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, 1998

                                       OR

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

For the transition period from _____________ to ________________________________

                         Commission file number 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)


        4001 MAIN STREET, VANCOUVER, WA                      98663
        -------------------------------                   ------------
(Address of Principal Executive Offices)                   (Zip Code)

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

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

                  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
11, 1998, there were outstanding 36,075,758 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 Sheets - June 30,
               1998 (unaudited) and December 31, 1997                       3

               Consolidated Condensed Statements of Operations
               - Three Months Ended June 30, 1998 and
               1997 and Six Months Ended June 30, 1998 and 1997
               (unaudited)                                                  4

               Consolidated Condensed Statements of Cash Flows
               - Six Months Ended June 30, 1998 and 1997
               (unaudited)                                                  5

               Notes to Consolidated Condensed Financial
               Statements (unaudited)                                     6-7


ITEM 2.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS                       8-12


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

                           PART II: OTHER INFORMATION

ITEM 2.        CHANGES IN SECURITIES                                       13

ITEM 5.        OTHER INFORMATION                                           13

ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K                            13

SIGNATURES                                                                 14


                                      -2-
<PAGE>
                          GST TELECOMMUNICATIONS, INC.
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                 JUNE 30, 1998 (UNAUDITED) AND DECEMBER 31, 1997
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                                   June 30, 1998                December 31, 1997 (1)
                                                               -----------------               ----------------------
ASSETS
<S>                                                                <C>                            <C>      
     Current assets:
       Cash and cash equivalents                                   $ 176,692                      $ 199,053
       Restricted cash and investments                                32,888                         31,731
       Accounts receivable, net                                       24,188                         27,324
       Investments                                                        55                          7,619
       Prepaid expenses and other current assets                      13,510                         16,539
                                                               --------------                 --------------
            Total current assets                                     247,333                        282,266
                                                               --------------                 --------------

     Restricted investments                                          348,195                        112,719
     Property, plant and equipment                                   529,568                        433,680
       less accumulated depreciation                                 (37,770)                       (26,785)
                                                               --------------                 --------------
                                                                     491,798                        406,895

     Other assets                                                    159,512                        117,908
       less accumulated amortization                                 (27,759)                       (21,614)
                                                               --------------                 --------------
                                                                     131,753                         96,294

                                                                 $ 1,219,079                      $ 898,174
                                                               ==============                 ==============
LIABILITIES AND SHAREHOLDERS' DEFICIT
     Current liabilities:
       Accounts payable                                             $ 25,990                       $ 14,798
       Accrued liabilities                                            29,806                         30,869
       Current portion of capital lease obligations                    5,201                          6,286
       Current portion of long term debt                               5,992                          4,579
       Other current liabilities                                         478                            993
                                                               -------------                  -------------
            Total current liabilities                                 67,467                         57,525
                                                               -------------                  -------------

     Other liabilities                                                11,466                          3,551
     Capital lease obligations, less current portion                  18,430                         13,994
     Long term debt, less current portion                          1,081,335                        763,292

     Minority interest in subsidiaries                                     -                         12,732

     Preference shares                                                58,088                         54,635

     Shareholders' deficit:
       Common shares                                                 237,649                        221,105
       Commitment to issue shares                                          -                            604
       Deficit                                                      (255,356)                      (229,264)
                                                               -------------                  -------------
            Total shareholders' deficit                              (17,707)                        (7,555)
                                                               -------------                  -------------

                                                                 $ 1,219,079                      $ 898,174
                                                               =============                  =============
</TABLE>

(1)    The  information  in this column was derived from the  Company's  audited
       financial statements as of December 31, 1997.

           See notes to consolidated condensed financial statements.

                                      -3-
<PAGE>
                          GST TELECOMMUNICATIONS, INC.
                 CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                Three Months                               Six Months
                                                               Ended June 30,                            Ended June 30,
                                                   -----------------------------------      ----------------------------------

                                                         1998              1997                      1998              1997
                                                      --------          ---------               ------------     -------------
Revenue:
<S>                                                   <C>                <C>                       <C>              <C>     
      Telecommunication and other services            $ 38,493           $ 20,682                  $ 67,673         $ 40,301
      Telecommunication products                         1,034              6,333                     1,898           11,406
                                                   -----------          ---------               -----------     -------------
                                                        39,527             27,015                    69,571           51,707
                                                   -----------          ---------               -----------     -------------
Operating costs and expenses:
      Network expenses                                  26,025             15,593                    47,153           32,522
      Facilities administration and maintenance          3,701              3,388                     7,656            6,508
      Cost of product revenues                             707              1,873                     1,397            3,736
      Selling, general and administrative               24,651             18,772                    45,061           34,163
      Research and development                               -                713                         -            1,329
      Depreciation and amortization                     11,075              5,663                    19,744           10,144
                                                   -----------          ---------              ------------     -------------
                                                        66,159             46,002                   121,011           88,402
                                                   -----------          ---------              ------------     -------------

