UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-Q


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

                  For the quarterly period ended March 31, 1997

                                       OR


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

                      (Commission File Number 1-11965)
                            ICG COMMUNICATIONS, INC.
                      (Commission File Number 1-11052)
                           ICG HOLDINGS (CANADA), INC.
                        (Commission File Number 33-96540)
                               ICG HOLDINGS, INC.
           (Exact name of Registrants as Specified in their Charters)

----------------------------------- --------------------------------------------
Delaware                                84-1342022
Canada                                  Not Applicable
Colorado                                84-1158866
(State or other jurisdiction of 
incorporation)                          (I.R.S. employer identification number)
----------------------------------- --------------------------------------------
9605 East Maroon Circle                 Not applicable
Englewood, Colorado 80112

1710-1177 West Hastings Street          c/o ICG Communications, Inc.
Vancouver, BC V6E 2L3                   9605 East Maroon Circle
                                        P.O. Box 6742
                                        Englewood, Colorado 80155-6742

9605 East Maroon Circle Not  applicable  Englewood,  Colorado  80112 (Address of
principal   executive   offices)   (Address   of   U.S.   agent   for   service)
--------------------------------------------------------------------------------
Registrants'  telephone  numbers,  including area codes: (800) 650-5960 or (303)
572-5960

Indicate  by check mark  whether  the  Registrants  (1) have  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
Registrants  were required to file such  reports),  and (2) have been subject to
such filing requirements for the past 90 days. Yes X No

The number of Registrants'  outstanding  common shares as of April 29, 1997 were
31,804,671,  31,795,270 and 1,918,  respectively.  ICG Holdings (Canada), Inc.
owns all of the issued and outstanding shares of ICG Holdings, Inc.

<PAGE>




                                TABLE OF CONTENTS




PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         3
       ITEM 1.    CONSOLIDATED FINANCIAL STATEMENTS  . . . . . . . . .         3
                  Consolidated Balance Sheets as of December 31, 1996 
                      and March 31, 1997 (unaudited) . . . . . . . . .         3
                  Consolidated Statements of Operations (unaudited) for 
                      the Three Months Ended March 31, 1996 and 1997. .        5
                  Consolidated Statement of Stockholders' Deficit 
                      (unaudited) for the Three Months Ended March 31, 1997    6
                  Consolidated Statements of Cash Flows (unaudited) for 
                      the Three Months Ended March 31, 1996 and 1997 .         7
                  Notes to Consolidated Financial Statements (unaudited)       9

         ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                  AND RESULTS OF OPERATIONS . . . . . . . . . . . . . .       16

PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       24

         ITEM 1.    LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . .       24
         ITEM 2.    CHANGES IN SECURITIES . . . . . . . . . . . . . . .       24
         ITEM 3.    DEFAULTS UPON SENIOR SECURITIES . . . . . . . . . .       24
         ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS     24
         ITEM 5.    OTHER INFORMATION . . . . . . . . . . . . . . . . .       24
         ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K  . . . . . . . . .       24
                    Exhibits  . . . . . . . . . . . . . . . . . . . . .       24
                    Reports on Form 8-K . . . . . . . . . . . . . . . .       24

                                       2
<PAGE>

                    ICG COMMUNICATIONS, INC. AND SUBSIDIARIES

                           Consolidated Balance Sheets
                December 31, 1996 and March 31, 1997 (unaudited)


                                             December 31,            March 31,
                                                1996                  1997
                                        ------------------     ----------------
Assets                                                (in thousands)
Current assets:
  Cash and cash equivalents                  $    359,934               459,288
  Short-term investments                           32,601                31,747
  Receivables:
  Trade, net of allowance of $2,515 
     and $4,006 at December 31, 1996 
     and March 31, 1997, respectively              41,131                34,071
  Revenue earned, but unbilled                      6,053                 7,329
  Joint venture and affiliate                           -                   113
  Other                                             1,440                 1,358
                                         ------------------     ----------------
                                                   48,624                42,871

  Inventory                                         2,845                 2,595
  Prepaid expenses and deposits                     5,019                 4,661
  Notes receivable                                    200                   200
                                         ------------------     ----------------

      Total current assets                        449,223               541,362
                                         ------------------     ----------------

Property and equipment                            460,477               522,980
  Less accumulated depreciation                   (56,545)              (66,255)
                                         ------------------     ----------------
      Net property and equipment                  403,932               456,725
                                         ------------------     ----------------

Investments                                         5,170                 5,170
Long-term notes receivable, net                       623                   552
Restricted cash (note 4)                           13,333                12,932
Other assets, net of accumulated amortization:
  Goodwill                                         31,881                31,454
  Deferred financing costs                         21,963                24,861
  Transmission and other licenses                   8,526                 8,441
  Other                                             9,482                 8,184
                                         ------------------     ----------------
                                                   71,852                72,940
                                         ==================     ================
                                            $     944,133             1,089,681
                                         ==================     ================
                                 3                                   (Continued)
<PAGE>

                    ICG COMMUNICATIONS, INC. AND SUBSIDIARIES

                     Consolidated Balance Sheets, Continued


                                             December 31,             March 31,
                                                 1996                    1997
                                      ------------------     -------------------
Liabilities and Stockholders' Deficit               (in thousands)
Current liabilities:
   Accounts payable                         $      24,813                19,839
   Accrued liabilities                             37,309                47,820
   Current portion of long-term debt 
     (note 2)                                         817                 1,727
   Current portion of capital lease 
     obligations                                   24,683                 6,728
                                          ---------------    -------------------
      Total current liabilities                    87,622                76,114

Long-term debt, net of discount, less
     current portion (note 2)                     690,358               811,560
Capital lease obligations, less current
      portion                                      71,146                70,916
                                          ----------------   -------------------

   Total liabilities                              849,126               958,590
                                          ----------------   -------------------

Minority interests                                  1,967                   930

Redeemable  preferred  stock of subsidiary
     ($164.8  million and $271.4  million
     liquidation value at December 31, 1996
     and March 31, 1997, respectively)(note 2)    159,120               261,909

Stockholders' deficit:
   Common stock (note 3)                            8,088                 5,282
   Additional paid-in capital                     294,472               298,391
   Accumulated deficit                           (368,640)             (435,421)
                                            --------------    ------------------
      Total stockholders' deficit                 (66,080)             (131,748)
                                            --------------    ------------------

Commitments and contingencies (note 4)
                                           $     944,133              1,089,681
                                             ==============    =================

                See accompanying notes to consolidated financial
                                  statements.
                                       4
<PAGE>

                    ICG COMMUNICATIONS, INC. AND SUBSIDIARIES

                Consolidated Statements of Operations (unaudited)
                   Three Months Ended March 31, 1996 and 1997


                                                  Three months ended March 31,
                                       -----------------------------------------
                                               1996                   1997
                                       -------------------     -----------------
                                         (in thousands, except per share data)
Revenue:
   Telecom services                        $       17,635                38,280
   Network services                                13,973                17,987
   Satellite services                               4,336                 6,783
                                       -------------------     -----------------
      Total revenue                                35,944                63,050

Operating costs and expenses:
   Operating costs                                 28,171                59,572
   Selling, general and administrative
      expenses                                     16,154                33,379
   Depreciation and amortization                    7,442                10,882
                                       -------------------     -----------------
      Total operating costs and 
          expenses                                 51,767               103,833

      Operating loss                              (15,823)              (40,783)

Other income (expense):
   Interest expense                               (14,217)              (25,140)
   Interest income                                  2,725                 5,134
   Other, net                                      (1,554)                 (239)
                                       -------------------     -----------------
                                                  (13,046)              (20,245)
                                       -------------------     -----------------

Loss before income taxes, minority 
     interest and share of losses                (28,869)               (61,028)
Income tax benefit                                 4,482                      -
                                        ------------------     -----------------
Loss before minority interest and 
     shares of losses                            (24,387)               (61,028)
Minorty interest in share of losses,
     net of accretion and preferred
     dividends on subsidiary preferred stock      (1,970)                (5,753)
Share of losses of joint venture and
     investment                                     (582)                     -
                                       ===================     =================
   Net loss                                $     (26,939)               (66,781)
                                       ===================     =================

Loss per share (note 3):
   Loss per share                         $       (1.04)                  (2.09)
                                       ===================     =================
   Weighted average number of shares 
     outstanding                                 25,803                  31,938
                                       ===================     =================

                See accompanying notes to consolidated financial
                                  statements.
                                       5
<PAGE>

                    ICG COMMUNICATIONS, INC. AND SUBSIDIARIES

           Consolidated Statement of Stockholders' Deficit (unaudited)
                        Three Months Ended March 31, 1997


                                             Additional               Total    
                               Common stock   paid-in  Accumlated  stockholders'
                             Shares   Amount  capital   deficit        deficit
                           -------- ------- --------- -----------  -------------
                                               (in thousands)

Balances at 
 January 1, 1997             31,895   $ 8,088    294,472  (368,640)     (66,080)
   Shares issued for cash
    in connection with the 
    exercise of options and
    warrants                     23         -        249         -          249
   Shares issued for cash in 
    connection with the 
    employee stock purchase
    plan                         22         -        330         -          330
   Shares issued as contribution
    to 401(k) plan               28         -        534         -          534
   Exchange of Holdings-Canada 
    common shares for ICG common 
    stock                         -    (2,806)     2,806         -            -
   Net loss                       -         -          -   (66,781)     (66,781)
                             ======== =========  ========  ========  ===========
Balances at March 31, 1997   31,968   $ 5,282    298,391  (435,421)    (131,748)
                             ======== =========  ========  ========  ===========


                     See accompanying notes to consolidated
                             financial statements.




