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 June 30, 1998

                                       OR

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

             FOR THE TRANSITION PERIOD FROM __________ TO __________

                         Commission File Number 0-27176


                               SAVILLE SYSTEMS PLC
             (Exact name of registrant as specified in its charter)

                               Republic of Ireland
         (State or other jurisdiction of incorporation or organization)

                                 Not Applicable
                      (I.R.S. Employer Identification No.)

                   IDA Business Park, Dangan, Galway, Ireland
          (Address of principal executive offices, including zip code)

                               011-353-9-152-6611
              (Registrant's telephone number, including area code)

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

Number of shares  outstanding of the registrant's class of Ordinary Shares as of
July 31, 1998 was 38,652,159.


<PAGE>



                               SAVILLE SYSTEMS PLC

                                FORM 10-Q REPORT

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998

                                TABLE OF CONTENTS

                                                                              

                         PART I - FINANCIAL INFORMATION                    PAGE

Item 1.  Consolidated Financial Statements

         Consolidated Balance Sheets as of June 30, 1998                   
         (unaudited) and December 31, 1997                                   3

         Consolidated Statements of (Loss) Income for the three months 
         and for the six months ended June 30, 1998 and 1997 (unaudited)     4

         Consolidated Statements of Cash Flows for the six months ended     
         June 30, 1998 and 1997 (unaudited)                                  5

         Notes to Consolidated Financial Statements (unaudited)            6-8

Item 2.  Management's Discussion and Analysis of Financial Condition 
         and Results of Operations                                        9-15


                           PART II - OTHER INFORMATION


Item 1.  Legal Proceedings                                                  16

Item 2.  Changes in Securities                                              16

Item 3.  Defaults Upon Senior Securities                                    16

Item 4.  Submission of Matters to a Vote of Security Holders                16

Item 5.  Other Information                                                  16

Item 6.  Exhibits and Reports on Form 8-K                                   17


SIGNATURES                                                                  18




<PAGE>


Saville Systems PLC


CONSOLIDATED BALANCE SHEETS


(in thousands of U.S. dollars, except share data amounts)

<TABLE>

                                                      June 30     December 31
                                                        1998         1997
                                                    (unaudited)
---------------------------------------------------------------- -------------
<S>                                                 <C>           <C>   
ASSETS
Current
Cash and cash equivalents                            $   31,880    $   55,785
Short-term investments                                   47,611        13,015
Accounts receivable, less allowance for doubtful
accounts of $1,737 and $1,687, respectively              36,799        22,373
Prepaid expenses and other assets                         5,540         3,581
---------------------------------------------------------------- -------------
Total current assets                                    121,830        94,754
Property and equipment, net                              12,835        10,621
Other assets, net                                         6,675           -
---------------------------------------------------------------- -------------
Total assets                                          $ 141,340     $ 105,375
---------------------------------------------------------------- -------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable                                          5,758         5,336
Accrued compensation and related benefits                 7,616         5,248
Accrued expenses and other liabilities                    4,595         3,084
Income taxes payable                                      7,892         7,167
Deferred revenue                                          9,012         3,402
Current portion of long-term liabilities                  1,136           134
---------------------------------------------------------------- -------------
Total current liabilities                                36,009        24,371
Long-term liabilities                                     1,257           336
Minority interest                                           240           366
---------------------------------------------------------------- -------------
Total liabilities                                        37,506        25,073
---------------------------------------------------------------- -------------

Shareholders' equity
Ordinary Shares, nominal value $0.0025 per share
  Authorized:  75,000,000
  Issued and outstanding:  38,652,159 and 37,504,596         97            94
Deferred Ordinary Shares, nominal value 
  IR(punt)1.00 per share
  Authorized, issued and outstanding:  30,000                48            48
Additional paid-in capital                               61,521        37,734
Retained earnings                                        42,984        42,750
Accumulated other comprehensive income                    (816)         (324)
---------------------------------------------------------------- -------------
Total shareholders' equity                              103,834        80,302
---------------------------------------------------------------- -------------
Total liabilities and shareholders' equity            $ 141,340     $ 105,375
---------------------------------------------------------------- -------------
</TABLE>

See accompanying notes



<PAGE>


Saville Systems PLC


CONSOLIDATED STATEMENTS OF (LOSS) INCOME

(unaudited)
(in thousands of U.S. dollars, except share and per share data)

<TABLE>

                                                      Three months ended              Six months ended
                                                    June 30         June 30        June 30         June 30
                                                      1998           1997            1998             1997
-------------------------------------------- --------------- --------------- -------------- ---------------
<S>                                          <C>             <C>             <C>            <C>    
REVENUE
Services                                           $ 31,114        $ 20,088       $ 61,053        $ 36,603
License fees                                         11,797           5,405         19,880           9,020
-------------------------------------------- --------------- --------------- -------------- ---------------
Total revenue                                        42,911          25,493         80,933          45,623
-------------------------------------------- --------------- --------------- -------------- ---------------
EXPENSES
Cost of services                                     16,063           9,448         30,111          17,485
Cost of license fees                                    270             128            550             216
Sales and marketing                                   2,186           1,522          4,108           2,724
Research and development                              5,968           2,530          9,899           4,011
General and administrative                            7,780           4,913         14,323           8,822
Charge for purchased in-process research and
development                                          18,808              -          18,808              -
-------------------------------------------- --------------- --------------- -------------- ---------------
Total expenses                                       51,075          18,541         77,799          33,258
-------------------------------------------- --------------- --------------- -------------- ---------------
(Loss) income from operations                       (8,164)           6,952          3,134          12,365
Other income, net                                       631             559          1,354             913
-------------------------------------------- --------------- --------------- -------------- ---------------
(Loss) income before income taxes                   (7,533)           7,511          4,488          13,278
Provision for income taxes                            1,429           1,995          4,254           3,320
-------------------------------------------- --------------- --------------- -------------- ---------------
(Loss) income before minority interest              (8,962)           5,516            234           9,958
Minority interest share in subsidiaries' net
income                                                   -               75             -              115
-------------------------------------------- --------------- --------------- -------------- ---------------
Net(loss)income                                   $ (8,962)        $  5,441      $     234       $   9,843
-------------------------------------------- --------------- --------------- -------------- ---------------
Basic (loss) earnings per share                  $   (0.23)       $    0.15      $    0.01      $     0.27  
Diluted (loss) earnings per share                $   (0.22)       $    0.14      $    0.01      $     0.25
-------------------------------------------- --------------- --------------- -------------- ---------------
(in thousands)
Ordinary shares                                      38,554          36,449         38,188          36,329
Ordinary shares assuming dilution                    41,269          39,131         41,057          38,841
-------------------------------------------- --------------- --------------- -------------- ---------------
</TABLE>

