreased to 51.3%  year-over-year  from 51.6%.  These
decreases were primarily in the core business where  telecommunications  expense
as a percentage of revenue  decreased in the third quarter of 1996 to 49.4% from
52.3% in the year-ago  quarter and, on a  year-to-date  basis,  to 50.2% in 1996
from  51.9%  in  1995.  These  declines  were  largely  a  result  of  continued
maximization of network efficiencies, use of alternative carriers and reductions
in international settlement rates.

As reported,  sales, operations and general expense increased 2% year over year.
Absent the 1995 special charge, sales,  operations and general expense increased
year-over-year  22% and 21% for the three and nine months  ended  September  30,
1996, respectively. For the comparative quarter periods, core business accounted
for approximately 54% of the total increase  primarily due to increases in sales
and  marketing  costs in the quarter to support  business  markets  growth.  The
remaining 46% is primarily  attributable to expenses incurred by Systemhouse and
Nationwide.  For the nine months ended September 30, 1996, core business results
accounted for 41% of the increase due to increases in sales and marketing  costs
in the second and third  quarter of 1996 offset by cost  savings  related to the
company's 1995  reorganization.  The remaining  increase is due to the operating
results of Systemhouse and Nationwide  acquired in late 1995 and included in the
nine months ended September 30, 1996.

Depreciation expense increased 31% and 26% year-over-year for the three and nine
months ended September 30, 1996,  respectively.  Additions to the communications
system  network,   in  order  to  increase  network  capacity,   redundancy  and
reliability,  accounted  for  approximately  69% and 67% of the increase for the
three and nine months ended September 30, 1996, respectively,


<PAGE>


                                     PAGE 14

                 MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
         FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995




offset by  depreciation  savings  related to the asset  write-down  in September
1995. The remaining increase was primarily comprised of additional  depreciation
on Systemhouse and Nationwide property and equipment and amortization associated
with these acquired  companies,  representing  approximately  23% and 28% of the
increase in  depreciation  expense for the three and nine months ended September
30, 1996, respectively.

Interest  expense  for the  three  and nine  months  ended  September  30,  1996
increased $16 million and $44 million,  respectively,  from the year-ago periods
due to increased  debt  balances as a result of  commercial  paper and Debenture
issuances  during the current  quarter and year.  Interest  income  declined $29
million  year-over-year  due to the lower cash  balances  that resulted from the
continued use of cash to fund capital network  expenditures,  investments in DBS
and the company's investments in its VDM businesses.

As reported,  equity in losses of affiliated  companies  improved by $88 million
and $35 million for the quarter and year to date period in 1996.  Excluding  the
1995 special charge,  equity in losses of affiliated  companies  increased by $7
million and $60 million from the comparable  quarter and year to date periods in
1995.  The  increase in losses for the nine months ended  September  30, 1996 is
primarily  the  result  of  increased  losses   associated  with  the  company's
investment in ICS, the company's  equity share of its  investment in Avantel,  a
development stage enterprise, and its share of operating expenses of its on-line
project.

Other  expense,  net,  decreased by $1 million and $22 million for the three and
nine months ended September 30, 1996, respectively,  from the comparable periods
during 1995 due to dividend  income of $15 million and $39 million for the three
months  and  nine  months  ended  September  30,  1996,  respectively,  from the
company's preferred stock investment in News Corp. made in August 1995.

Distributions  on Trust preferred  securities,  issued in May 1996,  totaled $15
million for the quarter.



<PAGE>


                                     PAGE 15

                 MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
         FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995


ENTERPRISE REPORTING
--------------------
This section  segregates the performance of the company's core business from its
investments in VDM businesses.  The following unaudited information was prepared
using all  amounts  included in the  company's  interim  condensed  consolidated
financial  statements and reflects  estimates and  allocations  that  management
believes provide a reasonable basis on which to present such information.

