<PAGE>


                       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 June 30, 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 1-12866
                                                -------

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

          CANADA                                   NOT APPLICABLE
----------------------------------         -----------------------------
(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) 356-7100
                                                    --------------
                                       N/A
--------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)

         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 practicable date: At August 6, 1999,
there were outstanding 37,558,205 Common Shares, without par value, of the
Registrant.

<PAGE>


                          GST TELECOMMUNICATIONS, INC.


                                      INDEX

<TABLE>
<CAPTION>

                                                                               PAGE(S)
                                                                               -------
<S>                                                                            <C>
                          PART I: FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS:

         Condensed Consolidated Balance Sheets - June 30, 1999
         and December 31, 1998                                                     2

         Condensed Consolidated Statements of Operations
         - Three and Six Months Ended June 30, 1999 and 1998                       3

         Condensed Consolidated Statements of Cash Flows
         - Six Months Ended June 30, 1999 and 1998                                 4

         Notes to Condensed Consolidated Financial Statements                     5-6


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS                                     7-12


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                13


                           PART II: OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS                                                      14-16

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                                          16

SIGNATURES                                                                         17

</TABLE>


                                      -1-

<PAGE>


                          GST Telecommunications, Inc.
                      Condensed Consolidated Balance Sheets
                                 (In thousands)

<TABLE>
<CAPTION>

                                                            JUNE 30, 1999   DECEMBER 31, 1998 (1)
                                                            -------------   -----------------
<S>                                                          <C>            <C>
ASSETS
Current assets:
  Cash and cash equivalents                                  $    45,388    $    86,070
  Restricted investments                                          35,272         34,107
  Accounts receivable, net                                        42,042         32,935
  Investments                                                     32,446         16,246
  Inventory, net                                                   1,454          1,485
  Prepaid and other current assets                                21,213         11,454
                                                             -----------    -----------
         Total current assets                                    177,815        182,297
                                                             -----------    -----------

Restricted investments                                           119,710        247,257

Property and equipment                                           825,215        678,374
  less accumulated depreciation                                  (82,919)       (62,522)
                                                             -----------    -----------
                                                                 742,296        615,852

Other assets                                                     144,004        145,906
  less accumulated amortization                                  (49,104)       (40,029)
                                                             -----------    -----------
                                                                  94,900        105,877
                                                             -----------    -----------
         Total assets                                        $ 1,134,721    $ 1,151,283
                                                             -----------    -----------
                                                             -----------    -----------

LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
  Accounts payable                                           $    29,624    $    26,411
  Accrued expenses                                                40,478         37,445
  Deferred revenue                                                16,163          6,030
  Current portion of capital lease obligations                     6,539          5,649
  Current portion of long-term debt                               13,533         13,417
                                                             -----------    -----------
         Total current liabilities                               106,337         88,952
                                                             -----------    -----------

Other liabilities                                                 31,600         21,377
Capital lease obligations, less current portion                   17,051         19,741
Long-term debt, less current portion                           1,123,307      1,092,959

Redeemable preference shares                                      65,603         61,741

Shareholders' deficit:
  Common shares                                                  240,212        234,267
  Accumulated deficit                                           (481,789)      (383,954)
  Accumulated other comprehensive income                          32,400         16,200
                                                             -----------    -----------
                                                                (209,177)      (133,487)
                                                             -----------    -----------
         Total liabilities and shareholders' deficit         $ 1,134,721    $ 1,151,283
                                                             -----------    -----------
                                                             -----------    -----------

</TABLE>

(1)  The information in this column was derived from the Company's audited
     financial statements as of December 31, 1998.

     See notes to condensed consolidated financial statements.


                                      -2-

<PAGE>


                          GST Telecommunications, Inc.
                 Condensed Consolidated Statements of Operations
               (In thousands, except share and per share amounts)


<TABLE>
<CAPTION>

                                                            THREE MONTHS                    SIX MONTHS
                                                           ENDED JUNE 30,                 ENDED JUNE 30,
                                                   ----------------------------    ----------------------------
                                                      1999             1998            1999             1998
                                                   ------------    ------------    ------------    ------------
<S>                                                <C>             <C>             <C>             <C>
Revenues:
     Telecommunications services                   $     51,214    $     37,737    $     99,938    $     66,917
     Construction, facility sales and other              19,551             756          25,427             756
     Product                                              1,157           1,034           2,239           1,898
                                                   ------------    ------------    ------------    ------------
         Total revenues                                  71,922          39,527         127,604          69,571
                                                   ------------    ------------    ------------    ------------
Operating costs and expenses:
     Network expenses                                    32,776          25,825          64,475          46,953
     Facilities administration and maintenance            4,265           3,701           9,400           7,656
     Cost of construction revenues                        6,954             200           9,468             200
     Cost of product revenues                               655             707           1,350           1,397
     Selling, general and administrative                 28,802          24,651          56,077          45,061
     Depreciation and amortization                       16,646          11,075          33,624          19,744
                                                   ------------    ------------    ------------    ------------
         Total operating costs and expenses              90,098          66,159         174,394         121,011
                                                   ------------    ------------    ------------    ------------
         Loss from operations                           (18,176)        (26,632)        (46,790)        (51,440)
                                                   ------------    ------------    ------------    ------------
Other expenses (income):
    Interest income                                      (2,622)         (6,793)         (6,483)        (11,728)
    Interest expense, net of amounts capitalized         27,776          25,250          56,036          46,525
    Gain on sale of subsidiary shares                      --              --              --           (61,266)
    Other                                                 1,293             492           1,492           1,121
                                                   ------------    ------------    ------------    ------------
                                                         26,447          18,949          51,045         (25,348)
                                                   ------------    ------------    ------------    ------------
         Loss before income taxes                       (44,623)        (45,581)        (97,835)        (26,092)
                                                   ------------    ------------    ------------    ------------
Income tax expense                                         --              --              --              --
                                                   ------------    ------------    ------------    ------------
         Net loss                                  $    (44,623)   $    (45,581)   $    (97,835)   $    (26,092)
                                                   ------------    ------------    ------------    ------------
                                                   ------------    ------------    ------------    ------------
         Net loss per share, basic and diluted (1) $      (1.30)   $      (1.36)   $      (2.76)   $      (0.83)
                                                   ------------    ------------    ------------    ------------
                                                   ------------    ------------    ------------    ------------
         Weighted average shares outstanding         37,341,335      35,966,492      36,903,627      35,606,617
                                                   ------------    ------------    ------------    ------------
                                                   ------------    ------------    ------------    ------------

