<PAGE>   1
-------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q


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

                  For the quarterly period ended March 31, 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: 0-11258

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

                                 WORLDCOM, INC.
             (Exact name of registrant as specified in its charter)
                         -------------------------------
<TABLE>
<S>                                                                   <C>
                       Georgia                                                      58-1521612
(State or other jurisdiction of incorporation or organization)         (I.R.S. Employer Identification No.)
</TABLE>

 515 East Amite Street, Jackson, Mississippi                  39201-2702
 (Address of principal executive offices)                     (Zip Code)

Registrant's telephone number, including area code :  (601) 360-8600

     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
                                             ---     ---


     The number of outstanding shares of the registrant's Common Stock, par
value $.01 per share, was 1,032,087,418 on April 30, 1998.


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


<PAGE>   2



                          QUARTERLY REPORT ON FORM 10-Q
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                                              Page
                                                                                              Number
                                                                                              ------
<S>                    <C>                                                                   <C>
PART I.                FINANCIAL INFORMATION

        Item 1.        Financial Statements

                       Consolidated Balance Sheets as of
                       March 31, 1998 and December 31, 1997.................................      3

                       Consolidated Statements of Operations
                       for the three months ended March 31, 1998
                       and March 31, 1997...................................................      4

                       Consolidated Statements of Cash Flows for
                       the three months ended  March 31, 1998 and
                       March 31, 1997.......................................................      5

                       Notes to Consolidated Financial Statements...........................      6

        Item 2.        Management's Discussion and Analysis of
                       Financial Condition and Results of Operations........................     12

        Item 3.        Quantitative and Qualitative Disclosure About Market Risk ...........     20

PART II.               OTHER INFORMATION

        Item 1.        Legal Proceedings....................................................     20

        Item 2.        Changes in Securities and Use of Proceeds............................     20

        Item 3.        Defaults Upon Senior Securities......................................     20

        Item 4.        Submission of Matters to a Vote
                       of Securities Holders................................................     20

        Item 5.        Other Information....................................................     20

        Item 6.        Exhibits and Reports on Form 8-K.....................................     21

Signature              .....................................................................     22

Exhibit Index          .....................................................................     23

</TABLE>


                                     Page 2


<PAGE>   3

PART I. FINANCIAL INFORMATION
 Item 1. Financial Statements.

                         WORLDCOM, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                (In Thousands of Dollars, Except Per Share Data)

<TABLE>
<CAPTION>

                                                                                           March 31,        December 31,
                                                                                             1998               1997
                                                                                          ------------      ------------
<S>                                                                                       <C>               <C>         
ASSETS
Current assets:
  Cash and cash equivalents                                                               $     93,119      $    154,591
  Marketable securities                                                                            746            53,516
  Accounts receivable, net of allowance for bad debts of $222,862 in 1998
   and $203,076 in 1997                                                                      1,614,489         1,240,731
  Income taxes receivable                                                                       15,928             5,422
  Other current assets                                                                         458,556           419,727
                                                                                          ------------      ------------
         Total current assets                                                                2,182,838         1,873,987
                                                                                          ------------      ------------
Property and equipment:
  Transmission equipment                                                                     4,998,451         4,156,319
  Communications equipment                                                                   2,618,912         2,493,363
  Furniture, fixtures and other                                                              1,124,451           919,687
                                                                                          ------------      ------------
                                                                                             8,741,814         7,569,369
  Less - accumulated depreciation                                                           (1,010,087)         (855,168)
                                                                                          ------------      ------------
                                                                                             7,731,727         6,714,201
                                                                                          ------------      ------------
Goodwill and other intangible assets                                                        14,718,248        13,881,505
Deferred tax asset                                                                             452,222           404,864
Other assets                                                                                   830,342           721,229
                                                                                          ------------      ------------
                                                                                          $ 25,915,377      $ 23,595,786
                                                                                          ============      ============
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
  Short-term debt and current maturities of long-term debt                                $      6,318      $     10,779
  Accounts payable                                                                             413,553           470,389
  Accrued line costs                                                                           925,656           867,588
  Accrued interest                                                                             133,738           119,262
  Deferred tax liability                                                                        45,254            59,442
  Other current liabilities                                                                    785,551           546,175
                                                                                          ------------      ------------
     Total current liabilities                                                               2,310,070         2,073,635
                                                                                          ------------      ------------
Long-term liabilities, less current portion:
  Long-term debt                                                                             8,331,536         7,413,333
  Other liabilities                                                                            451,312           307,906
                                                                                          ------------      ------------
         Total long-term liabilities                                                         8,782,848         7,721,239
                                                                                          ------------      ------------

Commitments and contingencies

Shareholders' investment:
  Series A preferred stock, par value $.01 per share; authorized, issued and
    outstanding: 94,992 shares in 1998 and 1997 (variable liquidation preference)                    1                 1
  Series B preferred stock, par value $.01 per share; authorized, issued and
    outstanding: 12,237,025 shares in 1998 and 12,421,858 shares in 1997 (liquidation
    preference of $1.00 per share plus unpaid dividends)                                           122               124
  Preferred stock, par value $.01 per share; authorized: 34,905,008 shares in
   1998 and 1997; none issued                                                                     --                --
  Common stock, par value $.01 per share; authorized: 2,500,000,000 shares; issued
    and outstanding: 1,028,976,222 shares in 1998 and 981,615,661 shares in 1997                10,290             9,816
  Additional paid-in capital                                                                16,950,898        15,530,551
  Unrealized holding gain on marketable equity securities                                       50,328            33,883
  Retained earnings (deficit)                                                               (2,189,180)       (1,773,463)
                                                                                          ------------      ------------
        Total shareholders' investment                                                      14,822,459        13,800,912
                                                                                          ------------      ------------
                                                                                          $ 25,915,377      $ 23,595,786
                                                                                          ============      ============
</TABLE>