CORE BUSINESS RESULTS
---------------------
                                          Three Months Ended  Nine Months Ended
                                             September 30,       September 30,
                                          ------------------  -----------------
                                                      (In millions)

                                              1996      1995       1996    1995
                                            ------    ------    ------   ------
REVENUE                                     $4,274    $3,837   $12,482  $11,078
                                            ------    ------    ------   ------
OPERATING EXPENSES
  Cost of services                           2,111     2,005     6,266    5,754
  Sales, operations and general              1,151     1,238     3,258    3,215
  Depreciation                                 395       325     1,127      959
  Asset write-down                               -       481         -      481
                                            ------    ------    ------   ------
TOTAL OPERATING EXPENSES                     3,657     4,049    10,651   10,409
                                            ------    ------    ------   ------
INCOME (LOSS) FROM OPERATIONS                  617      (212)    1,831      669

Non-operating (expense) income,
  net                                           (3)        1        (1)       1
                                            ------    ------    ------   ------
INCOME BEFORE INCOME TAXES                     614      (211)    1,830      670

Income tax (provision) benefit                (233)       80      (699)    (258)
                                            ------    ------    ------   ------
NET INCOME (LOSS)                           $  381    $ (131)  $ 1,131  $   412
                                            ======    ======    ======   ======



<PAGE>


                                     PAGE 16

                 MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
         FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995

For the  third  quarter  of 1996,  core  business  revenue  grew  11.4% and core
business traffic grew 11% year-over-year, which resulted in a revenue to traffic
variance of .4%. The revenue to traffic variance,  which was an improvement from
the year-over-year variance reported in the second quarter of 1996, was a result
of the improved mix of higher margin  product sales in the business and consumer
markets, a more comparable mix of carrier traffic over the third quarter of 1995
and a reduction in consumer  promotional  activities.  These  revenue gains were
partially offset by increased  provisions for uncollectibles  during the quarter
as a result of tightening  credit  policies.  For the first nine months of 1996,
core  business   revenue  grew  12.7%  and  core  business  traffic  grew  15.4%
year-over-year,  which resulted in a revenue to traffic variance of (2.7)%.  The
company  expects  the  year-over-year  annual  revenue  to traffic  variance  to
continue to narrow in the fourth quarter of 1996.

Most  segments  of the  business  market  increased  year-over-year  revenue and
traffic in the third  quarter  1996 and nine months  ended  September  30, 1996.
Year-over-year  product revenue increases were primarily  attributable to growth
in Prism I*, data, 800, prepaid cards, Internet and conference calling products.
International  traffic grew  approximately 50%  year-over-year for the three and
nine months ended September 30, 1996.

In the mass  markets,  which  includes the former  consumer  and small  business
market  groups,  competitive  pressures  continued to affect revenue and traffic
growth. While customer churn has increased on a year-over-year basis, efforts to
focus on revenue per customer and  profitability  have  resulted in a sequential
decline in churn. On a year-over-year  basis, mass markets' growth was primarily
in Intralata, Personal 800* and 1-800-COLLECT* products.

Excluding the 1995 special  charges,  income from  operations  increased 27% and
operating  margin  increased  to 14.4% from  12.6% in the third  quarter of 1996
versus the  year-ago  quarter.  In the first nine  months of 1996,  income  from
operations  increased 34% year-over-year and operating margin increased to 14.7%
in 1996 from 12.3% in 1995.  Operating margin  improvements were attributable to
reductions in international settlement costs,  productivity  improvements in the
sales force, efficiencies in managing the network and streamlining actions taken
in the third quarter of 1995.


<PAGE>


                                     PAGE 17

                 MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
         FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995


Excluding the 1995 special charges,  EBITDA  (earnings  before interest,  taxes,
depreciation  and   amortization),   excluding  equity  in  income  (losses)  of
affiliated  companies and other income (expense),  net,  increased 25% to $1,012
million  for the  third  quarter  of 1996  from $810  million  for the  year-ago
quarter.  On a year-to-date basis, EBITDA increased 27% year-over-year to $2,958
million  from $2,325  million.  EBITDA,  a measure of the  company's  ability to
generate cash flows, does not represent net income or cash flows from operating,
investing and financing  activities as defined by generally accepted  accounting
principles and should be considered in addition to, but not as a substitute for,
or superior to, other measures of financial  performance  reported in accordance
with generally accepted accounting principles.