</TABLE>

(1)  Net loss per share is increased for preference shares' accretion totaling
     $3,862 and $3,453 for the three and six-month periods ended June 30, 1999
     and 1998, respectively.

See notes to condensed consolidated financial statements.


                                      -3-

<PAGE>


                          GST Telecommunications, Inc.
                 Condensed Consolidated Statements of Cash Flows
                                 (In thousands)

<TABLE>
<CAPTION>

                                                                SIX MONTHS
                                                              ENDED JUNE 30,
                                                          ----------------------
                                                            1999         1998
                                                          ---------    ---------
<S>                                                       <C>          <C>
Operations:
     Net loss                                             $ (97,835)   $ (26,092)
     Adjustments to reconcile net loss to net cash used
      in operations:
         Depreciation and amortization                       36,464       22,717
         Accretion and accrual of interest                   35,945       25,625
         Non-cash stock compensation and other expense        1,434        1,213
         Loss on disposal of assets                           1,755           56
         Equity in losses of investments and joint
          venture                                                --          593
         Gain on sale of subsidiary shares                       --      (61,266)
         Changes in non-cash operating working capital:
              Accounts receivable, net                       (9,276)      (6,574)
              Inventory                                          31         (137)
              Prepaid, other current and other assets,
               net                                           (9,759)       1,188
              Accounts payable and accrued liabilities       14,149       (6,719)
              Deferred revenue                               10,133          878
                                                          ---------    ---------
                  Cash used in operations                   (16,959)     (48,518)
                                                          ---------    ---------

Investments:
     Acquisition of subsidiaries, net of cash acquired           --      (35,471)
     Proceeds from sale of investments                           --          318
     Purchase of property and equipment                    (150,232)     (80,458)
     Proceeds from sale of property and equipment                --        3,584
     Purchase of other assets                                  (169)      (1,991)
     Change in investments restricted for the
          purchase of property and equipment                110,231     (254,335)
     Proceeds from the sale of subsidiary shares, net            --       85,048
     Cash disposed of in sale of subsidiary                      --       (5,252)
                                                          ---------    ---------
                  Cash used in  investing activities        (40,170)    (288,557)
                                                          ---------    ---------

Financing:
     Proceeds from long-term debt                             1,040      299,874
     Principal payments on long-term debt and capital
      leases                                                 (8,343)      (5,819)
     Issuance of common shares, net of issuance costs         7,599       15,832
     Deferred debt financing costs                               --      (12,876)
     Change in investments restricted to finance
      interest payments                                      16,151       17,703
                                                          ---------    ---------
                  Cash provided by financing activities      16,447      314,714
                                                          ---------    ---------

                  Decrease in cash and cash
                       equivalents                          (40,682)     (22,361)

Cash and cash equivalents, beginning of period               86,070      199,053
                                                          ---------    ---------

Cash and cash equivalents, end of period                  $  45,388    $ 176,692
                                                          ---------    ---------
                                                          ---------    ---------
</TABLE>

See notes to condensed consolidated financial statements.

                                      -4-

<PAGE>

                          GST TELECOMMUNICATIONS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
                                   (UNAUDITED)


1.       BASIS OF PRESENTATION

         The accompanying financial statements 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 Company's audited consolidated
financial statements for the fiscal year ended December 31, 1998 as included in
the Company's annual report on Form 10-K/A.

2.       BASIC AND DILUTED NET LOSS PER SHARE

         For the three and six months ended June 30, 1999 and 1998, common stock
equivalents were antidilutive and were not included in diluted weighted average
shares outstanding. If the Company had reported net income for the periods
presented, the weighted average number of common equivalent shares used to
determine diluted net loss per share would have increased by 14,554,461 and
14,992,169 for the three and six months ended June 30, 1999, respectively, and
13,479,609 and 13,839,484 for the three and six months ended June 30, 1998,
respectively.

