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 DECEMBER 31, 1996

                                       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 333-8807

                          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)


4317 NE THURSTON WAY, VANCOUVER, WA                        98662
----------------------------------------                 ----------
(Address of Principal Executive Offices)                 (Zip Code)

Registrant's Telephone Number, Including Area Code: (360) 254-4700

                                       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 January
24, 1997, there were outstanding 23,658,331 Common Shares, without par value, of
the Registrant.
<PAGE>

                          GST TELECOMMUNICATIONS, INC.
                          ----------------------------

                                      INDEX

                                                                         PAGE(S)

                          PART I: FINANCIAL INFORMATION

ITEM 1.  Financial Statements:

         Consolidated Condensed Balance Sheet - December 31,
         1996 (unaudited) and September 30, 1995...............................2

         Consolidated Statements of Operations and
         Deficit- Three Months Ended December 31, 1996
         and 1995 (unaudited)..................................................3

         Consolidated Statements of Cash Flows - Three
         Months Ended December 31, 1996 and 1995 (unaudited)...................4

         Notes to Consolidated Condensed Financial
         Statements (unaudited)..............................................5-8

ITEM 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations................................9-12

                           PART II: OTHER INFORMATION

ITEM 1.  Legal Proceedings....................................................13

ITEM 6.  Exhibits and Reports on Form 8-K..................................13-14

SIGNATURES....................................................................15
<PAGE>

Part 1.  Financial Information

                          GST TELECOMMUNICATIONS, INC.
                      CONSOLIDATED CONDENSED BALANCE SHEET
              DECEMBER 31, 1996 (UNAUDITED) AND SEPTEMBER 30, 1996
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                    DECEMBER 31, 1996     SEPTEMBER 30, 1996(1)
                                                                                    -----------------     ---------------------
<S>                                                                                   <C>                     <C>
ASSETS
  Current assets
   Cash and cash equivalents                                                         $  13,363                $  61,343
   Restricted cash                                                                      11,112                   16,000
   Accounts receivable, net                                                             13,413                    9,472
   Investments                                                                            --                      5,176
   Inventories                                                                           2,626                    2,406
   Prepaid expenses and other current assets                                            10,202                    6,151
                                                                                     ---------                ---------

    Total current assets                                                                50,716                  100,548
                                                                                     ---------                ---------

  Property, plant and equipment, net                                                   185,961                  127,575
  Other assets, net                                                                     75,069                   73,578
                                                                                     ---------                ---------

                                                                                     $ 311,746                $ 301,701
                                                                                     =========                =========

LIABILITIES AND SHAREHOLDERS' EQUITY
  Current liabilities
   Accounts payable                                                                   $  19,374                $  12,443
   Accrued liabilities                                                                   10,299                   26,743
   Current portion of capital lease obligations                                             723                      722
   Current portion of long term debt                                                      3,415                    4,832
   Other current liabilities                                                               563                      726
                                                                                     ---------                ---------

    Total current liabilities                                                           34,374                   45,466
                                                                                     ---------                ---------

  Deferred compensation                                                                    158                      158
  Capital lease obligation, less current portion                                         1,733                    1,453
  Long term debt, less current portion                                                 264,864                  232,674

  Minority interest in subsidiaries                                                        229                      182
                                                                                     ---------                ---------

  Shareholders' equity
   Common shares                                                                        93,607                   72,647
   Commitment to issue shares                                                           15,748                   25,454
   Deficit                                                                             (98,967)                 (76,333)
                                                                                     ---------                ---------

    Total shareholders' equity                                                          10,388                   21,768
                                                                                     ---------                ---------

                                                                                     $ 311,746                $ 301,701
                                                                                     =========                =========
</TABLE>
(1)      The  information in this column was derived from the Company's  audited
         financial statements as of September 30, 1996.