The accompanying notes are an integral part of these statements


                                     Page 3

<PAGE>   4




                         WORLDCOM, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In Thousands, Except Per Share Data)

<TABLE>
<CAPTION>

                                                                                 For the Three Months Ended March 31,
                                                                                 ------------------------------------
                                                                                        1998             1997
                                                                                 ---------------      ---------------

<S>                                                                                  <C>              <C>        
Revenues                                                                             $ 2,349,967      $ 1,696,794
                                                                                     -----------      -----------

Operating expenses:
  Line costs                                                                           1,146,949          921,477
  Selling, general and administrative                                                    478,131          388,199
  Depreciation and amortization                                                          298,580          231,639
  Brooks Fiber merger costs                                                               69,490             --
  Charge for in-process research and development                                         429,000             --
                                                                                     -----------      -----------
        Total                                                                          2,422,150        1,541,315
                                                                                     -----------      -----------
Operating income (loss)                                                                  (72,183)         155,479
Other income (expense):
  Interest expense                                                                      (102,248)         (90,160)
  Miscellaneous                                                                           12,247           13,481
                                                                                     -----------      -----------
Income (loss) before income taxes and extraordinary item                                (162,184)          78,800
Provision for income taxes                                                               118,200           53,802
                                                                                     -----------      -----------
Net income (loss) before extraordinary item                                             (280,384)          24,998
Extraordinary item (net of income taxes of $77,568 in 1998)                             (128,731)            --
                                                                                     -----------      -----------
Net income (loss)                                                                       (409,115)          24,998
Preferred dividend requirement                                                             6,602            6,610
                                                                                     -----------      -----------
Net income (loss) applicable to common shareholders                                  $  (415,717)     $    18,388
                                                                                     ===========      ===========


Earnings (loss)  per common share -
  Net income (loss) applicable to common shareholders before extraordinary item:
      Basic                                                                          $     (0.28)     $      0.02
                                                                                     ===========      ===========
      Diluted                                                                        $     (0.28)     $      0.02
                                                                                     ===========      ===========
  Extraordinary item                                                                 $     (0.13)     $        --
                                                                                     ===========      ===========
  Net income (loss):
      Basic                                                                          $     (0.41)     $      0.02
                                                                                     ===========      ===========
      Diluted                                                                        $     (0.41)     $      0.02
                                                                                     ===========      ===========

</TABLE>

 The accompanying notes are an integral part of these statements.


                                     Page 4



<PAGE>   5





                         WORLDCOM, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In Thousands)

<TABLE>
<CAPTION>

                                                                 For the Three Months Ended March 31,
                                                                 ------------------------------------
                                                                       1998               1997
                                                                 --------------      ----------------
<S>                                                                 <C>              <C>        
Cash flows from operating activities:
Net income (loss)                                                   $  (409,115)     $    24,998
Adjustments to reconcile net income (loss) to net cash
  provided by operating activities:
    Extraordinary item                                                  128,731             --
    Brooks Fiber merger costs                                            69,490             --
    Charge for in-process research and development                      429,000             --
    Depreciation  and amortization                                      298,580          231,639
    Provision for losses on accounts receivable                          24,200           24,965
    Provision for deferred income taxes                                 117,571           43,845
    Accreted interest on debt                                            15,462           42,237
    Change in assets and liabilities, net of effect of business
      combinations:
        Accounts receivable                                            (316,484)        (140,679)
        Income taxes, net                                               (10,506)           3,848
        Other current assets                                             (6,913)         (30,781)
        Accrued line costs                                               22,371            4,225
        Accounts payable and other current liabilities                  (87,428)         (22,036)
    Other                                                                  (944)           1,798
                                                                    -----------      -----------
Net cash provided by operating activities                               274,015          184,059
                                                                    -----------      -----------
Cash flows from investing activities:
  Capital expenditures                                                 (961,526)        (575,274)
  Sale of short-term investments, net                                    52,770          729,693
  Acquisitions and related costs                                        (40,237)        (290,477)
  Increase in intangible assets                                         (43,855)         (28,000)
  Proceeds from disposition of long-term assets                          55,746            8,103
  Increase in other assets                                             (196,385)         (65,100)
  Decrease in other liabilities                                         (31,724)         (25,959)
                                                                    -----------      -----------
Net cash used in investing activities                                (1,165,211)        (247,014)
                                                                    -----------      -----------
Cash flows from financing activities:
  Borrowings                                                            916,930             --
  Principal payments on debt                                           (200,291)        (217,749)
  Common stock issuance                                                 119,687           59,936
  Dividends paid on preferred stock                                      (6,602)          (6,610)
  Other                                                                    --              3,286
                                                                    -----------      -----------
Net cash provided by (used  in) financing activities                    829,724         (161,137)
                                                                    -----------      -----------

Net decrease in cash and cash equivalents                               (61,472)        (224,092)
Cash and cash equivalents at beginning of period                        154,591          484,609
                                                                    -----------      -----------
Cash and cash equivalents at end of period                          $    93,119      $   260,517
                                                                    ===========      ===========
</TABLE>


The accompanying notes are an integral part of these statements.