VENTURES AND DEVELOPING MARKETS RESULTS
---------------------------------------
                                           Three Months Ended Nine Months Ended
                                              September 30,      September 30,
                                           ------------------ -----------------
                                                       (In millions)

                                                1996     1995     1996     1995
                                               -----    -----    -----    -----
REVENUE                                        $ 474      $50   $1,427     $107
                                               -----    -----    -----    -----
OPERATING EXPENSES
  Cost of services                               318       22      951       45
  Sales, operations and general                  153       44      460       82
  Depreciation                                    35        3       96       13
  Asset write-down                                 -       39        -       39
                                               -----    -----    -----    -----
TOTAL OPERATING EXPENSES                         506      108    1,507      179
                                               -----    -----    -----    -----
LOSS FROM OPERATIONS                             (32)     (58)     (80)     (72)

Non-operating (expense) income, net              (57)      (2)    (146)      (2)

Equity in income (losses)
  of affiliated companies                        (28)    (116)    (128)    (163)
                                               -----    -----    -----    -----
LOSS BEFORE INCOME TAXES                        (117)    (176)    (354)    (237)

Income tax benefit                                44       67      129       89
                                               -----    -----    -----    -----
NET LOSS                                       $ (73)   $(109)   $(225)   $(148)
                                               =====    =====    =====    =====



<PAGE>


                                     PAGE 18

                 MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
         FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995

The significant  year-over-year  changes in the VDM business results reflect the
acquisitions  in late 1995 of  Systemhouse  and  Nationwide.  The 1995 operating
results consisted primarily of the operations of MCImetro,  Inc. (MCImetro*),  a
wholly-owned subsidiary of the company.

Excluding the 1995 special charge, loss from operations increased year-over-year
for the three and nine months  ended  September  30,  1996  compared to the same
periods in the prior year  primarily due to product  operating  costs and losses
from wireless  services and MCImetro.  Equity in losses of affiliated  companies
increased for the three and nine months ended September 30, 1996 compared to the
same  periods in the prior  year.  The  increased  losses for the three and nine
months  ended  September  30,  1996 as  compared  to 1995  were  largely  due to
increased  losses of ICS,  initial  start-up  costs  for  Avantel  S.A.  de C.V.
(Avantel),  the company's  44.5% owned  business  venture with Grupo  Financiero
Banamex-Accival  in Mexico,  and costs  associated  with the  company's  on-line
project with News Corp.

Information Technology Services
-------------------------------
Revenue from information technology services, which was primarily generated from
Systemhouse's operations, for the three and nine months ended September 30, 1996
was $339 million and $1,010 million, respectively. Income from operations was $2
million and $29 million for the three and nine months ended  September  30, 1996
and net loss,  which includes  allocated  interest,  was $(19) million and $(46)
million,  respectively.  EBITDA was $21  million  and $87  million  for the same
periods. A discussion of results of operations and EBITDA for comparable periods
during 1995 is not meaningful due to the company's acquisition of Systemhouse in
November  1995.  Systemhouse  has increased  its mix of revenue from  deployment
services which has resulted in reduced operating margins during the three months
ended  September  30, 1996.  In  addition,  Systemhouse  has  incurred  expenses
relating to infrastructure investment to expand its systems integration practice
in  the  United  States.   Systemhouse's  backlog  at  September  30,  1996  was
approximately  $2  billion,  the  majority  of which  was  from  its 10  largest
customers.  The company expects that approximately 14% of this estimated backlog
will be delivered in the fourth quarter of 1996.

Wireless Services
-----------------
Revenue from wireless services,  which is comprised  primarily of the operations
of  Nationwide,  amounted to $83 million and $267 million for the three and nine
months ended September 30, 1996, respectively, as compared to $9 million and $11
million for the comparable  periods of 1995.  Wireless revenues are derived from
cellular and paging services and equipment sales. The increase in revenues


<PAGE>


                                     PAGE 19

                 MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
         FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995



for the  three  and nine  month  periods  in 1996 is the  direct  result  of the
acquisition of Nationwide in September 1995.

