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, 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 333-50049

                               DTI Holdings, Inc.
             (Exact name of registrant as specified in its charter)

               Missouri                               43-1828147
    (State or other jurisdiction of     (I.R.S. Employer Identification Number)
    incorporation or organization)

       8112 Maryland Ave, 4th Floor
          St. Louis, Missouri                            63105
(Address of principal executive office)               (Zip Code)

Registrant's telephone number, including area code:  (314) 880-1000

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by  Sections  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  [_]

As of February 11, 1999,  30,000,000  shares of the  Registrant's  common stock,
$.01 par value, were issued and outstanding.



<PAGE>

                               DTI HOLDINGS, INC.

                                    FORM 10-Q

                                December 31, 1998

                                TABLE OF CONTENTS

                                                                          Page

PART I     FINANCIAL INFORMATION

Item 1.    Financial Statements

           Condensed Consolidated Balance Sheets at June 30, 1998
            and December 31, 1998 (Unaudited)                               1

           Condensed Consolidated Statements of Operations for 
            the Three and Six Months Ended December 31, 1997 
            and 1998 (Unaudited)                                            2

           Condensed Consolidated Statements of Cash Flows for 
            the Six Months Ended December 31, 1997 and 1998 
            (Unaudited)                                                     3

           Notes to Condensed Consolidated Financial Statements
            (Unaudited)                                                   4 - 5

Item 2.    Management's Discussion and Analysis of Financial 
           Condition and Results of Operations                           6 - 10

Item 3:    Quantitative and Qualitative Disclosures About Market
           Risk                                                            10


PART II    OTHER INFORMATION

Item 6.    Exhibits and Reports on Form 8-K                                11

Signatures
Exhibit Index

<PAGE>


Part I:   FINANCIAL INFORMATION
Item 1.  Financial Statements

<TABLE>
<CAPTION>

                        DTI HOLDINGS, INC. AND SUBSIDIARY

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)
<S>                                                                 <C>               <C>
                                                                      June 30,        December 31,
                                                                        1998              1998
                                                                    ------------      ------------
Assets                                                            
Current assets:                                                        
  Cash and cash equivalents.....................................    $251,057,274      $225,500,478
  Trade accounts receivable, net................................         501,612           189,185
  Other receivables.............................................            --             211,828
  Prepaid and other current assets..............................          69,635           451,929
                                                                    ------------      ------------
       Total current assets.....................................     251,628,521       226,353,420
Property and equipment, net.....................................      77,771,527       123,489,489
Deferred financing costs, net of amortization of $509,869
       and $1,327,422...........................................      10,028,558         9,736,120
Deferred tax asset..............................................       3,234,331         3,234,331
Other assets....................................................         202,223            64,633
                                                                    ------------      ------------
       Total....................................................    $342,865,160      $362,877,993
                                                                    ============      ============
Liabilities and stockholders' equity                                                       
Current liabilities:                                                                       
  Accounts payable..............................................     $ 4,722,418      $ 13,193,567
  Vendor financing..............................................            --           1,282,485
  Taxes payable (other than income taxes).......................       1,830,668         1,596,368
  Other current liabilities.....................................          83,605           506,611
                                                                    ------------      ------------
        Total current liabilities................................      6,636,691        16,579,031
Deferred revenues...............................................      16,814,488        19,343,923
Senior discount notes, net of unamortized discount of  
   $9,465,882 and $8,716,240                                         277,455,859       295,555,199
Vendor financing................................................            --           1,282,484
Other long-term liabilities.....................................            --             228,869
                                                                    ------------      ------------
       Total liabilities........................................     300,907,038       332,989,506
                                                                    ------------      ------------
Commitments and contingencies                                               --                --
Stockholders' equity:
  Preferred stock, $.01 par value, 20,000 shares
      authorized, no shares issued and outstanding..............            --                --
  Convertible series A preferred stock, $.01 par value,
      (aggregate liquidation preference of $45,000,000)
      30,000 shares authorized, issued and outstanding..........             300               300
  Common stock, $.01 par value, 100,000,000 shares
      authorized, 30,000,000 shares issued and
      outstanding...............................................         300,000           300,000
  Additional paid-in capital....................................      44,013,063        44,213,063
  Common stock warrants                                               10,421,336        10,421,336
  Unearned compensation.........................................            --             (90,910)
  Accumulated deficit...........................................     (12,776,577)     ( 24,955,302)
                                                                    ------------      ------------
           Total stockholders' equity...........................      41,958,122        29,888,487
                                                                    ------------      ------------
Total...........................................................    $342,865,160      $362,877,993
                                                                    ============      ============
</TABLE>
            See notes to condensed consolidated financial statements.