See accompanying notes


<PAGE>

Saville Systems PLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)
(in thousands of U.S. dollars)
<TABLE>
                                                          Six months ended  
                                                       June 30       June 30                     
                                                        1998           1997
---------------------------------------------------------------- --------------
<S>                                                   <C>         <C>    
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                           $      234        $ 9,843
Adjustments to reconcile net income to net cash
 provided by operating activities:
  Depreciation and amortization                           1,385            600
  Allowance for doubtful accounts                           585            614
  Minority interest in net income                            -             115
  Gain on sale of property and equipment                  (119)           (24)
  Compensation related to stock transactions               103             60
  Deferred taxes                                        (1,477)             -
  Charge for purchased in-process research 
   and development                                       18,808             -
Changes in operating assets and liabilities:
  Accounts receivable                                  (15,023)        (8,997)
  Prepaid expenses and other assets                     (1,768)        (1,555)
  Accounts payable                                          160            955
  Accrued compensation and related benefits               2,367            843
  Accrued expenses and other liabilities                  (339)          2,113
  Income taxes payable                                      726          1,918
  Deferred revenue                                        5,610          7,371
---------------------------------------------------------------- --------------
Net cash provided by operating activities                11,252         13,856
---------------------------------------------------------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net purchase of property and equipment                  (2,893)        (1,525)
Purchase of other assets                                (2,089)            -           -
Purchase of short-term investments                     (34,596)       (18,059)
Purchase of business assets                            (19,167)            -
---------------------------------------------------------------- --------------
Net cash used in investing activities                  (58,745)       (19,584)
---------------------------------------------------------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term liabilities                         (64)           (43)
Advances on operating line of credit                     15,100            -
Repayments on operating line of credit                 (15,100)            -
Proceeds from share issuances                            23,356          1,439
Share issue costs                                         (428)           (63)
Tax benefit on employee stock transactions                  634            645
---------------------------------------------------------------- --------------
Net cash provided by financing activities                23,498          1,978
---------------------------------------------------------------- --------------
Effect of exchange rate changes on cash                      90            (3)
---------------------------------------------------------------- --------------
Net decrease in cash and cash equivalents              (23,905)        (3,753)
Cash and cash equivalents, beginning of period           55,785         34,395
---------------------------------------------------------------- --------------
Cash and cash equivalents, end of period               $ 31,880        $30,642
---------------------------------------------------------------- --------------
Short-term investments                                   47,611         19,059
---------------------------------------------------------------- --------------
Cash and short-term investments                        $ 79,491        $49,701
---------------------------------------------------------------- --------------
Supplementary disclosure of cash flow information:
  Cash paid for interest                                    157            -
  Cash paid for income taxes                              4,043            833
</TABLE>

See accompanying notes


<PAGE>


Saville Systems PLC

Notes to Consolidated Financial Statements as of June 30, 1998  (unaudited)

1.       Basis of Presentation

The accompanying  unaudited consolidated financial statements have been prepared
by the Company in accordance with U.S. generally accepted accounting  principles
for  interim   financial   information  and  with  instructions  to  Form  10-Q.
Accordingly,  certain  information and footnote  disclosure normally included in
the  Company's  audited  annual  consolidated  financial  statements  have  been
condensed  or  omitted  in  accordance  with the  rules and  regulations  of the
Securities and Exchange Commission. The unaudited interim consolidated financial
statements,  in the opinion of management,  reflect all adjustments  (consisting
only of normal and recurring  adjustments)  necessary for a fair presentation of
the  results  of the  interim  periods  ended  June  30,  1998  and 1997 and the
financial position as of June 30, 1998.

The results of operations for the interim periods are not necessarily indicative
of the results of operations  to be expected for the fiscal year.  These interim
consolidated financial statements should be read in conjunction with the audited
consolidated  financial  statements  of the Company  which are  contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997.

Earnings per share amounts for comparative  periods have been restated to comply
with Statement of Financial Accounting Standards No. 128.


2.       Share Capital

During the three and six month  periods  ended June 30, 1998 the Company  issued
148,765 and 863,865  Ordinary  Shares,  respectively,  to officers and employees
pursuant to option  exercises for aggregate cash  consideration of approximately
$1.4  million and $9.3  million,  respectively.  All of these shares were issued
under  the  1995  Share  Option  Plan  ("1995   Plan")  with  the  exception  of
approximately  62,000 issued under the 1996 Employee  Share Purchase Plan ("1996
Plan").

During the three  months  ended June 30,  1998 the Company  also issued  283,698
Ordinary  Shares to BHA Pty Ltd. for aggregate  consideration  of  approximately
$14.0  million  in order to fund,  in  part,  an asset  acquisition.  See Note 5
"Acquisition".

