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 September 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
October 26, 1998 was 38,731,973.


<PAGE>



                               SAVILLE SYSTEMS PLC

                                FORM 10-Q REPORT

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998

                                TABLE OF CONTENTS

                                                               
                         PART I - FINANCIAL INFORMATION                    PAGE

Item 1.  Consolidated Financial Statements

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

         Consolidated Statements of Income for the three months 
         and for the nine months ended September 30, 1998 and 1997 
         (unaudited)                                                         4

         Consolidated Statements of Cash Flows for the nine months ended 
         September 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                                        9-16


                           PART II - OTHER INFORMATION



Item 1.  Legal Proceedings                                                  17

Item 2.  Changes in Securities                                              17

Item 3.  Defaults Upon Senior Securities                                    17

Item 4.  Submission of Matters to a Vote of Security Holders                17

Item 5.  Other Information                                                  17

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>

                                                           Sept. 30    Dec. 31
                                                             1998        1997

                                                          (unaudited)
------------------------------------------------------------------- ----------
<S>                                                      <C>        <C>    
ASSETS
Current
Cash and cash equivalents                                 $ 37,240   $ 55,785
Short-term investments                                      44,604     13,015
Accounts receivable, less allowance for 
doubtful accounts of  $1,740 and $1,687, respectively       37,827     22,373
Prepaid expenses and other assets                            5,120      3,581
------------------------------------------------------------------- ----------
Total current assets                                       124,791     94,754
Property and equipment, net                                 12,390     10,621
Other assets, net                                            6,266        -
------------------------------------------------------------------- ----------
Total assets                                             $ 143,447  $ 105,375
------------------------------------------------------------------- ----------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable                                             3,256      5,336
Accrued compensation and related benefits                    6,263      5,248
Accrued expenses and other liabilities                       6,555      3,084
Income taxes payable                                         7,302      7,167
Deferred revenue                                             4,358      3,402
Current portion of long-term liabilities                     1,114        134
------------------------------------------------------------------- ----------
Total current liabilities                                   28,848     24,371
Long-term liabilities                                        1,213        336
Minority interest                                              244        366
------------------------------------------------------------------- ----------
Total liabilities                                           30,305     25,073
------------------------------------------------------------------- ----------

Shareholders' equity
Ordinary Shares, nominal value $0.0025 per share
  Authorized:  75,000,000
  Issued and outstanding:  38,731,115 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                                  62,680     37,734
Retained earnings                                           51,554     42,750
Accumulated other comprehensive income                     (1,237)      (324)
------------------------------------------------------------------- ----------
Total shareholders' equity                                 113,142     80,302
------------------------------------------------------------------- ----------
Total liabilities and shareholders' equity               $ 143,447  $ 105,375
------------------------------------------------------------------- ----------
</TABLE>

See accompanying notes



<PAGE>


Saville Systems PLC


CONSOLIDATED STATEMENTS OF INCOME

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

<TABLE>

                                                    Three months ended              Nine months ended
                                                 Sept. 30        Sept. 30       Sept. 30         Sept. 30
                                                    1998           1997            1998             1997
------------------------------------------ --------------- --------------- -------------- ----------------
<S>                                          <C>            <C>             <C>           <C>
REVENUE
Services                                         $ 31,332        $ 22,575        $92,385         $ 59,178
License fees                                       11,245           6,006         31,125           15,026
------------------------------------------ --------------- --------------- -------------- ----------------
Total revenue                                      42,577          28,581        123,510           74,204
------------------------------------------ --------------- --------------- -------------- ----------------