                                       1
<PAGE>



<TABLE>
<CAPTION>

                        DTI HOLDINGS, INC. AND SUBSIDIARY

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

                                                              For the Three Months Ended          For the Six Months Ended
                                                                      December 31                        December 31,
                                                                1997            1998              1997               1998
                                                             -----------     ------------     ------------      -------------
<S>                                                          <C>             <C>              <C>               <C>    
  REVENUES:                                                 
  Telecommunications services:
    Carrier's carrier services.........................      $  426,523      $ 1,626,946      $   744,185       $  3,251,478
    End-user services..................................         139,926          103,486          274,346            218,603
                                                             ----------      -----------      -----------       ------------
       Total revenues..................................         566,449        1,730,432        1,018,531          3,470,081
                                                             ----------      -----------      -----------       ------------
  OPERATING EXPENSES:                                                                                     
    Telecommunications services........................         225,566        1,002,707          409,372          1,995,351
    Selling, general and administrative................         944,056        1,463,268        1,598,136          2,999,806
    Depreciation and amortization......................         468,950          809,000          830,700          1,501,000
                                                             ----------      -----------      -----------       ------------
       Total operating expenses........................       1,638,572        3,274,975        2,838,208          6,496,157
                                                             ----------      -----------      -----------       ------------
  LOSS FROM OPERATIONS.................................      (1,072,123)      (1,544,543)      (1,819,677)        (3,026,076)

  OTHER INCOME (EXPENSES):                                                                                
    Interest income....................................          67,869        2,960,830          120,146          6,304,340
    Interest expense...................................            --         (7,705,422)              --        (15,456,989)
                                                             ----------      -----------      -----------       ------------
       Loss before income tax benefit..................      (1,004,254)      (6,289,135)      (1,699,531)       (12,178,725)

  INCOME TAX BENEFIT...................................         402,000             --            680,000               --
                                                             ----------      -----------      -----------       ------------
  NET LOSS.............................................      $ (602,254)     $(6,289,135)     $(1,019,531)      $(12,178,725)
                                                             ==========      ===========      ===========       ============
</TABLE>
            See notes to condensed consolidated financial statements.


                                       2
<PAGE>





<TABLE>

<CAPTION>

                        DTI HOLDINGS, INC. AND SUBSIDIARY

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

                                                                             Six Months Ended
                                                                                December 31,
<S>                                                                 <C>               <C> 
                                                                        1997               1998
                                                                    ------------      -------------

Cash flows provided by operating activities:
  Net loss......................................................    $(1,019,531)      $(12,178,725)
  Adjustments to reconcile net loss to cash provided
     by operating activities:                                           830,700          1,501,000
       Depreciation and amortization............................
       Accretion of senior discount notes.......................           --           14,592,346
       Amortization of deferred financing costs.................           --              817,615
       Deferred income taxes....................................       (680,000)
       Amortization of unearned compensation....................           --              109,090
       Other noncash items......................................           --               45,534
       Changes in assets and liabilities:                                           
          Trade accounts receivable.............................     (1,330,458)          (111,229)
          Other assets..........................................       (232,502)           (32,876)
          Accounts payable......................................        958,853          8,471,149
          Other liabilities.....................................        (20,949)           606,341
          Taxes payable (other than income taxes)...............        808,654           (234,300)
          Deferred revenues.....................................      4,631,269          2,529,435
                                                                    -----------       ------------
Net cash flows provided by operating activities.................      3,946,036         16,115,380
                                                                    -----------       ------------
Cash flows from investing activities:                                               
  Increase in network and equipment.............................    (21,926,768)       (41,146,999)
                                                                    -----------       ------------
Net cash used in investing activities...........................    (21,926,768)       (41,146,999)
                                                                    -----------       ------------
Cash flows from financing activities:
  Proceeds from issuance of redeemable convertible
     Preferred stock............................................     17,250,000               --
  Deferred financing costs......................................           --             (525,177)
                                                                    -----------       ------------
Cash flows provided by (used in) financing activities...........     17,250,000           (525,177)
                                                                    -----------       ------------
Net decrease in cash and cash equivalents.......................       (730,732)       (25,556,796)
Cash and cash equivalents, beginning of period                        4,366,906        251,057,274
                                                                    -----------       ------------
Cash and cash equivalents, end of period........................    $ 3,636,174       $225,500,478
                                                                    ===========       ============
Noncash investing and financing activities:
  Interest capitalized to fixed assets..........................    $      --         $  3,506,994
                                                                    ===========       ============
  Fixed assets acquired through vendor financing................    $      --         $  2,564,969
                                                                    ===========       ============