                                     Page 5

<PAGE>   6



                         WORLDCOM, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(A) GENERAL

The financial statements of WorldCom, Inc. (the "Company" or "WorldCom")
included herein, are unaudited and have been prepared in accordance with
generally accepted accounting principles for interim financial reporting and
Securities and Exchange Commission ("SEC") regulations. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. In the opinion of management,
the financial statements reflect all adjustments (of a normal and recurring
nature) which are necessary to present fairly the financial position, results of
operations and cash flows for the interim periods. These financial statements
should be read in conjunction with the Annual Report of the Company on Form 10-K
for the year ended December 31, 1997. The results for the three month period
ended March 31, 1998, are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998.

(B) BUSINESS COMBINATIONS

On January 31, 1998, WorldCom acquired CompuServe Corporation, a Delaware
corporation ("CompuServe"), pursuant to the merger (the "CompuServe Merger") of
a wholly owned subsidiary of WorldCom with and into CompuServe. Upon
consummation of the CompuServe Merger, CompuServe became a wholly owned
subsidiary of WorldCom.

As a result of the CompuServe Merger, each share of CompuServe common stock was
converted into the right to receive 0.40625 shares of WorldCom common stock, par
value $.01 per share (the "Common Stock") or approximately 37.6 million WorldCom
common shares in the aggregate. Prior to the CompuServe Merger, CompuServe
operated primarily through two divisions: Interactive Services and Network
Services. Interactive Services offered worldwide online and Internet access
services for consumers, while Network Services provided worldwide network
access, management and applications, and Internet service to businesses. The
CompuServe Merger was accounted for as a purchase; accordingly, operating
results for CompuServe have been included from the date of acquisition.

On January 31, 1998, WorldCom also acquired ANS Communications, Inc., a Delaware
corporation ("ANS"), from America Online, Inc. ("AOL") and has entered into five
year contracts with AOL under which WorldCom and its subsidiaries will provide
network services to AOL (collectively, the "AOL Transaction"). As part of the
AOL Transaction, AOL acquired CompuServe's Interactive Services division and
received a $175 million cash payment from WorldCom. WorldCom retained the
CompuServe Network Services ("CNS") division. ANS provides Internet access to
AOL and AOL's subscribers in the United States, Canada, the United Kingdom,
Sweden and Japan, and also designs, develops and operates high performance
wide-area networks for business, research, education and governmental
organizations. The AOL Transaction was accounted for as a purchase; accordingly,
operating results for ANS have been included from the date of acquisition.

On January 29, 1998, WorldCom acquired Brooks Fiber Properties, Inc., a Delaware
corporation ("BFP"), pursuant to the merger (the "BFP Merger") of a wholly owned
subsidiary of WorldCom, with and into BFP. Upon consummation of the BFP Merger,
BFP became a wholly owned subsidiary of WorldCom. BFP is a leading
facilities-based provider of competitive local telecommunications services,
commonly referred to as a competitive local exchange carrier in selected cities
within the United States. BFP acquires and constructs its own state-of-the-art
fiber optic networks and facilities and leases network capacity from others to
provide long distance carriers ("IXCs") Internet Service Providers ("ISPs"),
wireless carriers and business, government and institutional end users with an
alternative to the incumbent local exchange carriers ("ILECs") for a broad array
of high quality voice, data, video transport and other telecommunications
services.


                                     Page 6


<PAGE>   7



As a result of the BFP Merger, each share of BFP common stock was converted into
the right to receive 1.85 shares of Common Stock or approximately 72.6 million
WorldCom common shares in the aggregate. The BFP Merger was accounted for as a
pooling-of-interests and, accordingly, the Company's financial statements for
periods prior to the BFP Merger have been restated to include the results of BFP
for all periods presented. Separate and combined unaudited results of operations
for the three months ended March 31, 1997 are as follows (in thousands, except
per share data):

<TABLE>
<CAPTION>

                                                                      For the Three Months
                                                                      Ended March 31, 1997
                                                                      --------------------
<S>                                                                      <C>        
     Revenues:
       BFP                                                               $    20,550
       WorldCom                                                            1,677,239
       Intercompany elimination                                                 (995)   
                                                                         -----------    
                      Combined                                           $ 1,696,794    
                                                                         ===========    
                                                                                        
                                                                         
     Net income (loss) before extraordinary items:
       BFP                                                               $   (24,666) 
       WorldCom                                                               49,664  
                                                                         -----------  
                      Combined                                           $    24,998  
                                                                         ===========  
                                                                         
     Combined earnings per share:
       Basic                                                             $      0.02  
                                                                         ===========  
       Diluted                                                           $      0.02  
                                                                         ===========  
                                                                         