EXPENSES
Cost of services                                   15,505          10,852         45,616           28,337
Cost of license fees                                  372             165            922              381
Sales and marketing                                 2,194           1,600          6,302            4,324
Research and development                            5,362           2,805         15,261            6,816
General and administrative                          8,851           5,325         23,174           14,147
Charge for purchased in-process research
and development                                       -                -          18,808               -
------------------------------------------ --------------- --------------- -------------- ----------------
Total expenses                                     32,284          20,747        110,083           54,005
------------------------------------------ --------------- --------------- -------------- ----------------
Income from operations                             10,293           7,834         13,427           20,199
Other income, net                                     837             596          2,191            1,509
------------------------------------------ --------------- --------------- -------------- ----------------
Income before income taxes                         11,130           8,430         15,618           21,708
Provision for income taxes                          2,560           2,096          6,814            5,416
------------------------------------------ --------------- --------------- -------------- ----------------
Income before minority interest                     8,570           6,334          8,804           16,292
Minority interest share in subsidiaries'
net income                                             -               50             -               165
------------------------------------------ --------------- --------------- -------------- ----------------
Net income                                        $ 8,570          $6,284        $ 8,804         $ 16,127
------------------------------------------ --------------- --------------- -------------- ----------------
Basic earnings per share                           $ 0.22          $ 0.17         $ 0.23           $ 0.44
Diluted earnings per share                         $ 0.21          $ 0.16         $ 0.22           $ 0.41
------------------------------------------ --------------- --------------- -------------- ----------------
(in thousands)
Ordinary shares                                    38,679          36,965         38,352           36,541
Ordinary shares assuming dilution                  40,271          39,597         40,795           39,093
------------------------------------------ --------------- --------------- -------------- ----------------
</TABLE>

See accompanying notes



<PAGE>


Saville Systems PLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)
(in thousands of U.S. dollars)

<TABLE>
                                                            Nine months ended
                                                          Sept. 30    Sept. 30
                                                            1998         1997
-------------------------------------------------------------------- ----------
<S>                                                    <C>            <C>    
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                   $8,804    $16,127
Adjustments to reconcile net income to net cash
provided by operating activities:
 Depreciation and amortization                                2,602        975
 Allowance for doubtful accounts                              2,762      1,010
 Minority interest in net income                                  -        165
 (Gain) loss on sale of property and equipment                (122)         54
 Compensation related to stock transactions                     155         60
 Deferred taxes                                             (1,477)          -
 Charge for purchased in-process research 
   and development                                           18,808          -                                 
Changes in operating assets and liabilities:
  Accounts receivable                                      (18,218)   (13,777)
  Prepaid expenses and other assets                         (1,350)    (1,592)
  Accounts payable                                          (2,374)      2,372
  Accrued compensation and related benefits                   1,015      2,422
  Accrued expenses and other liabilities                      2,828      1,939
  Income taxes payable                                          135      2,248
  Deferred revenue                                              956      4,022
-------------------------------------------------------------------- ----------
Net cash provided by operating activities                    14,524     16,025
-------------------------------------------------------------------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net purchase of property and equipment                      (3,725)    (3,450)
Purchase of other assets                                    (2,089)          -
Net purchase of short-term investments                     (31,589)   (21,004)
Purchase of business assets                                (20,436)          -
-------------------------------------------------------------------- ----------
Net cash used in investing activities                      (57,839)   (24,454)
-------------------------------------------------------------------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term liabilities                             (97)          -
Advances on operating line of credit                         15,100          - 
Repayments on operating line of credit                     (15,100)          -
Proceeds from share issuances                                24,505      8,059
Share issue costs                                             (418)      (140)
Tax benefit on employee stock transactions                      653        645
-------------------------------------------------------------------- ----------
Net cash provided by financing activities                    24,643      8,564
-------------------------------------------------------------------- ----------
Effect of exchange rate changes on cash                         127        (6)
-------------------------------------------------------------------- ----------
Net increase (decrease) in cash and cash equivalents       (18,545)        129
Cash and cash equivalents, beginning of period               55,785     34,395
-------------------------------------------------------------------- ----------
Cash and cash equivalents, end of period                    $37,240    $34,524
-------------------------------------------------------------------- ----------
Short-term investments                                       44,604     22,004
-------------------------------------------------------------------- ----------
Cash and short-term investments                             $81,844    $56,528
-------------------------------------------------------------------- ----------
Supplementary disclosure of cash flow information:
  Cash paid for income taxes                                  7,155      2,600

</TABLE>

See accompanying notes


<PAGE>


Saville Systems PLC

Notes to Consolidated Financial Statements as of September 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  September  30, 1998 and 1997 and the
financial position as of September 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 nine month  periods  ended  September  30, 1998 the Company
issued  78,956  Ordinary  Shares for  approximately  $1.1  million  and  942,821
Ordinary Shares for approximately $10.5 million,  respectively,  to officers and
employees  pursuant to option exercises and stock issuances under the 1995 Share
Option Plan  ("1995  Plan") and 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 4
"Acquisition and Other Assets".