The following table  summarizes the activity in Ordinary Share options under the
1995 and 1996 Plans from December 31, 1997 to June 30, 1998:

<TABLE>
                                        Number of Ordinary Share Options
------------------------------- ---------------- ---------------- -------------
                                 Available for     Unexercised       Weighted
                                     grant                         average price
                                                                     per share
<S>                              <C>              <C>             <C>  
Balance at December 31, 1997          5,449,408        4,279,435       $13.61

Options granted                     (2,236,773)        2,236,773        39.56
Options exercised                         -            (863,865)        10.78
Options cancelled                       107,617        (107,617)        30.30
------------------------------- ---------------- ---------------- -------------
Balance at June 30, 1998              3,320,252        5,544,726       $24.20
------------------------------- ---------------- ---------------- -------------
</TABLE>

<PAGE>
Saville Systems PLC

Notes to Consolidated Financial Statements as of June 30, 1998  (unaudited)
(continued)

A summary  of  Ordinary  Share  options  outstanding  as of June 30,  1998 is as
follows:

<TABLE>

------------------ ----------------- ----------------- ----------------- ----------------- -----------------
Total Outstanding      Range of          Weighted          Weighted       Exercisable at       Weighted
                   Exercise Prices       Average           Average        June 30, 1998        Average
                                      Exercise Price      Remaining                         Exercise Price
                                                         Contractual                        of Exercisable
                                                       Life (in years)                         Options
<S>                <C>               <C>               <C>               <C>              <C>    
------------------ ----------------- ----------------- ----------------- ----------------- -----------------
          235,528          $1.20          $1.20              1.6             235,528             1.20
        1,105,271      4.33-5.00           4.48              7.2             552,266             4.55
           40,590     7.50-13.32           8.79              7.6              27,256             8.28
        1,584,162    14.06-21.50          18.62              8.6             643,155            18.81
          207,000    21.75-32.56          29.51              9.3               8,666            25.44
        2,218,875    33.50-50.25          38.23              9.3                -                 -
          153,300    50.25-59.00          53.06              9.8                -                 -
------------------ ----------------- ----------------- ----------------- ----------------- -----------------
        5,544,726    $1.20-59.00         $24.20              8.4           1,466,871           $10.46
------------------ ----------------- ----------------- ----------------- ----------------- -----------------
</TABLE>

Of the options granted in 1998,  approximately 1,698,000 options were granted to
employees  and  directors  that may vest earlier  than the  original  three year
vesting period if the market price of the Company's American Depositary Receipts
(ADRs)  increases in  specified  time  frames.  At June 30, 1998,  approximately
1,647,000 of these options were outstanding.

3.        Comprehensive (Loss) Income

The Company has adopted  Statement of  Financial  Accounting  Standards  No. 130
(SFAS 130),  "Reporting  Comprehensive  Income",  which became effective for the
Company's quarter ended March 31, 1998. The Company's  comprehensive  income was
as follows:

(in thousands of U.S. dollars)

<TABLE>
                                  Three months ended        Six months ended
                                 June 30     June 30      June 30     June 30   
                                   1998       1997          1998       1997
----------------------------- ------------ ----------- ------------ ------------
<S>                           <C>          <C>         <C>          <C>  
Net (loss) income                $(8,962)    $5,441         $234      $9,843
Foreign currency translation
adjustment, net of NIL tax          (523)         7        (492)         (26)
                              ------------ ----------- ------------ ------------

Comprehensive (loss) income      $(9,485)    $5,448        $(258)     $9,817
                              ============ =========== ============ ============
</TABLE>

The earnings of the Company's non-Irish foreign subsidiaries, which give rise to
the foreign currency  translation  adjustments,  are reinvested with no plan for
repatriation.  Therefore,  there is no tax  effect  on this  component  of other
comprehensive income.

4.       Other Assets

In February 1998, the Company purchased telecommunications  interconnect billing
software  technology  for resale  from a Swedish  company  for an amount of $2.0
million in cash with a  commitment  of at least $2.0  million in royalties to be
paid over the next two years.  The total cost of the  software at June 30, 1998,
including  acquisition  costs and minimum  royalty  payments,  was $4.1 million.
Long-term  liabilities  include the $2.0 million  minimum royalty  payments,  of
which $1.0  million is due on January  31,  1999 and is  included in the current
portion of  long-term  liabilities.  During the three months ended June 30, 1998
the Company,  with the  assistance of an  independent  appraiser,  completed its
review  of the  technology  acquired  and  determined  that  at the  time of the
purchase,  technological  feasibility  had not been  reached  and  there  was no
alternative future use for this technology.  At that time,  further  development
was  required to  integrate  the  technology  into a product for future sale and
accordingly,   the  Company   recorded  a  one-time   charge  to  the  Company's
consolidated results of $4.1 million for in-process research and development.

5.       Acquisition

On  April  3,  1998  the  Company   acquired   the  net  assets  of   Australian
telecommunications  software company BHA Pty Ltd. ("BHA") and its majority-owned
subsidiary  BHA Computer Pty Ltd.  ("BHAC") for  approximately  $15.8 million in
cash and the settlement of  approximately  $3.3 million in related bank debt, as
well as  approximately  $906,000  in  acquisition  related  costs  and  expenses
including  applicable  duties and taxes. The Company funded the acquisition,  in
part, by the borrowing of approximately $15.1 million from the Company's working
capital line of credit. The entire amount borrowed was repaid during the quarter
ended June 30,  1998,  in part,  through the issuance of 283,698 of its Ordinary
Shares to BHA for aggregate consideration of approximately $14.0 million.