                                       -2-
<PAGE>
                          GST TELECOMMUNICATIONS, INC.
                 CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
                     DECEMBER 31, 1996 AND 1995 (UNAUDITED)
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                                      Three Months
                                                                                                   Ended December 31,
                                                                                         -------------------------------------------

                                                                                                1996                     1995
                                                                                         -------------------       -----------------
<S>                                                                                         <C>                        <C>         
Revenue:

  Telecommunication services                                                                $     18,437               $      4,534
  Telecommunication products                                                                       4,780                      1,985
                                                                                            ------------               ------------

                                                                                                  23,217                      6,519
                                                                                            ------------               ------------
Operating costs and expenses:

  Network expenses                                                                                15,728                      4,225
  Facilities administration and maintenance                                                        3,325                      1,341
  Cost of product revenues                                                                         1,821                        805
  Selling, general and administrative                                                             15,232                      4,482
  Research and development                                                                           410                        283
  Depreciation and amortization                                                                    4,689                      1,320
                                                                                            ------------               ------------

                                                                                                  41,205                     12,456
                                                                                            ------------               ------------

 Loss from operations                                                                            (17,988)                    (5,937)
                                                                                            ------------               ------------

Other expenses (income)

  Interest income                                                                                   (839)                      (269)
  Interest expense                                                                                 5,434                      1,727
  Loss from joint venture                                                                           --                          228
  Other                                                                                              104                        (10)
                                                                                            ------------               ------------

                                                                                                   4,699                      1,676
                                                                                            ------------               ------------

Loss before income taxes
 and minority interest                                                                           (22,687)                    (7,613)
                                                                                            ------------               ------------


  Minority interest in loss of subsidiaries                                                           53                        175
                                                                                            ------------               ------------

Net loss                                                                                    $    (22,634)              $     (7,438)
                                                                                            ============               ============


Net loss per common and common equivalent share                                             $      (1.02)              $      (0.41)
                                                                                            ============               ============


Weighted average common and common equivalent
shares outstanding                                                                            22,237,008                 18,038,314
                                                                                            ============               ============

</TABLE>


                                       -3-
<PAGE>

                          GST TELECOMMUNICATIONS, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
               DECEMBER 31, 1996 AND DECEMBER 31, 1995 (UNAUDITED)
                                 (IN THOUSANDS)

                                                               Three Months
                                                            Ended December 31,
                                                         ----------------------

                                                           1996          1995
                                                         ---------    ---------
CASH FLOWS FROM OPERATING ACTIVITIES

Net loss                                                 $ (22,634)   $  (7,438)
Items not involving cash:
  Minority interest in loss of subsidiaries                    (53)        (175)
  Loss on investments                                           23          228
  Accretion of interest                                      6,743        1,016
  Amortization and depreciation                              5,078        1,411
  Stock compensation                                            65         --
  Issuance of stock for financing commitments                 --            396
Changes in non-cash operating working capital:
  Receivables                                               (3,653)         346
  Inventory                                                   (220)        (214)
  Prepaid expenses and other                                   (34)         (96)
  Accounts payable and accrued liabilities                    (881)        (861)
  Deferred revenue                                              87          (83)
                                                         ---------    ---------

NET CASH USED IN OPERATING ACTIVITIES                      (15,479)      (5,470)

CASH FLOWS FROM INVESTING ACTIVITIES
Sale of marketable securities                                5,176          218
Acquisition of subsidiaries, net of cash acquired             (672)        --
Acquisition of property and equipment                      (62,554)      (8,091)
Purchase of other assets                                    (9,171)        (897)
                                                         ---------    ---------

NET CASH USED IN INVESTING ACTIVITIES                      (67,221)      (8,770)

CASH FLOWS FROM FINANCING ACTIVITIES
Advances on notes receivable                                  --           (159)
Issuance of special warrants                                 9,690         --
Issuance of common shares                                    1,499          287
Deferred financing costs                                      (253)      (7,928)
Principal payments on capital leases                          (245)        --
Principal payments on long term debt                        (2,683)        --
Proceeds from long term debt                                26,712      180,773
                                                         ---------    ---------

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES                 34,720      172,973
                                                         ---------    ---------

NET INCREASE IN CASH AND CASH EQUIVALENTS                  (47,980)     158,733
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD                                                      61,343        6,024
                                                         ---------    ---------

CASH AND CASH EQUIVALENTS AT END OF PERIOD               $  13,363    $ 164,757
                                                         =========    =========


                                       -4-
<PAGE>

                          GST TELECOMMUNICATIONS, INC.
              NOTES TO CONSOLIDATED CONDENSED 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. These financial statements
should be read in conjunction with the Company's audited consolidated financial
statements for the year ended September 30, 1996, as included in the Company's
Annual Report on Form 10-K.

