Electric Lightwave, Inc.                           Form 10-Q


















                                Quarterly Report Pursuant To Section 13 or 15(d)
                                of The Securities Exchange Act of 1934

                                For The Quarterly Period Ended March 31, 1999


<PAGE>


================================================================================

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q


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

For the quarterly period ended March 31, 1999

                                       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 0-23393


                            ELECTRIC LIGHTWAVE, INC.
             (Exact name of registrant as specified in its charter)

                Delaware                                          93-1035711
    (State or other jurisdiction of                            (I.R.S. Employer
     incorporation or organization)                          Identification No.)


                               4400 NE 77th Avenue
                           Vancouver, Washington 98662
               (Address, zip code of principal executive offices)


        Registrant's telephone number, including area code (360) 816-3000


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  twelve 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 ninety days.
                       Yes   |X|              No   |_|

The number of shares outstanding of the registrant's class of common stock as of
April 26, 1999 were:

                         Common Stock Class A  8,610,614
                         Common Stock Class B 41,165,000


<PAGE>

================================================================================
Electric Lightwave, Inc.
<TABLE>
<CAPTION>

Index
<S>                                                                             <C>
                                                                                Page No.
Part I.      Financial Information                                                
   Item 1.   Financial Statements

     Balance Sheets at March 31, 1999 and December 31, 1998 (unaudited).........  2
     Statements of Operations for the Three Months Ended                        
       March 31, 1999 and 1998 (unaudited)......................................  3
     Condensed Statements of Cash Flows for the Three Months                    
       Ended March 31, 1999 and 1998 (unaudited)................................  4
     Notes to Financial Statements..............................................  5
   Item 2.   Management's Discussion and Analysis of Financial Condition and 
             Results of Operations..............................................  9
   Item 3.   Quantitative and Qualitative Disclosures About Market Risk......... 16
Part II.     Other Information                                                   
   Item 1.   Legal Proceedings.................................................. 17
   Item 2.   Changes in Securities and Use of Proceeds.......................... 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
Signature ...................................................................... 18

</TABLE>



                                       1

<PAGE>


Electric Lightwave, Inc.
PART I.       FINANCIAL INFORMATION
Item 1.       Financial Statements
<TABLE>
<CAPTION>

Balance Sheets

(In thousands)
(Unaudited)
                                                                              March 31,          December 31,
                                                                                1999                1998
                                                                           ---------------   ----------------
Assets
<S>                                                                      <C>               <C>            

Current assets:
   Cash ................................................................ $         7,920   $        13,120
   Trade receivables, net...............................................          17,759            20,320
   Other receivables....................................................           2,038             2,671
   Other current assets.................................................           2,257             1,953
                                                                           ---------------   ----------------
     Total current assets...............................................          29,974            38,064
                                                                           ---------------   ----------------

Property, plant and equipment...........................................         585,533           528,582
Less accumulated depreciation and amortization..........................         (47,749)          (40,912)
                                                                           ---------------   ----------------
   Property, plant and equipment, net...................................         537,784           487,670
                                                                           ---------------   ----------------

Other assets............................................................           6,660             6,575
                                                                           ---------------   ----------------

     Total assets....................................................... $       574,418   $       532,309
                                                                           ===============   ================

Liabilities And Equity

Current liabilities:
   Accounts payable and accrued liabilities............................. $        62,853  $         61,760
   Other accrued taxes..................................................           7,233             5,577
   Due to Citizens Utilities Company....................................           5,675             5,254
   Other current liabilities............................................           8,750             5,375
                                                                            --------------    ---------------
     Total current liabilities..........................................          84,511            77,966

Deferred credits and other..............................................           1,688             1,834
Deferred income taxes payable...........................................           2,192             1,760
Capital lease obligation................................................          18,164            18,256
Long-term debt..........................................................         354,000           284,000
                                                                           ---------------   ----------------
     Total liabilities..................................................         460,555           383,816
                                                                           ---------------   ----------------

Shareholders' equity:
   Common stock issued, $.01 par value
     Class A............................................................              86                86
     Class B............................................................             412               412
   Additional paid-in-capital...........................................         322,248           321,926
   Deficit..............................................................        (208,883)         (173,931)
                                                                           ---------------   ----------------
     Total shareholders' equity.........................................         113,863           148,493
                                                                           ---------------   ----------------

     Total liabilities and shareholders' equity......................... $       574,418   $       532,309
                                                                           ===============   ================
</TABLE>


                             See accompanying notes.