The following table  summarizes the activity in Ordinary Share options under the
1995 and 1996 Plans from December 31, 1997 to September 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                  (2,657,201)       2,657,201         36.05
Options exercised                      -           (942,821)         11.09
Options cancelled                    179,290       (179,290)         34.20

Balance at September 30, 1998      2,971,497       5,814,525        $23.64
----------------------------------------------- --------------- ---------------
</TABLE>


<PAGE>


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

<TABLE>

------------------- ----------------- ----------------- ----------------- ----------------- -----------------
Total Outstanding       Range of          Weighted          Weighted       Exercisable at       Weighted
                    Exercise Prices       Average           Average        Sept. 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              1.3               235,528          $ 1.20
         1,094,784      4.33-5.00           4.49              6.9             1,021,449            4.45
            48,590     7.50-13.69           9.54              7.8                29,256            8.62
         1,859,381    14.06-21.50          18.08              8.5               650,634           18.75
           296,500    21.75-32.56          30.28              9.2                17,332           28.71
         2,143,442    33.50-50.25          38.24              9.3                18,666           33.75
           136,300    50.75-55.00          53.05              9.5                  -               -
------------------- ----------------- ----------------- ----------------- ----------------- -----------------
         5,814,525    $1.20-55.00         $23.64            8.2               1,972,865          $ 9.33
------------------- ----------------- ----------------- ----------------- ----------------- -----------------
</TABLE>

3.       Comprehensive 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      Nine months ended
                               Sept. 30     Sept. 30   Sept. 30     Sept. 30
                                 1998         1997       1998         1997
-------------------------------------------------------------------------------
<S>                           <C>          <C>         <C>         <C> 
Net income                      $8,570       $6,284     $8,804      $16,127
Foreign currency translation
adjustment, net of NIL tax        (421)          (4)      (913)         (30)
                              -------------------------------------------------

Comprehensive income            $8,149       $6,280     $7,891      $16,097
                              =================================================

</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.   Acquisition and Other Assets


During the  quarter  ended  September  30,  1998,  the  Company did not have any
acquisition activity. However, in April 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 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.

Also, during 1998, the Company purchased telecommunications interconnect billing
software  technology  for  resale  from a  Swedish  company  for a total of $4.1
million, including acquisition costs.


During the three months ended June 30, 1998 the Company,  with the assistance of
an  independent  appraiser,  completed  its review of all  technology  acquired,
including certain in-process research and development and determined that at the
time of the purchase,  technological  feasibility had not been reached and there
was no  alternative  future use for these  technologies.  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 its consolidated
results of $18.8 million for in-process research and development.


5.       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.

Statement of Financial  Accounting  Standards No. 133 "Accounting for Derivative
Instruments  and Hedging  Activities" has also been issued and will be effective
for the Company's fiscal quarter ending September 30, 1999. The Company does not
expect  any  significant  impact  of  this  pronouncement  on  its  consolidated
financial statements.


<PAGE>


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

Overview


Saville Systems PLC (the  "Company") is a leading  provider of customer care and
billing solutions for service providers in the  telecommunications  market.  The
Company offers an innovative  convergent billing platform 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,  with the second version
of this software product released in September 1998. 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
CBP from Saville or a customer care and billing solution,  including CBP, can be
provided by a Company  operated  service  bureau.  Saville  has also  introduced
facilities management services,  which allows customers to contract with Saville
to manage the operation of the  customized  billing  software on customer  owned
hardware.  Additionally,  Saville is developing  relationships  with  authorized
integrators  to  provide  implementation  services  to  purchasers  of  the  CBP
products.  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  49.0% from $28.6  million in the three  months  ended
September  30, 1997 to $42.6  million in the three  months ended  September  30,
1998, and increased  66.4% from $74.2 million in the nine months ended September
30, 1997 to $123.5  million in the nine months ended  September  30, 1998 due to
overall  increases in services and license  fees as described  below.  While the
Company   expects  the  current   growth  rate  to  be  tempered  by   continued
consolidation  in the  U.S.  telecommunications  marketplace,  weakening  credit
markets  and a slowdown in global  growth,  the Company  believes  that  revenue
growth will be strong in 1999.