2.       NET LOSS PER COMMON AND COMMON EQUIVALENT SHARE

         Net loss per common and common equivalent share is computed using the
weighted average number of common and dilutive common equivalent shares assumed
to be outstanding during the period. Common equivalent shares consist of options
and warrants to purchase common shares.

3.       INVENTORIES

         Inventories, net of reserves, stated at the lower of cost or market
consist of:

                                         December 31, 1996    September 30, 1996
                                         -----------------    ------------------

Raw Material                                    $  498               $  378
Work in Progress                                   273                  346
Finished Goods                                   1,855                1,682
                                         -----------------    ------------------
                                                                 
         Total Inventories                      $2,626               $2,406
                                         =================    ==================

4.       SHAREHOLDERS' EQUITY

         Shares authorized and outstanding are as follows:

                                         December 31, 1996    September 30, 1996
                                         -----------------    ------------------

Common Shares, no par                        23,353,337            21,257,697
value
Unlimited number of
common shares authorized


5.       SUPPLEMENTAL CASH FLOW INFORMATION

         As a result of acquisition discussed in note 6, the Company recorded
$3,837 in assets and $379 in liabilities during the quarter ended December 31,
1996. The company purchased $524 in assets via capital leases during the three
months ended December 31, 1996. Accounts payable and accrued liabilities include
$12,396 in fixed asset purchases at December 31, 1996.

6.       RECENT DEVELOPMENTS

         During the first quarter, the Company acquired the 50% of Phoenix Fiber
Access, Inc. not owned by the Company for $2,094 in cash.


                                       -5-
<PAGE>

7.
GST USA, INC. (1)
CONSOLIDATED CONDENSED BALANCE SHEET
DECEMBER 31, 1996 (UNAUDITED) AND SEPTEMBER 30, 1996
(IN THOUSANDS)
(STATED IN U.S. DOLLARS)


                                                   December 31,    September 30,
                                                        1996           1996
                                                   ------------    -------------

Assets

Current assets                                     $  37,197        $  77,506

Non-current asset                                    229,772          168,882
                                                   ---------        ---------

   Total Assets                                    $ 266,969        $ 246,388
                                                   =========        =========

Liabilities and stockholders' equity

Current liabilities                                $  42,489        $  34,286

Non-current liabilities                              242,336          210,243

Minority interest                                        229              182
                                                   ---------        ---------

   Total liabilities                                 285,054          244,711
                                                   ---------        ---------

   Total shareholders' equity                        (18,085)           1,677
                                                   ---------        ---------

   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY      $ 266,969        $ 246,388
                                                   =========        =========


(1) GST USA, Inc. ("GUS") is a wholly-owned subsidiary of the Company. The
summarized financial information of GUS is for the three months ended December
31, 1996 and the comparable 1995 period. The total outstanding indebtedness of
GUS includes its senior discount notes with an accreted value of $ 183.8 million
as of December 31, 1996, which the Company fully and unconditionally has
guaranteed. Separate financial statements and other disclosures concerning GUS
are not presented because management has determined that such information is not
materially different than the information already provided.


                                       -6-
<PAGE>

GST USA, INC.
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995 (UNAUDITED)
(IN THOUSANDS)
(STATED IN U.S. DOLLARS)

                                                             Three Months
                                                          Ended December 31,
                                                     ---------------------------

                                                       1996              1995
                                                     --------          --------

Revenue                                              $ 15,161          $  6,519

Operating costs and expenses                         $ 31,952          $ 12,089
                                                     --------          --------

  Loss from operations                               $(16,801)         $ (5,570)

Other expenses                                       $  2,964          $  1,160
                                                     --------          --------

Net loss                                             $(19,765)         $ (6,730)
                                                     ========          ========


                                       -7-
<PAGE>

GST USA, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995 (UNAUDITED)
(IN THOUSANDS)
(STATED IN U.S. DOLLARS)

                                                              Three Months
                                                           Ended December 31,
                                                        ------------------------

                                                           1996          1995
                                                        ---------     ---------

Cash used in operations                                 $ (15,172)    $  (5,658)

Cash used in investing                                    (63,755)       (6,841)

Cash provided by financing                                 40,503       153,652
                                                        ---------     ---------

Increase in cash and cash equivalents                     (38,424)      141,153

Cash and cash equivalents, beginning of period             41,420         3,894
                                                        ---------     ---------

Cash and cash equivalents, end of period                $   2,996     $ 145,047
                                                        =========     =========


                                       -8-
<PAGE>

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

         The following management's discussion and analysis of financial
condition and results of operations contains forward looking statements that
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward looking statements as a
result of certain factors discussed herein.