Loss from  operations  was $(9) million and $(26)  million and net loss was $(9)
million  and $(27)  million for the three and nine months  ended  September  30,
1996, respectively.  EBITDA was $(4) million and $(14) million for the three and
nine months ended September 30, 1996,  respectively.  A discussion of results of
operations  and EBITDA for the  corresponding  periods of 1995 is not meaningful
due to the  acquisition of Nationwide in September  1995. At September 30, 1996,
the company  had 407  thousand  cellular  service  subscribers,  up 28% from the
comparable period in 1995, and 342 thousand paging service  subscribers.  Paging
subscribers declined during the third quarter of 1996 as the company proactively
terminated paging offerings to consumers in the second quarter of 1996 to revise
the infrastructure. The company anticipates re-launching the service late in the
fourth quarter of 1996 or the first quarter of 1997.

Local Services
--------------
During the three and nine  months  ended  September  30,  1996,  MCImetro*,  the
company's  local  services  provider,  reported  revenue of $45 million and $129
million,  respectively,  on sales of fiber-optic capacity and competitive access
services,  substantially  all of which were to the company's core business.  For
the three and nine months ended  September 30, 1996,  loss from  operations  was
$(25)  million  and  $(58)  million  and net loss was  $(19)  million  and $(44)
million, respectively. EBITDA was $(15) million and $(35) million, respectively,
for the same periods.  During the third quarter of 1996,  MCImetro added 6 local
city networks, which brought the total number of operational local city networks
to 61 in 34 cities.  During the third  quarter of 1996,  MCImetro  increased its
route miles to 2,769 from 2,625 and its right-of-way miles to 4,114 from 4,050.

Global Services
---------------
For the three and nine months ended September 30, 1996,  Concert  Communications
Company**  product sales by its  distributors  amounted to $160 million and $404
million,  respectively,  an  increase of greater  than 100% from the  comparable
year-ago periods.  Concert's virtual network service continued to grow with over
90 sites active or becoming operational around the world. For the three and nine
months  ended  September  30, 1996,  the  company's  share of  Concert's  losses
reported in accordance with U.S.  generally accepted  accounting  principles was
$(7) million and $(23) million, respectively.


<PAGE>


                                     PAGE 20

                 MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
         FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995


On August 12, 1996, Avantel became the first company to provide competitive long
distance service in the Mexican telecommunications market and launched the first
branded  Mexico to United  States  collect  calling  product and two new dialing
products targeted to consumers and businesses. Avantel increased its fiber-optic
network in Mexico  during the quarter by 31% to 3,355  route miles at  September
30,  1996.  Avantel's  capital   expenditures,   substantially  related  to  the
development of its communication system, were approximately $400 million for the
nine months ended September 30, 1996.  Avantel's operating expenses are expected
to  increase  in the  fourth  quarter  directly  related  to the  launch of long
distance service and the need for additional workforce to support new customers.
The company's  share of Avantel's  losses was $(9) million and $(20) million for
the three and nine months ended September 30, 1996, respectively.

Multimedia  Services  
-------------------  
For the three and nine  months  ended September 30, 1996, the company recorded
dividend income of $15 million and $39 million, respectively, on its preferred 
stock investment in News Corp.

In January 1996, the company won the last national  direct  broadcast  satellite
(DBS)  license  with a bid of $682  million,  of which the company has paid $136
million and expects to pay the remainder prior to the end of this year. In March
1996, the company  entered into contracts for the  insurance,  construction  and
launch of two high-powered  satellites at a cost of approximately  $430 million.
The company and News Corp.  have  agreed to form a joint  venture,  in which the
company  anticipates  owning  less  than  a 20%  interest,  to  provide  digital
satellite  services to homes and  businesses in the United  States  beginning in
late 1997.  The total cost required to initiate  service,  including the cost of
the license,  construction and launch of the satellites,  and the related ground
facilities, is expected to be approximately $1.3 billion.


FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
----------------------------------------------------
Cash Flows
----------
Cash from  operating  activities  for the first nine months of 1996 increased to
$2,055  million  from the  comparable  period in 1995  primarily  due to the 24%
growth in revenues  and the  associated  collections  from  customers  offset by
increased cash paid to local exchange carriers, suppliers and employees.


<PAGE>


                                     PAGE 21

                 MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
         FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995

Net cash  used for  investing  activities  increased  by $711  million.  The net
increase was primarily  due to a reduction  from the prior year in cash proceeds
received from the sale of marketable securities of $1.2 billion offset by a $650
million  decrease in the amount the company invested in News Corp. in 1996. Also
contributing  to the net  increase in cash used for  investing  activities  were
increases in capital  expenditures  of $162  million,  primarily  related to the
continuing  investment  in  networking  capabilities,  $136  million for the 20%
downpayment  of the  license  fee for the DBS  orbital  spectrum  slot  and $132
million of DBS satellite construction costs.

Cash proceeds from financing  activities increased by approximately $860 million
due to the  issuances  of the $750  million of 8%  Cumulative  Quarterly  Income
Preferred  Securities due June 30, 2026, $500 million aggregate principal amount
of 7 1/8%  debentures  due June 15, 2027 and $300  million  aggregate  principal
amount of 6.95% senior notes due August 15, 2006. Additionally, $342 million was
received  for  issuances of stock under the  employee  stock and benefit  plans.
Gross  proceeds  received  under these  issuances  were offset by  repayments of
commercial paper and other debt of approximately  $370 million and $310 million,
respectively,  treasury  stock  repurchases  of  approximately  $520 million and
dividends paid on common stock and Class A common stock of $17 million.

Capital  Resources  and  Liquidity  
----------------------------------  
The company  believes  that it will be able to meet its  current  and  long-term
liquidity  and  capital  requirements,  including  the  $247.5  million  planned
investment in Avantel,  planned DBS venture costs, and investments in News Corp.
and  MCImetro,  through its cash flows from  operating  activities,  bank credit
facility,  debt shelf  registrations  and access to the capital markets.  During
September  1996,  the company  replaced its bank credit  facility  with a new $2
billion bank credit facility  expiring in September  2001.  There are no amounts
currently outstanding under this facility.

During the first nine months of 1996,  the  company  issued  $6,221  million and
repaid $6,589 million of commercial  paper  borrowings,  leaving $338 million of
such borrowings outstanding at September 30, 1996.




<PAGE>


                                     PAGE 22

                 MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
         FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995

On May 29, 1996, MCI Capital I, a wholly-owned Delaware statutory business trust
(Trust),  issued  $750  million  of 8%  Cumulative  Quarterly  Income  Preferred
Securities,  Series A (preferred securities) due June 30, 2026. The Trust exists
for the sole  purpose of issuing the  preferred  securities  and  investing  the
proceeds in the company's 8% Junior Subordinated Deferrable Interest Debentures,
Series A  (Subordinated  Debt  Securities) due June 30, 2026, the only assets of
the Trust.  The proceeds from the issuance of the  Subordinated  Debt Securities
were used for general corporate purposes.

During the nine months ended  September 30, 1996,  the company issued two series
of debt under its $1 billion shelf  registration.  On June 24, 1996, the company
issued $500 million aggregate principal amount of 7 1/8% Debentures due June 15,
2027 and on August 9, 1996, the company issued $300 million aggregate  principal
amount of 6.95% Senior Notes due August 15, 2006.  The proceeds of the issuances
were used for general corporate purposes,  including the repayment of short-term
borrowings under the company's commercial paper program.

On September 30, 1996,  the company  filed a new $1 billion  shelf  registration
that, together with the $200 million available under the prior $1 billion shelf,
will allow the company to issue up to $1.2 billion aggregate principal amount of
debt securities with a range of maturities at either fixed or variable rates.