Services  revenue  increased  38.8% from $22.6 million in the three months ended
September 30, 1997 to $31.3 million in the three months ended September 30, 1998
and increased  56.1% from $59.2  million in the nine months ended  September 30,
1997 to $92.4 million in the nine months ended  September 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 continued service
to existing customers. To a lesser extent,  increased service bureau revenue due
to new  initiatives,  as well as the inclusion of revenue from the operations of
the Company's  Australian  subsidiary since the acquisition of the assets of BHA
and BHAC in April 1998, contributed to the increase.

License fees revenue increased 87.2% from $6.0 million in the three months ended
September  30, 1997 to $11.2  million in the three  months ended  September  30,
1998, and increased 107.1% from $15.0 million in the nine months ended September
30, 1997 to $31.1  million in the nine months  ended  September  30,  1998.  The
increase in both the  quarterly  and nine month results was due primarily to the
recognition of license fee revenue on customization  projects commencing in late
1997 and in 1998.


Cost of Services

Cost of services  increased  42.9% from $10.9  million in the three months ended
September  30, 1997 to $15.5  million in the three  months ended  September  30,
1998, and increased  61.0% from $28.3 million in the nine months ended September
30, 1997 to $45.6  million in the nine months ended  September  30,  1998.  As a
percentage of services revenue,  cost of services increased from 48.1% and 47.9%
in the three months and nine months ended September 30, 1997 to 49.5% and 49.4%,
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,  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, higher cost of services as a percentage of service revenue at the
Company's Australian  subsidiary as a result of the acquisition of BHA and BHAC.
Additionally,  computer  system costs incurred to support the Company's  growing
development and service bureau base  contributed to the overall  increase in the
cost of 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  125.5% from  $165,000 in the three months ended
September 30, 1997 to $372,000 in the three months ended September 30, 1998, and
increased  142.0% from  $381,000 in the nine months ended  September 30, 1997 to
$922,000 in the nine months ended  September 30, 1998.  This increase was due to
an increase in commission  expense resulting  primarily from the increase in the
license fees earned by the Company,  and to a lesser extent, from an increase in
license fees eligible for commissions in 1998 compared to 1997.


Sales and Marketing

Sales and  marketing  expenses  increased  37.1% from $1.6  million in the three
months  ended  September  30,  1997 to $2.2  million in the three  months  ended
September  30, 1998,  and  increased  45.7% from $4.3 million in the nine months
ended  September 30, 1997 to $6.3 million in the nine months ended September 30,
1998. As a percentage of total revenue,  sales and marketing  expenses decreased
from 5.6% and 5.8% in the three months and nine months ended  September 30, 1997
to 5.2% and 5.1%, respectively,  in the same periods in 1998. The overall dollar
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 to a lesser extent,
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
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 but expects any such expenses to remain at similar levels as a
percentage of total revenue.


Research and Development

Research and development expenses increased 91.2% from $2.8 million in the three
months  ended  September  30,  1997 to $5.4  million in the three  months  ended
September 30, 1998,  and  increased  123.9% from $6.8 million in the nine months
ended September 30, 1997 to $15.3 million in the nine months ended September 30,
1998.  As a  percentage  of total  revenue,  research and  development  expenses
increased from 9.8% and 9.2% in the three months and nine months ended September
30, 1997, respectively, to 12.6% and 12.4%, respectively, in the same periods in
1998.  Both the  overall  increase  and the  increase as a  percentage  of total
revenue was due to  development  efforts by the Company on its CBP  products for
both the DB2/400 platform and UNIX platform, including the release of the second
version of its UNIX-based  product and a scheduled  release of its DB2/400 based
product  later this year.  To a lesser  extent,  the  development  of technology
acquired in 1998 contributed to the overall increase in research and development
expenses.  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 throughout the remainder
of 1998.