 Loss from operations                                  (26,632)           (18,987)                  (51,440)         (36,695)
                                                   -----------          ---------              ------------     -------------
Other expenses (income):
      Interest income                                   (6,793)            (2,000)                  (11,728)          (2,538)
      Interest expense                                  25,250             10,503                    46,525           15,887
      Other                                                492                271                   (60,145)          (6,657)
                                                   -----------          ---------              ------------     -------------
                                                        18,949              8,774                   (25,348)           6,692
                                                   -----------          ---------              ------------     -------------
Loss before income taxes
      and minority interest                            (45,581)           (27,761)                  (26,092)         (43,387)
                                                   -----------          ---------              ------------     -------------

      Income taxes                                           -               (729)                        -             (847)
      Minority interest in income of subsidiaries            -               (404)                        -             (444)
                                                   -----------          ---------              ------------     -------------
                                                             -             (1,133)                        -           (1,291)
Net loss                                             $ (45,581)         $ (28,894)                $ (26,092)       $ (44,678)
                                                   ===========          =========              ============     =============
Net loss per common and common
      equivalent share (1)                             $ (1.36)           $ (1.27)                  $ (0.83)         $ (1.94)
                                                   ===========         ==========              ============     =============
Weighted average common and common
      equivalent shares outstanding                 35,966,492         25,164,628                35,606,617       24,577,047
                                                   ===========         ==========              ============     =============
</TABLE>

(1)    Net loss per share is increased for preference shares' accretion totaling
       $3,453 and $2,969 for the three and six-month periods ended June 30, 1998
       and 1997, respectively.

       See notes to consolidated condensed financial statements.

                                      -4-
<PAGE>
                          GST TELECOMMUNICATIONS, INC.
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                              Six Months
                                                                            Ended June 30,
                                                                        1998             1997
                                                                   ----------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                       <C>              <C>       
Net loss                                                                  $(26,092)        $ (44,678)
Adjustments to reconcile net loss to net cash used
in operating activities:
  Minority interest in income of subsidiary                                      -               444
  Depreciation and amortization                                             22,717            10,992
  Accretion of interest                                                     18,120             9,692
  Stock compensation                                                         1,213               381
  Equity in loss of affiliate                                                  593               773
  Loss on disposal of assets                                                    56                 -
  Gain on sale of subsidiary shares                                        (61,292)           (7,424)

Changes in non-cash operating working capital:
  Accounts receivable                                                       (6,574)           (4,804)
  Prepaids expenses and other current assets                                 1,051            (5,030)
  Accounts payable and accrued liabilities                                  (6,719)            6,579
  Other liabilities                                                          8,383              (457)
                                                                   ------------------     -----------

Net cash used in operating activities                                      (48,544)          (33,532)

CASH FLOWS FROM INVESTING ACTIVITIES
 Acquisition of subsidiaries, net of cash acquired                         (35,471)             (892)
 Proceeds from sale of investments                                             318                 -
 Purchase of investments                                                         -            (3,065)
 Purchase of fixed assets                                                  (80,458)          (99,636)
 Purchase of other assets                                                   (1,991)           (2,980)
 Proceeds from sale of subsidiary shares, net                               85,074            27,365
 Cash disposed of in sale of subsidiary                                     (5,252)                -
 Proceeds from the sale of fixed assets                                      3,584             5,774
 Change in investments restricted for fixed asset purchases               (254,335)         (110,203)
                                                                   ------------------     -----------
Net cash used in investing activities                                     (288,531)         (183,637)

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from long term debt                                             299,874           288,138
  Principal payments on long term debt and capital leases                   (5,819)           (3,837)
  Issuance of common shares, net                                            15,832            13,463
  Issuance of preferred shares                                                   -            48,679
  Deferred financing costs                                                 (12,876)           (9,739)
  Change in investments restricted to finance interest payments             17,703           (94,548)
                                                                   ------------------     -----------
Net cash provided by financing activities                                  314,714           242,156
                                                                   ------------------     -----------

Net increase (decrease) in cash and cash equivalents                       (22,361)           24,987
Cash and cash equivalents at beginning of period                           199,053            13,363
                                                                   ------------------     -----------
Cash and cash equivalents at end of period                                $176,692          $ 38,350
                                                                   ==================     ===========
</TABLE>

            See notes to consolidated condensed financial statements.