                                       6
<PAGE>
                   ICG COMMUNICATIONS, INC. AND SUBISIDIARIES

                Consolidated Statements of Cash Flows (unaudited)
                   Three Months Ended March 31, 1996 and 1997

                                                   Three months ended March 31,
                                         ---------------------------------------
                                                  1996                  1997
                                         -------------------    ----------------
                                                      (in thousands)
Cash flows from operating activities:
      Net loss                             $     (26,939)               (66,781)
      Adjustments to reconcile net loss 
       to net cash used by operating 
       activities:
         Share of losses of joint venture
          and investment                             582                      -
         Minority interest in share of losses,
           net of accretion and non-cash
           preferred dividends on subsidiary 
           preferred stock                         1,970                  5,753
         Depreciation and amortization             7,442                 10,882
         Compensation expense related to issuance
           of stock options                           14                      -
         Interest expense deferred and included 
           in long-term debt and non-cash 
           interest expense                       11,911                 22,621
         Amortization of deferred financing
           costs included in interest expense        162                    643
         Contribution to 401(k) plan through 
           issuance of common shares                 171                    534
         Deferred income tax benefit              (4,482)                     -
         Loss on sale of certain Satellite
           Services assets                           891                      -
         Gain on sale of certain other assets          -                   (319)
         (Increase) decrease in operating assets,
            excluding the effects of business
            acquisitions:
              Receivables                         (1,975)                 5,753
              Inventory                              (90)                   250
              Prepaid expenses and deposits         (606)                   358
         Increase(decrease)in operating liabilities,
              excluding the effects of
              business acquisitions:
                 Accounts payable and accrued 
                    Liabilities                   (6,073)                 5,537
                                            ---------------    -----------------
                          
           Net cash used by operating
            activities                           (17,022)               (14,769)
                                            ---------------    -----------------
Cash flows from investing activities:
      Decrease in notes receivable                 1,524                     71
      Increase in advances to affiliates            (358)                     -
      Investments in and advances to joint 
       venture                                    (1,951)                     -
      Payments for business acquisitions,
       net of cash acquired                       (2,680)                     -
      Purchase of long-term investment            (3,960)                     -
      (Purchase) sale of short-term 
       investments                               (14,573)                   854
      Decrease in restricted cash                      -                    401
      Acquisition of property, equipment
       and other assets, net                     (29,149)               (59,891)
      Proceeds from the sale of certain 
       Satellite Services assets                     447                      -
                                             --------------    -----------------
            Net cash used by investing 
             activities                          (50,700)               (58,565)
                                             --------------    -----------------
Cash flows from financing activities:
      Proceeds from issuance of common stock         665                    579
      Proceeds from issuance of subsidiary 
       preferred stock, net of issue costs             -                 96,000
      Proceeds from issuance of long-term debt         -                 99,908
      Deferred long-term debt issuance costs           -                 (3,543)
      Principal payments on short-term debt      (17,500)                     -
      Principal payments on long-term debt          (551)                  (417)
      Principal payments on capital lease 
       obligations                                (6,570)               (19,839)
                                            ---------------    -----------------
         Net cash (used) provided by 
          financing activities                   (23,956)               172,688
                                            ---------------    -----------------
         Net(decrease)increase in cash and 
          cash equivalents                       (91,678)                99,354
Cash and cash equivalents, 
 beginning of period                             231,163                359,934
                                            ===============    =================
Cash and cash equivalents, end of period     $   139,485                459,288
                                            ===============    =================
                                                                     (Continued)
                                       7
<PAGE>

                   ICG COMMUNICATIONS, INC. AND SUBISIDIARIES

                Consolidated Statements of Cash Flows, Continued


                                                Three months ended March 31,
                                        ----------------------------------------
                                                1996                  1997
                                        -------------------    -----------------
                                                     (in thousands)
Supplemental disclosure of
 cash flow information:
      Cash paid for interest             $       2,144                  1,876
                                        ===================    =================

Supplemental schedule of non-cash 
 financing and investing activities:
      Common shares issued in connection
        with business combinations and
        repayment of debt                $       9,409                      -
                                        ===================    =================
      Assets acquired under capital 
        leases                           $      47,284                  1,654
                                        ===================    =================

                See accompanying notes to consolidated financial
                                   statements.


                                       8
<PAGE>

                    ICG COMMUNICATIONS INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                December 31, 1996 and March 31, 1997 (unaudited)


(1)  Nature of Business and Reference to Other Reports

     ICG Communications,  Inc. ("ICG"), a Delaware corporation, was incorporated
     on April 11, 1996, for the purpose of becoming the new publicly-traded U.S.
     parent  company  of ICG  Holdings  (Canada),  Inc.  ("Holdings-Canada"),  a
     Canadian federal  corporation  (formerly known as IntelCom Group Inc.), ICG
     Holdings,  Inc.  ("Holdings"),  a Colorado  corporation  (formerly known as
     IntelCom Group (U.S.A),  Inc.),  and its  subsidiaries  (collectively,  the
     "Company"). The Company's principal business activity is telecommunications
     services,  including  Telecom  Services,  Network  Services  and  Satellite
     Services.  Telecom  Services  consists of the Company's  competitive  local
     exchange  carrier  operations  which  provide  services  to  long  distance
     carriers and  resellers,  as well as business end users.  Network  Services
     supplies information  technology services and selected networking products,
     focusing on network  design,  installation,  maintenance  and support for a
     variety  of end  users,  including  Fortune  1000  firms  and  other  large
     businesses and  telecommunications  companies.  Satellite Services provides
     satellite  voice  and  data  services  to  major  cruise  ship  lines,  the
     commercial  shipping  industry,  yachts,  the U.S.  Navy and  offshore  oil
     platforms.
         
     (a)  Reference to Annual and Transition Reports

          These  financial  statements  should be read in  conjunction  with the
          Annual  Report on Form 10-K for the year ended  September 30, 1996 and
          the Transition Report on Form 10-K for the three months ended December
          31,  1996,  as  certain  information  and  note  disclosures  normally
          included in financial statements prepared in accordance with generally
          accepted accounting principles have been condensed or omitted pursuant
          to the rules and  regulations  of the  United  States  Securities  and
          Exchange  Commission.  The interim  financial  statements  reflect all
          adjustments  which are, in the opinion of management,  necessary for a
          fair  presentation  of financial  position,  results of operations and
          cash  flows  as  of and  for  the  interim  periods  presented.  Such
          adjustments are of a normal recurring  nature.  Operating  results for
          the three months ended March 31, 1997, are not necessarily  indicative
          of the results that may be expected  for the year ending  December 31,
          1997.