This asset acquisition was accounted for using the purchase method of accounting
and results have been included since the date of acquisition. The assets consist
of those assets used by BHA and BHAC in developing  and marketing  customer care
and billing software for the telecommunications industry, including property and
equipment,  intellectual  property  and the  benefit  of  current  BHA and  BHAC
contracts.  The purchase  price was allocated  based on estimated fair values at
the date of acquisition.  The intellectual  property  purchased included certain
in-process  research  and  development  which the Company  determined,  with the
assistance of an independent  appraiser,  that at the time of acquisition it had
not reached  technological  feasibility and had no alternative  future use. This
resulted in a one-time  charge to the  Company's  consolidated  results of $14.7
million. The aggregate cost of the acquisition exceeded the estimated fair value
of the  acquired  net  assets by $3.1  million,  which is being  amortized  on a
straight-line  basis  over the  estimated  useful  life of such  assets of seven
years.

6.       Recently Issued Accounting Standards

The  American  Institute  of  Certified  Public  Accountants  (AICPA) has issued
Statements of Position 97-2 "Software  Revenue  Recognition"  ("SOP 97-2") which
was effective  for the  Company's  quarter ended March 31, 1998 and Statement of
Position 98-4  "Deferral of the Effective Date of a Provision of SOP 97-2" ("SOP
98-4")  which  was  effective  as of  March  31,  1998.  The  Company's  revenue
recognition policies were largely unaffected by SOP 97-2 and SOP 98-4 and are in
accordance with their requirements.

Statement of Position 98-1 "Accounting for Costs of Computer Software  Developed
or Obtained  for  Internal  Use" ("SOP  98-1") has also been issued and provides
guidance on capitalization of the costs incurred for computer software developed
or obtained for internal  use. The Company has adopted SOP 98-1 as of January 1,
1998.

Statement of Position 98-5 "Reporting on the Costs of Start-Up Activities" ("SOP
98-5") has also been issued and will be effective for the Company's December 31,
1999 year end.  The  Company  does not  expect  any  significant  impact of this
pronouncement on its consolidated financial statements.

The  Financial  Accounting  Standards  Board  (FASB)  has  issued  Statement  of
Financial  Accounting  Standards  No.  131  "Disclosures  about  Segments  of an
Enterprise  and  Related  Information"  which  is  effective  for the  Company's
December  31, 1998 year end. No  additional  disclosure  is required for interim
financial statements until the Company's quarter ending March 31, 1999.

<PAGE>

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

Overview

Saville is a leading provider of customer care and billing solutions for service
providers in the  telecommunications  market.  The Company  offers an innovative
convergent  billing  product  called  Saville  CBP(R)  ("CBP") that  operates on
DB2/400 and Oracle/UNIX platforms for the telecommunications and energy markets.
The Oracle/UNIX-based  platform of this software was introduced to the market in
December  1997.  In  addition,  Saville  offers  its  customers  a full range of
professional   services.  The  Company  assists  a  customer  in  analyzing  the
customer's  requirements  and then designs,  develops and  implements a customer
care and billing  solution.  The customer can either  license the solution  from
Saville or the solution can be provided by a Company  operated  service  bureau.
Saville has also introduced facilities management services.  This service allows
customers  to contract  with Saville to manage the  operation of the  customized
billing software on customer owned hardware.  Saville also assists its customers
on an ongoing basis by addressing  their changing  business needs through future
enhancements and developments to their customer care and billing solutions.

The  following  information  should be read in  conjunction  with the  Unaudited
Consolidated  Financial  Statements and Notes thereto included in Item 1 of this
Quarterly  Report and the Audited  Consolidated  Financial  Statements and Notes
thereto and  Management's  Discussion  and Analysis of Financial  Condition  and
Results of Operations  contained in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997.


Results of Operations

Revenue

Total revenue  increased 68.3% from $25.5 million in the three months ended June
30, 1997 to $42.9 million in the three months ended June 30, 1998, and increased
77.4% from $45.6  million in the six months ended June 30, 1997 to $80.9 million
in the six months  ended June 30, 1998 due to overall  increases in services and
license fees as described below.

Services  revenue  increased  54.9% from $20.1 million in the three months ended
June 30,  1997 to $31.1  million in the three  months  ended  June 30,  1998 and
increased  66.8% from $36.6  million  in the six months  ended June 30,  1997 to
$61.1  million  in the six months  ended June 30,  1998.  The  increase  in both
periods  was   attributable   primarily  to  an  increase  in   consulting   and
implementation  services  provided  to new  customers  as well as  increases  in
projects  for  existing  customers  and, to a lesser  extent,  the  inclusion of
revenue from the operations since the acquisition of the assets of BHA and BHAC
in April 1998. As a result of the significant merger and consolidation  activity
currently  being  experienced  by  the  telecommunications  industry,  including
certain  customers  of the  Company,  the  Company  expects  revenue to maintain
current levels in the near term.

License  fees  revenue  increased  118.3% from $5.4  million in the three months
ended June 30, 1997 to $11.8  million in the three  months  ended June 30, 1998,
and increased  120.4% from $9.0 million in the six months ended June 30, 1997 to
$19.9  million in the six months ended June 30,  1998.  The increase in both the
quarterly  and  six  month  results  was due  primarily  to the  recognition  of
additional  license fees for the Company's  CBP product  contracted in both 1997
and 1998 and, to a lesser  extent,  fees  recognized  with the  execution  of an
authorized  reseller agreement.


