SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 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 0-9728

                           GST EQUIPMENT FUNDING, INC.
--------------------------------------------------------------------------------
             (Exact name of Registrant as Specified in its Charter)

          Delaware                                 91-1785734
--------------------------------------------------------------------------------
(State or Other Jurisdiction               (IRS Employer Identification
 of Incorporation or Organization)                     Number)


        4001 Main Street, Vancouver, WA                            98663
--------------------------------------------------------------------------------
(Address of Principal Executive Offices)                         (Zip Code)

Registrant's Telephone Number, Including Area Code: (360) 906-7100

                                       N/A
--------------------------------------------------------------------------------
              (Former Name, Former Address and Former Fiscal Year,
                         if Changed Since Last Report)

            THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL
                 INSTRUCTION H(1)(A) AND (B) OF FORM 10-Q AND IS
                    THEREFORE FILING THIS FORM 10-Q WITH THE
                 REDUCED DISCLOSURE FORMAT CONTEMPLATED THEREBY.

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

         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock, as of the latest

<PAGE>
practicable date: At May 11, 1998, there were outstanding 100 shares of common
stock, $.01 par value per share, of the Registrant.

                                       -1-

<PAGE>
                           GST EQUIPMENT FUNDING, INC.

                                      INDEX

                                                                         PAGE(S)

                          PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS:

        Balance Sheet - March 31, 1998 (unaudited)
        and December 31, 1997                                                 3

        Statements of Operations - Three Months
        Ended March 31, 1998 and period from March 5, 1997 (date of
        inception) to March 31, 1997 (unaudited)                              4

        Statements of Cash Flows - Three Months
        Ended March 31, 1998 and period from March 5, 1997 (date of
        inception) to March 31, 1997 (unaudited)                              5

        Notes to Financial Statements (unaudited)                             6


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        CONDITION AND RESULTS OF OPERATIONS (REDUCED DISCLOSURE
        NARRATIVE)                                                             7

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
        Not Required

                           PART II: OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                       8


SIGNATURES                                                                     9

                                      -2-
<PAGE>
                           GST EQUIPMENT FUNDING, INC.
                                 BALANCE SHEETS
                MARCH 31, 1998 (UNAUDITED) AND DECEMBER 31, 1997
                                 (IN THOUSANDS)



                                           March 31, 1998  December 31, 1997 (1)
                                           --------------  ---------------------

ASSETS
     Current assets:
       Cash                                   $     916          $     373
       Restricted cash and investments           31,109             30,656
                                              ---------          ---------
            Total current assets                 32,025             31,029
                                                             
     Restricted investments                     103,013            112,719
     Notes receivable from parent               120,443            109,164
     Interest receivable from parent              7,042              2,670
     Deferred financing costs, net                8,918              8,994
                                              ---------          ---------
                                                             
                                              $ 271,441          $ 264,576
                                              =========          =========
                                                             
LIABILITIES AND SHAREHOLDER'S DEFICIT                        
     Current liabilities:                                    
       Accrued interest payable                  14,630              5,852
       Other payable to parent                    1,968              1,260
                                              ---------          ---------
                                                             
            Total current liabilities            16,598              7,112
                                              ---------          ---------
                                                             
     Long term debt                             265,000            265,000
                                                             
     Shareholder's deficit:                                  
       Common stock                                --                 --
       Additional paid-in capital                 1,000              1,000
       Deficit                                  (11,157)            (8,536)
                                              ---------          ---------
                                                             
            Total shareholder's deficit         (10,157)            (7,536)
                                              ---------          ---------
                                                             
                                              $ 271,441          $ 264,576
                                              =========          =========
                                                            
(1)    The information in this column was derived from GST Equipment Funding's
       audited financial statements as of December 31, 1997.

See accompanying notes to financial statements.

                                      -3-
<PAGE>
                           GST EQUIPMENT FUNDING, INC.
                            STATEMENTS OF OPERATIONS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

                                                            Period from
                                                           March 5, 1997
                                        Three Months         (date of
                                       Ended March 31,     inception) to
                                           1998            March 31, 1997
                                       ---------------     -------------

Revenue:
        Interest income                  $ 6,413                $--
                                                          
Operating costs and expenses:                             
        Interest expense                   9,034                 --
                                         -------                ---
                                                          
Loss before income taxes                  (2,621)                --
                                                          
        Income taxes                        --                   --
                                         -------                ---
                                                          
Net loss                                 $(2,621)               $--
                                         =======                ===

See accompanying notes to financial statements.



                                      -4-
<PAGE>
                           GST EQUIPMENT FUNDING, INC.
                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                                          Period from
                                                                                                         March 5, 1997
                                                                                      Three Months         (date of
                                                                                     Ended March 31,     inception) to
OPERATIONS:                                                                               1998           March 31, 1997
                                                                                     ---------------     -------------
<S>                                                                                   <C>                   <C>   
Net loss                                                                              $ (2,621)             $   --
Items not involving cash:
  Amortization of deferred financing costs                                                 256                  --
Changes in non-cash operating working capital:
  Interest receivable from parent                                                       (4,372)                 --
  Accrued interest payable                                                               8,778                  --
  Other payable to parent                                                                  708                  --
                                                                                      --------              --------

Net cash used in operations                                                              2,749                  --

INVESTING:
 Change in investments restricted for fixed asset purchases                              8,011                  --
  Notes receivable from parent                                                         (11,279)                 --
                                                                                      --------              --------

Net cash used in investing activities                                                   (3,268)                 --

FINANCING:
  Equity investment by parent                                                             --                       1
  Change in investments restricted to finance interest payments                          1,242                  --
  Deferred debt issuance costs                                                            (180)                 --
                                                                                      --------              --------

Cash provided by financing activities                                                    1,062                  --
                                                                                      --------              --------

Net increase (decrease) in cash and cash equivalents                                       543                     1
Cash and cash equivalents at beginning of period                                           373                  --
                                                                                      --------              --------

Cash and cash equivalents at end of period                                            $    916              $      1
                                                                                      ========              ========

</TABLE>
See accompanying notes to financial statements.