                                        2


<PAGE>
<TABLE>
Statements of Operations

<CAPTION>
(In thousands, except per-share amounts)                                  For the three months ended March 31,
                                                                          ------------------------------------
<S>                                                                    <C>                  <C>               
(Unaudited)
                                                                                   1999                 1998
                                                                          ----------------     ---------------

Revenues...............................................................$         38,216     $         20,057
                                                                          ----------------     ---------------
Operating expenses:
   Network access .....................................................          25,224                9,212
   Operations..........................................................           9,034                5,246
   Selling, general and administrative.................................          26,767               15,375
   Depreciation and amortization.......................................           6,994                3,884
                                                                          ----------------     ---------------
     Total operating expenses..........................................          68,019               33,717
                                                                          ----------------     ---------------

   Loss from operations................................................         (29,803)             (13,660)

Interest expense.......................................................           5,101                  911
Interest income .......................................................            (322)                (167)
                                                                          ----------------     ---------------

   Net loss before income taxes and cumulative effect of
     change in accounting principle....................................         (34,582)             (14,404)

Income tax expense (benefit)...........................................             370               (2,449)
                                                                          ----------------     ---------------

   Net loss before cumulative effect of change in accounting
     principle.........................................................         (34,952)             (11,955)

Cumulative effect of change in accounting principle
   (net of $577 income tax benefit)....................................               -                2,817
                                                                          ----------------     ---------------

   Net loss............................................................$        (34,952)    $        (14,772)
                                                                          ================     ===============

Net loss per share before cumulative effect of change in accounting 
     principle:
     Basic.............................................................$           (.70)    $           (.24)
     Diluted...........................................................$           (.70)    $           (.24)

Net loss per common share:
     Basic.............................................................$           (.70)    $           (.30)
     Diluted...........................................................$           (.70)    $           (.30)

Weighted average shares outstanding....................................          49,801               49,685

</TABLE>



                             See accompanying notes.


                                        3

<PAGE>


<TABLE>

Condensed Statements of Cash Flows

<CAPTION>

(In thousands)
(Unaudited)
                                                                        For the three months ended March 31,
                                                                        --------------------------------------
                                                                                   1999                 1998
                                                                           ---------------      --------------
<S>                                                                     <C>                  <C>             
Net cash used for operating activities..................................$       (26,577)     $        (6,541)
                                                                           ---------------      --------------

Cash flows used for investing activities:
   Capital expenditures.................................................        (48,537)             (38,028)
                                                                           ---------------      --------------

Cash flows from financing activities:
   Debt borrowings......................................................         70,000               40,000
   Reduction of capital lease obligations...............................            (86)                (113)
                                                                           ---------------      --------------
     Net cash provided by financing activities..........................         69,914               39,887
                                                                           ---------------      --------------

Net decrease in cash....................................................         (5,200)              (4,682)

Cash at January 1,......................................................         13,120               26,531
                                                                           ---------------      --------------
Cash at March 31,.......................................................$         7,920      $        21,849
                                                                           ===============      ==============




Supplemental cash flow information:
   Cash paid for interest, net of capitalized portion...................$         4,712      $         1,153
   Non-cash increase in capital lease asset and obligation..............              -                2,174


</TABLE>


                             See accompanying notes.

                                       4
<PAGE>


Electric Lightwave, Inc.

Notes to Financial Statements

1.       Summary of Significant Accounting Policies

  a.       Basis of Presentation and Use of Estimates

           We have prepared  these  unaudited  financial  statements of Electric
           Lightwave,  Inc.  ("we",  "us" or "our") in accordance with generally
           accepted   accounting   principles   (GAAP)  for  interim   financial
           information and with the  instructions to Form 10-Q and Article 10 of
           Regulation  S-X.  Accordingly,  we have condensed or omitted  certain
           information and footnote disclosures. In our opinion, these financial
           statements  include all adjustments and recurring  accruals necessary
           to present fairly the results for the interim periods shown.

           Preparing financial statements in conformity with GAAP requires us to
           make  estimates and  assumptions  which affect the amounts of assets,
           liabilities,   revenues  and  expenses  we  have   reported  and  our
           disclosure of contingent  assets and  liabilities  at the date of the
           financial  statements.  The  results of the  interim  periods are not
           necessarily indicative of the results for the full year. We have made
           certain  reclassifications of balances previously reported to conform
           to the  current  financial  statement  presentation.  You should read
           these financial  statements in conjunction with the audited financial
           statements  and the related  notes  included in our Annual  Report on
           Form 10-K for the year ended December 31, 1998.

  b.       Capitalized Interest

           Property,  plant and equipment  includes  interest costs  capitalized
           during the installation and expansion of our communications networks.
           Approximately  $3,218,000  and  $1,788,000  of  interest  costs  were
           capitalized in the first quarter 1999 and 1998, respectively.

  c.       Reciprocal Compensation

           We   have   various   interconnection   agreements   with  U  S  WEST
           Communications,  Inc. (US West), the Incumbent Local Exchange Carrier
           (ILEC) in the states in which we  operate.  These  agreements  govern
           reciprocal  compensation relating to the transport and termination of
           traffic  between US West's  network  and our  network.  We  recognize
           reciprocal compensation revenues as earned, based on the terms of the
           interconnection   agreements.   Total  net  reciprocal   compensation
           revenues that we recognized for the quarters ended March 31, 1999 and
           1998 totaled $6.6 million and $2.7 million,  respectively.  Total net
           trade  accounts  receivable  relating to reciprocal  compensation  at
           March 31, 1999  totaled  $8.4  million.  Most of our  interconnection
           agreements are scheduled to expire in the second half of 1999.