<PAGE>

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

Cost of Services

Cost of services  increased  70.0% from $9.4  million in the three  months ended
June 30, 1997 to $16.1  million in the three  months  ended June 30,  1998,  and
increased  72.2% from $17.5  million  in the six months  ended June 30,  1997 to
$30.1 million in the six months ended June 30, 1998. As a percentage of services
revenue, cost of services increased from 47.0% and 47.8% in the three months and
six months  ended June 30,  1997 to 51.6% and 49.3%,  respectively,  in the same
periods in 1998.  The overall  increase in cost of services was primarily due to
additional  personnel hired to support the growth of the Company including those
employees hired as a result of the acquisition of the assets of BHA and BHAC, as
well as additional costs incurred to attract and retain qualified personnel. The
increase  in cost  of  services  as a  percentage  of  services  revenue  is due
primarily to the training of current personnel on the UNIX platform,  the hiring
of additional  UNIX-skilled  personnel in  anticipation  of additional  services
related to the Company's UNIX-based CBP product, and to a lesser extent, the use
of more independent contractors to support the Company's services. As the market
demands for skilled employees and contractors increase, the Company expects that
the costs to attract,  retain and train  personnel  will  continue to  increase.
Also,  as the Company  continues  to expand,  it expects  the  overall  costs of
services to increase accordingly.

Cost of License Fees

Cost of license fees  increased  110.9% from  $128,000 in the three months ended
June 30, 1997 to $270,000 in the three months ended June 30, 1998, and increased
154.6% from  $216,000  in the six months  ended June 30, 1997 to $550,000 in the
six  months  ended  June 30,  1998.  This  increase  was due to an  increase  in
commission expense resulting from the increase in the license fees earned by the
Company.

Sales and Marketing

Sales and  marketing  expenses  increased  43.6% from $1.5  million in the three
months  ended June 30, 1997 to $2.2  million in the three  months ended June 30,
1998,  and  increased  50.8% from $2.7  million in the six months ended June 30,
1997 to $4.1 million in the six months ended June 30, 1998.  As a percentage  of
total  revenue,  sales and marketing  expenses  decreased from 6.0% in the three
months and six months  ended June 30, 1997 to 5.1% in the same  periods in 1998.
The overall increase was primarily due to the Company's  continued  expansion of
its sales force globally,  including in North America, Europe, Latin America and
Asia Pacific,  the associated  expansion of its infrastructure and the inclusion
of the sales and marketing  costs in Australia as a result of the acquisition of
the assets of BHA and BHAC. The Company  anticipates  that the  establishment of
new sales offices and the continued  emphasis on its North American and European
marketing  efforts will  increase its sales and  marketing  expenses in absolute
dollars  through the  remainder  of 1998 and that such  expenses  will remain at
similar levels to the first half of 1998 as a percentage of total revenue.

Research and Development

Research  and  development  expenses  increased  135.9% from $2.5 million in the
three  months ended June 30, 1997 to $6.0 million in the three months ended June
30, 1998,  and  increased  146.8% from $4.0 million in the six months ended June
30, 1997 to $9.9 million in the six months ended June 30, 1998.  As a percentage
of total revenue, research and development expenses increased from 9.9% and 8.8%
in the three months and six months ended June 30, 1997,  respectively,  to 13.9%
and 12.2%, respectively,  in the same periods in 1998. Both the overall increase
and  the  increase  as a  percentage  of  total  revenue  was  due to  increased
development  efforts by the  Company on its CBP  products  for both the  DB2/400
platform  and UNIX  platform,  including a scheduled  additional  release of its
UNIX-based  product later this year and the development of acquired  technology,
as well as the use of more independent  contractors to support these development
activities.  The Company  intends to continue to invest  resources to expand and
enhance its product  offerings in the future and therefore expects that research
and  development  expenses  will  remain at similar  levels to the first half of
1998.

General and Administrative

General and  administrative  expenses  increased  58.4% from $4.9 million in the
three  months ended June 30, 1997 to $7.8 million in the three months ended June
30, 1998, and increased 62.4% from $8.8 million in the six months ended June 30,
1997 to $14.3 in the six months  ended June 30, 1998.  As a percentage  of total
revenue,  general and administrative  expenses decreased from 19.3% in the three
months and six months ended June 30, 1997 to 18.1% and 17.7%,  respectively,  in
the same periods in 1998.  The overall  additional  costs were  attributable  to
additional senior and middle management and recruiting and infrastructure  costs
associated  with the growth in the Company's  employee base and the expansion of
the Company's business,  including the acquisition of the assets of BHA and BHAC
in April 1998.

Charge for Purchased In-Process Research and Development

With the assistance of an independent appraiser,  the Company conducted a review
of the interconnect  billing software technology purchased in February 1998 (see
Note 4) and of the in-process research and development purchased with the assets
of BHA and  BHAC  (see  Note  5).  The  Company  determined  that at the time of
acquisition for each of these purchases,  technological feasibility had not been
reached and the  technology  had no  alternative  future use. This resulted in a
one-time charge to the Company's  consolidated results of $17.7 million net of a
deferred tax benefit of $1.1 million. Subsequent to these purchases, the Company
continues  to invest in research  and  development  efforts in order for each of
these to reach technological feasibility.  Any costs incurred have been expensed
to date.

Other Income and Expenses

Other  income and other  expenses  increased  12.9% from  $559,000  in the three
months  ended June 30, 1997 to $631,000 in the three months ended June 30, 1998,
and  increased  48.3% from  $913,000  in the six months  ended June 30,  1997 to
$1,354,000 in the six months ended June 30, 1998.  Increased  interest income on
larger cash and short-term investment balances accounted for the majority of the
increase in other income.

Provision for Income Taxes

The Company  recorded a tax  provision  of $2.0  million and $3.3 million in the
three and six months  ended June 30, 1997  representing  effective  tax rates of
26.6% and 25.0%, respectively. Comparatively, tax provisions of $2.5 million and
$5.4  million  were  recorded  in the three and six months  ended June 30,  1998
before the  deferred  tax benefit of $1.1  million  recognized  on the  one-time
charge for purchased in-process research and development of $18.8 million. These
provisions  for the 1998  periods  represent  effective  tax  rates of 23.0% and
23.2%,  respectively.  The Company's  effective tax rate is largely dependent on
the  proportion of the Company's  income earned in different tax  jurisdictions.
The Company is currently eligible for a 10% tax rate on  "manufacturing"  income
earned in the  Republic  of  Ireland  and a 32% tax rate on  "non-manufacturing"
income,  such as income  earned on the  Company's  Irish cash  investments.  The
Company's  effective  tax rate reflects the tax relief on  manufacturing  income
subject  to this  reduced  rate of tax,  which is below the  statutory  rates of
Ireland,  Canada,  the United States and  Australia.  There can be no assurances
that the  Company  will  continue  to be  eligible  for the reduced tax rate for
manufacturing income in future periods.