                                      -5-

<PAGE>
                           GST EQUIPMENT FUNDING, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.     BASIS OF PRESENTATION

       The  accompanying  financial  statements of GST Equipment  Funding,  Inc.
("GST  Funding")  have been  prepared  in  conformity  with  generally  accepted
accounting  principles.  However,  certain  information or footnote  disclosures
normally included in financial  statements prepared in accordance with generally
accepted accounting principles have been condensed, or omitted,  pursuant to the
rules and regulations of the Securities and Exchange Commission.  In the opinion
of management,  the statements include all adjustments necessary (which are of a
normal and  recurring  nature) for the fair  presentation  of the results of the
interim periods  presented.  The results of operations for the periods presented
are not necessarily indicative of the results to be expected for the full fiscal
year or for subsequent  periods.  These financial  statements  should be read in
conjunction with the GST Funding's audited consolidated financial statements for
the three months  ended  December  31,  1997,  as included in the GST  Funding's
Transition  Report on Form  10-K for the three  month  transition  period  ended
December 31, 1997.

2.     NET INCOME (LOSS) PER SHARE AND SHAREHOLDER'S EQUITY

       GST  Funding  does not have any equity  instruments  that are  considered
common stock equivalents,  and, as weighted average common shares total only 100
for the  periods  presented,  all of which  are owned by GST USA,  Inc.,  income
(loss) per share data is  meaningless  and is not presented in the  accompanying
consolidated condensed financial statements.



                                      -6-
<PAGE>
ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS 
            (REDUCED DISCLOSURE NARRATIVE).

OVERVIEW

            GST Equipment  Funding,  Inc. ("GST Funding") was formed on March 5,
1997 for the purpose of issuing its 13-1/4%  Senior  Secured Notes due 2007 (the
"Secured  Notes")  in a  private  placement  in May  1997  (the  "Secured  Notes
Offering")  and to finance the  purchase of  telecommunications  equipment.  GST
Funding acts as purchasing  agent for GST USA, Inc. ("GST USA") and sells to GST
USA the  equipment  it  purchases  with  the  proceeds  from the  Secured  Notes
Offering. GST Funding has only a limited operating history.

            As of March 31, 1998, GST Funding has purchased approximately $115.7
million of equipment and holds restricted  investments of  approximately  $134.1
million restricted for the acquisition of equipment and the payment of interest.
All of such  equipment  has been sold to GST USA in  exchange  for  intercompany
notes. Ultimately,  such equipment is leased by GST USA to the various operating
subsidiaries of GST Telecommunications, Inc. ("GST").

OPERATIONS

            The  operations  of  GST  Funding  are  limited  to  (i)  purchasing
equipment,  (ii) selling equipment,  (iii) receiving payments under intercompany
notes,  (iv) making payments of interest and principal on the Secured Notes, and
(v)  fulfilling  its  obligations  under the  indenture  relating to the Secured
Notes,  the pledge  agreement  relating to the security  interest in the Secured
Notes and the registration  rights agreement  relating to the Secured Notes. GST
Funding satisfied its obligations  under such  registration  rights agreement in
November 1997, upon the consummation of an exchange offer for the Secured Notes.

LIQUIDITY AND CAPITAL RESOURCES

            On May 13, 1997, GST Funding  completed the Secured Notes  Offering,
consisting  of $265.0  million in Secured  Notes.  Of the $255.8  million of net
proceeds  from  the  issuance  of  the  Secured  Notes,  as of  March  31,  1998
approximately $93.8 million had been used to purchase securities pledged to fund
the first six interest  payments on the Secured Notes (the first such payment of
$16.4  million  having  been made in  November  1997) and  approximately  $115.7
million had been used to purchase telecommunications equipment ($41.5 million of
which was used to refinance intercompany indebtedness).  The indenture governing
the Secured Notes includes restrictive covenants which, among other items, limit
or restrict additional  indebtedness incurred by GST Funding and GST, investment
in certain subsidiaries and the payment of dividends.

                                      -7-
<PAGE>
                           PART II: OTHER INFORMATION

ITEM 6.       EXHIBITS AND REPORTS ON FORM 8-K

         (a)  Exhibits
              Exhibit 27                             Financial Data Schedule

         (b)  Reports on Form 8-K
                  None

                                       -8-
<PAGE>
                               S I G N A T U R E S


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





Date: May 14, 1998                      GST EQUIPMENT FUNDING, INC.
                                        (Registrant)


                                        /s/ Daniel L. Trampush
                                        ----------------------
                                        Daniel L. Trampush,
                                        (Vice President and Chief
                                        Financial Officer)


                                       -9-