     (b)  Reclassifications

          Certain 1996 amounts have been  reclassified  to conform with the 1997
          presentation.
                                       9
<PAGE>

                    ICG COMMUNICATIONS, INC. AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


(2)  Long-term Debt and Redeemable Preferred Stock of Subsidiary

     Long-term  debt at December  31, 1996 and March 31, 1997 is  summarized  as
     follows (in thousands):

                                            December 31, 1996    March 31, 1997
                                          -------------------- -----------------
     11 5/8% Senior discount notes, 
       net of discount (a)                    $          -              100,545
     12 1/2% Senior discount notes, net
       of discount                                 325,530              335,493
     13 1/2% Senior discount notes, net
       of discount                                 355,955              367,976
     Convertible subordinated notes                     65                   65
     Note payable with interest at the
       90-day commercial paper rate plus
       4 3/4% (10 3/8% at March 31, 1997),
       due 2001, secured by certain 
       telecommunications equipment                  5,815                5,594
     Note payable with interest at 11%, due
       monthly through fiscal 1999, secured
       by equipment                                  2,625                2,442
     Mortgage payable with interest at 8 1/2%,
       due monthly through 2009, secured by
       building                                      1,177                1,165
     Other                                               8                    7
                                           ----------------    -----------------
                                                   691,175              813,287
     Less current portion                             (817)              (1,727)
                                           ================    =================
                                                $  690,358              811,560
                                           ================   ==================

     Redeemable preferred stock of subsidiary at December 31, 1996 and March 31,
     1997 is summarized as follows (in thousands):
     
                                         December 31,1996        March 31, 1997
                                        ------------------    ------------------
     14% Exchangeable preferred stock      
       mandatorily redeemable 2008(a)      $          -                  96,787
     14 1/4% Exchangeable preferred
       stock mandatorily redeemable 2007        159,120                 165,122
                                         ================    ===================
                                           $    159,120                 261,909
                                        =================    ===================

     (a) Private Placement

          On March  11,  1997,  Holdings  completed  a  private  placement  (the
          "Private  Placement")  of 11 5/8% Senior  Discount Notes (the "11 5/8%
          Notes")  and 14%  Exchangeable  Preferred  Stock  (the "14%  Preferred
          Stock")  for gross  proceeds  of $99.9  million  and  $100.0  million,
          respectively.  Net proceeds from the private placement, after costs of
          approximately $7.5 million, were approximately $192.4 million.

          The 11  5/8%  Notes  are  unsecured  senior  obligations  of  Holdings
          (guaranteed by ICG) that mature on March 15, 2007, at a maturity value
          of $176.0 million. Interest will accrue at 11 5/8% per annum beginning
          March  15,  2002,  and is  payable  each  March 15 and  September  15,
          commencing September 15, 2002.

          The 11 5/8% Notes were  originally  recorded  at  approximately  $99.9
          million.  The  discount  on the 11 5/8% Notes and the debt issue costs
          are being  accreted  over ten years until  maturity at March 15, 2007.
          The  accretion  of the  discount  and debt issue  costs is included in
          interest   expense   in  the   accompanying   consolidated   financial
          statements.

          The 14%  Preferred  Stock  consists  of  100,000  shares  of  Holdings
          Preferred Stock that bear a cumulative dividend at the rate of 14% per
          annum.  The  dividend is payable  quarterly  in arrears each March 15,
          June
                                       10
<PAGE>

ICG COMMUNICATIONS, INC. AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


(2)  Long-term Debt and Redeemable Preferred Stock of Subsidiary (continued)

     15, September 15, and December 15, commencing June 15, 1997.  Through March
     15,  2002,  the  dividend  is payable at the option of  Holdings in cash or
     additional  shares of Holdings  Preferred Stock.  Holdings may exchange the
     14% Preferred Stock into 14% Senior Subordinated Exchange Debentures at any
     time after the exchange is permitted by certain indenture restrictions. The
     14% Preferred Stock is subject to mandatory redemption on March 15, 2008.

(3)  Stockholders' Deficit

     (a)  Common Stock 

          Common stock  outstanding at March 31, 1997  represents the issued and
          outstanding  Common  Stock  of  ICG  and  Class  A  common  shares  of
          Holdings-Canada (owned by third parties) which are exchangeable at any
          time, on a  one-for-one  basis,  for ICG Common  Stock.  The following
          table  sets  forth  the  number  of  shares  outstanding  for  ICG and
          Holdings-Canada  on a  separate  company  basis as of March 31,  1997:
          
                                               Shares owned      Shares owned
                                                   by ICG      by third parties
                                                -----------   ------------------
          ICG Common Stock, $.01 par value,
           100,000,000 shares authorized; 
           31,087,825 and 31,316,840 shares
           issued and outstanding at December 
           31, 1996 and March 31, 1997,
           respectively                                  -           31,316,840
          Holdings-Canada Class A common shares, 
           no par value, 100,000,000 shares 
           authorized;31,795,270 shares issued
           and outstanding at December 31, 1996
           and March 31, 1997:
            Class A common shares, exchangeable
             on a one-for-one basis for ICG
             Common Stock at any time                     -              651,074
            Class A common shares owned by ICG   31,144,196                   -
                                                                ----------------
          Total shares outstanding                                   31,967,914
                                                                ================

     (b)  Stock Options

          In order to continue to provide non-cash  incentives to key employees,
          all employee stock options outstanding on April 16, 1997 with exercise
          prices at or in excess of $15.875 were repriced by the Company's Board
          of Directors to $10.375,  the closing  price of the  Company's  Common
          Stock on April 16,  1997.  Approximately  0.6  million  options,  with
          original  exercise  prices  ranging from $15.875 to $26.25,  have been
          repriced.  There  will  be no  effect  on the  Company's  consolidated
          financial statements as a result of the repricing of options.

     (c)  Loss Per Share

          Loss per share is  calculated by dividing the net loss by the weighted
          average  number  of shares  outstanding.  Weighted  average  number of
          shares  outstanding  represents  outstanding   Holdings-Canada  common
          shares for the three months ended March 31, 1996, and  outstanding ICG
          Common Stock and Holdings-Canada Class A common shares (owned by third
          parties)  for the three  months  ended March 31,  1997.  Common  stock
          equivalents,   which  include   options,   warrants  and   convertible
          subordinated  notes and preferred  stock, are not included in the loss
          per share calculation as their effect is anti-dilutive.
                                       11
<PAGE>


                    ICG COMMUNICATIONS, INC. AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


(4)  Commitments and Contingencies

     (a)  Network Construction

          In November  1995,  the Company  signed an agreement  with City Public
          Service  of  San  Antonio   ("CPS")  to  license  excess  fiber optic
          facilities  on a  new  300-mile  fiber  network  being  built  by  the
          municipally-owned   electric  and  gas  utility  to  provide  for  its
          communications  needs in the greater  metropolitan  area.  Pursuant to
          this agreement,  the Company has provided a $12.0 million  irrevocable
          letter of credit to secure  payment  of the  Company's  portion of the
          construction costs. The letter of credit is secured by cash collateral
          of $12.9 million as of March 31, 1997.
              
          The legal  ability of CPS, as a  municipally-owned  utility,  to enter
          into  this  contract  with  the  Company  has been  challenged  by SBC
          Communications,  Inc.  ("SBC")  before the San Antonio City Council as
          being in violation of a May 1995 Texas state law.

          The Company has filed a petition with the FCC requesting a declaratory
          ruling   that  the  federal   Telecommunications   Act  of  1996  (the
          "Telecommunications  Act")  preempts the Texas state law to the extent
          that  the  Telecommunications  Act  precludes  implementation  of  the
          agreement  between  CPS  and  the  Company,   and  has  also  filed  a
          declaratory  ruling  request with a Texas state  court.  Both of these
          actions are  pending.  The Company also filed a civil suit against SBC
          in federal district court that has been dismissed.

          In February  1996, the Company  entered into a 20-year  agreement with
          WorldCom,  Inc.  ("WorldCom"),   under  which  the  Company  will  pay
          approximately $8.8 million for the right to use fiber along a 330-mile
          fiber  optic  network in Ohio.  The  network is being  constructed  by
          WorldCom  in   conjunction   with  the   Company.   An   aggregate  of
          approximately  $2.7 million has been paid by the Company through March
          31,  1997,  with the  balance  due upon the  completion  of  specified
          segments of the network.

          In March 1996,  the Company and  Southern  California  Edison  Company
          ("SCE")  jointly  entered  into a 25-year  agreement  under  which the
          Company  will  license  1,258  miles of fiber  optic cable in Southern
          California,  and can install up to 500 additional miles of fiber optic
          cable. This network,  which will be maintained and operated  primarily
          by the Company,  stretches from Los Angeles to southern Orange County.
          Under the terms of this agreement,  SCE will be entitled to receive an
          annual  fee  for  ten  years,  certain  fixed  quarterly  payments,  a
          quarterly  payment equal to a percentage of certain  network  revenue,
          and  certain  other   installation  and  fiber  connection  fees.  The
          aggregate  fixed  payments   remaining  under  the  agreement  totaled
          approximately $149.1 million at March 31, 1997. The agreement has been
          accounted  for as a  capital  lease in the  accompanying  consolidated
          balance sheets at March 31, 1997.