           We have filed complaints with the Public Utility  Commissions  (PUCs)
           in Washington,  Utah, Oregon and Arizona  requesting that US West pay
           us for reciprocal compensation charges relating to the termination of
           calls to  Internet  Service  Providers  (ISPs),  as  required  by the
           interconnection agreements. The Washington and Utah PUCs ruled in our
           favor  and  accordingly,  US West  is now  paying  us for  reciprocal
           compensation  charges  in these  states.  The Oregon PUC ruled in our
           favor in April  1999.  US West is  disputing  the  start  date of the
           Oregon PUC approved reciprocal compensation charges. The complaint in
           Arizona is pending.


                                       5
<PAGE>

           On February 25, 1999, the FCC issued a Declaratory  Ruling and Notice
           of Proposed  Rulemaking that categorized  calls terminated to ISPs as
           "largely"  interstate  in  nature,  which  could  have the  effect of
           precluding these calls from reciprocal compensation charges. However,
           the   ruling   stated   that   ILECs  are   bound  by  the   existing
           interconnection  agreements and the state decisions that have defined
           them.  The FCC gave the states the  authority to  interpret  existing
           interconnection agreements.  

  d.       Net Loss Per Share

           We  follow  the  provisions  of  Statement  of  Financial  Accounting
           Standards   (SFAS)  128,   "Earnings   Per  Share"   which   requires
           presentation  of both basic and diluted  earnings  per share (EPS) on
           the face of the statement of operations.  Basic EPS is computed using
           the weighted average number of common shares  outstanding  during the
           period. The diluted EPS calculation assumes that all stock options or
           contracts  to issue common  stock were  exercised  or converted  into
           common stock at the beginning of the period. We have excluded certain
           common stock equivalents from our diluted EPS calculation  during the
           quarters  ended March 31, 1999 and 1998 because the effect would have
           reduced our net loss per share.


2.       Change in Accounting Principle

           On April 3, 1998, the Accounting Standards Executive Committee of the
           AICPA released  Statement of Position  (SOP) 98-5,  "Reporting on the
           Costs of Start-Up Activities". The SOP requires that at the beginning
           of the fiscal year of adoption, any remaining deferred start-up costs
           be expensed and reported as a change in accounting principle.  Future
           costs of start-up activities should then be expensed as incurred.

           We adopted SOP 98-5 effective January 1, 1998. Previous to January 1,
           1998, we had capitalized certain third party direct costs incurred in
           connection with  negotiating and securing initial  rights-of-way  and
           developing network design for new markets or locations. These amounts
           were being  amortized over five years. We have reported the remaining
           net  book  value  of  these  deferred  amounts  of  $3,394,000  as  a
           cumulative  effect  of  a  change  in  accounting  principle  in  the
           statement of operations for the first quarter 1998, net of income tax
           benefit of $577,000.

3.       Commitments and Contingencies

           Our license agreements for the exclusive use of long-haul  facilities
           connecting our Portland to Seattle,  Portland to Spokane and Portland
           to Eugene long-haul  transport  networks and for the exclusive use of
           the Phoenix network contain annual minimum usage requirements. If our
           traffic  on any of these  networks  falls  below  the  minimums,  the
           licensor will obtain the right to share usage of a specific number of
           fibers with us.

                                       6
<PAGE>

           In March 1999, we entered into a 20-year fiber-swap, in which we will
           exchange  unused  fiber on our  network  for unused  fiber on another
           carrier's  network.  This exchange will provide us with direct access
           from Salt Lake  City to  Denver,  continuing  on to  Dallas.  We will
           provide the other carrier with unused fiber on our long-haul  network
           that connects Spokane and Seattle,  Washington,  Portland and the Bay
           Area in California.  We anticipate  incorporating the other carrier's
           fiber into our network  during  2000.  We will pay the other  carrier
           approximately $101 million over 20 years beginning in 2000. The other
           carrier  will pay us  approximately  $77  million  over the same time
           period.

4.       Related Party Transactions

           Citizens  Utilities Company  (Citizens) owns approximately 83% of our
           common stock.  During 1998, Citizens announced its intent to separate
           its  telecommunications  businesses and its public service businesses
           into two  stand-alone,  publicly  traded  companies.  The  separation
           requires  numerous federal and state  regulatory  approvals before it
           can take effect.  The approval process is ongoing.  Although Citizens
           continues to pursue its separation plans, the increased opportunities
           that have  recently  become  available to acquire  telecommunications
           properties  which  fit  within  Citizens'  acquisition  criteria  and
           long-term planning require it to consider the possible  advantages of
           other  transactions,  besides  the  separation,  to enhance  security
           holder value.  Therefore,  Citizens is continuing to investigate  and
           review  opportunities  for the acquisition of new  telecommunications
           properties  and the  sale or other  disposition  of  public  services
           properties.