                                      -5-
<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.  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 three months ended December 31, 1997, as included
in the Company's  Transition  Report on Form 10-K for the three month transition
period ended December 31, 1997.

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 stock and convertible  securities.  Common stock
equivalents were antidilutive for all periods presented and were not included in
diluted weighted average common and common equivalent shares outstanding.

3.       SHAREHOLDERS' EQUITY

         Shares issued and outstanding are as follows:

                                       JUNE 30, 1998        DECEMBER 31, 1997
                                       -------------        -----------------

         Common shares, no par value     35,991,787             34,564,898

         Unlimited number of
         common shares authorized

4.       SUPPLEMENTAL CASH FLOW INFORMATION

                                                  SIX MONTHS
                                                ENDED JUNE 30,
                                             -----------------------

                                              1998              1997
                                              ----              ----
     Cash Transactions:
       Cash paid for interest                27,461            1,802
       Cash paid for income taxes                 -               62


                                      -6-
<PAGE>
     Non-Cash Transactions:
       Recorded in business combinations:
            Assets                           45,719           12,151
            Liabilities                       7,900            3,990
            Common shares                     2,348            8,161

        Disposition of subsidiary:
            Assets                           35,480                -
            Liabilities                       4,218                -
            Minority interest                12,732                -

        Assets acquired through capital
           leases                             6,043           15,052

        Amounts in accounts payable and
        accrued liabilities for the
        purchase of fixed assets at
        period end                           23,770           10,988

5.       DISPOSAL OF SUBSIDIARY

         In February 1998,  the Company  completed the sale of its remaining 63%
interest in NACT  Telecommunications,  Inc.  for net  proceeds of  approximately
$85.0 million and recorded a gain of approximately $61.3 million on such sale.

6.       ADOPTION OF NEW ACCOUNTING STANDARD

         The Company  has  adopted the  provisions  of  Statement  of  Financial
Accounting  Standards ("SFAS") No. 130,  "Reporting  Comprehensive  Income." The
objective  of SFAS No. 130 is to report all  changes in equity  that result from
transactions  and  economic  events  other than from  transactions  with owners.
Comprehensive  income is the total of net income and all other non-owner changes
in equity. There was no effect from the adoption of SFAS No. 130.

7.       RECENT DEVELOPMENTS

         In April 1998,  the  Company  acquired  ICON  Communications  Corp.,  a
switch-based  reseller of long distance and local  services  located in Seattle,
Washington, for $23.8 million in cash.

         In May  1998,  the  Company  completed  a private  placement  of $500.0
million  principal amount at maturity of 10.5% senior secured discount notes due
2008 (the "1998 Notes").  The 1998 Notes will fully accrete to face value on May
1, 2003.  From and after May 1, 2003, the 1998 Notes will bear  interest,  which
will be payable in cash, at a rate of 10.5% per annum on each May 1 and November
1, commencing November 1, 2003. The net proceeds from the sale of the 1998 Notes
of   approximately   $288.9   million  are   restricted   for  the  purchase  of
telecommunications equipment and network infrastructure.

                                      -7-

<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 business
customers located in California, Hawaii and other western continental states. As
a  facilities-based  competitive  local exchange carrier  ("CLEC"),  the Company
operates state-of-the-art,  digital telecommunications  networks that provide an
alternative  to incumbent  local exchange  carriers.  The Company's full line of
products,  which offer a "one-stop"  solution to  customers'  telecommunications
services requirements,  include local dial tone, long distance,  Internet,  data
transmission and private line services.

         The Company's  digital networks  currently serve 41 markets in Arizona,
California, Hawaii, Idaho, New Mexico, Oregon, Texas and Washington. The Company
also constructs, markets and manages longhaul fiber optic facilities in Arizona,
California and Hawaii. The Company's  longhaul fiber optic facilities  currently
extend  over  1,300  miles  and  approximately   1,800  route  miles  are  under
construction and expected to become operational over the next 12 months.