</TABLE>


On November 9, 1997, WorldCom entered into an Agreement and Plan of Merger (the
"MCI/WorldCom Merger Agreement") with MCI Communications Corporation ("MCI") and
a wholly owned acquisition subsidiary of WorldCom ("MCI Merger Sub"), providing
for the merger (the "MCI/WorldCom Merger") of MCI with and into MCI Merger Sub,
with MCI Merger Sub surviving as a wholly owned subsidiary of WorldCom. As a
result of the MCI/WorldCom Merger, the separate corporate existence of MCI will
cease, and MCI Merger Sub (which will be renamed "MCI Communications
Corporation") will succeed to all the rights and be responsible for all the
obligations of MCI in accordance with the Delaware General Corporation Law.
Subject to the terms and conditions of the MCI/WorldCom Merger Agreement, each
share of MCI common stock, par value $0.10 per share ("MCI Common Stock"),
outstanding immediately prior to the effective time of the MCI/WorldCom Merger
(the "MCI/WorldCom Effective Time") will be converted into the right to receive
that number of shares of Common Stock equal to the MCI Exchange Ratio (as
defined below), and each share of MCI Class A common stock, par value $.10 per
share ("MCI Class A Common Stock"), outstanding immediately prior to the
MCI/WorldCom Effective Time will be converted into the right to receive $51.00
in cash, without interest thereon. The "MCI Exchange Ratio" means the quotient
(rounded to the nearest 1/10,000) determined by dividing $51.00 by the average
of the high and low sales prices of Common Stock (the "MCI/WorldCom Average
Price") as reported on The Nasdaq National Market on each of the 20 consecutive
trading days ending with the third trading day immediately preceding the
MCI/WorldCom Effective Time; provided, however, that the MCI Exchange Ratio will
not be less than 1.2439 or greater than 1.7586. Cash will be paid in lieu of the
issuance of any fractional share of WorldCom Common Stock in the MCI/WorldCom
Merger.

Based on the number of shares of MCI Common Stock outstanding as of January 20,
1998 and assumed MCI Exchange Ratios of 1.2439 and 1.7586, approximately
710,554,160 shares and 1,004,566,722 shares, respectively, of Common Stock would
be issued in the MCI/WorldCom Merger. In addition, as of December 31, 1997,
outstanding options to purchase shares of MCI Common Stock would be converted in
the MCI/WorldCom Merger to options to acquire an aggregate of approximately
86,491,688 shares and 122,280,154 shares, respectively, of Common Stock, and the
exercise price would be adjusted to reflect the MCI Exchange Ratio, so that, on
exercise, the holders would receive, in the aggregate, the same number of shares
of Common Stock as they would have received had they exercised prior to the
MCI/WorldCom Merger, at the same exercise price.

The MCI/WorldCom Merger was approved by the MCI stockholders and the WorldCom
shareholders at separate meetings held on March 11, 1998. The MCI/WorldCom
Merger is also subject to approvals from the Federal


                                     Page 7


<PAGE>   8


Communications Commission ("FCC"), the Department of Justice ("DOJ") and various
state government bodies. In addition, the MCI/WorldCom Merger is subject to
approval by the Commission of the European Communities (the "European
Commission"). WorldCom anticipates that the MCI/WorldCom Merger will close
mid-year 1998.

Termination of the MCI/WorldCom Merger Agreement by MCI or WorldCom under
certain conditions will require MCI to pay WorldCom $750 million as a
termination fee and to reimburse WorldCom the $450 million alternative
transaction fee and certain related expenses paid by WorldCom to British
Telecommunications plc ("BT"). Further, termination of the MCI/WorldCom Merger
Agreement by MCI or WorldCom under certain conditions, will require WorldCom to
pay MCI $1.635 billion as a termination fee.

Pursuant to an agreement (the "BT Agreement") among MCI, WorldCom and BT, the
prior merger agreement between BT and MCI (the "BT/MCI Merger Agreement") was
terminated, and WorldCom agreed to pay BT an alternative transaction fee of $450
million and expenses of $15 million payable to BT in accordance with the BT/MCI
Merger Agreement. These fees were paid on November 12, 1997. WorldCom also
agreed to pay to BT an additional payment of $250 million in the event that
WorldCom is required to make the $1.635 billion payment to MCI in accordance
with the MCI/WorldCom Merger Agreement. In addition, pursuant to the BT
Agreement, BT voted (or caused to be voted) its shares of MCI Class A Common
Stock in favor of the MCI/WorldCom Merger Agreement and the approval of the
other transactions contemplated by the MCI/WorldCom Merger Agreement.