           This table  summarizes  the activity in the liability  account Due to
           Citizens for the first quarter 1999:

           ($ in thousands)
           Balance beginning of period.........................   $   5,254
           Guarantee fees......................................       3,452
           Administrative services:
               Services provided by Citizens...................       1,880
               ELI expenses paid by Citizens...................       1,589
           Payments to Citizens................................      (6,500)
                                                                  ----------
           Balance end of period...............................   $   5,675
                                                                  ==========

5.       Significant Customer

           During the quarters  ended March 31, 1999 and 1998, US West accounted
           for  19%  and  14%,  respectively,  of our  total  revenues  for  the
           respective quarters. Most of the US West revenues were generated from
           reciprocal  compensation  as discussed  above in Note 1(c).  No other
           customer  accounted  for 10% or more of our  total  revenues  for the
           quarters ended March 31, 1999 and 1998.

6.       Income Taxes

           Citizens includes us in their consolidated  federal income tax return
           which uses a calendar year reporting  period.  We record income taxes
           as if we were a stand-alone  company.  We recorded income tax expense
           of $370,000 in the first quarter 1999.  This expense  represents  the
           deferred tax effect of the increase in temporary  differences between
           our GAAP  financial  statements  and our tax  return  that may not be
           fully  offset  with  the  use  of tax  loss  carryforwards  when  the
           temporary differences reverse in future periods.

                                       7
<PAGE>
7.         Subsequent Event

           We issued $325 million of five-year  senior  unsecured notes in April
           1999. The notes have an interest rate of 6.05% and will mature on May
           15, 2004.  Citizens has initially  guaranteed the notes for an annual
           fee of 4.0% of the outstanding  balance.    See "Item 2, Management's
           Discussion  and  Analysis  of  Financial  Condition  and  Results  of
           Operations - Liquidity and Capital Resources".

                                       8
<PAGE>

Electric Lightwave, Inc.

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

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

           This   quarterly   report  on  Form  10-Q  contains   forward-looking
           statements  that are subject to risks and  uncertainties  which could
           cause actual  results to differ  materially  from those  expressed or
           implied in the statements. Forward-looking statements (including oral
           representations)  are statements about future performance or results,
           and  include  any  statements  using the words  "believe",  "expect",
           "anticipate"  or similar words.  All  forward-looking  statements are
           only  predictions  or  statements  of  current  plans,  which  we are
           constantly reviewing. All forward-looking  statements may differ from
           actual  future  results due to, but not  limited  to,  changes in the
           local and  overall  economy,  the  nature  and pace of  technological
           changes, the number and effectiveness of competitors in the Company's
           markets, success in overall strategy, changes in legal and regulatory
           policy, relations with ILECs and their ability to provide delivery of
           services  including  interoffice  trunking,  implementation  of  back
           office service delivery  systems,  the Company's  ability to identify
           future markets and  successfully  expand existing ones and the mix of
           products and services  offered in the Company's  target markets.  You
           should consider these  important  factors in evaluating any statement
           contained in this report and/or made by us or on our behalf.  We have
           no obligation to update or revise forward-looking statements.

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

           The following  information has not been audited. You should read this
           information in conjunction  with the condensed  financial  statements
           and related notes to financial statements included in this report. In
           addition,  please  see our  Management  Discussion  and  Analysis  of
           Financial  Condition  and Results of  Operations,  audited  financial
           statements  and related  notes  included in our Annual Report on Form
           10-K for the year ended December 31, 1998. Electric  Lightwave,  Inc.
           is referred to as "we", "us" or "our" in this report.

     Overview

           We have built an extensive  fiber-optic network in the western United
           States, which we use to provide products and services to customers in
           seven major  cities and their  surrounding  areas.  In  addition,  we
           provide data services in certain strategic markets across the nation.
           Our product offerings include:

           *   Network services - includes  dedicated service between two points
               for a customer's  exclusive  use. We offer this in both local and
               long-haul applications.  

           *   Local telephone services - consists of the delivery of local dial
               tone and related services.

           *   Long  distance  services - includes  retail  and  wholesale  long
               distance  phone  services,   including  our  prepaid  phone  card
               business.

           *   Data  services - includes  a wide  range of  products  to deliver
               large  quantities  of data from one  location to another  through
               Asynchronous  Transfer  Mode  (ATM),  Frame  Relay  and  Internet
               Protocol  packet  technologies.  These  technologies  group  data
               (voice,  video,  images  and  character-based  data)  into  small
               packets of information and transmit the packets over a network.

           We are  investing  in our  network  in the  west  and are  developing
           long-haul  networks  that will  connect all of our seven major cities
           and several of our data-only  cities with  high-capacity  fiber-optic
           cable and electronics. Certain segments of our long-haul networks are
           currently  operational,  and we expect to complete  the  remainder of
           this  network in the  second  half of 1999.  During  March  1999,  we
           entered  into a  fiber-swap,  which  exchanges  unused  fiber  on our
           network for unused fiber on another carrier's network.  This exchange
           will  provide us with  direct  access  from Salt Lake  City,  Utah to
           Denver,  Colorado and  continue on to Dallas,  Texas.  We  anticipate
           incorporating the other carrier's fiber into our network during 2000.