         Management  believes  that  the  formation  of an  integrated  regional
network through the  interconnection of the Company's  individual  networks with
the longhaul fiber optic  facilities  will provide  significant  competitive and
economic  advantages.  In  addition  to  providing  the  Company  with a  larger
addressable market, the interconnection of its networks is expected to allow the
Company  to carry a portion  of its  intra-regional  telecommunications  traffic
on-net,  thereby  improving  operational  margins by reducing  payments to other
carriers for use of their  facilities.  In addition,  increasing demand for high
bandwidth  capacity has created  opportunities  for the Company to sell or lease
capacity on its network to other communications carriers.

         The  Company  plans  to build  specific  network  segments  or to lease
capacity as economically  justified and as the demands of its customers warrant.
Management  believes that pursuing the "smart-build"  approach should permit the
Company to provide for ongoing  capital  expenditures  on a "success  basis" and
allow the  Company to build its  customer  base  through an  increased  focus on
sales, marketing and operations support systems. "Smart-builds" also provide the
Company  with the  ability  to  address  attractive  service  areas  selectively
throughout its targeted markets.

RESULTS OF OPERATIONS

         REVENUES. Total revenues for the three and six month periods ended June
30,  1998  increased  $12.5  million,  or 46.3%,  and $17.9  million,  or 34.5%,
respectively,  over the  comparable  three and six month  periods ended June 30,
1997. Telecommunications and other services revenues for the three and six month
periods  ended  June 30,  1998  increased  $17.8  million,  or 86.1%,  and $27.4
million,  or 67.9%,  respectively,  over the comparable  periods in the previous
year. The increase in  telecommunications  and other services  revenues resulted
primarily  from strategic  acquisitions,  including the  acquisitions  of Action
Telcom  Co.  ("Action  Telcom")  in May  1997,  the Guam  operations  of  Sprint
Corporation in October 1997, and ICON  Communications,  Corp.  ("ICON") in April

                                      -8-

<PAGE>
1998,  and from  increased  local  service  revenue  generated by the  Company's
networks.  To a lesser  extent,  the  increase in  telecommunications  and other
services  revenues  resulted from  increased  long  distance,  Internet and data
services and from  revenues  generated by the sale of network  conduit  systems.
Telecommunications  products  revenues for the three and six month periods ended
June 30, 1998  decreased  $5.3 million,  or 83.7%,  and $9.5 million,  or 83.4%,
respectively, over the three and six months ended June 30, 1997. The decrease in
product  revenues  resulted  from the sale of the Company's 63% interest in NACT
Telecommunications, Inc. ("NACT").

         OPERATING  EXPENSES.  Total  operating  expenses  for the three and six
month periods ended June 30, 1998 increased $20.2 million,  or 43.8%,  and $32.6
million, or 36.9%, respectively, over the three and six month periods ended June
30, 1997. Network expenses, which include direct local and long distance circuit
costs,  were  67.6% and 69.7%,  respectively,  of  telecommunications  and other
services  revenues  for the three and six month  periods  ended  June 30,  1998,
compared to 75.4% and 80.7% for the comparable periods in the previous year. The
decrease  in network  expenses  as a  percentage  of revenue  resulted  from the
inclusion  of  strategic  acquisitions  and an increase in revenues  for traffic
carried on the Company's network as a percentage of total telecommunications and
other services revenues.  Facilities administration and maintenance expenses for
the  three and six  month  periods  ended  June 30,  1998  were 9.6% and  11.3%,
respectively,  of  telecommunications  and other services  revenues  compared to
16.4% and 16.1% for the  comparable  periods  ended June 30,  1997.  The primary
reason for the decrease in these expenses as a percent of telecommunications and
other   services   revenues  is  the  inclusion  of  revenues   from   strategic
acquisitions,  substantially  all of which are not  generated  on the  Company's
networks.

         Cost of product  revenues  decreased $1.2 million,  or 62.3%,  and $2.3
million, or 62.6%, respectively, over the three and six month periods ended June
30,  1997.  For the three  and six month  periods  ended  June 30,  1998 cost of
product  revenues  were 68.4% and  73.6%,  respectively,  of  telecommunications
products revenues,  compared to 29.6% and 32.8% for the comparable periods ended
June 30, 1997. The decrease in the dollar amount of cost of product revenues and
the increase in cost of product  revenues as a percent of product sales resulted
from the sale of NACT.  Research and development costs reported in the three and
six month periods ended June 30, 1997 were related to activities at NACT.