(C) EARNINGS PER SHARE

Earnings per share are calculated in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 128 "Earnings Per Share." The following is a
reconciliation of the numerators and the denominators of the basic and diluted
per share computations (in thousands, except per share data):

<TABLE>
<CAPTION>

                                                                      For the Three Months
                                                                        Ended March 31,
                                                                 ----------------------------
                                                                    1998             1997
                                                                 -----------      -----------
Basic
<S>                                                              <C>              <C>        
Net income (loss) before extraordinary items                     $  (280,384)     $    24,998
Preferred stock dividends                                              6,602            6,610
                                                                 -----------      -----------
Net income (loss) applicable to common shareholders
  before extraordinary items                                     $  (286,986)     $    18,388
                                                                 ===========      ===========
Weighted average shares outstanding                                1,011,662          947,761
                                                                 ===========      ===========
Basic earnings (loss) per share
  before extraordinary items                                     $     (0.28)     $      0.02
                                                                 ===========      ===========
Diluted
Net income (loss) applicable to common shareholders
 before extraordinary items                                      $  (286,986)     $    18,388
Add back:
  Preferred stock dividends                                             --              6,610
                                                                 -----------      -----------
Net income (loss) applicable to common shareholders              $  (286,986)     $    24,998
                                                                 ===========      ===========

Weighted average shares outstanding                                1,011,662          947,761
Common stock equivalents                                                --             30,168
Common stock issuable upon conversion of:
  Preferred stock                                                       --             33,940
                                                                 -----------      -----------
Diluted shares outstanding                                         1,011,662        1,011,869
                                                                 ===========      ===========
Diluted earnings (loss) per share before extraordinary items     $     (0.28)     $      0.02
                                                                 ===========      ===========
</TABLE>



                                     Page 8

<PAGE>   9




(D) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Interest paid by the Company during the three months ended March 31, 1998 and
1997 amounted to $152.9 million and $61.7 million, respectively. Income taxes
paid during the three months ended March 31, 1998 and 1997 were $0.7 million and
$6.9 million, respectively. In conjunction with business combinations during the
three months ended March 31, 1998 and 1997, assumed assets and liabilities were
as follows (in thousands):

<TABLE>
<CAPTION>

                                                         For the Three Months
                                                            Ended March 31,
                                                     ----------------------------
                                                         1998             1997
                                                     -----------      -----------
<S>                                                  <C>              <C>        
Fair value of assets acquired                        $   401,816      $    19,598
Excess of cost over net tangible assets acquired       1,343,963           97,675
Liabilities paid (assumed)                              (443,641)         188,932
Common stock issued                                   (1,261,901)         (15,728)
                                                     -----------      -----------
                                                     $    40,237      $   290,477
                                                     ===========      ===========
</TABLE>

(E) BROOKS FIBER MERGER COSTS
                                                                    
In the first quarter of 1998, the Company recorded a one-time charge for
employee severance, alignment charges and direct merger costs associated with
the BFP Merger. The following table reflects the components of the significant
items shown as Brooks Fiber merger costs for the three months ended March 31,
1998 (in thousands):

<TABLE>

<S>                                                       <C>    
Direct merger costs                                       $17,217
Severance costs                                             8,349
Alignment charges                                          43,924
                                                          -------
                                                          $69,490
                                                          =======
</TABLE>


(F) LONG-TERM DEBT

In connection with the BFP Merger, the Company announced on February 27, 1998
that it had commenced an offer (the "Tender Offers") to purchase for cash each
of the following series of debt: the 10-7/8% Senior Discount Notes of BFP due
2006, the 11-7/8% Senior Discount Notes of BFP due 2006 and the 10% Senior
Discount Notes of BFP due 2007 (collectively, the "BFP Notes"). WorldCom offered
to pay each registered holder of the BFP Notes, in the case of the 10-7/8%
Senior Discount Notes, 118.586% of their accreted value as of the date of the
purchase, in the case of the 11-7/8% Senior Discount Notes, 127.104% of their
accreted value as of the date of purchase, and in the case of the 10% Senior
Notes, 117.615% of their principal amount, plus accrued interest to the date of
purchase. The accreted value per $1,000 principal amount at stated maturity as
of the tender purchase date of March 27, 1998, was $733.42 for the 10-7/8%
Senior Discount Notes, and $660.57 for the 11-7/8% Senior Discount Notes. The
accrued interest of the 10% Senior Notes per $1,000 principal amount at stated
maturity to such date was $32.22. Concurrently with the Tender Offers, WorldCom
obtained the requisite consents to eliminate certain restrictive covenants and
amend certain other provisions of the respective indentures of the BFP Notes.

On March 27, 1998, the Company accepted all BFP Notes validly tendered. As of
the expiration of the offers at 11:59 p.m., New York City time, March 26, 1998,
WorldCom had received valid tenders and consents from holders of approximately
$424.9 million of principal amount at stated maturity of 10-7/8% Senior Discount
Notes due 2006 of BFP (or approximately 99.96% of total outstanding), from
holders of $400.0 million of principal amount at stated maturity of 11-7/8%
Senior Discount Notes due 2006 of BFP (or 100% of total outstanding), and from
holders of approximately $241.0 million of principal amount at stated maturity
of 10% Senior Notes due 2007 of BFP (or approximately 96.4% of total
outstanding).



                                     Page 9

<PAGE>   10



The funds required to pay all amounts required under the Tender Offers were
obtained by WorldCom from available working capital and lines of credit. Such
lines of credit included a new $1.25 billion 364-day revolving credit facility
which became effective in February 1998. In connection with the Tender Offers
and related refinancings, WorldCom recorded an extraordinary accounting item of
$128.7 million, net of income tax benefit of $77.6 million in the first quarter
of 1998.