3.       SHAREHOLDERS' EQUITY

         Shares issued and outstanding are as follows:

<TABLE>
<CAPTION>

                                  JUNE 30, 1999     DECEMBER 31, 1998
                                  -------------     -----------------
<S>                                <C>                <C>
     Common shares, no par value   37,469,614         36,264,066

</TABLE>


                                      -5-

<PAGE>


                          GST TELECOMMUNICATIONS, INC.
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)



4.        SUPPLEMENTAL CASH FLOW INFORMATION

<TABLE>
<CAPTION>

                                                                 SIX MONTHS
                                                                ENDED JUNE 30,
                                                             --------------------
                                                               1999        1998
                                                             --------    --------
<S>                                                          <C>         <C>
Supplemental disclosure of cash flow information:
     Cash paid for interest                                  $ 24,079    $ 27,461
     Cash paid for income taxes                                    --          --

Supplemental schedule of non-cash investing and
 financing activities:
     Recorded in business combinations:
         Assets                                                    --      45,719
         Liabilities                                               --       7,900
           Common shares                                           --       2,348
     Disposition of subsidiary:
         Assets                                                (1,373)     35,480
         Liabilities                                              216       4,218
         Minority interest                                         --      12,732
     Amounts in accounts payable and accrued liabilities
      for the purchase of fixed assets at end of period        27,220      23,770
     Assets acquired through capital leases                     1,194       6,043
     Conversion of debt to equity                                 774        --

</TABLE>


5.       ACCRUED SEVERANCE

         In the fourth quarter of 1998, the Company accrued $1,113 in
severance-related costs. The following table details activity related to the
severance accrual.

<TABLE>
         <S>                                    <C>
         Accrual at December 31, 1998           $1,113
         Payments                                 (737)
         Adjustments                               (61)
                                                ------
         Accrual at June 30, 1999               $  315
                                                ======
</TABLE>


6.       ADOPTION OF NEW ACCOUNTING STANDARD

         In June 1999, the FASB issued Interpretation No. 43, "Real Estate
Sales," an interpretation of FASB Statement No. 66, "Accounting for Sales of
Real Estate." Interpretation No. 43 clarifies that the phrase ALL REAL ESTATE
SALES, from Paragraph 1 of Statement No. 66, includes sales of real estate
with property improvements or integral equipment that cannot be removed and
used separately from the real estate without incurring significant costs. This
Interpretation applies to all sales of real estate with property improvements
or integral equipment entered into after June 30, 1999. The Company is
currently evaluating Interpretation No. 43 to determine the impact it will
have on its financial statements.

                                      -6-

<PAGE>


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

         Certain information included in this Quarterly Report may be deemed to
include forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, that involve risk and uncertainty, such as information
relating to expected capital expenditures and expected trends in operating
losses and cash flows, as well as any statements preceded by, followed by, or
that include the words "intends," "estimates," "believes," "expects,"
"anticipates," "should," "could," or similar expressions, and other statements
contained herein regarding matters that are not historical facts. Although the
Company believes that its expectations are based on reasonable assumptions, it
can give no assurance that its expectations will be achieved. The important
factors that could cause actual results to differ materially from those in the
forward-looking statements herein (the "Cautionary Statements") include, without
limitation, risks associated with the Company's operating losses, risks relating
to the Company's development and expansion and possible inability to manage
growth, risks relating to the Company's significant capital requirements,
substantial indebtedness and possible inability to service its debt, risks
relating to competition and regulatory developments, risks relating to
implementing local and enhanced services, risks relating to its long distance
business, as well as other risks referenced from time to time in the Company's
filings with the Securities and Exchange Commission, including Amendment No. 5
to the Company's Form S-4 as filed on August 4, 1999 and the Company's Form
10-K/A for the fiscal year ended December 31, 1998. All subsequent written and
oral forward-looking statements attributable to the Company or persons acting
on its behalf are expressly qualified in their entirety by the Cautionary
Statements. The Company does not undertake any obligation to release publicly
any revisions to such forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

OVERVIEW

         The Company, through its subsidiaries, provides a broad range of
integrated telecommunications products and services, including enhanced data and
Internet services and comprehensive voice services throughout the United States,
with a robust presence in California and the West. The Company continues to
focus on its western regional strategy by anchoring its next generation networks
in local markets and connecting them via long haul fiber networks. The Company's
products include local dial tone, long distance, Internet, data transmission and
private line services.

The following table highlights key statistical information about the Company, as
of June 30, 1999:

<TABLE>
<S>                                    <C>
-------------------------------------- ---------------------------------------
Access Lines, sold this quarter        52,173
-------------------------------------- ---------------------------------------
Access Lines, installed this quarter   30,696
-------------------------------------- ---------------------------------------
Cities Served                          48
-------------------------------------- ---------------------------------------
Route Miles, total                     6,823 (87% owned, 13% leased)
-------------------------------------- ---------------------------------------
Fiber Miles, total                     307,382 (97% owned, 3% leased)
-------------------------------------- ---------------------------------------
Collocations                           92
-------------------------------------- ---------------------------------------
Buildings On-Net                       715
-------------------------------------- ---------------------------------------