</TABLE>
            See notes to condensed consolidated financial statements.


                                       3

<PAGE>

DTI Holdings, inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------


1.    PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial  information and with the  instructions to Form 10-Q and Article 10-01
of Regulation S-X.  Accordingly,  they do not include all of the information and
notes  required  by  generally  accepted  accounting   principles  for  complete
financial statements.

In the opinion of the  management  of DTI  Holdings,  Inc. and  subsidiary  (the
"Company" or "DTI") the accompanying  unaudited condensed consolidated financial
statements contain all adjustments  (consisting of normal recurring adjustments)
considered  necessary to present fairly the Company's financial  information for
the  interim  periods  presented  and have  been  prepared  in  accordance  with
generally accepted accounting principles.  The interim results of operations are
not necessarily indicative of results that may be expected for any other interim
period or for the full year.

The  financial  statements  should  be  read in  conjunction  with  the  audited
consolidated  financial statements and notes thereto for the year ended June 30,
1998 included in the Company's  Form 10-K filed with the Securities and Exchange
Commission.  Accordingly,  note disclosures which would substantially  duplicate
the disclosures in the audited financial statements have been omitted.

2.    COMMITMENTS AND CONTINGENCIES

On June 20, 1995,  the Company and its  President  were named as defendants in a
suit in which the plaintiff  alleges that (i) the plaintiff entered into an oral
contract  with the  defendants  pursuant to which the plaintiff was to receive a
percentage of the Company's common stock,  (ii) the plaintiff  provided services
to the Company for which the  plaintiff was not and should be  compensated,  and
(iii) the defendants  misrepresented  certain facts to the plaintiff in order to
induce him to loan money and provide services to the defendants.  Based on these
allegations,  the  plaintiff  is suing for breach of  contract  and fraud and is
seeking actual monetary damages, punitive damages and a percentage of the common
stock of the Company.  Management  believes the  plaintiff's  claims are without
merit and  intends  to  vigorously  defend the  claims.  It is not  possible  to
determine what impact,  if any, the outcome of this litigation might have on the
financial condition,  results of operations or cash flows of the Company at this
time. The President has agreed  personally to indemnify the Company  against any
and all losses and damages  resulting  from any  judgments  and awards  rendered
against the Company in this litigation.  However, no guarantee can be made as to
the  ability to satisfy  all such  amounts.  The  President  has also  agreed to
indemnify  the holder of the  convertible  preferred  stock from such losses and
damages,  and has  pledged  his stock  ownership  in the  Company to secure such
obligation.

The  Company  has  received  notice  from a customer  that it intends to set off
against amounts  payable to the Company $15,000 per month,  which as of December
31, 1998 totaled approximately  $180,000 (in addition to $400,000 previously set
off  against  other  payments)  as damages  and  penalties  under the  Company's
contract  with that  customer  due to the failure by the Company to meet certain
construction  deadlines,  and such  customer  reserved  its rights to seek other
remedies under the contract.  The Company  believes that if such $180,000 setoff

                                       4
<PAGE>

were to be made, it would not be material to the Company's  business,  financial
position or results of operations.  The Company is behind  schedule with respect
to such contract as a result of such  customer's  not obtaining on behalf of the
Company  certain  rights-of-way  required  for  completion  of  certain  network
facilities,  and the Company's limitations on its financial and human resources,
particularly  prior to the Senior  Discount  Notes  Offering.  The  Company  has
obtained alternative rights-of-way and hired additional construction supervisory
personnel to accelerate the completion of such construction. Upon completion and
turn-up of services,  such customer is contractually required to pay the Company
a lump sum of  approximately  $3.8 million for the Company's  telecommunications
services over its network.