(G) CHARGE FOR IN-PROCESS RESEARCH AND DEVELOPMENT

In the first quarter of 1998, the Company recorded a $429 million charge for
in-process research and development related to the CompuServe Merger and AOL
Transaction. The charge is based on a valuation analysis of CNS and ANS
technologies including the companies' virtual private data networks, application
hosting products, security systems, next generation network architectures, and
certain other identified research and development projects purchased in the
CompuServe Merger and AOL Transaction. At the date of the CompuServe Merger and
AOL Transaction, the technological feasibility of the acquired technology had
not yet been established and the technology had no future alternative uses.

(H) COMPREHENSIVE INCOME

Effective January 1, 1998, WorldCom adopted SFAS No. 130 "Reporting
Comprehensive Income." This statement requires the reporting of comprehensive
income in addition to net income from operations. Comprehensive income is a more
inclusive financial reporting methodology that includes disclosure of certain
financial information that historically has not been recognized in the
calculation of net income.

The following table reflects the calculation of comprehensive income (loss) for
WorldCom for the three months ended March 31, 1998 and 1997 (in thousands):

<TABLE>
<CAPTION>

                                                           For the Three Months
                                                             Ended March 31,
                                                         ------------------------
                                                           1998           1997
                                                         ---------      ---------
<S>                                                      <C>            <C>      
Net income (loss) applicable to common shareholders      $(415,717)     $  18,388
                                                         ---------      ---------
Other comprehensive income (loss):
  Foreign currency translation losses                       (8,862)       (16,939)
  Unrealized holding gains (losses)                         26,354        (14,819)
                                                         ---------      ---------
Other comprehensive income (loss) before tax                17,492        (31,758)
Income tax (expense) benefit                                (9,909)         5,572
                                                         ---------      ---------
Other comprehensive income (loss)                            7,583        (26,186)
                                                         ---------      ---------
Comprehensive loss applicable to common shareholders     $(408,134)     $  (7,798)
                                                         =========      =========


</TABLE>

(I) CONTINGENCIES

FEDERAL REGULATION. On February 8, 1996, President Clinton signed the Telecom
Act, which permits the Bell System Operating Companies ("BOCs") to provide
domestic and international long distance services to customers located outside
of the BOCs' home regions; permits a petitioning BOC to provide domestic and
international long distance services to customers within its operating area on a
state by state basis upon a finding by the FCC that a petitioning BOC has
satisfied certain criteria for opening up its local exchange network to
competition and that its provision of long distance services would further the
public interest; and removes existing barriers to entry into local service
markets. Additionally, there were significant changes in: the manner in which
carrier-to-carrier arrangements are regulated at the federal and state level;
procedures to revise universal service standards; and penalties for unauthorized
switching of customers. The FCC has instituted and, in most instances completed,
proceedings addressing the implementation of this legislation.

In implementing the Telecom Act, the FCC established nationwide rules designed
to encourage new entrants to participate in the local services markets through
interconnection with the ILECs, resale of ILEC's retail services and




                                    Page 10

<PAGE>   11




use of individual and combinations of unbundled network elements. These rules
set the groundwork for the statutory criteria governing BOC entry into the long
distance market. Appeals of the FCC order adopting those rules were consolidated
before the United States Court of Appeals for the Eighth Circuit (the "Eighth
Circuit"). The Eighth Circuit found constitutional challenges to certain
practices implementing cost provisions of the Telecom Act that were ordered by
certain Public Utility Commissions ("PUCs") to be premature, but vacated
significant portions of the FCC's nationwide pricing rules and vacated an FCC
rule requiring that unbundled network elements be provided on a combined basis.
In response to requests by the Solicitor General, on behalf of the FCC, and
certain other parties, including WorldCom, the United States Supreme Court has
agreed to review the decision of the Eighth Circuit. Certain BOCs have also
raised constitutional challenges to provisions of the Telecom Act restricting
BOC provision of long distance services, manufacturing of telecommunications
equipment, electronic publishing and alarm monitoring services. On December 31,
1997, the United States District Court for the Northern District of Texas (the
"Texas District Court") ruled that these restrictions violate the Bill of
Attainder Clause of the U.S. Constitution. Currently, this decision only applies
to SBC Corporation ("SBC"), US WEST Communications Group ("US WEST"), and Bell
Atlantic Corporation ("Bell Atlantic"). At the request of various parties, on
February 11, 1998 the Texas District Court issued a stay of its decision pending
appeal. AT&T, MCI, the Department of Justice, the FCC and other parties have
appealed the decision to the United States Court of Appeals for the Fifth
Circuit. BellSouth Corporation ("BellSouth") raised the Bill of Attainder issue
in its appeal before the United States Court of Appeals for the Fifth Circuit of
the electronic publishing restrictions imposed under the Telecom Act. A decision
on that appeal is pending. WorldCom cannot predict either the ultimate outcome
of these or future challenges to the Telecom Act, any related appeals of
regulatory or court decisions, or the eventual effect on WorldCom's business or
the industry in general.