</TABLE>


                                      -7-

<PAGE>


<TABLE>
<S>                                    <C>
-------------------------------------- ---------------------------------------
Class 4/5 Switches Operational         15
-------------------------------------- ---------------------------------------
Frame Relay Switches Operational       24
-------------------------------------- ---------------------------------------
ATM Switches Operational               35
-------------------------------------- ---------------------------------------
Customers                              107,425
-------------------------------------- ---------------------------------------
Interconnection Agreements             13
-------------------------------------- ---------------------------------------
Employees                              1,258
-------------------------------------- ---------------------------------------

</TABLE>

RESULTS OF OPERATIONS

         REVENUES. Total revenue for the three month and six month periods
ended June 30, 1999 increased $32.4 million, or 82.0%, and $58.0 million, or
83.4%, respectively, over the comparable three and six month periods ended
June 30, 1998. Telecommunications services revenues for the three and six
month periods ended June 30, 1999 increased $13.5 million, or 35.7%, and
$33.0 million, or 49.3%, respectively, over the comparable three and six
month periods ended June 30, 1998. The increase in telecommunications
services revenues resulted from increased local, long distance, data, and
Internet services revenue as the Company launched new products and entered
new markets.  The Company is bundling these products to provide better access
and services to its customers.  In addition, for the six-month period ended
June 30, 1999, the increase was also attributable to 1998 strategic
acquisitions, including the acquisition of ICON Communications, Corp.
Reciprocal compensation, which the Company recognizes based on interconnection
agreements, totaled $1.5 million and $2.2 million for the three and six-month
periods ended June 30, 1999, respectively, as compared to $0 for both the three
and six-month periods ended June 30, 1998. Construction, facility sales and
other revenue for the three and six month periods ended June 30, 1999
increased $18.8 million and $24.7 million, respectively, over the comparable
three and six month periods ended June 30, 1998. The increase in construction,
facility sales and other revenue was attributable to revenue from several
agreements to sell or lease conduit and fiber capacity to other carriers. The
Company anticipates it will record approximately $75.0 million in revenue,
related to three significant transactions, in the third and fourth quarters of
1999. Product revenue for the three and six month periods ended June 30, 1999
increased $.1 million, or 11.9%,and $.3 million, or 18.0%, respectively, over
the three and six month periods ended June 30, 1998.

         OPERATING EXPENSES. Total operating expenses for the three and six
month periods ended June 30, 1999 increased $23.9 million, or 36.2%, and
$53.4 million, or 44.1%, respectively, over the comparable three and six
month periods ended June 30, 1998. Network expenses, which include direct
local and long distance circuit costs, were 64.0% and 64.5%, respectively, of
telecommunications services revenues for the three and six month periods
ended June 30, 1999 compared to 68.4% and 70.2% for the comparable periods in
the previous year. The decrease in network expenses as a percentage of
telecommunications services revenue resulted primarily from an increase in
traffic carried on the Company's network. Facilities administration and
maintenance expenses for the three and six month periods ended June 30, 1999
were 8.3% and 9.4%, respectively, of telecommunications services revenues
compared to 9.8% and 11.4% for the comparable periods ended June 30, 1998. The
decrease in these expenses as a percentage of telecommunications services
revenues primarily results from the inclusion of revenues from strategic
acquisitions, substantially all of which are not generated on the Company's
networks.

         Cost of construction revenues for the three and six month periods
ended June 30, 1999 were $7.0 million and $9.5 million, respectively, an
increase of $6.8 million and $9.3 million over the comparable periods in the
previous year.  The increase was caused by the increase in construction,
facility sales and other revenue.  For the three and six month periods ended
June 30, 1999, cost of construction revenues were 35.6% and 37.2%, respectively,
of construction revenues, compared to 26.5% for both the three and six month
periods ended June 30, 1998.

         Consistent with the comparable periods in 1998, cost of product
revenues for the three and six month periods ended June 30, 1999 were $.7
million and $1.4 million, respectively. For the three and six month periods
ended June 30, 1999 cost of product revenues were 56.6% and 60.3%,
respectively, of product revenues, compared to 68.4% and 73.6% for the
comparable three and six month periods ended June 30, 1998.

         Selling, general and administrative expenses for the three and six
month periods ended June 30, 1999 increased $4.2 million, or 16.8%, and $11.0
million, or 24.4%, respectively, as compared to the three and six month periods
ended June 30, 1998. The increase is due primarily to the expansion of the


                                      -8-

<PAGE>


Company's local and enhanced services operations, which resulted in additional
marketing, management information and sales staff, and to selling, general and
administrative expenses related to companies acquired in 1998. In addition,
the Company had increased litigation costs related to its legal proceedings.
See "Legal Proceedings" in "Part II: Other Information." As a percentage of
total revenue, selling, general and administrative expenses for the three and
six months ended June 30, 1999 were 40.0% and 43.9%, respectively, compared to
62.4% and 64.8%, respectively, for the three and six months ended June 30,
1998.

         Depreciation and amortization for the three and six month periods ended
June 30, 1999 increased $5.6 million, or 50.3%, and $13.9 million, or 70.3%,
respectively, as compared to the three and six months periods ended June 30,
1998. The increase is attributable to newly-constructed networks and related
equipment being placed into service and to the amortization of intangible assets
related to companies acquired by the Company in 1998. The Company expects that
depreciation will continue to increase as it expands its networks and longhaul
fiber optic facilities and installs additional switches. Depreciation and
amortization expense was 23.1% and 26.4% of total revenue for the three and six
months ended June 30, 1999 compared to 28.0% and 28.4% for the comparable three
and six month periods ended June 30, 1998.