         Selling,  general  and  administrative  expenses  for the three and six
month periods ended June 30, 1998  increased $5.9 million,  or 31.3%,  and $10.9
million,  or 31.9%,  respectively,  over the three and six months ended June 30,
1997.  The increase is due to the expansion of the  Company's  CLEC and enhanced
services  operations,  which has resulted in  additional  marketing,  management
information and sales staff, and to selling, general and administrative expenses
related to strategic  acquisitions.  As a percentage of total revenue,  selling,
general and  administrative  expenses for the three and six month  periods ended
June 30,  1998 were 62.4% and 64.8%,  respectively,  compared to 69.5% and 66.1%
for the comparable periods ended June 30, 1997.

         Depreciation and amortization for the three and six month periods ended
June 30, 1998  increased $5.4 million and $9.6 million,  respectively,  over the
comparable  periods 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  acquisitions.  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 28.0% and 28.4% of total revenue for the three and
six  month  periods  ended  June 30,  1998  compared  to 21.0% and 19.6% for the
comparable periods ended June 30, 1997.


                                      -9-
<PAGE>
         OTHER  EXPENSES/INCOME.  For the three and six  months  ended  June 30,
1998,  the Company  recorded  net other  expense of $18.9  million and net other
income of $25.3  million,  respectively,  compared to net other  expense of $9.9
million and $8.0 million for the comparable periods ended June 30, 1997. For the
three month period ended June 30, 1998,  the primary  reason for the increase in
net other expenses as compared to the same period in 1997 was increased interest
expense resulting from the issuance in November 1997 of $144.0 million in senior
subordinated accrual notes (the "Accrual Notes") and the issuance in May 1998 of
$500.0 million  principal  amount at maturity of senior  secured  discount notes
(the "1998  Notes").  For the six month period  ended June 30,  1998,  net other
income includes a $61.3 million gain resulting from the sale of NACT.

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.

         The Company's net cash used in operating and investing  activities  was
$337.1  million and $217.2  million  for the six months  ended June 30, 1998 and
1997,  respectively.  Net cash provided by financing  activities from borrowings
and equity  issuances to fund capital  expenditures,  acquisitions and operating
losses was $314.7  million and $242.2  million for the six months ended June 30,
1998 and 1997, respectively.

         Capital  expenditures  for the six months  ended June 30, 1998 and 1997
were $97.5  million and $110.4  million,  respectively.  The  Company  estimates
capital  expenditures  for fiscal  1998 and fiscal  1999 of  approximately  $325
million and $300 million,  respectively.  The majority of these  expenditures is
expected to be made for the  construction  of network and  longhaul  fiber optic
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.

         In addition to the Company's capital  expenditures,  in March 1998, the
Company  acquired KLP, Inc. (d/b/a Call America),  a  Phoenix-based  reseller of
long distance,  for approximately $3.8 million in cash and the business of Whole
Earth  Networks,  LLC, a San  Francisco-based  Internet  service  provider,  for
approximately $9.0 million in cash and the assumption of certain liabilities. In
April 1998, the Company acquired ICON, a switch-based  reseller of long distance
and local services located in Seattle, for approximately $23.8 million in cash.

         In May  1998,  the  Company  completed  a private  placement  of $500.0
million  principal  amount at maturity  of the 1998  Notes.  The 1998 Notes will
fully  accrete  to face value on May 1,  2003.  From and after May 1, 2003,  the
notes will bear interest,  which will be payable in cash, at a rate of 10.5% per
annum on each  May 1 and  November  1,  commencing  November  1,  2003.  The net
proceeds  from the sale of the 1998 Notes of  approximately  $288.9  million are
restricted  for  the  purchase  of  telecommunications   equipment  and  network
infrastructure.  The  indenture  related to the 1998 Notes,  and the  indentures


                                      -10-
<PAGE>
associated with previously issued notes,  include  restrictive  covenants which,
among other items,  limit or restrict  additional  indebtedness  incurred by the
Company, investment in certain subsidiaries,  the sale of assets and the payment
of dividends.