From  time to time the  Company  is named as a  defendant  in  routine  lawsuits
incidental  to its  business.  The Company  believes  that none of such  current
proceedings,  individually  or in the  aggregate,  will have a material  adverse
effect on the Company's financial position, results of operations or cash flows.

During  fiscal  1999,  the Company has made and will  continue to make  material
commitments related to the expansion of its network.

2.    VENDOR FINANCING AGREEMENT

On December 15, 1998, the Company entered into a vendor financing agreement with
its fiber optic cable vendor  allowing for  deferred  payment  terms for one and
two-year periods on qualifying cable purchases up to $15 million. Interest under
the  agreement  will accrue at a rate of LIBOR plus 2%. As of December 31, 1998,
total borrowings under this agreement were $2,564,969.

                                       5
<PAGE>



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


Results of Operations


Three and Six Months  Ended  December  31,  1997  Compared  to the Three and Six
Months Ended December 31, 1998

Revenue

Total revenue for the second quarter grew $1.2 million,  or 205%,  from $566,000
in fiscal 1998 to $1.7 million in fiscal 1999, totally attributable to increased
revenue from carrier's carrier services. Revenue from carrier's carrier services
was up  281%  principally  from  increased  sales  of  point-to-point  transport
business on the  Company's  completed  routes.  Total  revenue for the first six
months of the year  increased  241% over the first six months of fiscal 1998 due
to increased  carrier's carrier  services.  Subsequent to December 31, 1998, DTI
has completed or will soon complete its performance of several  one-year service
agreements  with one of its carrier  customers.  The  expiration  dates of these
service agreements range from February 1, 1999 to March 4, 1999. The anticipated
decline  of  monthly  recurring  revenues  related  to  these  expiring  service
agreements is  approximately  $170,000 and is partially offset by leased circuit
costs of approximately  $50,000 that the Company is incurring to provide some of
the services.


Operating Expenses

Telecommunications services expenses were up $777,000 from the second quarter of
fiscal 1999 over 1998.  For the first six months of fiscal 1999 compared to 1998
telecommunication  services increased $1.6 million.  These increases reflect the
growth  of  personnel   costs   related  to  the  building  of  the   management
infrastructure, as well as increased costs related to leased capacity to support
existing customers in areas not yet reached by the Company's network.

Selling, general and administrative expenses for the three months ended December
31, 1998 increased $519,000 over the same period in fiscal 1998 and were up $1.4
million for the  respective  six-month  periods.  The  increase is mainly due to
additional  administrative  and sales  personnel  and the expenses of supporting
these personnel.

Depreciation and  amortization  grew 73% from last year's second quarter and 81%
for the six month period due to increasing  amounts of the Company's fiber optic
network being placed into service in fiscal 1999.  Depreciation and amortization
will  continue to grow as the Company  continues to invest in capital  assets to
increase  network  capacity  and as  additional  network  routes are placed into
service.


Other Income (Expense)

Net other income  (expense)  for the second  quarter and the fiscal year to date
increased from net income of $68,000 and $120,000,  respectively, in fiscal 1998
to a net expense of $4.7 million and $9.2 million, respectively, in fiscal 1999.
This change is due to the issuance of the  Company's  Senior  Discount  Notes in

                                       6
<PAGE>

February 1998, which resulted in increased noncash interest  expense,  offset in
part by interest  income  earned on the portion of the proceeds  from the Senior
Discount Notes invested in short-term investment-grade securities.


Income Taxes

An income tax benefit of $402,000  and  $680,000  was recorded for the three and
six-month periods, respectively,  ended December 31, 1997 compared to no benefit
or provision in the comparable periods in fiscal 1999. Management believes it is
more likely than not that the deferred  income tax assets,  net of the valuation
allowance, will be realized based on current income tax laws and expectations of
future  taxable  income  stemming  from the  reversal of existing  deferred  tax
liabilities or ordinary  operations.  A valuation allowance is being provided to
reserve for  significant  deferred tax assets  generated from net operating loss
carryforwards  and the  nondeductible  interest expense related to the Company's
Senior Discount  Notes,  issued in February 1998, that may not be realizable due
to uncertainties  surrounding income tax law changes and future operating income
levels.