The FCC has denied applications filed by Ameritech Corporation ("Ameritech"),
SBC and BellSouth seeking authority to provide interLATA long distance service
in Michigan, Oklahoma, Louisiana and South Carolina, respectively. SBC appealed
the FCC's denial of its application covering Oklahoma to the United States Court
of Appeals for the District of Columbia Circuit. The court has affirmed the
FCC's denial of that application. In its denial of an Ameritech application and
a BellSouth application, the FCC provided detailed guidance to applicants
regarding the obligations of the applicants, the format of future applications,
the content of future applications, and the review standards that it will apply
in evaluating any future applications. The National Association of Regulatory
Utility Commissioners and several state regulatory commissions have appealed
jurisdictional aspects of that Ameritech application denial to the Eighth
Circuit. WorldCom cannot predict either the outcome of these appeals, or the
BOCs' willingness to abide by these FCC guidelines, or the timing or outcome of
future applications submitted to the FCC. Additionally, several Regional Bell
Operating Companies ("RBOCs") have filed petitions requesting that the FCC
forbear from imposing the line of business restrictions upon their data service
offerings and data network deployment. Other BOCs have announced their intention
to file applications at the FCC for authority to provide interLATA services.
Additionally, the FCC and several PUCs are considering a proposal that would
allow BOCs electing to create separate wholesale network and retail
organizations to enter the long distance market on an accelerated basis.
WorldCom cannot predict the outcome of these proceedings or whether the outcome
will have a material impact upon its consolidated financial position or results
of operations.

On May 7, 1997, the FCC announced that it will issue a series of orders that
will reform Universal Service Subsidy allocations and adopted various reforms to
the existing rate structure for interstate access services provided by the ILECs
that are designed to reduce access charges, over time, to more economically
efficient levels and rate structures. It also affirmed that information service
providers (including, among others, ISPs) should not be subject to existing
access charges ("ISP Exemption"). Petitions for reconsideration of, among other
things, the access service and ISP Exemption related actions were filed before
the FCC and appeals taken to various United States Courts of Appeals. On
reconsideration, the FCC in significant part affirmed the access charge and ISP
Exemption actions and the court appeals have been consolidated before the Eighth
Circuit. Also, several state agencies have started proceedings to address the
reallocation of implicit subsidies contained in the access rates and retail
service rates to state universal service funds. Access charges are a principal
component of WorldCom's telecommunications expense. Additionally, modification
of the ISP Exemption could have an adverse effect on the Company's
Internet-related services business. WorldCom cannot predict either the outcome
of these appeals or whether or not the result(s) will have a material impact
upon its consolidated financial position or results of operations.

The FCC issued on December 24, 1996 a Notice of Inquiry to seek comment on
whether it should consider various actions relating to interstate information
services and the Internet. The FCC recognized that these services and recent




                                    Page 11

<PAGE>   12



technological advances may be constrained by current regulatory practices that
have their foundations in traditional circuit switched telecommunications
services and technologies. Based upon this and other proceedings, the FCC may
permit telecommunications companies, BOCs, or others to increase the scope or
reduce the cost of their Internet access services. WorldCom cannot predict the
effect that the Notice of Inquiry, the Telecom Act or any future legislation,
regulation or regulatory changes may have on its consolidated financial position
or results of operations.

INTERNATIONAL. In December 1996, the FCC adopted a new policy that will make it
easier for United States international carriers to obtain authority to route
international public switched voice traffic to and from the United States
outside of the traditional settlement rate and proportionate return regimes. In
February 1997, the United States entered into a World Trade Organization
Agreement (the "WTO Agreement") that should have the effect of liberalizing the
provision of switched voice telephone and other telecommunications services in
scores of foreign countries over the next several years. The WTO Agreement
became effective in February 1998. In order to comply with United States
commitments to the WTO Agreement, the FCC implemented new rules in February 1998
that liberalize existing policies regarding (i) the services that may be
provided by foreign affiliated United States international common carriers,
including carriers controlled or more than 25 percent owned by foreign carriers
that have market power in their home markets, and (ii) the provision of
international switched voice services outside of the traditional settlement rate
and proportionate return regimes. The new rules make it much easier for foreign
affiliated carriers to enter the United States market for the provision of
international services.

In August 1997, the FCC adopted mandatory settlement rate benchmarks. These
benchmarks are intended to reduce the rates that United States carriers pay
foreign carriers to terminate traffic in their home countries. The FCC will also
prohibit a United States carrier affiliated with a foreign carrier from
providing facilities-based service to the foreign carrier's home market until
and unless the foreign carrier has implemented a settlement rate within the
benchmark. The FCC also adopted new rules that will liberalize the provision of
switched services over private lines to World Trade Organization member
countries, by allowing such services on routes where 50% or more of United
States billed traffic is being terminated in the foreign country at or below the
applicable settlement rate benchmark or where the foreign country's rules
concerning provision of international switched services over private lines
deemed equivalent to United States rules.

Although the FCC's new policies and implementation of the WTO Agreement may
result in lower costs to WorldCom to terminate international traffic, there is a
risk that the revenues that WorldCom will receive from inbound international
traffic may decrease to an even greater degree. The implementation of the WTO
Agreement may also make it easier for foreign carriers with market power in
their home markets to offer United States and foreign customers end-to-end
services to the disadvantage of WorldCom, which may continue to face substantial
obstacles in obtaining from foreign governments and foreign carriers the
authority and facilities to provide such end-to-end services. Further, many
foreign carriers have challenged, in court and at the FCC, the FCC's order
adopting mandatory settlement rate benchmarks. If the FCC's settlement rate
benchmark order was overturned, it could accelerate the full-fledged entry of
foreign carriers into the United States, and make it more advantageous for
foreign carriers to route international traffic into the United States at low,
cost-based termination rates, while United States carriers would continue to
have little choice but to route international traffic into most foreign
countries at much higher, above cost, settlement rates.