         At June 30, 1998,  the Company had  approximately  $1,111.0  million of
indebtedness  outstanding and $58.1 million of mandatorily redeemable preference
shares.  In  addition,  as of June 30,  1998,  the Company had $30.5  million of
availability  under a credit  facility  with  Tomen  America  Inc.  (the  "Tomen
Facility")  and  $107.4  million of  availability  under a loan  agreement  with
Siemens Telecom Networks (the "Siemens Loan Agreement").  Although the Company's
liquidity was  substantially  improved as a result of proceeds received from the
sale of senior and convertible  notes in December 1995 (collectively,  the "1995
Notes"), the sale of senior secured notes in May 1997 (the "Secured Notes"), the
Accrual Notes and the 1998 Notes, the Company will have significant debt service
obligations.  The  Company  will be  required  to make  principal  and  interest
payments of  approximately  $30.6  million (of which $17.6  million will be made
from funds  securing the Secured  Notes),  $64.6 million (of which $35.1 million
will be made from funds  securing the Secured  Notes),  $67.6  million (of which
$17.6  million  will be made from funds  securing  the  Secured  Notes),  $116.3
million and $114.7 million in the remainder of 1998 and in 1999,  2000, 2001 and
2002,  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 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,  1998,  the  Company  had  cash,  cash  equivalents,  and
investments,  including restricted cash and investments, of approximately $557.8
million.  The Company believes that the amounts on hand and borrowings  expected
to be available  under the Tomen Facility and the Siemens Loan  Agreement,  will
provide  sufficient  funds for the Company to expand its  business as  presently
planned and to fund its operating expenses through October 1999. 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,  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 (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 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.

                                      -11-
<PAGE>

YEAR 2000 PROGRAM

         Many  computer  systems will  experience  difficulty  processing  dates
beyond  the year  1999  and will  need to be  modified  prior to the year  2000.
Failure  to  make  such  modifications   could  result  in  system  failures  or
miscalculations causing disruptions of operations,  including among other things
an inability to process transactions, send invoices or engage in normal business
activities.  The  Company's  core  internal  systems  that  have  been  recently
implemented  are year 2000  compliant.  The remaining core internal  systems are
scheduled  to be replaced by the second  quarter of 1999 and are  expected to be
year 2000 compliant when installed. The Company is also completing a preliminary
assessment of year 2000 issues not related to its core systems, including issues
surrounding  systems that interface  with those  operated by unrelated  parties.
Based on its initial  evaluation,  the Company does not believe that the cost of
remedial actions will have a material adverse effect on the Company's results of
operations and financial  condition.  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.

NEW ACCOUNTING PRONOUNCEMENTS

         In April 1998, the American  Institute of Certified Public  Accountants
issued Statement of Position 98-5, REPORTING ON THE COSTS OF START-UP ACTIVITIES
(SOP 98-5).  SOP 98-5 requires that costs incurred during  start-up  activities,
including  organization  costs,  be  expensed as  incurred  and that  previously
capitalized  costs related to such activities be expensed as a cumulative effect
of a change in accounting  principle upon  adoption.  The Company will adopt the
provisions of SOP 98-5 at the beginning of 1999 and has not yet  determined  the
effect that such adoption will have on its future results of operations.


                                      -12-
<PAGE>
                           PART II: OTHER INFORMATION


ITEM 2.     CHANGES IN SECURITIES

         1. On June 19,  1998,  the  Registrant  issued an  aggregate  of 26,064
Common Shares to four individuals as an installment payment in consideration for
the  Registrant's   acquisition  in  September  1996  of  Tri-Star   Residential
Communications Corp.

            There were no  underwriters  involved in the  foregoing  issuance of
equity securities and such issuance was exempt from  registration  under Section
4(2) of the Securities Act of 1933, as amended,  as transactions not involving a
public offering.

ITEM 5.     OTHER INFORMATION

            In  accordance  with recent  amendments to the proxy rules under the
Securities Exchange Act of 1934, as amended,  the Registrant's  shareholders are
notified  that the deadline for providing  the  Registrant  timely notice of any
shareholder  proposal  to be  submitted  outside of the Rule 14a-8  process  for
consideration  at the Registrant's  1999 Annual Meeting of Shareholders  will be
December 15, 1998.  As to all such matters as to which the  Registrant  does not
have notice on or prior to December 15, 1998,  discretionary  authority shall be
granted to the  designated  persons in the  Registrant's  proxy for such  Annual
Meeting.

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

       (a)  Exhibits

            Exhibit 27                    Financial Data Schedule

       (b)  Reports on Form 8-K

            On May 4,  1998,  the  Registrant  reported  on Form 8-K in "Item 5.
Other  Events," the  completion of a private  placement by GST Network  Funding,
Inc., an indirect  wholly-owned  subsidiary of the  Registrant,  of $500 million
principal amount at maturity of senior secured discount notes.

            On June 15, 1998,  the  Registrant  reported on Form 8-K in "Item 5.
Other Events," the retirement of John Warta,  formerly the Chairman of the Board
and Chief Executive Officer of the Registrant.


                                      -13-
<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 13, 1998                    GST TELECOMMUNICATIONS, INC.
                                         (Registrant)




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


                                      -14-