          In March 1996, the Company  entered into a long-term  agreement with a
          subsidiary  of The Southern  Company  ("Southern"),  and Alabama Power
          Company  ("Alabama  Power")  for the right to use 22 miles of existing
          fiber  and 122 miles of  additional  Alabama  Power  rights of way and
          facilities to reach the three major  business  centers in  Birmingham.
          Southern will, in conjunction with the Company,  construct the network
          and provide maintenance  services with respect to the fiber installed.
          Southern also will provide consulting services to the Company relating
          to the  build-out  of the network and  potential  enhancements  to the
          Company=s products and services. Under the agreement, the Company also
          is  required  to pay  Southern  a  quarterly  fee  based on  specified
          percentages  of the Company's  revenue for services  provided  through
          this network.  The Company's  estimated  costs to complete the network
          are  approximately  $4.0  million,  of  which  $2.5  million  has been
          incurred as of March 31, 1997.

          In July  1996,  the  Company  entered  into a 20-year  agreement  with
          subsidiaries  of American  Electric  Power  ("AEP") to jointly build a
          45-mile network addition in metropolitan Columbus, plus a 138-mile
                                       12
<PAGE>

                    ICG COMMUNICATIONS, INC. AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


(4)  Commitments and Contingencies (continued)

          long-haul  link to Canton,  Ohio.  The  Company's  estimated  costs to
          complete the construction  are  approximately  $4.7 million,  of which
          $1.3 million has been incurred as of March 31, 1997.

          In January  1997,  the Company  announced a joint venture with Central
          and  Southwest  Corporation  ("CSW")  which  will  develop  and market
          telecommunications  services in Texas and Oklahoma  (and may expand to
          Arkansas and  Louisiana).  Each party has a 50% equity interest and is
          required  to  make  additional  pro  rata  capital   contributions  as
          prescribed in the joint venture  agreement.  The Company estimates its
          contributions  to  be  approximately   $24.2  million  in  1997,  with
          aggregate  contributions of approximately  $49.7 million over the next
          five years. The joint venture is accounted for under the equity method
          of accounting.
         
     (b)  Company Headquarters

          The Company has  acquired  property for its new  headquarters  and has
          commenced  construction of an office building that the Company expects
          will accommodate all of the Company's Colorado  operations.  The total
          cost of the project is expected to be approximately  $44.0 million, of
          which  $13.0  million  has been  incurred  as of March 31, 1997 and is
          included in construction in progress.  The Company has signed a letter
          of intent to sell the  completed  building  to a third party and lease
          back the office  space  under a  long-term  operating  lease.  A final
          agreement  is expected to be reached in the near  future.  The Company
          anticipates that the building will be completed near the end of 1997.

     (c)  Other Commitments

          The Company is obligated to purchase, at fair value, all of the shares
          of Maritime  Telecommunications  Network,  Inc.  ("MTN"),  a 64% owned
          subsidiary   of  the   Company,   that  are  owned  by  the   minority
          shareholders, if MTN has not completed a public offering by January 3,
          1998.

          The Company has entered into  various  equipment  purchase  agreements
          with certain of its vendors.  Under these  agreements,  if the Company
          does not meet a minimum  purchase  level in any given year, the vendor
          may  discontinue  for that  year  certain  discounts,  allowances  and
          incentives  otherwise  provided  to  the  Company.  In  addition,  the
          agreements  may be terminated by either the Company or the vendor upon
          prior written notice.
               
          Additionally,  the Company has entered  into  certain  commitments  to
          purchase  assets with an  aggregate  purchase  price of  approximately
          $46.9 million at March 31, 1997.

     (d)  Litigation

          In January  1997,  the Company and its wholly  owned  subsidiary,  ICG
          Holdings  (Canada),  Inc., filed a declaratory  judgment action in the
          United  States  District  Court for the  District of  Colorado  (Civil
          Action  No.  97-Z-118)  against  the  minority   shareholders  of  the
          Company's majority owned subsidiary,  Zycom Corporation ("Zycom"),  an
          Alberta,  Canada  corporation,  seeking a number of  rulings  from the
          Court,  including  that  the  Company  has not  violated  the  federal
          securities  laws.  The action was filed by the  Company as a result of
          demands made by the minority  shareholders  that the Company  purchase
          their  shares  of Zycom  for a price  in  excess  of the  value of the
          shares,  and allegations that the Company violated certain sections of
          the Securities Act of 1933 and the Securities Exchange Act of 1934. In
          response to the Company's filing of this action,  the defendants filed
          affidavits  in which  they  stated  that  they do not  intend to bring
          claims  under the federal  securities  laws.  Given this  statement by
          these  defendants,  which the Company believes is a vindication of its
          position that there was no violation of the 
                                       13
<PAGE>

                   ICG COMMUNICATIONS, INC. AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


(4)  Commitments and Contingencies (continued)

          federal securities laws, the Company is filing a notice  discontinuing
          without prejudice this action.

          On April 4, 1997,  certain  shareholders  of Zycom,  not  individually
          named  in  the  Company's   declaratory   judgment  action,   filed  a
          shareholder   derivative   suit  and  class  action   complaint   for
          unspecified  damages,  purportedly  on behalf  of all of the  minority
          shareholders of Zycom,  in the District Court of Harris County,  Texas
          (Cause No. 97-17777)  against the Company,  Zycom and certain of their
          subsidiaries.  This complaint is based entirely on Texas state law and
          does not allege any federal securities law violations. The Company has
          not yet been served in this action. Management of the Company believes
          the  Texas   complaint  to  be  a  direct  response  to  the  Colorado
          declaratory  judgment action, that it is without merit and will defend
          it vigorously.  Management  believes these proceedings will not have a
          material adverse effect on the Company's financial condition,  results
          of operations or cash flows.
 
          The Company is a party to certain other litigation which has arisen in
          the ordinary  course of  business.  In the opinion of  management  and
          legal counsel,  the ultimate resolution of these matters will not have
          a significant effect on the financial condition, results of operations
          or cash flows of the Company.         
                                      
(5)  Summarized Financial Information of ICG Holdings, Inc.

     The 11 5/8% Notes issued by Holdings during 1997 are guaranteed by ICG. The
     12 1/2% Senior  Discount Notes (the "12 1/2% Notes") and the 13 1/2% Senior
     Discount Notes (the "13 1/2% Notes")  (collectively with the 11 5/8% Notes,
     the "Senior Notes") issued by Holdings during 1996 and 1995,  respectively,
     are guaranteed by ICG and Holdings-Canada.

     The  separate  complete  financial  statements  of  Holdings  have not been
     included herein because such disclosure is not considered to be material to
     the holders of the Senior Notes.  However,  summarized  combined  financial
     information for Holdings and subsidiaries and affiliates as of December 31,
     1996 and March 31, 1997,  and for the three months ended March 31, 1996 and
     1997 is as follows (in thousands):

                       Condensed Balance Sheet Information

                                        December 31, 1996        March 31, 1997
                                        -----------------     ------------------


     Current assets                   $       449,059                   541,200
     Property and equipment, net              403,932                   456,725
     Other non-current assets, net             88,183                    88,848
     Current liabilities                       87,423                    75,425
     Long-term debt, less current portion     690,293                   811,495
     Due to parent                             11,485                    12,987
     Other long-term liabilities               73,113                    71,846
     Preferred stock                          159,120                   261,909
     Stockholder's deficit                    (80,260)                 (146,889)


                                       14
<PAGE>

                    ICG COMMUNICATIONS, INC. AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


(5)  Summarized Financial Information of ICG Holdings, Inc. (continued)

                  Condensed Statement of Operations Information

                                               Three months ended March 31,
                                            ------------------------------------
                                                    1996                1997
                                            ---------------- -------------------

            Total revenue                        $  35,944              63,050
            Total operating costs and expenses      51,413             103,681
            Operating loss                         (15,469)            (40,631)
            Net loss                               (25,091)            (66,629)

(6)  Condensed Financial Information of ICG Holdings (Canada), Inc.