OVERVIEW

         GST Telecommunications, Inc. (the "Company") provides a broad range of
integrated telecommunications products and services, primarily to customers
located in the western continental United States and Hawaii. Since inception as
a facilities-based competitive access provider ("CAP"), the Company has
constructed and operated state- of-the-art, digital telecommunications networks
that provide an alternative to incumbent local exchange carriers. The Company
has expanded beyond the scope of traditional CAP operations into competitive
local exchange carrier ("CLEC") services and currently provides, through its
established sales channels, a range of enhanced telecommunications services that
include long distance, internet access and data services. In addition, the
Company provides switched access and recently began to provide local dial tone
services to complement its existing telecommunications service offerings. The
Company also provides advanced telecommunications switching platforms with
integrated applications software and network telemanagement capabilities through
its wholly owned subsidiary, NACT Telecommunications, Inc. ("NACT").

         The Company's fiber optic networks currently serve 18 cities in
Arizona, California, Hawaii, New Mexico and Washington and its digital microwave
network serves four of the Hawaiian Islands. In addition, the Company has 20
networks under construction and two networks in development, thereby expanding
its regional footprint to include Idaho, Oregon, Texas and Utah.

         The Telecommunications Act of 1996 and several state regulatory
initiatives have substantially changed the telecommunications regulatory
environment in the United States. As a result of these regulatory changes, the
Company is permitted in certain states to provide local dial tone in addition to
its existing telecommunications service offerings. Management believes that the
Company has an opportunity to leverage its network infrastructure and service
capabilities to expand the Company's addressable market and to improve its
opportunity to participate, on a regional basis, in both the local and long
distance telecommunications markets in the United States. In order to capitalize
on these opportunities, the Company has accelerated the development and
construction of additional networks within its region. In addition, to
facilitate the provision of local services, the Company has deployed nine high
capacity digital switches, one of which is operational and the balance of which
are expected to be operational in the first half of 1997. The Company intends to
deploy an additional five such switches in the first half of 1997, all of which
are expected to be operational by the third quarter of 1997.

RESULTS OF OPERATIONS

         REVENUES. Total revenues for the three months ended December 31, 1996
increased $16.7 million to $23.2 million from $6.5 million for the three months
ended December 31, 1995. Telecommunications services revenues for the three
months ended December 31, 1996 increased $13.9 million to $18.4 million from
$4.5 million for the comparable period in the previous year. The increase in
telecommunications services revenues resulted from the inclusion of revenues
from strategic acquisitions, including Call America Business Communications
Corporation and affiliated companies and TotalNet Communications, Inc., as well
as increased CLEC service revenues generated by the Company's networks. To a
lesser extent, the increase in telecommunications services revenues resulted
from increased Internet, shared tenant and data services. Telecommunications
products revenues for the three months ended December 31, 1996 increased $2.8
million to $4.8 million from $2.0 million for the three months ended December
31, 1995. The increase in telecommunication products revenues resulted from
increased unit sales of NACT's STX switch.


                                       -9-
<PAGE>

         OPERATING EXPENSES. Total operating expenses for the three months ended
December 31, 1996 increased $28.7 million to $41.2 million from $12.5 million
for the three months ended December 31, 1995. Network expenses, which include
direct local and long distance circuit costs, increased $11.5 million to $15.7
million for the three months ended December 31, 1996 from $4.2 million for the
comparable period in the previous year. As a percentage of telecommunications
services revenues, network expenses decreased from 93.2% for the three months
ended December 31, 1995 to 85.3% for the three months ended December 31, 1996.
Facilities administration and maintenance expenses for the three months ended
December 31, 1996 increased $2.0 million to $3.3 million from $1.3 million for
the three months ended December 31, 1995. The increase relates to additional
personnel and facility costs associated with network expansion. As a percentage
of telecommunication services revenues, facilities administration and
maintenance expense decreased from 29.6% for the three months ended December 31,
1995 to 18.0% for the three months ended December 31, 1996. The decrease results
from the expansion of the Company's customer base over the past year.