Consolidated EBITDA 
------------------- 
EBITDA  (earnings  before  interest,   taxes,  depreciation  and  amortization),
excluding  equity in income  (losses)  of  affiliated  companies,  other  income
(expense),  net, and distributions on Trust preferred securities,  increased 42%
to $2,967  million  for the nine  months  ended  September  30, 1996 from $2,089
million  from the prior year to date  period and from  $2,305  million,  or 29%,
excluding  the 1995  special  charges.  Improvement  in  consolidated  EBITDA is
primarily  the result of the  improvement  in core business  results,  partially
offset by EBITDA declines in the local and multimedia and international markets.
EBITDA,  a measure of the  company's  ability to generate  cash flows,  does not
represent  net income or cash  flows from  operating,  investing  and  financing
activities as defined by generally accepted accounting  principles and should be
considered  in addition to, but not as a  substitute  for, or superior to, other
measures of financial performance reported in accordance with generally accepted
accounting principles.



<PAGE>


                                     PAGE 23

                 MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
         FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995

CURRENT INDUSTRY ENVIRONMENT
----------------------------
In April  1996,  two  separate  mergers  among four of the seven  Regional  Bell
Operating  Companies  (RBOCs) were proposed.  Each of the RBOC mergers  requires
approval of the FCC, the Department of Justice (DOJ) and regulatory  commissions
in a number of states. In November 1996, the DOJ closed its investigation of one
merger having  determined that there are no antitrust  violations.  Both mergers
still require FCC and other regulatory approvals.  The company believes that the
consummation of these mergers could slow the development of competition in local
services markets because it removes competing parties.

On August 8, 1996, pursuant to the Telecommunications Act of 1996 (the Act), the
FCC  adopted  rules  relating  to the manner in which and the price at which new
entrants  into local  services  markets  will be able to  interconnect  with the
incumbent  local  exchange  carriers  (ILECs).  On October 15, 1996,  the United
States Court of Appeals stayed key provisions of the FCC Interconnection  Order,
pending the appeal of the FCC's decision.  The decision  suspends pricing rules,
thereby permitting individual state regulatory agencies to interpret the pricing
provisions  in the Act  without  regard  to the  FCC's  interpretation  of those
provisions.  The company  believes  that the October 15 decision  may hinder the
company's  ability to obtain ILEC services and  facilities on an economic  basis
and will  delay  broad-based  competition  in the local  services  markets.  The
company  will  continue  to pursue  revenue  growth  and  expand  local  service
capabilities  in  cities  where the  company  has  existing  and  planned  local
switches.  MCImetro currently has 13 switches installed in major U.S. cities and
plans   installation   of  an  additional  11  switches  by  the  end  of  1996.


-----------------------------------------------  
* MCImetro, Personal 800, 1-800-COLLECT  and Prism  I  are  registered  service
  marks of MCI Communications Corporation.
**Concert is a mark of Concert Communications Company and is used under license.



<PAGE>


                                     PAGE 24

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

         10(a)             Executive Severance Policy.

         11                Computation of Earnings per Common Share.

         12                Computation of Ratio of Earnings to Fixed Charges.

         27                Financial Data Schedule as of September 30, 1996.

         99(a)             Capitalization Schedule as of September 30, 1996.


b)Reports on Form 8-K

The company filed a Current Report on Form 8-K on August 8, 1996, which reported
matters under Items 5 and 7.









<PAGE>


                                     PAGE 25

                 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:  November 14, 1996                   Signed: /s/ David M. Case
                                                  -----------------------
                                                  David M. Case

                                                  Vice President and Controller





<PAGE>


                                     PAGE 26

                 MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
                                    FORM 10-Q
                                  EXHIBIT INDEX





 Exhibit No.                  Description
 -----------                  -----------

         10(a)                Executive Severance Policy.

         11                   Computation of Earnings per Common Share.

         12                   Computation of Ratio of Earnings to Fixed Charges.

         27                   Financial Data Schedule as of September 30, 1996.

         99(a)                Capitalization Schedule as of September 30, 1996.