                                       9
<PAGE>

           In addition to our expansion  plans in the west, we are expanding our
           reach into key cities across the nation by offering  high-speed  data
           and  Internet  services.  We added  Atlanta,  Dallas,  San  Diego and
           Washington,  D.C.  during the first quarter of 1999 and Cleveland and
           Philadelphia  in April 1999.  We plan to connect  Austin,  Boston and
           Houston by the end of 1999. Our current data cities include  Atlanta,
           Chicago,  Cleveland,  Dallas,  Las  Vegas,  Los  Angeles,  New  York,
           Philadelphia, San Diego, San Francisco and Washington D.C.

           Citizens  Utilities Company  (Citizens)  currently owns approximately
           83% of our common stock.  During 1998,  Citizens announced its intent
           to separate its telecommunications businesses and its public services
           businesses into two stand-alone,  publicly traded  companies.  One of
           these companies will be a holding company for the  telecommunications
           businesses,  and it will hold the 83% ownership in us. The separation
           requires  numerous federal and state  regulatory  approvals before it
           can take effect.  The approval process is ongoing.  Although Citizens
           continues to pursue its separation plans, the increased opportunities
           that have  recently  become  available to acquire  telecommunications
           properties  which  fit  within  Citizens'  acquisition  criteria  and
           long-term planning require it to consider the possible  advantages of
           other  transactions,  besides  the  separation,  to enhance  security
           holder value.  Therefore,  Citizens is continuing to investigate  and
           review  opportunities  for the acquisition of new  telecommunications
           properties  and the  sale or other  disposition  of  public  services
           properties.

a.       Liquidity and Capital Resources

           We drew $70 million from our bank credit  facility to fund  operating
           and capital  expenditures  during the first  quarter  1999.  In April
           1999, we issued $325 million of five-year senior unsecured notes. The
           notes have an interest rate of 6.05% and will mature on May 15, 2004.
           We used the net  proceeds  from  the  issuance  to repay  outstanding
           borrowings under our revolving bank credit facility. As a result, pro
           forma at March 31, 1999, we have approximately $369 million available
           through  November  2002 under the revolving  bank credit  facility to
           fund  future  operating  and  capital   expenditures.   Citizens  has
           guaranteed  both the revolving bank credit facility and the notes for
           a fee of  3.25%  and  4.0%,  respectively,  based  on the  respective
           outstanding balances.

           We continue to invest in the installation,  development and expansion
           of our  new  and  existing  communications  networks.  A  significant
           portion of these  expenditures  is incurred  before any  revenues are
           realized. Our capital additions were approximately $57 million in the
           first quarter 1999. These  expenditures,  combined with our operating
           expenses,  have resulted in operating losses and negative cash flows.
           We expect to continue  incurring  operating  losses and negative cash
           flows until we can  establish an adequate  customer  base and revenue
           stream to support our network.  We cannot  provide  assurance that we
           will achieve or sustain profitability or generate sufficient positive
           cash flow to fund our operating and capital  requirements  or service
           debt.

           We continue  to evaluate  opportunities  to generate  revenue  growth
           through  making  substantial   investments  in  connection  with  the
           continued development of our existing networks,  new long-haul routes
           and  entry  into  new  markets.   These   opportunities  may  include
           acquisitions  and/or  joint  ventures  that are  consistent  with our
           business plan of generating  revenue growth through  expansion of our
           network and customer base. Any such acquisitions,  investments and/or
           strategic  arrangements,   if  available,  could  require  additional
           financial resources and/or reallocation of our financial resources.

                                       10
<PAGE>

     Other Matters

           Year 2000

           The Year 2000  (Y2K)  issue  stems  from the fact that many  computer
           programs  worldwide  use two digits,  rather than four, to define the
           applicable year. For instance,  many computers on January 1, 2000 may
           assume  that  01-01-00  is the first day of the year 1900 rather than
           2000. Massive system failures may occur globally if this issue is not
           properly   addressed.   We  have  developed  a  Y2K  Initiative  (the
           Initiative)  to mitigate the impact of the Y2K issue for our internal
           systems  and  the  systems  that we rely  on  indirectly  from  third
           parties.

           Under the Initiative,  we have formed a cross-functional  Y2K project
           team that reports to the Chief Information Officer (CIO). The CIO has
           authority  to  establish  methodologies,  approve  expenditures,  and
           marshal  additional  resources as necessary.  A full-time  consultant
           project  manager,  who  reports  regularly  to the CIO,  manages  the
           Initiative and oversees the project team. The CIO is responsible  for
           researching,  planning,  executing,  implementing  and completing the
           Initiative.