         Condensed financial information for Holdings-Canada only as of December
         31, 1996 and March 31,  1997,  and for the three months ended March 31,
         1996 and 1997 is as follows (in thousands):

                       Condensed Balance Sheet Information

                                           December 31, 1996      March 31, 1997

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

            Current assets                       $    165                   162
            Advances to subsidiaries               11,485                12,987
            Other non-current assets, net           2,793                 2,746
            Current liabilities                       199                   689
            Long-term debt, less current portion       65                    65
            Due to parent                           1,566                 2,581
            Share of losses of subsidiary          80,260               146,889
            Shareholders' deficit                 (67,647)             (134,329)

                  Condensed Statement of Operations Information

                                              Three months ended March 31,
                                           -------------------------------------
                                                    1996                1997
                                           -----------------  ------------------
                                                         
            Total revenue                              -                      - 
            Total operating costs and expenses       353                     53
            Operating loss                          (353)                   (53)
            Losses from subsidiaries             (25,091)               (66,629)
            Net loss attributable to common 
             shareholders                        (25,444)              (66,682)

(7)  Condensed  Financial  Information  of  ICG  Communications,   Inc.  (Parent
     company)

     The sole  asset of ICG is its  investment  in  Holdings-Canada.  ICG has no
     operations other than those of Holdings-Canada and its subsidiaries.
                                       15
<PAGE>

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

     The following discussion includes certain forward-looking  statements which
are affected by important factors  including,  but not limited to, dependence on
increased traffic on the Company's facilities,  the successful implementation of
the  Company's  local  dial tone and long  distance  strategies  and  actions of
competitors and regulatory authorities that could cause actual results to differ
materially from the forward-looking  statements.  The terms "fiscal" and "fiscal
year" refer to ICG's fiscal year ending  September  30. The Company  changed its
fiscal year end to December 31 from September 30, effective January 1, 1997. All
dollar amounts are in U.S. dollars.

Company Overview

     The Company  provides  Telecom  Services,  Network  Services and  Satellite
Services.  Telecom Services consist primarily of the Company's competitive local
exchange  carrier ("CLEC")  operations.  CLECs seek to provide an alternative to
the  incumbent   local  exchange   carriers   ("ILECs")  for  a  full  range  of
telecommunications  services.  The  Company is one of the largest  providers  of
competitive local telephone services in the United States, based on estimates of
the industry's 1996 revenue.  As a CLEC, the Company operates  networks in three
regional clusters covering major  metropolitan  statistical areas in California,
Colorado,  and the Ohio  Valley,  and in three  markets  in the  Southeast.  The
Company is expanding its geographic focus to include Texas and Oklahoma (and may
also expand to Arkansas  and  Louisiana)  through its recently  announced  joint
venture  with CSW that will  develop  and  market  telecommunications  services,
including local exchange telephone service,  in these markets.  Network Services
consist of information  technology  services and selected  networking  products,
focusing on network design,  installation,  maintenance  and support.  Satellite
Services consist of maritime and international  satellite  transmission services
and  provides  private  data  networks  utilizing  VSATs  (very  small  aperture
terminals).  As a leading  participant in the rapidly growing  competitive local
telecommunications  industry,  the Company has experienced  significant  growth,
with total  revenue  increasing  from $59.1  million  for fiscal  1994 to $217.8
million for the 12-month period ended March 31, 1997. The Company's rapid growth
is primarily the result of the initial installation,  acquisition and subsequent
expansion of its fiber optic networks and the expansion of its communication
service offerings.

     Prior to fiscal  1996,  the  majority  of the  Company's  revenue  had been
derived from Network Services.  However,  the Company's Network Services revenue
(as well as Satellite Services revenue) will continue to represent a diminishing
percentage of the  Company's  consolidated  revenue as the Company  continues to
emphasize its Telecom Services. In March 1996, the Company completed the sale of
four of its  teleports  which  were  used in the  Company's  Satellite  Services
operations.

     The  Telecommunications  Act and several  pro-competitive  state regulatory
initiatives  have  substantially  changed  the   telecommunications   regulatory
environment in the United States. Due to these regulatory  changes,  the Company
is now permitted to offer all  interstate  and  intrastate  telephone  services,
including  local  dial  tone,  and is  developing  a full  set of  complementary
services,  such as long  distance and data  transmission  services.  The Company
began marketing and selling competitive local dial tone services in three of its
primary markets:  California,  launched statewide in late January 1997, followed
by Ohio in February  1997 and  Colorado in March 1997.  During the three  months
ended March 31, 1997, the Company sold 17,491 local access lines, of which 5,371
were in service at March 31,  1997.  The  Company has 15 high  capacity  digital
telephony  switches (and one additional  switch located in Phoenix which will be
operational  through April 1997,  after which it will be relocated)  and 10 data
communications  switches  in  operation  to support its  services,  and plans to
install additional telephony and data switches as demand warrants. To facilitate
the  expansion of its  services,  the Company has entered into  agreements  with
Lucent Technologies,  Inc., Northern Telecom,  Inc. and Cascade  Communications,
Inc., to purchase a full range of switching systems,  fiber optic cable, network
electronics,  software and  services.  The Company  will  continue to expand its
network through construction, leased facilities and strategic joint ventures.
    
     The Company's  operating  networks have grown from 323 fiber route miles at
the end of fiscal 1994 to 2,483 fiber  route  miles at March 31,  1997.  Telecom
Services  revenue  has  increased  from $14.9  million for fiscal 1994 to $129.6
million  for  the  12-month  period  ended  March  31,  1997.  The  Company  has
experienced  declining access unit prices and increasing price competition which
have been more than offset by increasing  network usage.  The Company expects to
continue  to  experience  declining  access  unit  prices and  increasing  price
competition for the foreseeable future. 
                                       16
<PAGE>

     In conjunction with the increase in its service  offerings,  the Company is
required to invest significant amounts on sales, marketing, customer service and
engineering  personnel prior to the generation of appreciable revenue. This will
have an  adverse  effect on  operating  margins  until  such time as  sufficient
volumes of customers are attained.  As the  Company's  customer base grows,  the
Company  anticipates that operating margins will improve as incremental  revenue
will  exceed  incremental  operating  expenses.  The  preceding  forward-looking
statement is dependent upon the successful implementation of the Company's local
dial tone, data transmission and long distance strategies,  increased traffic on
the Company's facilities and actions of competitors and regulatory  authorities,
any or all of which may not occur.

     The Company expects to continue to experience  negative  operating  margins
from the  provision of switched  access  services  while its networks are in the
development  and  construction  phases,  during which the Company relies on ILEC
networks to carry a significant portion of its customers' switched traffic.  The
Company expects to realize improved  operating margins from switched services on
a given network when (i) increased volumes of traffic are attained and build-out
enables such traffic to be carried on the Company's own network  instead of ILEC
facilities,  and (ii) higher margin enhanced  services are provided to customers
on the Company's network. In addition,  the Company believes that the unbundling
of ILEC services and the  implementation of local telephone number  portability,
which are  mandated by the  Telecommunications  Act,  will reduce the  Company's
costs of  providing  switched  services  and  facilitate  the  marketing of such
services.  However,  the Company's switched access services strategy has not yet
been profitable and may not become profitable due to, among other factors,  lack
of customer  demand,  competition from other CLECs and downward pricing pressure
from the ILECs.

     The Company  believes that the  provisions of the  Telecommunications  Act,
including the opening of the local telephone services market to competition, the
unbundling of ILEC services and the  implementation  of local  telephone  number
portability,  will  facilitate  the  Company's  plan to  provide a full array of
local,  long  distance  and  data  communications  services.  In  order to fully
implement its strategy,  the Company must make significant capital  expenditures
to provide additional switching capacity,  network infrastructure and electronic
components.  The Company must also make significant investments and expenditures
to develop, train and manage its marketing and sales personnel.  The Company has
limited  experience  providing  such services and there can be no assurance that
the Company will be successful.

     The  continued  development,  construction  and  expansion of the Company's
business  requires  significant  capital,  a large  portion of which is expended
before any revenue is  generated.  The Company has  experienced,  and expects to
continue to  experience,  negative  cash flow and  significant  losses  while it
expands its  operations to provide a wide range of  telecommunications  services
and establishes a sufficient  revenue-generating  customer base. There can be no
assurance  that the Company  will be able to establish or retain such a customer
base.  When  constructing  and relying  principally on its own  facilities,  the
Company has  experienced  a period of up to 18 months from  initial  design of a
network to revenue  generation  for that  network.  However,  using  leased ILEC
facilities to provide initial  customer service and the Company's new agreements
to use utilities'  existing fiber,  the Company has experienced  initial revenue
generation within nine months after commencing network design.
                                       17
<PAGE>

Results of Operations

     The following table provides a breakdown of revenue and operating costs for
Telecom  Services,  Network Services and Satellite  Services,  and certain other
financial data for the Company for the periods  indicated.  The table also shows
certain  revenue,  expenses,  operating  loss and EBITDA as a percentage  of the
Company's total revenue.