         OTHER EXPENSES/INCOME. For the three and six month periods ended June
30, 1999, the Company recorded net other expense of $26.4 million and $51.0
million, respectively, compared to net other expense of $18.9 million and net
other income of $25.3 million for the comparable three and six month periods
ended June 30, 1998, respectively. For the six months ended June 30, 1998, net
other income includes a $61.3 million gain resulting from the Company's sale
of its remaining 63% interest in NACT Telecommunications, Inc. (the "NACT
Sale"). Excluding such gain, net other expense would have increased $15.1
million for the six month period ended June 30, 1999 as compared to the same
period in the previous year. The increase in net other expense related
primarily to increased interest expense resulting from the issuance in May,
1998 of $500.0 million principal amount at maturity of 10.5% senior secured
discount notes.

         NET INCOME/LOSS. Net loss for the three month period ended June 30,
1999 decreased $1.0 million, or 2.1%, to $44.6 million from $45.6 million for
the three months ended June 30, 1998. Net loss for the six month period ended
June 30, 1999 increased $71.7 million, or 275.0%, to $97.8 million from $26.1
million for the six month period ended June 30, 1998. Excluding the $61.3
million gain on the NACT Sale, net loss would have increased $10.4 million for
the six months ended June 30, 1999 as compared to the six months ended June
30, 1998. Such increase primarily relates to increased interest expense.

LIQUIDITY AND CAPITAL RESOURCES

         The Company has incurred significant operating and net losses as a
result of the development and operation of its networks. The Company expects
that such losses will continue as the Company emphasizes the development,
construction and expansion of its networks and builds its customer base. Cash
provided by the Company's operations will not be sufficient to fund the
expansion of its networks, longhaul fiber optic facilities and services.

         At June 30, 1999, the Company had approximately $1,160.4 million of
indebtedness outstanding. Although the Company's liquidity was substantially
improved as a result of proceeds received from the sale of $312.4 million
principal amount at maturity of 13.875% senior discount notes and $37.9 million
principal amount at maturity of 13.875% convertible senior subordinated discount
notes in December 1995 (collectively the "1995 Notes"), the sale of $265.0
million of 13.25% senior secured notes in May 1997 (the "Secured Notes"), the
sale of $144.0 million of 12.75% senior subordinated accrual notes in November
1997 (the "Accrual Notes") and the sale of


                                      -9-

<PAGE>

$500.0 million principal amount at maturity of 10.5% senior secured discount
notes in May 1998 (the "1998 Notes"), the Company has significant debt service
obligations. The Company will be required to make principal and interest
payments of approximately $36.5 million (of which $17.6 million will be made
from funds securing the Secured Notes), $67.5 million (of which $17.6 million
will be made from funds securing the Secured Notes), $113.5 million, $111.8
million and $155.3 million in the remainder of 1999 and in 2000, 2001, 2002, and
2003, respectively. In addition, the Company anticipates that cash flow from
operations will be insufficient to pay interest in cash on the 1995 Notes when
such interest becomes payable in June 2001 and on the Secured Notes
starting in November 2000 once the amount pledged to fund the first six
scheduled interest payments on the Secured Notes is paid and to repay the 1995
Notes, the Secured Notes and the Accrual Notes in full and that such notes will
need to be refinanced. The ability of the Company to effect such refinancings
will be dependent upon the future performance of the Company, which will be
subject to prevailing economic conditions and to financial, business and other
factors beyond the control of the Company. There can be no assurance that the
Company will be able to improve its operating results or that the Company will
be able to meet its debt service obligations.

         At June 30, 1999, the Company had cash, cash equivalents, and
investments, including restricted investments, of approximately $232.8 million.
The Company believes that such amounts will be sufficient to fund the Company's
operations through the end of Fiscal 1999. Divestitures and other management
actions may prolong capital availability into the fiscal year 2000 and beyond.
Thereafter, the Company expects to require additional financing. The extent of
additional financing will depend on, among other things, the rate of the
Company's expansion and the success of the Company's businesses. In the event
that the Company's plans or assumptions change or prove to be inaccurate, the
Company incurs significant unexpected expenses, or the Company's cash resources,
together with borrowings under the current financing arrangements prove to be
insufficient to fund the Company's growth and operations, or if the Company
consummates additional acquisitions, the Company may be required to seek
additional sources of capital (or seek additional capital sooner than currently
anticipated). The Company may also seek to raise additional capital to take
advantage of favorable conditions in the capital markets. There can be no
assurance that additional financing will be available to the Company or, if
available, that it can be concluded on terms acceptable to the Company or within
the limitations contained within the Company's financing arrangements. Failure
to obtain such financing could result in the delay or abandonment of some or all
of the Company's development or expansion plans and could have a material
adverse effect on the Company's business. Such failure could also limit the
ability of the Company to make principal and interest payments on its
outstanding indebtedness. The Company has no material working capital or other
credit facility under which it may borrow for working capital and other
general corporate purposes. There can be no assurance that such facility will
be available to the Company in the future or that if such facility were
available, that it would be available on terms and conditions acceptable to
the Company.