Liquidity and Capital Resources

On a  combined  basis,  cash and cash  equivalents  and  short-term  investments
increased $10.7 million from $68.8 million at December 31, 1997 to $79.5 million
at June 30,  1998.  This  increase  was  composed of a decrease in cash and cash
equivalents  of $23.9  million from $55.8  million at December 31, 1997 to $31.9
million at June 30, 1998 that was more than offset by an increase in  short-term
investments  of $34.6  million from $13.0  million at December 31, 1997 to $47.6
million  at  June  30,  1998.  This  overall  increase  in cash  and  short-term
investments  was due primarily to cash  provided by operations  and net proceeds
received from the issuance of Ordinary Shares offset by the purchase of property
and equipment, a software product and the assets of BHA and BHAC.

Operating Activities

During the six months  ended  June 30,  1998,  net cash  provided  by  operating
activities was $11.3 million.  During this period,  the Company received cash of
$5.6 million from deferred  revenue from customers offset by a $15.0 million use
of cash as accounts receivable balances grew in relation to increasing revenue.

Investing Activities

The net cash used in investing  activities  during the six months ended June 30,
1998 was  comprised of $2.9 million to purchase  property  and  equipment,  $2.1
million  to  purchase  other  assets,   $34.6  million  invested  in  short-term
investments  and $19.2  million to purchase the assets of BHA and BHAC (see Note
5) which included the settlement of $3.3 million in related bank debt as well as
approximately  $906,000 in acquisition  related costs and expenses.  The Company
continues to make property and equipment  expenditures  to support the growth of
the Company as locations are expanded  worldwide and expects to continue to make
property and equipment investments to support its business growth.

Financing Activities

During the three months  ended June 30, 1998 net cash  provided  from  financing
activities  was $23.5  million.  This was primarily due to the issue of Ordinary
Shares in relation  to the asset  acquisition  of BHA and BHAC and to  employees
pursuant to exercises of options under the 1995 Share Option Plan.

The Company and its subsidiaries  have available a $15.0 million  multi-currency
operating line of credit from a financial institution that expires on August 31,
1999 and bears  interest at rates  varying from 0.25% to 1% above the base rate.
This base rate  depends on the  currency of the funds drawn of the  facility and
includes the Canadian  U.S.  Dollar Base rate,  the Canadian Bank Prime rate and
LIBOR and DIBOR rates.  Total advances  drawn on this facility  during the three
months  ended June 30, 1998 were  approximately  $15.1  million and were used to
fund, in part,  the  acquisition of the assets of BHA and BHAC (see Note 5). The
entire  amount  borrowed was repaid  during the quarter  ended June 30, 1998, in
part, by the Company  through the issuance of 283,698 of its Ordinary  shares in
relation to the asset acquisition of BHA and BHAC for aggregate consideration of
approximately $14.0 million.

The Company had capital lease obligations in principal amounts of $394,000 as of
June 30, 1998 ($470,000 as of December 31, 1997) and subsequent to such date has
incurred no additional capital lease obligations.  Long-term liabilities include
$2.0 million of minimum royalty  payments due over the next two years as part of
the purchase of a  telecommunications  billing software  product,  of which $1.0
million is due on January 31,  1999 and is  included  in the current  portion of
long-term liabilities.

The Company believes that existing cash balances,  funds generated by operations
and the  availability of the Company's line of credit will be sufficient to meet
its anticipated  liquidity and working capital  requirements for the next twelve
months.

Foreign Currency Exposure

The Company's  international  sales are predominately  invoiced and paid in U.S.
currency  with the  exception of certain  clients who are invoiced  primarily in
Canadian dollars,  Pounds Sterling,  Australian dollars, New Zealand dollars and
Swiss Francs.  The impact of foreign currency  translation has not been material
to the Company's overall operations.

Certain Factors That May Affect Future Results

This Quarterly Report contains forward-looking  statements that involve a number
of  risks  and   uncertainties.   The  Company's   actual   results  may  differ
significantly  from the results  discussed  in the  forward-looking  statements,
including  statements  regarding  the  Company's  expectation  that revenue will
maintain  current  levels in the near term,  the  Company's  plans to expand its
international and North American sales presence, the Company's plans to continue
its research and development  efforts,  the Company's  expectation  that it will
continue to make  property and  equipment  investments  in 1998,  the  Company's
belief that its existing cash balance and funds  generated by operations will be
sufficient to meet its anticipated  liquidity and working  capital  requirements
for the next twelve  months,  the possible  adverse  foreign  currency  exposure
involved with international  expansion and the Company's general expectations of
growth. A number of  uncertainties  exist that could affect the Company's future
operating  results,  including,  without  limitation,  the Company's  ability to
retain existing  customers and attract new customers,  the Company's  ability to
attract and retain  qualified  employees,  the costs associated with significant
increases in number of employees,  the Company's  continuing  ability to develop
products that are responsive to the evolving  needs of its customers,  increased
competition, changes in operating expenses, foreign currency exchange rates, the
Company's  continued  ability  to take  advantage  of  favorable  tax  treatment
currently available to the Company and general economic factors.