         Cost of product revenues at NACT for the three months ended December
31, 1996 increased $1 million to $1.8 million from $.8 million for the three
months ended December 31, 1995. As a percentage of telecommunications products
revenues, cost of product revenues decreased from 40.6% to 38.1% for the same
periods. The decrease results from increased unit sales and the resultant
economies of scale. Research and development costs at NACT increased from $283
for the three months ended December 31, 1995 to $410 for the three months ended
December 31, 1996. The increase is primarily due to the addition of personnel to
enhance the current switch product line and to facilitate the development of new
switching products.

         Selling, general and administrative expenses for the three months ended
December 31, 1996 increased $10.7 million to $15.2 million from $4.5 million for
the three months ended December 31, 1995. The increase is primarily due to the
expansion of the Company's CLEC and enhanced services operations and the
acquisition of three long distance companies, an Internet service provider and a
provider of shared tenant services during the fiscal year ended September 30,
1996 ("Fiscal 1996"). The implementation of the Company's integrated services
strategy has resulted in additional marketing, management information and sales
staff dedicated to network expansion and increased service offerings.

         Depreciation and amortization for the three months ended December 31,
1996 increased $3.4 million to $4.7 million from $1.3 million for the comparable
period in the previous year. The increase is attributable to newly-constructed
networks becoming operational and to the amortization of intangible assets
related to the Company's Fiscal 1996 acquisitions. The Company expects that
depreciation will continue to increase as it expands its networks and provides
switched services.

         OTHER EXPENSES. Other expenses for the three months ended December 31,
1996 increased $3.0 million to $4.7 million from $1.7 million for the three
months ended December 31, 1995. The increase is principally the result of
additional interest expense associated with the December 1995 debt offering. The
increase was partially offset by the interest income resulting from the
investment of the proceeds of such offering.

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, and
that cash provided by operations will not be sufficient to fund the expansion of
its networks and services. The Company has financed, and expects to continue to
finance, its capital expenditures, acquisitions and working capital requirements
primarily through the sale of equity and debt securities.

         Net cash provided by financing activities from borrowings and equity
issuances to fund capital expenditures, acquisitions and operating losses was
$34.7 million and $173.0 million for the three month periods ended December


                                      -10-
<PAGE>

31, 1996 and 1995, respectively. The Company's net cash used in operating and
investment activities was $82.7 million and $14.2 million for the three month
periods ended December 31, 1996 and 1995, respectively.

         Capital expenditures for the three months ended December 31, 1996 and
1995 were $58.0 million and $8.1 million, respectively. The Company estimates
capital expenditures of in excess of $350 million for the 1997 and 1998 fiscal
years. The actual amount and timing of such expenditures will be dependent upon
a number of factors, including the availability of equity and debt financing,
customer demand, the ability to conclude interconnection agreements and the
regulatory environment. These expenditures will be utilized for the expansion,
development and construction of the Company's networks, the acquisition and
deployment of switches and related equipment to facilitate the offering of
advanced telecommunications services and internal management systems. Continued
significant capital expenditures are expected to be made thereafter. In
addition, the Company expects to continue to incur increasing operating losses
while it expands its business and builds its customer base. Actual capital
expenditures and operating losses will depend on numerous factors beyond the
Company's control, including the nature of future expansion and acquisition
opportunities, economic conditions, competition, regulatory developments and the
availability of capital.

         The Company completed a $180 million debt offering in December 1995,
consisting of $160 million in senior discount notes and $20 million in
convertible senior subordinated discount notes (collectively, the "1995 Notes").
The net proceeds from the issuance of the 1995 Notes, $171.3 million, are being
used to fund network development, capital expenditures and working capital
requirements. The indentures governing the 1995 Notes include restrictive
covenants which, among other items, limit or restrict additional indebtedness
incurred by the Company, investment in certain subsidiaries and the payment of
dividends.