                                     Three months ended March 31,
                                 -----------------------------------------------
                                        1996                      1997
                                 ---------------------- ------------------------
                                   $            %           $             %
                                 --------- ------------ ---------- -------------
                                                   (unaudited)
                                                  (in thousands)
                                             
Statement of Operations Data:                                             
Revenue:
     Telecom services             17,635          49      38,280           61
     Network services             13,973          39      17,987           28
     Satellite services            4,336          12       6,783           11
                                --------   ---------  -----------   ------------
       Total revenue              35,944         100      63,050          100
 Operating costs:
     Telecom services             15,194                  41,450
     Network services             11,058                  14,535
     Satellite services            1,919                   3,587
                                --------   ----------  ---------   -------------
         Total operating costs    28,171           78     59,572           95
 Selling, general and 
  administrative                  16,154           45     33,379           53
 Depreciation and amortization     7,442           21     10,882           17
                                --------  -----------  ---------   -------------
     Operating loss              (15,823)         (44)   (40,783)         (65)

 Other Data:
 EBITDA (1)                       (8,381)         (23)   (29,901)         (47)
 Net cash used by operating 
  activities                     (17,022)                (14,769)
 Net cash used by investing
  activities                     (50,700)                (58,565)
 Net cash (used) provided by 
  financing activities           (23,956)                172,688
 Capital expenditures             76,433                  61,545

                             March 31,  June 30, Sept. 30,  Dec. 31,   March 31,
                               1996      1996      1996      1996        1997
                            ---------- --------- ---------  --------- ----------
                                             (unaudited)
Statistical Data (2):
Full time employees             1,061     1,173     1,323      1,424       1,606
Telecom services:
     Buildings connected:
       On-net                     327       384       478        522         545
       Off-net                  1,401     1,493     1,589      1,547       1,550
                           ----------  --------  --------  ---------  ----------
          Total buildings 
           connected           1,728      1,877     2,067      2,069       2,095
     Customer circuits in 
       service (VGEs)        510,755    551,881   630,697    748,528     816,238
     Switches operational:
       Telephony                  13         13        14         14          16
       Frame relay                 -          -         -          1          10
                           ---------- ----------  --------  --------  ----------
          Total switches 
           operational            13         13        14         15          26
     Switched minutes of use
      (in millions)              362        475       563        607         682
     Fiber route miles (3):
       Operational               780        886     2,143      2,385       2,483
       Under construction          -          -         -          -         639
     Fiber strand miles (4):
       Operational            36,310     45,098    70,067     75,490      83,334
       Under construction          -          -         -          -      28,310
     Wireless miles (5)          582        483       491        506         511
Satellite services:
     VSATs                       658        659       835        860         875
     C-Band installations (6)     36         48        48         54          57
     L-Band installations (7)      3         53       109        204         355
                                       18
                                                                     (Continued)
<PAGE>
                                                                     

(1)  EBITDA  consists of  operating  loss plus  depreciation  and  amortization.
     EBITDA  is  provided   because  it  is  a  measure  commonly  used  in  the
     telecommunications industry. It is presented to enhance an understanding of
     the Company's  operating results and is not intended to represent cash flow
     or results of operations in accordance with generally  accepted  accounting
     principles  ("GAAP")  for  the  periods  indicated.  Net  cash  flows  from
     operating,  investing and financing  activities as calculated in accordance
     with GAAP are also presented in Other Data. See the Company's  Consolidated
     Financial Statements contained elsewhere in this report.

(2)  Amounts  presented are for  three-month  periods ended, or as of the end of
     the period presented.

(3)  Fiber  route  miles  refers to the  number of miles of fiber  optic  cable,
     including  leased fiber.  As of March 31, 1997, the Company had 2,483 fiber
     route  miles,  of which 359 fiber route miles were leased  under  operating
     leases.  Fiber  route  miles  under  construction  represents  fiber  under
     construction  and fiber  which is  expected  to be  operational  within six
     months.

(4)  Fiber strand  miles  refers to the number of fiber route  miles,  including
     leased fiber, along a  telecommunications  path multiplied by the number of
     fiber strands along that path. As of March 31, 1997, the Company had 83,334
     fiber  strand  miles,  of which 7,080 fiber  strand miles were leased under
     operating leases.  Fiber strand miles under  construction  represents fiber
     under construction and fiber which is expected to be operational within six
     months.

(5)  Wireless miles represents the total distance of the digital microwave paths
     between Company transmitters which are used in the Company's networks.

(6)  C-Band  installations  service cruise ships, U.S. Navy vessels and offshore
     oil platform installations.

(7)  L-Band  installations  service  smaller  maritime  installations,  and both
     mobile and fixed land-based units.


Three Months Ended March 31, 1997, Compared to Three Months Ended March 31, 1996
     
     Revenue.  Revenue for the three months ended March 31, 1997 increased $27.1
million,  or 75%, from the three months ended March 31, 1996.  Telecom  Services
revenue  increased 117% to $38.3 million due to an increase in network usage for
both  special  and  switched  access  services,  offset in part by a decline  in
average access rates. Switched services revenue increased from $9.1 million (52%
of Telecom Services  revenue) for the three months ended March 31, 1996 to $26.2
million (68% of Telecom  Services  revenue) for the three months ended March 31,
1997,  of which $7.6  million  relates to revenue  from Zycom,  compared to $1.1
million for the three  months  ended March 31,  1996.  Substantially  all of the
increase in Zycom  revenue for the three months ended March 31, 1997 as compared
to the same period in 1996 relates to changes in the  classification  of certain
operating  costs (which were netted against revenue during the 1996 period) as a
result  of  the  Company  entering  into  long-term  contracts  with  its  major
customers.  Network usage  reflected in VGEs  increased 60% from 510,755 VGEs at
March 31,  1996,  to  816,238  VGEs at March 31,  1997.  Additionally,  switched
minutes of use  increased 88% from 362 million  minutes  during the three months
ended March 31, 1996 to 682 million  minutes during the three months ended March
31, 1997.  Network Services revenue increased 29% to $18.0 million for the three
months  ended March 31, 1997 as compared to $14.0  million for the three  months
ended March 31, 1996.  The increase is  attributable  to an equipment  sale to a
single  customer  for  approximately  $1.5  million in excess of a similar  sale
during the comparable period in 1996. The remaining increase in Network Services
revenue is due to  additional  projects  from  existing  customers and increased
business  networking  requirements.  Satellite Services revenue increased 57% to
$6.8  million  for the three  months  ended  March 31,  1997.  This  increase is
primarily due to the operations of Maritime Cellular Tele-Network, Inc. ("MCN"),
a 90% owned  subsidiary of the Company  acquired in March 1996,  which comprised
$1.2  million of total  Satellite  Services  revenue for the three  months ended
March  31,  1997  and  provided  substantially  no  revenue  due to the  date of
acquisition  during  the same  period in 1996.  The  remaining  increase  can be
attributed  to the  general  growth  of MTN and its  increased  sales of  C-Band
equipment to offshore oil and gas customers.

         Operating costs. Total operating costs for the three months ended March
31, 1997 increased $31.4 million,  or 112% from the three months ended March 31,
1996. Telecom Services  operating costs increased from $15.2 million,  or 86% of
Telecom  Services  revenue,  for the three months ended March 31, 1996, to $41.5
million,  or 108% of Telecom Services revenue,  for the three months ended March
31, 1997.  Telecom Services operating costs consist of payments to
                                       19
<PAGE>

ILECs for the use of network  facilities to support  off-net and switched access
services,  network  operating  costs,  right of way fees and  other  costs.  The
increase in operating costs in absolute  dollars is attributable to the increase
in switched access services and the addition of engineering  personnel dedicated
to the development of local exchange  services.  The increase in operating costs
as a percentage  of total  revenue is due  primarily to the increase in switched
access services  revenue,  which generates  negative  margins as a result of the
higher  costs  associated  with  utilizing  ILEC  network  facilities,  and  the
investment in the development of local exchange  services without the benefit of
corresponding  revenue in the same period.  The Company expects that its Telecom
Services ratio of operating costs to revenue will continue to increase until the
Company provides a greater volume of higher margin services,  principally  local
exchange  services,  carries more traffic on its own facilities  rather than the
ILEC  facilities,  and obtains the right to use  unbundled  ILEC  facilities  on
satisfactory  terms,  any  or all of  which  may  not  occur.  Network  Services
operating  costs increased 31% to $14.5 million and increased as a percentage of
revenue from 79% for the three months ended March 31, 1996, to 81% for the three
months ended March 31, 1997. The increase is due to a substantially lower margin
earned on equipment sales relative to other services. Network Services operating
costs include the cost of equipment sold, direct hourly labor and other indirect
project costs.  Satellite Services operating costs increased to $3.6 million for
the three months  ended March 31,  1997,  from $1.9 million for the three months
ended March 31, 1996.  Satellite  Services  operating  costs as a percentage  of
revenue also  increased  from 44% for the three months ended March 31, 1996,  to
53% for the three  months  ended  March 31,  1997.  This  increase is due to the
addition of MCN's operating costs in the current  three-month  period as well as
the  increased  volume of equipment  sales,  both of which provide lower margins
than  other  maritime  services.  Satellite  Services  operating  costs  consist
primarily of transponder lease costs and the cost of equipment sold.