Liquidity and Capital Resources

As of  December  31,  1998,  the  Company  had  $225.5  million of cash and cash
equivalents. The decrease of $25.6 million for the six months ended December 31,
1998 was primarily due to expenditures  on the Company's  property and equipment
as the Company continues to expand its fiber optic network.

The net cash  provided by  operating  activities  was $16.1  million for the six
month period ended  December 31, 1998 compared to $3.9 million in the comparable
period in fiscal  1998,  primarily  as a result of cash  derived  from  interest
income  and an  increase  in  accounts  payable  associated  with the  continued
development of the Company's network.

Cash used in investing  activities  for the six month period ended  December 31,
1998 was $41.1 million  compared to $21.9 million for the  comparable  period of
fiscal 1998. The growth in investing activities reflects the purchase of network
and equipment to be used in the Company's operations.

Cash provided by (used in) financing  activities was $(525,000) in the first six
months of fiscal 1999, compared to $17.2 million from the issuance of redeemable
convertible  preferred stock in the first six months of fiscal 1998. The Company
did not enter into any new cash financing transactions in the first two quarters
of fiscal  1999.  However,  the  Company  has  entered  into a vendor  financing
agreement with its major fiber optic cable vendor allowing for deferred  payment
terms for one and  two-year  periods on  qualifying  cable  purchases  up to $15
million.

To achieve its business  plan, DTI will need  significant  financing to fund its
capital  expenditure,  working  capital and debt  service  requirements  and its
anticipated   future  operating   losses.   The  Company's   estimated   capital
requirements   primarily   include  the  estimated  cost  of  (i)   constructing
approximately half of the planned DTI network routes, (ii) purchasing, for cash,
fiber optic  facilities  pursuant to long-term  IRUs for planned routes that the
Company  will  neither   construct   nor  acquire   through   swaps  with  other
telecommunication  carriers,  and (iii) additional network expansion activities,
including the  construction of additional  local loops in secondary and tertiary
cities as network  traffic volume  increases.  The Company  estimates that total

                                       7
<PAGE>

capital expenditures  necessary to complete the DTI network will be in excess of
$800 million, of which the Company had expended $127 million, as of December 31,
1998.  During the balance of calendar 1999, the Company  anticipates its capital
expenditure  priorities  will be  focused  principally  on  expanding  from  its
existing  Missouri/Arkansas  base by  building  additional  regional  rings that
adjoin existing rings and those that initiate new rings in areas in which strong
carrier interest has been expressed.  The Company  anticipates that its existing
financial  resources will be adequate to fund the abovementioned  priorities and
its existing capital  commitments,  principally payments required under existing
IRU and short-term lease agreements,  totaling $119 million which are payable in
varying installments over the period through December 31, 1999. In addition, the
Company  has a  commitment  at December  31,  1998 for eight  telecommunications
switches  totaling  $15  million  which  is  cancelable  upon the  payment  of a
cancellation fee of $42,000 for each of the remaining unpurchased switches.  The
Company  also may  require  additional  capital in the future to fund  operating
deficits and net losses and for potential  strategic  alliances,  joint ventures
and acquisitions.  These activities could require significant additional capital
not included in the foregoing estimated capital requirements.

As of December 31, 1998,  DTI had $225.5  million of cash and cash  equivalents.
Such amount is expected to provide  sufficient  liquidity to meet the  Company's
operating  and capital  requirements  through  approximately  December 31, 1999.
Subsequent to such date,  DTI's operating and capital  requirements are expected
to be funded, in large part, out of additional debt or equity financing, advance
payments under IRUs,  wholesale  network  capacity  agreements and regional ring
service agreements, and available cash flow from operations, if any. The Company
is exploring  the  possibility  of an  additional  high yield debt  offering,  a
commercial  credit facility and equity sales,  but has no specific plans at this
time. The Company is in various stages of discussions  with potential  customers
for IRUs,  wholesale  network  capacity  agreements  and  regional  ring service
agreements.  There can be no assurance,  however, that the Company will continue
to obtain advance  payments from customers prior to commencing  construction of,
or obtaining IRUs for, planned routes,  that it will be able to obtain financing
under any credit  facility or that other sources of capital will be available on
a timely  basis or on terms that are  acceptable  to the  Company and within the
restrictions under the Company's existing financing arrangements,  or at all. If
the Company  fails to obtain the capital  required to complete  the DTI network,
the Company  could modify,  defer or abandon  plans to build or acquire  certain
portions of the DTI network.  The failure of the Company,  however, to raise the
substantial  capital  required to complete the DTI network could have a material
adverse  effect on the Company.  The actual  amount and timing of DTI's  capital
requirements may differ materially from the Company's estimates depending on the
actual  costs  of  network  construction  and  equipment,  the  actual  costs of
purchasing fiber optic  facilities  pursuant to long-term IRUs, the execution of
more or fewer swaps with other carriers than currently  planned,  demand for the
Company's services,  and the Company's ability to implement its current business
strategy as a result of regulatory,  technological and competitive  developments
(including market developments and new opportunities) in the  telecommunications
industry.