General and Administrative

General and  administrative  expenses  increased  66.2% from $5.3 million in the
three months ended  September 30, 1997 to $8.9 million in the three months ended
September 30, 1998,  and  increased  63.8% from $14.1 million in the nine months
ended  September 30, 1997 to $23.2 in the nine months ended  September 30, 1998.
As a percentage of total revenue,  general and administrative expenses increased
from 18.6% in the three  months  ended  September  30, 1997 to 20.8% in the same
period in 1998 but decreased  from 19.1% in the nine months ended  September 30,
1997 to 18.8% in the same  period in 1998.  The  overall  increase  in costs was
attributable, in part, 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.  Additional general and administrative
expenses in 1998 were  attributable  to  increased  provisions  to maintain  the
Company's  allowance  for doubtful  accounts  based on current and future market
conditions and recent write-offs of certain customer balances.


Charge for Purchased In-Process Research and Development

During the three months ended June 30, 1998 the Company,  with the assistance of
an  independent  appraiser,  conducted  a  review  of  in-process  research  and
development  purchased  with the assets of BHA and BHAC and of the  interconnect
billing  software  technology.  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  since  the
acquisition date have been expensed.


Other Income, Net

Other  income,  net  increased  40.4% from  $596,000 in the three  months  ended
September 30, 1997 to $837,000 in the three months ended September 30, 1998, and
increased 45.2% from $1.5 million in the nine months ended September 30, 1997 to
$2.2 million in the nine months ended  September  30, 1998.  Increased  interest
income on larger  cash and  short-term  investment  balances  accounted  for the
majority of the increase in other income, net.


Provision for Income Taxes

The Company  recorded a tax  provision  of $2.1  million and $5.4 million in the
three and nine months ended September 30, 1997 representing  effective tax rates
of 24.9% for both  periods.  Comparatively,  tax  provisions of $2.6 million and
$7.9 million were recorded in the three and nine months ended September 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, the United Kingdom 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 $13.0 million from $68.8 million at December 31, 1997 to $81.8 million
at  September  30,  1998.  During the first nine  months of 1998,  cash and cash
equivalents  decreased  $18.5  million to $37.2  million at September  30, 1998,
while  short-term  investments  increased  $31.6  million  to $44.6  million  at
September 30, 1998.

During the nine months ended  September 30, 1998, net cash provided by operating
activities  was $14.5 million.  Net income for the nine month period,  excluding
the non-cash effect of the one-time charge for purchased in-process research and
development,  offset primarily by an increase in accounts receivable,  comprised
the majority of cash provided by operations.

The cash used in investing activities during the nine months ended September 30,
1998 was  comprised of $3.7 million to purchase  property  and  equipment,  $2.1
million  to  purchase  other  assets,   $31.6  million  invested  in  short-term
investments and $20.4 million to purchase the assets of BHA and BHAC,  including
the  repayment of $3.3 million in related  bank debt,  as well as  approximately
$0.9 million in acquisition related costs and expenses.

During the nine months ended September 30, 1998 net cash provided from financing
activities  was $24.6  million.  This was primarily due to the issue of Ordinary
Shares  relating  to the  asset  acquisition  of BHA and BHAC  and to  employees
pursuant  to  exercises  of options  under the 1995 Share  Option Plan and, to a
lesser extent, to shares issued under the 1996 Employee Share Purchase Plan. The
Company  and its  subsidiaries  have  available a $15.0  million  multi-currency
operating  line of credit  (the "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 the
Line  of  Credit   during  the  nine  months  ended   September  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 4). The entire  amount  borrowed was repaid
during the quarter  ended June 30,  1998 by the  Company,  in part,  through the
issuance  of 283,698  of its  Ordinary  to BHA for  aggregate  consideration  of
approximately $14.0 million.

The Company had capital lease  obligations in principal  amounts of $0.3 million
as of September 30, 1998 and  subsequent to such date has incurred no additional
capital lease  obligations.  Long-term  liabilities  include  approximately $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
approximately  $1.0  million is due on January  31,  1999 and is included in the
current portion of long-term  liabilities.  In addition,  the Company expects to
continue to make property and equipment  expenditures  to support the growth and
worldwide expansion of the Company's business.

The Company believes that existing cash balances,  funds generated by operations
and the  availability  of the  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.