Historically,   the   Company  has  been   dependent   on   long-term   customer
relationships.  To date, a substantial  portion of the Company's  total revenues
has  been  derived  from  a  relatively   small  number  of   customers,   which
concentration  can cause the Company's  revenues and earnings to fluctuate  from
quarter to quarter,  based on these  customers'  requirements  and the timing of
their orders.  The Company's future success depends in large part on its ability
to maintain its current  relationships  and develop new  customer  relationships
with successful telecommunications and energy service providers. There can be no
assurance  that the Company will be able to develop and maintain such  long-term
relationships or that the service  providers that are or become customers of the
Company  will be  successful.  In  addition,  the  telecommunications  market is
presently experiencing significant merger,  consolidation and alliance formation
activity  among both  established  and start-up  carriers.  A  consolidation  or
alliance affecting one of the Company's  customers could result in such customer
shifting to another billing  system,  thus decreasing such customer's use of the
Company's  services.  A  significant  decrease in business from any of its major
customers or the failure of the Company to compete effectively for new customers
in the  telecommunications  and energy  markets,  would have a material  adverse
effect on the Company's business, financial condition and results of operations.

The billing and customer  care  industry is intensely  competitive.  The Company
competes  with both  independent  providers of systems and  services  similar to
those offered by the Company and with internal  billing  departments of existing
telecommunications   and   energy   service   providers,   many  of  which  have
substantially  greater  financial,   technical,   sales,   marketing  and  other
resources,  as well as greater name recognition,  than the Company. There can be
no  assurance  that the Company  will be able to compete  successfully  with its
existing competitors or with new competitors.

The market for the Company's  products is characterized  by rapid  technological
change,  frequent new product  introductions,  evolving  industry  standards and
changing customer needs. The Company has recently  introduced its UNIX-based CBP
for Oracle product, with an additional version release of this product scheduled
for later  this year.  In  addition  to the  resources  used for this  scheduled
release,  the Company is currently  devoting  significant  resources to develop,
refine and enhance its  DB2/400-based  CBP product and additional  customer care
and billing  technology  acquired in the past six months.  The Company  believes
that its future success will depend in large part on its ability to maintain and
enhance its current product and service offerings and to continually develop and
introduce  new  products  and  services  that will keep pace with  technological
advances and satisfy evolving customer requirements. If the Company is unable to
develop and  introduce new products and services in a timely  manner,  or if the
Company's  new  products,  developments  and  enhancements  do not  gain  market
acceptance,   the  Company's  business,   financial  condition  and  results  of
operations would be materially adversely affected.

The Company's international business is subject to risks such as fluctuations in
exchange rates,  difficulties or delays in developing and supporting non-English
language versions of the Company's  products,  political and economic conditions
in various jurisdictions, unexpected changes in regulatory requirements, tariffs
and  other  trade  barriers,  difficulties  in  staffing  and  managing  foreign
operations and longer accounts receivable payment cycles. Specifically, the Asia
Pacific region has  experienced a recent  downturn in economic  conditions,  the
continuation  of which could  adversely  affect the Company's  ability to expand
into this region.

Recently,  the Company has expanded  its  operations  rapidly,  which has placed
significant demands on the Company's  administrative,  operational and financial
personnel and systems.  Additional  expansion by the Company may further  strain
the  Company's  management,  financial  and  other  resources.  There  can be no
assurance that the Company's  systems,  procedures,  controls and existing space
will be adequate to support expansion of the Company's operations. The Company's
future  operating  results  will  substantially  depend  on the  ability  of its
officers  and key  employees  to  manage  changing  business  conditions  and to
implement and improve its operational,  financial control and reporting systems.
If the Company is unable to respond to and manage changing business  conditions,
the quality of the Company's  services,  its ability to retain key personnel and
its results of operations could be materially adversely affected.

The Company's  strategy  includes the acquisition of businesses and technologies
that  complement or augment the  Company's  existing  business and products.  On
April 3, 1998, the Company completed its acquisition of substantially all of the
assets of BHA and BHAC.  In  addition,  the Company  purchased  an  interconnect
telecommunications   software   product  from  a  Swedish   company.   Promising
acquisitions  are  difficult  to identify  and complete for a number of reasons,
including competition among prospective buyers and the need to obtain regulatory
approvals,  including  antitrust  approvals.  There can be no assurance that the
Company will be able to complete future acquisitions or that the Company will be
able to successfully integrate any acquired businesses. In order to finance such
acquisitions,  it may be  necessary  for the Company to raise  additional  funds
through public or private financing.  Any equity or debt financing, if available
at all, may be on terms that are not  favorable to the Company,  and in the case
of equity offerings, may result in dilution to the Company's shareholders.

Fluctuations  in  exchange  rates  may have a  material  adverse  effect  on the
Company's  results of operations,  particularly its operating  margins and could
also result in exchange losses.  The impact of future exchange rate fluctuations
on the Company's results of operations cannot be accurately predicted.  To date,
the Company has not sought to hedge the risks  associated  with  fluctuations in
exchange rates, but may undertake such transactions in the future.  There can be
no  assurance  that any hedging  techniques  implemented  by the Company will be
successful  or that the Company's  results of operations  will not be materially
adversely affected by exchange rate fluctuations.

The Company regards its software products as proprietary and relies primarily on
a combination of statutory and common law copyright,  trademark and trade secret
laws,  customer  licensing  agreements,  employee and third-party  nondisclosure
agreements and other methods to protect its proprietary  rights.  These laws and
contractual   provisions  provide  only  limited  protection  of  the  Company's
proprietary rights. Despite the Company's precautions,  it may be possible for a
third party to copy or otherwise obtain and use the Company's technology without
authorization.  Furthermore,  the laws of certain countries in which the Company
sells its  products do not  protect  the  Company's  software  and  intellectual
property  rights to the same  extent,  as do the laws of the United  States.  If
unauthorized  copying or misuse of the  Company's  products  was to occur to any
substantial degree, the Company's business,  results or operations and financial
condition could be materially adversely affected.