           The three functional categories evaluated in the Initiative include:

           *   Communications  Network - software and  electronics  that process
               voice  and  data  information   relating  to  our  communications
               operations, including transmission equipment,

           *   Information  Technology (IT) - consists of all internal  hardware
               and software  used to support our  financial  and  administrative
               operations, and

           *   Facilities  - consists of all systems  necessary to run an office
               including   security  systems,   fire  suppression,   generators,
               rectifiers,  batteries and components with embedded technology at
               our headquarters and leased facilities.

           The  Initiative  is composed  of three  primary  phases  which we are
           applying to each of the three functional categories.

           *   Phase I - Inventory  and  assessment 
           *   Phase  II -  Remediation
           *   Phase III - Testing, contingency planning and certification

           Phase I is  substantially  complete  for  all  systems.  Phase  II is
           substantially  complete  for all categories  except the  transmission
           equipment  segment  of  the   Communications   Network  category  and
           Facilities which we expect to complete by July 31, 1999. Phase III is
           underway and should be completed by June 30, 1999 for all  categories
           except  the  transmission  equipment  segment  of the  Communications
           Network category and Facilities,  which we anticipate to be completed
           by August 31, 1999.

           We  anticipate  the cost to address  the Y2K issue to be $2  million.
           This cost estimate is based on current information,  and there are no
           guarantees  that costs will not be higher than we  anticipate.  As of
           March 31, 1999, we had incurred $.6 million of Y2K costs.

                                       11
<PAGE>

           Within the  Communications  Network,  we depend on the ILEC and other
           carriers to provide  systems  that are Y2K  compliant  to allow us to
           connect  with  some  of  our  customers.  Within  IT,  we  depend  on
           appropriately  skilled  internal  and  external  experts  to  develop
           software.  Within  Facilities,  we depend  on  utility  suppliers  to
           provide  services to allow our network to continue to operate.  If we
           do not comply with Y2K, the worst case scenario would be a disruption
           of service or the  inability  to bill or  collect  revenues  from our
           customers,  which  could  have  a  material  adverse  effect  on  our
           business.  However,  we  believe  this is  unlikely  and that we will
           succeed in mitigating  Y2K issues.  As an added  precaution,  we have
           formed  a Y2K  Rapid  Response  Team  composed  of  experts  from key
           operational  departments  that will be able to quickly respond in the
           event of Y2K failures.

           Reciprocal Compensation

           We have various interconnection  agreements with US West, the ILEC in
           the states in which we operate.  These agreements  govern  reciprocal
           compensation  relating to the  transport and  termination  of traffic
           between US West's  network and our network.  We recognize  reciprocal
           compensation   revenues  as  earned,   based  on  the  terms  of  the
           interconnection   agreements.   Total  net  reciprocal   compensation
           revenues that we recognized for the quarters ended March 31, 1999 and
           1998 were  $6.6  million  and $2.7 million,  respectively.  Total net
           trade  accounts  receivable  relating to reciprocal  compensation  at
           March 31, 1999  were  $8.4  million.   Most  of  our  interconnection
           agreements are scheduled to expire in the second half of 1999.

           We have filed complaints with the Public Utility  Commissions  (PUCs)
           in Washington,  Utah, Oregon and Arizona  requesting that US West pay
           us for reciprocal compensation charges relating to the termination of
           calls to  Internet  Service  Providers  (ISPs),  as  required  by the
           interconnection agreements. The Washington and Utah PUCs ruled in our
           favor  and  accordingly,  US West  is now  paying  us for  reciprocal
           compensation  charges  in these  states.  The Oregon PUC ruled in our
           favor in April  1999.  US West is  disputing  the  start  date of the
           Oregon PUC approved reciprocal compensation charges. The complaint in
           Arizona is pending.

           On February 25, 1999, the FCC issued a Declaratory  Ruling and Notice
           of Proposed  Rulemaking that categorized  calls terminated to ISPs as
           "largely"  interstate  in  nature,  which  could  have the  effect of
           precluding these calls from reciprocal compensation charges. However,
           the   ruling   stated   that   ILECs  are   bound  by  the   existing
           interconnection  agreements and the state decisions that have defined
           them.  The FCC  gave  the  states  authority  to  interpret  existing
           interconnection agreements.

           The  reciprocal  compensation  rates  defined in our  interconnection
           agreements are subject to change by state PUC cost  proceedings.  The
           Oregon  PUC has  established  a lower rate than is  reflected  in our
           existing  interconnection  agreements.  The new rate is approximately
           70% less than the rate in the existing agreement.  We expect that the
           new rate will  become  effective  at some  point in the first half of
           1999. Both the Washington and Utah PUCs have begun proceedings to set
           new  reciprocal  compensation  rates.  Our best  estimate is that the
           current  rates will be  reduced by 50% or more in the second  half of
           1999.