Year 2000 Readiness Disclosure

The Company is currently  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
considers "Year 2000 Ready" to mean that a product, when used in accordance with
its  associated  documentation,  is capable of correctly  processing,  providing
and/or  receiving  date data within and between the twentieth  and  twenty-first
centuries,  provided that all non-Saville products (i.e., hardware, software and
firmware) used with such product properly exchange accurate date data with it.

The Company's  internal systems include both its information  technology  ("IT")
and non-IT  systems.  The Company has  initiated an  assessment  of its material
internal IT systems  including its accounting and software  development  systems
and its non-IT systems  including its security  systems and building  equipment.
The Company  expects to complete  this  assessment  in early 1999. To the extent
that the  Company is not able to test the  technology  provided  by  third-party
vendors,  the Company is seeking assurances from such vendors that their systems
are Year 2000 Ready.  Although  the  assessment  is still  underway,  management
currently  believes  that all  material  systems  will be Year 2000  Ready  when
necessary and that the cost to address the issues is not  material.  The Company
currently does not have a contingency  plan in the event of a particular  system
not being Year 2000 Ready.  Such a plan will be  developed  if it becomes  clear
that the Company is not going to achieve its scheduled objectives.

The Company has designed, tested and continues to test the most current versions
of its  products  to be Year 2000  Ready.  However,  a portion of the  Company's
currently  installed  customer base may require upgrade or other  remediation to
become  Year 2000  Ready.  The  Company is  currently  taking  inventory  of its
existing  customers and will assess on a  case-by-case  basis  whether  testing,
upgrade or modification for Year 2000 Readiness is required. The Company expects
to complete this  assessment in early 1999. The Company's total cost relating to
these activities,  and any modifications  required thereby,  has not been and is
not  expected to be material to the  Company's  financial  position,  results of
operations, or cash flows. Any such expenditures to date have been, and any such
expenditures  in the  future are  expected  to be,  treated  as normal  business
expenses funded out of operating cash flow. The Company  believes that its legal
liability for such  activities  is limited and that any necessary  modifications
will be made on a timely basis. There can be, therefore, no assurance that there
will not be  increased  costs  associated  with the  implementation  of any such
activities or required  modifications  and there can be no assurance  that there
will be  significant  legal  liabilities,  either of which could have a material
adverse affect to the Company's operations and financial position.

Despite  testing  by the  Company  and  current  and  potential  customers,  the
Company's  products and installed base may contain  undetected errors or defects
associated with year 2000 date functions.  Known or unknown errors or defects in
the  Company's IT systems,  non-IT  systems,  products or  installed  base could
result in delay or loss of revenue,  diversion of development resources,  damage
to the Company's  reputation,  or increased  service and warranty costs,  any of
which  could  materially  adversely  affect the  Company's  business,  operating
results,   or  financial   condition.   The  foregoing   assessment   represents
management's   best   estimates  at  the  present   time,   which  could  change
significantly in the future. In addition,  the Company is aware of the potential
for claims against it and other  companies for damages arising from products and
services provided by it and third party suppliers that were not Year 2000 Ready.
Because of the unprecedented nature of such litigation,  it is uncertain whether
or to what extent the Company may be affected by any such claims.


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  expectations  regarding  future
growth in revenues,  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 Company's  quarterly and annual operating results may fluctuate from quarter
to quarter and year to year depending on various  factors  including new product
development  and other  expenses,  introduction  of new products by competitors,
fluctuations in the numbers and types of customer contracts (i.e. service bureau
or license) signed in any given quarter, the hiring of additional staff, pricing
pressures, the effect of acquisitions,  the evolving and unpredictable nature of
the markets in which the  Company's  products  and services are sold and general
economic conditions.

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 and has just released an additional  version of this product.
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 nine 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  perform  or  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.  Additionally,  credit markets for smaller  telecommunications
companies in the U.S. have weakened  recently which could  adversely  affect the
Company's ability to attract and maintain relationships with such companies.

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,  United Kingdom 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.



<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

         None

Item 5.  Other Information

         None


Item 6.  Exhibits and Reports on Form 8-K

         (a)  Exhibits

               27.0   Financial Data Schedule

         (b)   Reports on form 8-K

               None


<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:  October 30, 1998         By:      /s/Christopher A. Hanson        

                                          Christopher A. Hanson
                                          Chief Financial Officer
                                          (Principal Financial and 
                                           Accounting Officer)