     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative  ("SG&A")  expenses  for the three  months  ended  March 31, 1997
increased $17.2 million,  or 107%,  compared to the three months ended March 31,
1996.  This increase was principally due to the continued rapid expansion of the
Company's  Telecom Services  networks and related  significant  additions to the
Company's management information systems, customer service,  marketing and sales
staffs dedicated to the expansion of the Company's  networks and  implementation
of the Company's expanded services strategy,  primarily the development of local
telephone  services.  SG&A expenses as a percentage  of total revenue  increased
from 45% for the three months ended March 31, 1996,  to 53% for the three months
ended March 31, 1997. There is typically a period of higher  administrative  and
marketing  expense  prior to the  generation of  appreciable  revenue from newly
developed  networks or services.  The Company  expects SG&A expenses for Telecom
Services to  increase  with or above  revenue  over the near term as a result of
hiring new staff to facilitate the marketing and development of local dial tone,
long distance and data transmission services to business and end user customers.

     Depreciation and amortization. Depreciation and amortization increased $3.4
million,  or 46%, for the three  months  ended March 31,  1997,  compared to the
three months ended March 31, 1996,  due to increased  investment in  depreciable
assets  resulting  from the continued  expansion of the  Company's  networks and
services.  The Company reports high levels of depreciation  expense  relative to
revenue  during the early years of operation  of a new network  because the full
cost of a network is depreciated using the straight-line  method despite the low
rate of capacity utilization in the early stages of network operation.

     Interest  expense.  Interest  expense  increased $10.9 million,  from $14.2
million for the three  months  ended March 31,  1996,  to $25.1  million for the
three months  ended March 31, 1997,  which  included  $23.3  million of non-cash
interest.  This  increase was  attributable  to an increase in  long-term  debt,
primarily the 11 5/8% Notes and the 12 1/2% Notes issued in March 1997 and April
1996, respectively,  and an increase in capitalized lease obligations to finance
certain equipment.

     Interest income.  Interest income increased $2.4 million, from $2.7 million
for the three months ended March 31, 1996,  to $5.1 million for the three months
ended March 31, 1997. The increase is  attributable to the increase in cash from
the proceeds of the  issuances of the 11 5/8% Notes and 14%  Preferred  Stock in
March 1997 and the 12 1/2% Notes and 14 1/4%  Exchangeable  Preferred Stock (the
"14 1/4% Preferred Stock") in April 1996.

     Other,  net.  Other,  net  fluctuated  from $1.6 million net expense in the
three  months  ended  March 31,  1996 to $0.2  million  net expense in the three
months ended March 31, 1997. Other expense  recorded in the three-month  periods
ended March 31, 1996 and 1997  represents  losses  recognized on the disposal of
assets.

         Minority  interest in share of losses,  net of accretion  and preferred
dividends on subsidiary  preferred stock.  Minority interest in share of losses,
net of accretion and preferred dividends on subsidiary preferred stock increased
$3.8
                                       20
<PAGE>

million,  from $2.0  million for the three  months  ended March 31, 1996 to $5.8
million for the three months ended March 31, 1997. The increase is due primarily
to the issuance of the 14 1/4% Preferred Stock in April 1996 and the issuance of
the 14% Preferred Stock in March 1997. Minority interest in share of losses, net
of accretion and  preferred  dividends on subsidiary  preferred  stock  recorded
during the current  three-month  period consists of the accretion of issue costs
($0.2  million) and the accrual of the preferred  stock  dividend ($6.6 million)
associated with the 14% Preferred Stock and the 14 1/4% Preferred Stock,  offset
by minority interest in losses of subsidiaries of $1.0 million.

     Share of losses in joint venture and investment. Effective October 1, 1996,
the Company sold its 50% interest in the Phoenix  network  joint  venture.  As a
result, no share of losses in joint venture was recorded during the three months
ended  March 31,  1997,  as  compared to the $0.6  million  recorded  during the
comparable  period in 1996.  Future results will include the Company's  share of
losses from the joint venture with CSW.

Liquidity and Capital Resources

     The Company's growth has been funded through a combination of equity,  debt
and lease  financing.  As of March 31, 1997,  the Company had current  assets of
$541.4  million,   including  $491.0  million  of  cash,  cash  equivalents  and
short-term  investments,  which exceeded  current  liabilities of $76.1 million,
providing working capital of $465.3 million. The Company invests excess funds in
short-term,  interest-bearing  investment-grade  securities until such funds are
used to fund the  capital  investments  and  operating  needs  of the  Company's
business.  The Company's investment objectives are safety,  liquidity and yield,
in that order.

Cash Used By Operating Activities

     The Company's operating activities used $17.0 million and $14.8 million for
the three  months  ended  March 31,  1996 and 1997,  respectively.  Cash used by
operations  is  primarily  due to net  losses,  which  are  partially  offset by
non-cash  expenses,  such as depreciation  expense,  deferred  interest expense,
preferred dividends on subsidiary preferred stock and changes in working capital
items.

     The  Company  expects  to  continue  to  generate  negative  cash flow from
operating activities while it emphasizes development, construction and expansion
of its Telecom Services business. Consequently, it does not anticipate that cash
provided by operations  will be sufficient to fund future  expansion of existing
networks or the construction and acquisition of new networks in the near term.

Cash Used By Investing Activities

     The Company's investing activities used $50.7 million and $58.6 million for
the three  months  ended  March 31,  1996 and 1997,  respectively.  Cash used by
investing  activities  includes cash expended for the  acquisition  of property,
equipment  and other assets,  net of proceeds  from the sale of such assets,  of
$29.1  million and $59.9  million for the three  months ended March 31, 1996 and
1997,  respectively.  The  Company  will  continue  to use  cash in 1997 for the
construction of new networks and the expansion of existing networks. The Company
acquired assets under  capitalized  leases of $47.3 million and $1.7 million for
the three months ended March 31, 1996 and 1997,  respectively.  Assets  acquired
under capitalized  leases during the three months ended March 31, 1996 primarily
consisted of fiber optic networks included in the Company's agreement with SCE.

     The Company expects to make investments of  approximately  $24.2 million in
1997 in its joint venture with CSW and estimates making  additional  investments
therein of approximately $25.5 million through 2002. The Company is obligated to
purchase, at fair value, all of the shares of MTN that are owned by the minority
shareholder, if MTN has not completed a public offering by January 3, 1998.

Cash (Used) Provided By Financing Activities

     Financing  activities used $24.0 million and provided $172.7 million in the
three months ended March 31, 1996 and 1997, respectively. The significant change
in cash  provided by  financing  activities  in the three months ended March 31,
1997,  compared to cash used by  financing  activities  in the three  months end
March 31, 1996, is due to the completion of the Private Placement of the 11 5/8%
Notes and the 14%  Preferred  Stock in March  1997.  Historically,  the funds to
finance the  Company's  business  acquisitions,  capital  expenditures,  working
capital  requirements and operating
                                       21
<PAGE>

losses   have  been   obtained   through   public  and  private   offerings   of
Holdings-Canada  common shares,  the 12 1/2% Notes and 14 1/4% Preferred  Stock,
units consisting of the 13 1/2% Notes and warrants,  redeemable preferred stock,
convertible subordinated notes, convertible preferred shares of Holdings-Canada,
capital lease financings and various working capital  sources,  including credit
facilities.

     On March 11,  1997,  Holdings  completed  the Private  Placement of 11 5/8%
Notes  and  100,000   shares  of  14%  Preferred   Stock  for  net  proceeds  of
approximately  $192.4  million.  The net proceeds of the Private  Placement will
improve the Company's  operating and financial  flexibility  over the near term.
The Company believes its liquidity improved because (a) the 11 5/8% Notes do not
require the payment of cash interest  until 2002 and (b) Holdings has the option
to pay  dividends  on the  14%  Preferred  Stock  in  additional  shares  of 14%
Preferred  Stock  prior  to 2002  and the  Preferred  Stock  is not  mandatorily
redeemable until 2008.