                                       12

<PAGE>

b.     Results of Operations

         Revenues

           Revenues  increased  approximately  $18.2 million or 91% in the first
           quarter 1999 over the first  quarter 1998 due to the expansion of our
           network and customer base. Since the first quarter 1998, we completed
           fiber  networks  in Boise,  Idaho  and  Spokane,  Washington.  We are
           providing our full suite of services in both of these markets.  Also,
           since the first quarter 1998, we began providing  high-speed data and
           Internet  services in various  cities  across the  nation,  including
           Atlanta,  Chicago,  Dallas,  Las Vegas,  Los Angeles,  New York,  San
           Diego, San Francisco and Washington, D.C. We also added 617 customers
           and 152 building connections, 50% and 24% increases, respectively.

                                            For the three months ended March 31,
                                          -------------------------------------
           ($ in thousands)                  1999          1998      % Increase
                                          ----------     --------   -----------
           Network services.............  $  10,424    $   9,107         14%
           Local telephone services.....     14,308        6,024        138%
           Long distance services.......      8,530        1,822        368%
           Data services................      4,954        3,104         60%
                                            --------     --------
               Total....................  $  38,216    $  20,057         91%
                                            ========     ========
           Network Services
           Network  services  revenues  increased  $1.3 million,  or 14%, in the
           first  quarter  1999  over the  first  quarter  1998.  This  increase
           resulted  from  sales  of  additional  circuits  to new and  existing
           customers. The increased revenues were partially offset by a decrease
           in revenue of $1.0 million from a significant  customer primarily due
           to the expiration of a short-term contract in the first quarter 1998.

           Local Telephone Services
           Local telephone services revenues increased $8.3 million, or 138%, in
           the first  quarter  1999 over the first  quarter  1998.  The  primary
           reasons for the increase in this category were  increased  reciprocal
           compensation  revenues of $3.9 million,  or 142%;  increased revenues
           from our ISDN PRI product of $2.4 million,  or 174%;  and an increase
           in local dial tone services of $1.0 million,  or 70%. These increases
           were the result of an increase in access line  equivalents  installed
           of 57,736, or 140%, from the end of the first quarter 1998 to the end
           of the first quarter  1999.  In the first  quarter  1999,  reciprocal
           compensation revenues were generated in Washington,  Utah, Oregon and
           Arizona,  compared to only  Washington in the first quarter 1998. The
           ISDN PRI  growth has  largely  come from  sales to  Internet  Service
           Providers.

           Long Distance Services
           Long distance services revenues  increased $6.7 million,  or 368%, in
           the first  quarter  1999 over the first  quarter  1998.  The  primary
           reason for the increase was a $6.0  million,  or 3,772%,  increase in
           revenues from prepaid services.  Prepaid services increased due to an
           increase  in minutes  processed  as a result of adding  large  volume
           customers. The remaining $.7 million increase was caused by increased
           minutes   processed  in  both  retail  and  wholesale  long  distance
           services.


                                       13
<PAGE>

           Data Services
           Data services  increased  $1.9 million,  or 60%, in the first quarter
           1999  over the  first  quarter  1998.  The  primary  reasons  for the
           increase in this  category  were  increased  revenues  from  Internet
           services of $1.1 million,  or 110%,  and frame relay  services of $.8
           million,  or 72%. Both of these  increases  were the result of strong
           customer demand for these services.


         Operating Expenses

           Operating  expenses  increased  $34.3 million,  or 102%, in the first
           quarter 1999 over the first quarter 1998.  This was due to our growth
           in network and customer  base as  reflected  in revenues,  as well as
           increased long distance network access costs,  expansion of our sales
           force, additions to our integrated  provisioning system and the costs
           incurred to support our national data expansion.

                                           For the three months ended March 31,
                                          -------------------------------------
           ($ in thousands)                       1999       1998    % Increase
                                                --------   --------   ---------
           Network access......................$ 25,224   $  9,212      174%
           Operations..........................   9,034      5,246       72%
           Selling, general and administrative.  26,767     15,375       74%
           Depreciation and amortization.......   6,994      3,884       80%
                                                ---------  ---------
               Total...........................$ 68,019   $ 33,717      102%
                                                =========  =========

           Network Access
           Network access expenses include resold product expenses.  The primary
           components  are  usage-based  charges for  carrying  and  terminating
           traffic on another carrier's network.

           Network access  expenses for the first quarter 1999  increased  $16.0
           million,  or 174%,  over the first quarter 1998. This increase is due
           to an increase in long distance costs related to our prepaid services
           programs,  expenses  related to our national data expansion before we
           have been able to realize  significant  related  revenues and overall
           revenue growth.

           Operations
           Operations expenses consist of costs related to providing  facilities
           based network and enhanced communications services other than network
           access  costs.   The  primary   components  of  these   expenses  are
           right-of-way  and  telecommunications  equipment  leases  as  well as
           operations and engineering personnel costs.

           Operations  expenses  for  the  first  quarter  1999  increased  $3.8
           million,  or 72%, over the first quarter 1998. This was primarily due
           to increases in payroll and related  expenses to support the expanded
           delivery of services, and an expanded customer service organization.

           Selling, General and Administrative
           Selling,  general and administrative  expenses include all direct and
           indirect  sales  channel  expenses  and  commissions,  as well as all
           general and administrative expenses.