         The Company anticipates that it will receive approximately $48
million of cash in the third quarter of 1999 from the completion of a network
conduit agreement. In addition, the Company expects to receive between $27
million and $30 million in September 1999 from the settlement of a complaint
against Global Light Telecommunications, Inc. See "Legal Proceedings" in "Part
II: Other Information."

         The Company's net cash used in operating and investing activities was
$57.1 million and $337.1 million for the six months ended June 30, 1999 and
1998, respectively. Net cash provided by financing activities from borrowings
and equity issuances to fund capital expenditures, acquisitions and operating
losses was $16.4 million and $314.7 million for the six months ended June 30,
1999 and 1998, respectively.

         Capital expenditures for the six months ended June 30, 1999 and 1998
were $151.9 million and $97.5 million, respectively. The Company estimates
capital expenditures of approximately $100 million and $150 million in the
remainder of 1999 and in Fiscal 2000, respectively. The majority of these
expenditures is expected to be made for the construction of network and
longhaul fiber optic

                                      -10-

<PAGE>

facilities and the purchase of switches and related equipment to facilitate the
offering of the Company's services. Continued significant capital expenditures
are expected to be made thereafter. In addition, the Company expects to continue
to incur operating losses while it expands its business and builds its customer
base. Actual capital expenditures and operating losses will depend on numerous
factors, including the extent of future expansion, acquisition opportunities and
other factors beyond the Company's control, including economic conditions,
competition, regulatory developments and the availability of capital.

YEAR 2000 PROGRAM

         The Company is currently verifying system readiness for the processing
of date-sensitive information by its information technology ("IT") systems
(applications, hardware, system software and interfaces) and its network
operations. The review of IT systems and network operations is centrally managed
through a year 2000 Program Management Office.

         THE COMPANY'S STATE OF READINESS. In general, the Company's year 2000
project is divided into three phases: (1) inventory and assessment ("Phase
One"), (2) strategy and contingency planning ("Phase Two"), and (3) conversion
and remediation ("Phase Three").

         The Company completed its Phase One assessment for IT systems in
October 1998. Phase One for network operations was completed in March 1999.
The Company has focused its independent testing activities principally on
those systems whose failure would pose the greatest risk to the Company. The
Company may not independently test all of its equipment and will rely upon
vendor representations, if received by the Company, where tests are not
conducted. There can be no assurance of the accuracy or completeness of such
representations. The Company is continuing to contact all of its significant
suppliers and large customers to determine the extent to which the Company's
interface systems are vulnerable to those third parties' failure to remediate
their own year 2000 issues.

         With respect to IT systems, the Company completed Phase Two, wherein
remedial actions were planned and a contingency plan was formulated, in December
1998. The Company expects to complete Phase Three for IT systems, wherein
remedial actions will be implemented and tested, in third quarter 1999. The
Company has completed strategy planning and anticipates conclusion of
remaining Phase Two and Phase Three activities for network operations in third
quarter 1999.

         COSTS. The total amount expended on the project through June 30, 1999
was approximately $1.9 million. The total cost of the year 2000 project is
estimated to be $3.3 million, including $.3 million in internal staffing costs,
$1.8 million in external staffing costs and $1.2 million in hardware and
software upgrade costs. This cost may be reduced if software and hardware are
replaced with compliant systems as a result of other currently scheduled capital
projects. The Company does not expect remediation costs to have a material
adverse effect on its financial position, results of operation or cash flows.
There can be no assurance, however, that there will not be a delay in, or
increased costs associated with, the implementation of changes as the program
progresses, and failure to implement such changes could have an adverse effect
on future results of operations.

         RISKS. The failure to correct a material year 2000 problem could result
in an interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the year 2000 problem, resulting in part from the


                                      -11-

<PAGE>


uncertainty of the year 2000 readiness of third-party suppliers and customers,
the Company is unable to determine at this time whether the consequences of year
2000 failures will have a material impact on the Company's results of
operations, liquidity or financial condition. The year 2000 project is expected
to significantly reduce the Company's level of uncertainty about the year 2000
problem. The Company believes that, with the implementation of new business
systems and completion of the project as scheduled, the possibility of
significant interruptions of normal operations should be reduced.

NEW ACCOUNTING PRONOUNCEMENTS

         In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 standardizes the accounting
for derivative instruments, including certain derivative instruments embedded in
other contracts. Under SFAS No. 133, entities are now required to carry all
derivative instruments in the balance sheet at fair value. The accounting for
changes in fair value (i.e., gains and losses) of a derivative instrument
depends on whether it has been designated and qualifies as part of a hedging
relationship and, if so, on the reason for holding it. The Company must adopt
SFAS No. 133 by January 1, 2001. The Company has not determined the impact that
SFAS No. 133 will have on its financial statements and believes that such
determination will not be meaningful until closer to the date of initial
adoption.

         In June 1999, the FASB issued Interpretation No. 43, "Real Estate
Sales," an interpretation of FASB Statement No. 66, "Accounting for Sales of
Real Estate." Interpretation No. 43 clarifies that the phrase ALL REAL ESTATE
SALES, from Paragraph 1 of Statement No. 66, includes sales of real estate
with property improvements or integral equipment that cannot be removed and
used separately from the real estate without incurring significant costs.
This Interpretation applies to all sales of real estate with property
improvements or integral equipment entered into after June 30, 1999. The
Company is currently evaluating Interpretation No. 43 to determine the impact
it will have on its financial statements.