         In October 1994, the Company and Tomen entered into agreements (the
"Tomen Facility") pursuant to which Tomen agreed to make available up to a total
of $100 million of financing, on a project-by-project basis, for the
construction and development of network projects. Tomen has a right of first
refusal to finance each network project up to the limit of the facility. To
date, Tomen has provided, or agreed to provide, $34.5 million in debt financing
under the Tomen Facility for the Company's network projects in Southern
California, Tucson and Albuquerque.] Furthermore, Tomen has purchased 1,324,074
common shares of the Company, without par value (the "Common Shares"), and holds
warrants to purchase 296,155 additional Common Shares. In November 1996 Tomen
agreed in principle to provide the Company with $41 million of additional
financing under the Tomen Facility for the Hawaiian inter-island network and
terrestrial fiber optic facilities and in connection with such financing will
purchase additional Common Shares and warrants to purchase 75,000 additional
Common Shares.

         In October 1996 the Company completed a private placement to non-U.S.
investors of two million special warrants (the "Special Warrants"). Each Special
Warrant is exercisable for one Common Share and one-half of an underlying
warrant. Each full underlying warrant entitles the holder to purchase one
additional Common Share for a purchase price of $13.00 for one year from the
date of issuance. The Special Warrants become exercisable by the holders for no
additional consideration upon the receipt of approval of the Canadian prospectus
(the "Canadian Prospectus") from the securities commission of each of the
Canadian provinces where the Special Warrants were sold, but in any event, no
later than September 22, 1997. In the event that the requisite regulatory
approvals for the Canadian Prospectus are not received by the Company by
February 19, 1997, then each Special Warrant will become exercisable for 1.1
Common Shares and one-half of one underlying warrant. The Company received $9.7
million in net proceeds in October 1996 and the remaining $11.1 million in net
proceeds in January 1997.

         In September 1996, the Company entered into a loan agreement with
Siemens Stromberg-Carlson ("Siemens") that provides for loans by Siemens of up
to an aggregate of $226 million to finance the purchase of Siemens equipment and
certain equipment from other suppliers. $116 million of such loan proceeds is
presently available to the Company. The Company may seek to obtain the balance
of such proceeds on an as-needed basis, subject to the negotiation and execution
of mutually satisfactory documentation. In December 1996, the Company entered
into an agreement with Northern Telecom Finance Company ("NTFC"), which provides
for $50 million of equipment


                                      -11-
<PAGE>

financing to finance the purchase of equipment and products from Northern
Telecom, Inc. As of December 31, 1996, the Company has borrowed $26 million
pursuant to the NTFC agreement.

         The Company proposes to incur significant additional indebtedness to
purchase telecommunications equipment such as switches and fiber optic cable and
to finance related design, development, construction, installation and
integration costs. The Company may make public and private offerings of its debt
and equity securities and may negotiate additional credit facilities.

         At December 31, 1996, the Company had cash, cash equivalents,
restricted cash and investments of $24.5 million, compared to $82.5 million at
September 30, 1996. Management believes that the cash on hand, the proceeds from
the Special Warrants offering, the expected proceeds of approximately $10
million from the public offering of NACT's common stock whereby the Company and
NACT will sell one million and two million shares respectively, of NACT's common
stock, borrowings expected to be available under the Tomen Facility, the NTFC
agreement and the Siemens agreement and currently contemplated offerings of the
Company's debt and equity securities will provide sufficient funds for the
Company to expand its business as presently planned and to fund its operating
expenses through December 31, 1997. Thereafter, the Company expects to acquire
additional financing. In the event that the Company's plans or assumptions
change or prove to be inaccurate, or its 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 sooner than currently anticipated. There can be no assurance that the
Tomen Facility, the currently contemplated offerings of debt and equity
securities or other 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 in 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 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 a facility will be available to the Company
in the future or that if such a facility were available, that it would be
available on terms and conditions acceptable to the Company.