           Selling,  general and  administrative  expenses for the first quarter
           1999 increased  $11.4  million,  or 74%, over the first quarter 1998.
           This was primarily  due to increases in payroll and related  expenses
           to support the  delivery  of  services  in  existing  and new markets
           including the national data  expansion.  We increased our sales force
           to 176 employees, a 98% increase over March 31, 1998.

                                       14
<PAGE>

           Depreciation and Amortization
           Depreciation  and  amortization   expenses  include  depreciation  of
           communications  network assets  including fiber-optic cable,  network
           electronics, network switching and network data equipment.

           Depreciation  and  amortization  expense for the first  quarter  1999
           increased $3.1 million, or 80%, over the first quarter 1998. This was
           primarily due to higher plant in service balances for newly completed
           communications network facilities and electronics.

           Interest Expense and Interest Income

                                           For the three months ended March 31,
                                          -------------------------------------
           ($ in thousands)                 1999       1998       % Increase
                                          --------   --------      ------------
           Interest expense........... $   5,101    $   911           460%
           Interest income............      (322)      (167)           93%

           Interest  expense  increased  $4.2  million,  or 460%,  in the  first
           quarter 1999 over the first quarter 1998.  The primary reason for the
           increase is a higher amount  outstanding on our bank credit facility.
           The higher  balance led to  increased  interest and  guarantee  fees.
           Interest  expense is net of capitalized  interest of $3.2 million and
           $1.8 million for 1999 and 1998, respectively.

           Interest income  increased $.2 million,  or 93%, in the first quarter
           1999 over the first quarter 1998.  This was primarily due to interest
           earned on higher cash balances.

           Income Tax Expense (Benefit)

                                           For the three months ended March 31,
                                          -------------------------------------
           ($ in thousands)                  1999        1998      % Increase
                                           --------    --------    ------------
           Income tax expense (benefit)...$   370    $     (2,449)      n/a

           In the first  quarter  1998,  we were able to recognize a tax benefit
           for our tax loss  carryforwards  to a limited  extent of our deferred
           tax liabilities.  In 1999, the benefit of our tax loss  carryforwards
           is not able to fully offset the deferred tax expense  associated with
           current year temporary differences.

           Cumulative Effect of Change in Accounting Principle

                                           For the three months ended March 31,
                                          -------------------------------------
           ($ in thousands)                 1999      1998       % Increase
                                          --------  --------    ---------------
           Cumulative effect of change
             in accounting principle        $ -     $ 3,394          n/a

           Cumulative  effect of change in  accounting  principle  represented a
           write-off of the unamortized  portion of deferred  start-up costs due
           to our adoption of AICPA  Statement of Position  98-5,  "Reporting on
           the costs of Start-Up Activities" in the first quarter 1998.


                                       15
<PAGE>

Item 3. Quantitative and Qualitative Disclosures About Market Risk

           We reduced our interest rate risk by issuing $325 million,  five-year
           senior unsecured notes in April 1999 that are guaranteed by Citizens.
           The notes have a fixed  interest rate of 6.05% and a guarantee fee of
           4.0%. We used the net proceeds from the issuance to repay outstanding
           borrowings under our floating rate bank credit facility.

                                       16
<PAGE>

PART II.      OTHER INFORMATION
Item 1.       Legal Proceedings

              We are party to routine litigation arising in the normal course of
              business,  except for an ongoing US West  arbitration  and federal
              court case as  discussed  in our 1998 Form 10-K.  We do not expect
              these  matters,  individually  or in  the  aggregate,  to  have  a
              material  adverse  effect on our  financial  position,  results of
              operations or cash flows. We are also party to various proceedings
              before state PUCs. These proceedings typically relate to authority
              to  operate  in  state  and  regulatory  arbitration   proceedings
              concerning   our   interconnection   agreements.   See  "Part  I.,
              Management's  Discussion  and Analysis of Financial  Condition and
              Results of  Operations - Liquidity  and Capital  Resources - Other
              Matters - Reciprocal Compensation".

Item 2.       Changes in Securities and Use of Proceeds

              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) The exhibits below are filed as part of this report:

              Exhibit No.     Description
              ----------      -----------
              10.23*          IRU Fiber Construction and Lease Agreement between
                              us and  IXC  Communication  Services,  Inc.  dated
                              February 28, 1999
              27.1            Financial Data Schedule for the three months ended
                              March 31, 1999.
              27.2            Restated Financial Data Schedule for the three
                              months ended March 31, 1998.

              *   Material   has  been   omitted   pursuant  to  a  request  for
                  confidential  treatment filed with the Securities and Exchange
                  Commission.

              b)  Reports on Form 8-K

              None.




                                       17
<PAGE>


Signature



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


              ELECTRIC LIGHTWAVE, INC.
              (Registrant)

              By:    /s/ Kerry D. Rea                      
                     Kerry D. Rea
                     Vice President and Controller





              May 4, 1999