                                      -12-

<PAGE>


ITEM 3:  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

         INTEREST RATE MARKET RISK - The Company has fixed income investments
consisting of cash equivalents, short-term investments in U.S. government debt
instruments, certificates of deposit and commercial paper.

         Interest income earned on the Company's investment portfolio is
affected by changes in the general level of U.S. interest rates. The Company
believes that it is not exposed to significant changes in fair value because
such investments are classified as available-for-sale and held-to-maturity and
are recorded at amortized cost. The fair value of each investment approximates
its amortized cost, and long-term securities have maturities of less than two
years.

         The following table provides information about the Company's risk
exposure associated with changing interest rates. Currently, the Company does
not use derivative financial instruments to manage its interest rate risk.

<TABLE>
<CAPTION>

                                                                                 EXPECTED MATURITY
                                                                              (In thousands of dollars)
                                           ---------------------------------------------------------------------------------------
                                                                                                                          Market
                                                                                                                        Value at
                                                                                                                        June 30,
                                            1999     2000      2001     2002     2003    Thereafter       Total         1999 (1)
                                            ----     ----      ----     ----     ----    ----------       -----         --------
<S>                                        <C>      <C>       <C>      <C>      <C>      <C>            <C>             <C>
Long-term Debt:
 Fixed rate                                $   30                                        $1,259,304 (2) $1,259,334 (2)  $1,209,726
  Average interest rate                      10.0%                                           12.275%
 Variable rate                             $6,189   $17,122   $19,733  $20,427  $21,295  $   17,087     $  101,853
  Average interest rate (LIBOR plus)         3.38%     3.26%     3.28%    3.33%    3.34%       3.15%

Capital Leases:
 Fixed rate                                $3,161   $ 5,501   $ 2,272  $ 1,833  $ 1,863  $    8,960     $   23,590
  Average interest rate                     12.36%    12.36%    12.36%   12.36%   12.36%      12.36%

Redeemable Preferred Stock:
 Fixed rate                                                                              $  112,000     $  112,000
  Average interest rate                                                                       11.88%

</TABLE>


(1)  Based on quoted market prices at June 30, 1999
(2)  Includes $224.3 million of unaccreted discount


         MARKET PRICE RISK - The Company's risk exposure associated with market
price is limitied to its long-term debt that is publicly traded. Such debt is
recorded at book value, which could vary from current market prices.

         FOREIGN CURRENCY MARKET RISK - Although the Company conducts some
business in Canada, the international operations were not material to the
Company's consolidated financial position. Accordingly, the Company was not
subject to material foreign currency exchange rate risk from the effects that
exchange rate movements of foreign currencies would have on the Company's future
costs or on future cash flows it would receive.


                                      -13-

<PAGE>


                           PART II: OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

GST AND GST TELECOM  V. GLOBAL LIGHT TELECOMMUNICATIONS, INC., ET AL.

         On October 20, 1998, GST and GST Telecom, Inc. ("GST Telecom")
(collectively, the "GST Companies") filed a complaint in the Superior Court
of California, County of Santa Clara, No. CV777408, against GST Global
Telecommunications, Inc., now known as Global Light Telecommunications, Inc.
("Global") and six former GST officers and directors. The complaint includes
claims for fraud, negligent misrepresentation, unjust enrichment, and unfair
competition primarily related to the alleged misappropriation of a Mexican
business opportunity. The complaint seeks an accounting, a constructive
trust, and restitution of the GST Companies' interest in the opportunity and
also seeks unspecified exemplary and punitive damages and reimbursement of
attorneys' fees.

         In particular, the complaint alleges that Global and the individual
defendants misappropriated the GST Companies' joint venture interest in
Bestel, the owner of a 2,270 kilometer fiber optic telecommunications network
in Mexico. The lawsuit alleges that the individual defendants caused the GST
Companies' 49% interest in Bestel to be transferred to Global, then a shell
corporation in which the individuals, had secretly invested. No written
agreement validated the transfer. The GST Companies therefore seek return of
the asset and monetary compensation to remedy the loss arising from the
wrongful transfer.

         On December 23, 1998, the defendants filed a motion to stay or dismiss
the action on grounds of inconvenient forum. The Superior Court granted the
defendants' motion to stay the proceedings on February 5, 1999, and
the GST Companies filed a notice of appeal on February 9, 1999.

         On July 12, 1999, the GST Companies entered into a tentative
settlement with Global Light Telecommunications, W. Gordon Blankstein, Ian
Watson, and Peter E. Legault (the "Global Parties"). Pursuant to the terms of
that settlement, the Global Parties will dismiss with prejudice all claims
asserted against GST, its affiliates, officers and directors, and the GST
Companies will dismiss with prejudice all claims against the Global Parties
with the exception of the claims asserted in GST v. Gordon Blankstein, et al.
relating to the allegedly wrongful release of escrowed shares. In
consideration of the GST Companies' dismissals, the Global Parties will pay
the GST Companies the sum of US$27 million on September 15, 1999.
Additionally, if the average closing price of Global Light Telecommunications
stock on the American Stock Exchange for the twenty trading days preceding
September 15, 1999, equals or exceeds US$10 per share, the Global parties
shall, on September 15, 1999, make an additional payment of US$3 million.