The Company has  significant  operations and generates a substantial  portion of
its taxable  income in the  Republic of Ireland,  and,  under an  incentive  tax
program due to terminate in 2010,  is taxed on its  "manufacturing  income" at a
rate that is  substantially  lower than U.S. tax rates.  If the Company could no
longer  qualify  for this  lower tax rate or if the tax laws were  rescinded  or
changed,  the Company's net income could be materially  adversely  affected.  In
addition, if U.S., Canadian, Australian or other foreign tax authorities were to
challenge  successfully  the manner in which  profits are  recognized  among the
Company and its  subsidiaries,  the Company's  effective tax rate could increase
and its cash  flow and  results  of  operations  could be  materially  adversely
affected.

The Company is reviewing  its products and  operations  to ensure that they will
not be adversely  affected by year 2000  software  failures,  which can arise in
time-sensitive  software  applications  that  utilize  a field of two  digits to
define the applicable year. In such applications,  a date using "00" as the year
may be  recognized  as the year 1900  rather than the year 2000.  The  Company's
current software product releases are year 2000 ready, and therefore the Company
does  not  believe  that  it  will  need  to  undertake  material  research  and
development  efforts in this  regard.  The  Company's  review,  correction,  and
upgrade of its internal  systems to ensure year 2000  readiness is ongoing.  The
Company believes that any correction or upgrade  necessary to make the Company's
major internal  systems year 2000 ready will be completed by early 1999 and that
the  cost of such  actions  will  not  have a  material  adverse  effect  on the
Company's  results  of  operations  or  financial  condition.  There  can  be no
assurances  that there will not be a delay in, or  increased  or material  costs
associated with, the  implementation  of any corrections or upgrades or that the
Company  will suffer no material  adverse  effects  from the year 2000  problem,
including  due to the lack of readiness on the part of third party  suppliers of
goods and services to the Company.


<PAGE>

                               SAVILLE SYSTEMS PLC

                           PART II - OTHER INFORMATION


Item 1.  Legal Proceedings

         None

Item 2.  Changes in Securities

         None

Item 3.  Defaults Upon Senior Securities

         None

Item 4.  Submission of Matters to a Vote of Security Holders

         The Company held the 1998 Annual General Meeting of  Shareholders  (the
         "Annual  Meeting)  on  April  23,  1998.  At the  Annual  meeting,  the
         following actions were taken.

         1.   The shareholders  considered the audited accounts of the Company 
              for the year ended December 31, 1997 and the Reports of the
              Directors and the Auditors thereon;

         2.   The shareholders  re-elected John A Blanchard III, Brian E. Boyle,
              Richard A.  Licursi and John W.  Sidgmore as Class II Directors of
              the Company, each to serve for a two year term and re-elected John
              J. Boyle III,  James B. Murray,  Jr. and Bruce A. Saville as Class
              III Directors of the Company, each to serve for a three-year term.
              Holders of 34,427,745 Ordinary Shares voted for Messrs. Blanchard,
              Boyle, Licursi,  Sidgmore, Boyle, Murray and Saville respectively,
              8,900  Ordinary  Shares  against and 124,111  Ordinary  Shares not
              voting;

         3.   The  shareholders  ratified the  reappointment of Ernst & Young as
              the  Company's  independent  auditors  by  a  vote  of  34,530,075
              Ordinary  Shares for,  1,377  Ordinary  Shares  against and 29,304
              Ordinary Shares not voting;

         4.   The  shareholders  re-approved  the adoption of the Company's 1995
              Share Option  Plan,  as amended by a vote of  25,734,361  Ordinary
              Shares for,  8,744,661 Ordinary Shares against and 81,734 Ordinary
              Shares not voting;

         5.   The  shareholders   authorized  the  directors  to  determine  the
              remuneration of the  independent  auditors by a vote of 34,523,913
              Ordinary  Shares for,  6,209  Ordinary  Shares  against and 30,634
              Ordinary Shares not voting, and

         6.   The shareholders authorized the holding of the 1999 Annual General
              Meeting of the  Company in North  America by a vote of  34,527,813
              Ordinary  Shares for,  2,759  Ordinary  Shares  against and 30,184
              Ordinary Shares not voting.


Item 5.  Other Information

         Shareholder Proposals for 1999 Annual General Meeting

         As set  forth in the  Company's  Proxy  Statement  for its 1998  Annual
         General  Meeting  of  Shareholders,   shareholder  proposals  submitted
         pursuant  to Rule 14a-8 under the  Exchange  Act for  inclusion  in the
         Company's  proxy  materials  for its 1999  Annual  General  Meeting  of
         Shareholders must be received by the Company at its principal office in
         Galway, Ireland no later than November 25, 1998.

         Shareholder  proposals  to be  presented  at the  1999  Annual  General
         Meeting of  Shareholders,  other than shareholder  proposals  submitted
         pursuant to Exchange Act Rule 14a-8, must be received in writing by the
         Company no later than February 8, 1999,  unless the 1999 Annual General
         Meeting of  Shareholders  is  scheduled  to take place before March 24,
         1999.  Any such  proposals  should  be  mailed  to the  Company  at its
         principal office in Galway, Ireland


Item 6.  Exhibits and Reports on Form 8-K

         (a)  Exhibits

               27.0   Financial Data Schedule

         (b)   Reports on form 8-K

               The  Company  filed a current  Report on Form 8-K dated  
               April 3,1998.



<PAGE>


                                   SIGNATURES

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

                                              SAVILLE SYSTEMS PLC
                                              (Registrant)


Date:    August 10, 1998                      By:      /s/ Christopher A. Hanson
                                                       Christopher A. Hanson
                                                       Chief Financial Officer
                                                       (Principal Financial and 
                                                       Accounting Officer)