         Although the Company's liquidity substantially improved as a result of
the 1995 Notes offering because the 1995 Notes do not require the payment of
cash interest prior to June 2001 and the 1995 Notes do not require payment of
principal until maturity in 2005, a portion of the indebtedness under the Tomen
Facility will, and a portion of the equipment financing may, mature prior to
2005. Accordingly, the Company may need to refinance a substantial amount of
indebtedness. In addition, the Company anticipates that cash flow from
operations may be insufficient to repay the 1995 Notes in full at maturity and
that such notes may need to be refinanced. There can be no assurance that the
Company will be able to improve its earnings before fixed charges or that the
Company will be able to meet its debt service obligations, including its
obligations under the Tomen Facility, the 1995 Notes or equipment financing.
Because the Company does not currently have a revolving credit facility, if a
shortfall occurs, alternative financing would be necessary in order for the
Company to meet its liquidity requirements and there can be no assurance that
such financing would be available. In such event, the Company could face
substantial liquidity problems. The ability of the Company to meets its
obligations and 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, including factors
beyond the control of the Company.


                                      -12-
<PAGE>

                           Part II. Other Information

Item 1.  LEGAL PROCEEDINGS

         Reference is made to ITEM 3. LEGAL PROCEEDINGS of the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 1996, and to the
descriptions therein of an action commenced by GST Tucson Lightwave, Inc. ("GST
Tucson") against the City of Tucson in the Superior Court of Arizona, County of
Pima (the "State Proceeding") and a second action commenced by GST Tucson
against the City of Tucson in the United States District Court for the District
of Arizona (the "Federal Proceeding"). In the State Proceeding, the Arizona
Court of Appeals affirmed the Superior Court's ruling denying GST Tucson the
relief sought in respect of its City of Tucson fiber optic communications
license. GST Tucson may appeal to the Arizona Supreme Court. In the Federal
Proceeding, the United States District Court dismissed GST Tucson's action. GST
Tucson filed a Notice of Appeal to the United States Court of Appeals for the
Ninth Circuit on January 16, 1997.

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

*10(a)   1996 Stock Option Plan of the Company, as amended to date.
*10(b)   1996 Senior Executive Officer Stock Option Plan of the Company.
*10(c)   1996 Senior Operating Officer Stock Option Plan of the Company.
*10(d)   Loan and  Security  Agreement  dated  as of  September  4,  1996 by and
         between Siemens  Stromberg-Carlson  ("Siemens") and GST Switchco,  Inc.
         ("GST Switchco").
*10(e)   Unconditional  Continuing Guaranty dated as of September 4, 1996 by and
         between Siemens and GST USA, Inc.
*10(f)   Unconditional  Limited Guaranty Agreement dated as of December 19, 1996
         made by GST USA, Inc., in favor of NTFC Capital Corporation.
*27      Financial Data Schedule.

----------------------
*        Filed herewith.

(b)  Reports on Form 8-K

         The Company filed a Current Report on Form 8-K dated October 31, 1996
reporting under Item 2 thereof the acquisition by merger of TotalNet and under
Item 5 thereof the Special Warrant offering.


                                      -13-
<PAGE>

                                  EXHIBIT INDEX

EXHIBIT

*10(a)   1996 Stock Option Plan of the Company, as amended to date.
*10(b)   1996 Senior Executive Officer Stock Option Plan of the Company.
*10(c)   1996 Senior Operating Officer Stock Option Plan of the Company.
*10(d)   Loan and  Security  Agreement  dated  as of  September  4,  1996 by and
         between Siemens  Stromberg-Carlson  ("Siemens") and GST Switchco,  Inc.
         ("GST Switchco").
*10(e)   Unconditional  Continuing Guaranty dated as of September 4, 1996 by and
         between Siemens and GST USA, Inc.
*10(f)   Unconditional  Limited Guaranty Agreement dated as of December 19, 1996
         made by GST USA, Inc., in favor of NTFC Capital Corporation.
*27      Financial Data Schedule.

----------------------
*        Filed herewith.


                                      -14-
<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.

                                             GST TELECOMMUNICATIONS, INC.
                                             (Registrant)

                                             /s/Robert H. Hanson
                                             ---------------------------------
                                             Robert H. Hanson,
                                             (Senior Vice President and Chief
                                             Financial Officer)

                                             /s/Clifford V. Sander
                                             ---------------------------------
                                             Clifford V. Sander
                                             (Senior Vice President, Treasurer
                                             and Chief Accounting Officer)

Date:  February 14, 1997


                                      -15-