         The settlement agreement is subject to the preparation and execution of
customary settlement agreements, regulatory approvals, and the funding and
payment of the settlement amount by the Global Parties.

WARTA V. GST, GST USA AND GST TELECOM AND COUNTERCLAIMS

         On January 25, 1999, John Warta filed a complaint in the Superior
Court of Washington, King County, No. 99-2-02287-4SEA, against GST, GST USA,
Inc. ("GST USA"), and GST Telecom (collectively, the "GST Companies"). The
complaint, which relates to the circumstances under which Mr. Warta ceased to
serve as an officer and director of the GST Companies, includes claims for
breach of employment

                                      -14-

<PAGE>


agreement, breach of the covenant of good faith and fair dealing, violation
of wage statutes, and indemnity.

         On February 23, 1999, the GST Companies answered by denying all
liability and filed counterclaims against Mr. Warta, Global and five other
former officers and directors for liability with respect to the matters
leading to the termination of Mr. Warta's employment. In particular, the GST
Companies seek recovery under Washington law for breaches committed with
respect to the wrongful use of the GST Companies' funds for the purchase of
telecommunications licenses by Mr. Warta through companies he owns and other
matters.

         See "GST and GST Telecom v. Global Light Telecommunications, Inc.,
et al." for a discussion of a tentative settlement as it relates to the
counterclaims against Global and Messrs. Blankstein, Watson and Legault.

GST V. SANDER

         On February 9, 1999, GST filed a complaint in the Superior Court for
the State of Washington, Clark County, No. 99-2-00573-6, against Clifford
Sander, the former treasurer of GST. The complaint, which is based on Mr.
Sander's alleged misconduct as an officer of GST, includes claims for fraud,
breach of fiduciary duty, unjust enrichment, and unfair business practices,
and seeks an accounting, imposition of a constructive trust, compensatory
damages, costs of suit, attorneys' fees, and treble damages. In particular,
the complaint seeks relief based on Mr. Sander's misuse of insider
information in the purchase of stock, wrongful disbursements to third
parties, and involvement in a fraudulent release of stock from escrow to
three former directors and/or officers of GST. Mr. Sander has not yet
responded to the complaint. On May 5, 1999, the court transferred this action
to King County, Superior Court in Seattle.

GLOBAL AND MEXTEL V. GST AND GST TELECOM

         On January 27, 1999, Global and GST Mextel, Inc. ("Mextel") filed a
complaint in the Supreme Court of British Columbia, No. C990449, against GST
and GST Telecom (collectively, the "GST Companies"). The complaint, which
arises from the same matters for which GST and GST Telecom brought suit
against Global et al. in the Superior Court of California, includes claims
for declaratory and injunctive relief to confirm the ownership of the Mexican
business opportunity by Global, and

                                      -15-

<PAGE>


unspecified general and special damages. In particular, Global seeks a
declaration from the court that it is entitled to retain the equity interest
in Bestel, or at least a judicial determination of the amount Global owes the
GST Companies.  The GST Companies have denied all liability and have asserted
counterclaims for damages and for a constructive trust in the Bestel
opportunity.

         See "GST and GST Telecom v. Global Light Telecommunications, Inc., et
al." for a discussion of a tentative settlement.

IRWIN ET AL. V. GST ET AL.

         On January 28, 1999, Messrs. Stephen Irwin, Robert Hanson, Peter
Legault, Clifford Sander, and John Warta, all former GST officers or
directors, filed a complaint in the Supreme Court of British Columbia, No.
C990488, against GST, GST Telecom, and four current GST directors
(collectively, the "GST Parties"). The complaint, which arises from the same
matters for which GST and GST Telecom brought suit against Global et al. in
the Superior Court of California, includes claims for oppression and
declaratory relief, and seeks unspecified actual and punitive damages, cost,
and attorneys' fees. In particular, the plaintiffs have asked the court to
declare that the plaintiffs may retain the Global stock they purchased while
fiduciaries of GST and seek to have the Canadian court enjoin the GST Parties
from pursuing its claims against them. The GST Parties  will vigorously
dispute the allegations in the complaint.

         See "GST and GST Telecom v. Global Light Telecommunications, Inc., et
al." for a discussion of a tentative settlement as it relates to Mr. Legault
and the GST Parties.

GST V. GORDON BLANKSTEIN, ET AL

         On June 4, 1999, GST commenced an action in the Supreme Court of
British Columbia, No. C992879, against Gordon Blankstein, Robert Blankstein, Ian
Watson and Clifford Sander seeking a constructive trust over the proceeds of
750,000 shares of GST stock wrongfully removed from an escrow account by Messrs.
Blankstein, Blankstein and Watson, with the assistance of Mr. Sander. The
defendants have not responded yet to the lawsuit.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)  Exhibits

              Exhibit 27       Financial Data Schedule

         (b)  Reports on Form 8-K

              None.


                                      -16-

<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: AUGUST 16, 1999       GST TELECOMMUNICATIONS, INC.
                                  (Registrant)


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


                                      -17-