     The 11 5/8% Notes are unsecured senior obligations of Holdings  (guaranteed
by ICG) that mature on March 15, 2007. Interest will accrue at 11 5/8% per annum
beginning  March 15,  2002,  and is  payable  each  March 15 and  September  15,
commencing  September  15,  2002.  Dividends  on the  14%  Preferred  Stock  are
cumulative at a rate of 14% per annum and are payable  quarterly in arrears each
March 15, June 15,  September 15 and December 15,  commencing June 15, 1997. The
14%  Preferred  Stock has a  liquidation  preference  of $1,000 per share,  plus
accrued  and  unpaid  dividends,  and is  mandatorily  redeemable  in 2008.  The
Preferred  Stock is  exchangeable,  at the option of  Holdings,  into 14% senior
subordinated  exchange  debentures  of Holdings due 2008,  at any time after the
exchange is permitted under certain indenture restrictions.

     Additionally,  as of March 31, 1997,  an aggregate of  approximately  $77.6
million of  capitalized  lease  obligations  and an aggregate  accreted value of
approximately $707.5 million were outstanding under the 12 1/2% Notes and the 13
1/2% Notes.  The 12 1/2% Notes  require  payments of interest to be made in cash
commencing  on  November  1, 2001 and mature on May 1,  2006.  The 13 1/2% Notes
require payments of interest to be made in cash commencing on March 15, 2001 and
mature on September 15, 2005. In addition,  the 14 1/4% Preferred Stock requires
payment of dividends to be made in cash  commencing  August 1, 2001. As of March
31, 1997, the Company had $9.3 million of other  indebtedness  outstanding.  The
Company may also have  additional  payment  obligations  prior to such time, the
amount of which cannot  presently be determined.  The Company's cash on hand and
amounts  expected to be available  through vendor  financing  arrangements  will
provide  sufficient  funds  necessary  for the  Company  to expand  its  Telecom
Services  business  as  currently  planned  and to fund its  operating  deficits
through  1997 and into 1998.  Accordingly,  the Company may have to  refinance a
substantial amount of indebtedness and obtain substantial additional funds prior
to March  2001.  The  Company's  ability to do so will  depend on,  among  other
things,  its financial  condition at the time,  restrictions  in the instruments
governing its  indebtedness,  and other factors,  including  market  conditions,
beyond the control of the Company.  There can be no  assurance  that the Company
will be able to refinance such indebtedness,  including such capitalized leases,
or obtain  such  additional  funds,  and if the Company is unable to effect such
refinancings or obtain additional funds, the Company's ability to make principal
and interest payments on its indebtedness or make payments of cash dividends on,
or the  mandatory  redemption  of,  its  preferred  stock,  would  be  adversely
affected.

Capital Expenditures

     The  Company  expects  to  continue  to  generate  negative  cash flow from
operating activities while it emphasizes development, construction and expansion
of   its   business   and   until   the   Company   establishes   a   sufficient
revenue-generating  customer base. The Company's capital expenditures (including
assets  acquired under capital  leases) were $76.4 million and $61.5 million for
the three  months  ended  March 31,  1996 and 1997,  respectively.  The  Company
anticipates  that  the  expansion  of  existing  networks,  construction  of new
networks and further  development  of the  Company's  products and services will
require capital  expenditures of approximately $188.5 million and $240.0 million
during  1997  and  1998,   respectively,   and  continued   significant  capital
expenditures  thereafter.  To facilitate the expansion of its switched  services
strategy and  entrance  into data  communications,  the Company has entered into
equipment purchase  agreements with various vendors under which the Company must
purchase a substantial  amount of equipment  and other assets,  including a full
range of switching systems, fiber optic cable, network electronics, software and
services. Actual capital expenditures will depend on numerous factors beyond the
Company's  control.  These  factors  include the nature of future  expansion and
acquisition   opportunities,   economic  conditions,   competition,   regulatory
developments and the availability of equity, debt and lease financing.
                                       22
<PAGE>

General

     The  Company's  operations  have  required  and will  continue  to  require
significant capital  expenditures for development,  construction,  expansion and
acquisitions.  Significant amounts of capital are required to be invested before
revenue is generated, which results in initial negative cash flow.

     In view of the  anticipated  negative cash flow from operating  activities,
the continuing development of the Company's products and services, the expansion
of  existing  networks  and  the  construction,  leasing  and  licensing  of new
networks, the Company will require additional amounts of cash in the future from
outside sources. Management believes that the Company's cash on hand and amounts
expected to be available  through  vendor  financing  arrangements  will provide
sufficient  funds  necessary  for the  Company  to expand its  Telecom  Services
business as currently  planned and to fund its operating  deficits  through 1997
and into 1998.  Additional sources of cash may include public and private equity
and debt financings, sales of non-strategic assets, capitalized leases and other
financing  arrangements.  The Company may require  additional  amounts of equity
capital  in the near  term.  In the past,  the  Company  has been able to secure
sufficient amounts of financing to meet its capital expenditure needs. There can
be no assurance that  additional  financing will be available to the Company or,
if available, that it can be obtained on terms acceptable to the Company.

     The failure to obtain  sufficient  amounts of financing could result in the
delay or abandonment of some or all of the Company's  development  and expansion
plans, which could have a material adverse effect on the Company's business.  In
addition,  the  inability  to fund  operating  deficits  with  the  proceeds  of
financings  until  the  Company  establishes  a  sufficient  revenue  generating
customer base could have a material adverse effect on the Company's liquidity.

New Accounting Standard

     In February 1997, the Financial Accounting Standards Board issued Statement
No. 128,  "Earnings Per Share" ("SFAS 128") which  revises the  calculation  and
presentation  provisions of Accounting  Principles  Board Opinion 15 and related
interpretations.  SFAS 128 is  effective  for the  Company's  fiscal year ending
December 31, 1997 and retroactive application is required. The Company believes
the adoption of SFAS 128 will have no effect on its reported loss per share.
                                       23
<PAGE>
                                     PART II


ITEM 1. LEGAL PROCEEDINGS

          See Note 4 (d) to the Company's  Consolidated Financial Statements for
          the three  months  ended March 31, 1997  contained  elsewhere  in this
          Quarterly Report.

ITEM 2. CHANGES IN SECURITIES
         
          None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

          None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          None.

ITEM 5. OTHER INFORMATION

          None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

          (A) Exhibits.

               (10) Amendment,   dated  as  of  March  26,  1997,   between  ICG
                    Communications,  Inc.  and J. Shelby  Bryan,  to  Employment
                    Agreement,  dated as of May 30, 1995, between IntelCom Group
                    Inc. and J. Shelby Bryan.

               (27) Financial Data Schedule.

          (B)  Reports on Form 8-K. The following reports on Form 8-K were filed
               by the Registrants during the three months ended March 31, 1997:

               (i)  Current   Report  on  Form  8-K  dated  February  20,  1997,
                    regarding  the  announcement  of  earnings  information  and
                    results of operations for the transition period from October
                    1, 1996 through December 31, 1996.

               (ii) Current   Report  on  Form  8-K  dated  February  24,  1997,
                    regarding the announcement of an offering of Senior Discount
                    Notes and Exchangeable Preferred Stock by ICG Holdings, Inc.
                                       24
<PAGE>




                                INDEX TO EXHIBITS
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549









<PAGE>

--------------------------------------------------------------------------------
                                   EXHIBIT 10
--------------------------------------------------------------------------------

   Amendment, dated as of March 26, 1997, between ICG Communications, Inc. and
  J. Shelby Bryan, to Employment Agreement, dated as of May 30, 1995, between
                    IntelCom Group Inc. and J. Shelby Bryan.











<PAGE>
--------------------------------------------------------------------------------
                                   EXHIBIT 27
--------------------------------------------------------------------------------

                                                      

                            Financial Data Schedule.




<PAGE>

                                   SIGNATURES


     Pursuant  to the  requirements  of  Section  13 or 15(d) 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, on April 30, 1997.

                                             ICG HOLDINGS, INC.





Date:  April 30, 1997                     By:    /s/ James D. Grenfell
                                             -----------------------------------
                                             James D. Grenfell, Executive Vice
                                             President, Chief Financial Officer,
                                             Treasurer and Director






Date:  April 30, 1997                     By:    /s/ Richard Bambach
                                             -----------------------------------
                                             Richard Bambach, Vice President and
                                             Corporate Controller