Subject to the Indenture  provisions  that limit  restrictions on the ability of
any of the  Company's  Restricted  Subsidiaries  to pay dividends and make other
payments to the Company, future debt instruments of Digital Teleport,  Inc., the
Company's wholly owned subsidiary ("Digital  Teleport"),  may impose significant
restrictions  that may  affect,  among  other  things,  the  ability  of Digital
Teleport to pay dividends or make loans,  advances or other distributions to the
Company.  The  ability  of  Digital  Teleport  to pay  dividends  and make other
distributions also will be subject to, among other things, applicable state laws
and regulations. Although the Senior Discount Notes do not require cash interest
payments  until  September 1, 2003, at such time the Senior  Discount Notes will
require annual cash interest payments of $63.25 million. In addition, the Senior
Discount Notes mature on March 1, 2008. The Company currently expects that the

                                       8
<PAGE>

earnings and cash flow, if any, of Digital Teleport will be retained and used by
such subsidiary in its operations, including servicing its own debt obligations.
The Company does not anticipate that it will receive any material  distributions
from Digital Teleport prior to September 1, 2003. Even if the Company determined
to pay a dividend on or make a  distribution  in respect of the capital stock of
Digital Teleport,  there can be no assurance that Digital Teleport will generate
sufficient  cash flow to pay such a  dividend  or  distribute  such funds to the
Company or that  applicable  state law and contractual  restrictions,  including
negative covenants contained in any future debt instruments of Digital Teleport,
will permit such dividends or distributions.  The failure of Digital Teleport to
pay, or to generate  sufficient  earnings  or cash flow to  distribute  any cash
dividends or make any loans,  advances or other payments of funds to the Company
would  have a  material  adverse  effect on the  Company's  ability  to meet its
obligations on the Senior  Discount  Notes.  Further,  there can be no assurance
that  the  Company  will  have  available,  or  will be  able  to  acquire  from
alternative  sources of financing,  funds  sufficient  to repurchase  the Senior
Discount Notes in the event of a Change of Control.

The  Company  has  received  notice  from a customer  that it intends to set off
against amounts  payable to the Company $15,000 per month,  which as of December
31, 1998 totaled approximately  $180,000 (in addition to $400,000 previously set
off  against  other  payments)  as damages  and  penalties  under the  Company's
contract  with that  customer  due to the failure by the Company to meet certain
construction  deadlines,  and such  customer  reserved  its rights to seek other
remedies under the contract.  The Company  believes that if such $180,000 setoff
were to be made, it would not be material to the Company's  business,  financial
position or results of operations.  The Company is behind  schedule with respect
to such contract as a result of such  customer's  not obtaining on behalf of the
Company  certain  rights-of-way  required  for  completion  of  certain  network
facilities,  and the Company's limitations on its financial and human resources,
particularly  prior to the Senior  Discount  Notes  Offering.  The  Company  has
obtained alternative rights-of-way and hired additional construction supervisory
personnel to accelerate the completion of such construction. Upon completion and
turn-up of services,  such customer is contractually required to pay the Company
a lump sum of  approximately  $3.8 million for the Company's  telecommunications
services over its network

Year 2000

While the Company believes that its existing  systems and software  applications
are Year 2000 compliant,  there can be no assurance until the year 2000 that all
of the Company's  systems and software  applications then in place will function
adequately.  The failure of the Company's  systems or software  applications  to
accommodate the year 2000 could have a material  adverse effect on its business,
financial  condition  and  results of  operations.  Further,  if the  systems or
software applications of telecommunications  equipment suppliers, ILECs, IXCs or
others on whose  services  or  products  the  Company  depends  or with whom the
Company's  systems must interface are not Year 2000  compliant,  it could have a
material  adverse  effect on the  Company's  business,  financial  condition and
results  of  operations.   The  Company  intends  to  continue  to  monitor  the
performance of its accounting,  information and processing  systems and software
applications  and those of its third-party  constituents to identify and resolve
any Year 2000 issues. To the extent necessary,  the Company may need to replace,
upgrade or reprogram certain systems to ensure that all interfacing applications
will  be  Year  2000  compliant  when  operating   jointly.   Based  on  current
information,  the Company  does not expect that the costs of such  replacements,
upgrades and reprogramming will be material to its business, financial condition
or results of operations.  Most major domestic carriers have announced that they
expect to achieve Year 2000 compliance for their networks and support systems by
mid-1999;   however,   other  domestic  and  international  carriers  and  other
third-party  constituents may not be Year 2000 compliant,  and failures on their

                                       9
<PAGE>

networks and systems  could  adversely  affect the  operation  of the  Company's
networks and support systems and have a material adverse effect on the Company's
business,  financial  condition and results of  operations.  The Company has not
developed a  contingency  plan with respect to the failure of its systems or the
systems of its suppliers or other carriers to achieve year 2000 compliance.


Forward Looking Statements

Certain statements throughout  Management's Discussion and Analysis of Financial
Condition and Results of Operations and elsewhere in this  quarterly  report are
"forward  looking  statements"  within  the  meaning of the  Private  Securities
Litigation Reform Act of 1995 and involve known and unknown risks, uncertainties
and other factors that may cause actual  events or results to differ  materially
from those  expressed  or implied by the forward  looking  statements.  The most
important factors that could prevent the Company from achieving its stated goals
include,  but are not limited to, (a) failure to obtain  substantial  amounts of
additional financing at reasonable costs and on acceptable terms, (b) failure to
effectively  and  efficiently  manage  the  expansion  and  construction  of the
Company's network,  (c) failure to enter into additional  indefeasible rights to
use ("IRUs") and/or wholesale network capacity agreements, (d) failure to obtain
and  maintain  sufficient  rights-of-way,  (e) intense  competition  and pricing
decreases, (f) potential for rapid and significant changes in telecommunications
technology and their effect on the Company's  business,  and (g) adverse changes
in the regulatory environment.


Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

                                       10

<PAGE>


                           PART II - OTHER INFORMATION


Item 6.  Exhibits and Reports on Form 8-K:

(a)      Exhibits


3.1      Restated  Articles of  Incorporation  of the  Registrant  (incorporated
         herein by  reference  to Exhibit 3.1 to the  Registrant's  Registration
         Statement on Form S-4 (File No. 333-50049)(the "S-4")).

3.2      Restated Bylaws of the Registrant (incorporated herein by reference to
         Exhibit 3.2 to the S-4).

27       Financial Data Schedule

(b)      Reports on Form 8-K


(1)      Form 8-K   dated   September 1, 1998  was  filed  on  October 14, 1998,
         pursuant to Item 7 (Financial Statements and Exhibits)

(2)      Form 8-K dated October 7, 1998 was filed on October 13, 1998,  pursuant
         to Item 6 (Resignation of Registrant's  Directors) and Item 7.


                                       11


<PAGE>


                                   SIGNATURES

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



                                          DTI HOLDINGS, INC.


Date:  February 11, 1999                  /S/Gary W. Douglass                   
       -----------------                 ---------------------------------------
                                         Gary W. Douglass, Senior Vice President
                                         Finance and Administration and
                                         Chief Financial Officer (Principal
                                         Financial and Accounting Officer)


<PAGE>


Exhibits Index:

3.1     Restated   Articles  of  Incorporation  of the Registrant  (incorporated
        herein by reference to  Exhibit 3.1  to  the  Registrant's  Registration
        Statement on Form S-4 (File No. 333-50049) (the "S-4")).

3.2     Restated  Bylaws  of the Registrant (incorporated herein by reference to
        Exhibit 3.2 to the S-4).

27      Financial Data Schedule