The Company is involved in other legal and regulatory proceedings generally
incidental to its business. In some instances, rulings by regulatory authorities
in some states may result in increased operating costs to the Company. While the
results of these various legal and regulatory matters contain an element of
uncertainty, the Company believes that the probable outcome of these matters
should not have a material adverse effect on the Company's consolidated results
of operations or financial position.

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

This Management's Discussion and Analysis of Financial Condition and Results of
Operations may be deemed to include forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, that involve risk and
uncertainty, including financial, regulatory environment and trend projections.
Although the Company believes that its expectations are



                                    Page 12


<PAGE>   13




based on reasonable assumptions, it can give no assurance that its expectations
will be achieved. The important factors that could cause actual results to
differ materially from those in the forward-looking statements herein (the
"Cautionary Statements") include, without limitation, the Company's degree of
financial leverage, risks associated with debt service requirements and interest
rate fluctuations, risks associated with acquisitions and the integration
thereof, risks of international business, dependence on availability of
transmission facilities, regulation risks including the impact of the Telecom
Act, contingent liabilities, and the impact of competitive services and pricing,
as well as other risks referenced from time to time in the Company's filings
with the SEC, including the Company's Form 10-K for the year ended December 31,
1997 (the "Form 10-K"). All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the Cautionary Statements. The Company
does not undertake any obligation to release publicly any revisions to such
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.

The following discussion and analysis relates to the financial condition and
results of operations of the Company for the three months ended March 31, 1998
and 1997 after giving effect to the BFP Merger, which was accounted for as a
pooling-of-interests. The information should be read in conjunction with the
consolidated financial statements and notes thereto contained herein and in the
Form 10-K and with Item 7 "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained in the Form 10-K.

Unless otherwise defined, capitalized terms used herein have the meanings
assigned to them in the Notes to Consolidated Financial Statements contained
herein.

GENERAL

The Company is one of the largest telecommunications companies in the United
States, serving local, long distance and Internet customers domestically and
internationally. The Company's operations have grown significantly in each year
of its operations as a result of internal growth, the selective acquisition of
smaller telecommunications companies with limited geographic service areas and
market shares, the consolidation of certain third tier long distance carriers
with larger market shares, and international expansion.

On January 31, 1998, WorldCom, through a wholly owned subsidiary, merged with
CompuServe. Prior to the CompuServe Merger, CompuServe operated primarily
through two divisions: Interactive Services and Network Services. Interactive
Services offered worldwide online and Internet access services for consumers,
while Network Services provided worldwide network access, management and
applications, and Internet service to businesses. The CompuServe Merger is being
accounted for as a purchase; accordingly, operating results for CompuServe will
be included from the date of acquisition.

On January 31, 1998, WorldCom also acquired ANS from AOL, and has entered into
five year contracts with AOL under which WorldCom and its subsidiaries will
provide network services to AOL (collectively, the "AOL Transaction"). As part
of the AOL Transaction, AOL acquired CompuServe's Interactive Services Division
and received a $175 million cash payment from WorldCom. WorldCom retained the
CNS division. ANS provides Internet access to AOL and AOL's subscribers in the
United States, Canada, the United Kingdom, Sweden and Japan, and also designs,
develops and operates high performance wide-area networks for business,
research, education and governmental organizations.

On January 29, 1998, WorldCom, through a wholly owned subsidiary, merged with
BFP. BFP is a leading facilities-based provider of competitive local
telecommunications services, commonly referred to as a competitive local
exchange carrier ("CLEC"), in selected cities within the United States. BFP
acquires and constructs its own state-of-the-art fiber optic networks and
facilities and leases network capacity from others to provide IXCs, ISPs,
wireless carriers and business, government and institutional end users with an
alternative to the ILECs for a broad array of high quality voice, data, video
transport and other telecommunications services.

On November 9, 1997, WorldCom entered into the MCI/WorldCom Merger Agreement
with MCI and MCI Merger Sub, providing for the MCI/WorldCom Merger, pursuant to
which MCI would merge with and into MCI Merger Sub, with MCI Merger Sub
surviving as a wholly owned subsidiary of WorldCom. Subject to the terms and
conditions of the MCI/WorldCom Merger Agreement, each share of MCI Common Stock
outstanding immediately



                                    Page 13


<PAGE>   14



prior to the MCI/WorldCom Effective Time will be converted into the right to
receive that number of shares of WorldCom Common Stock equal to the MCI Exchange
Ratio, and each share of MCI Class A Common Stock outstanding immediately prior
to the MCI/WorldCom Effective Time will be converted into the right to receive
$51.00 in cash, without interest thereon. The "MCI Exchange Ratio" means the
quotient (rounded to the nearest 1/10,000) determined by dividing $51.00 by the
MCI/WorldCom Average Price as reported on The Nasdaq National Market on each of
the 20 consecutive trading days ending with the third trading day immediately
preceding the MCI/WorldCom Effective Time; provided, however, that the MCI
Exchange Ratio will not be less than 1.2439 or greater than 1.7586. Cash will be
paid in lieu of the issuance of any fractional share of WorldCom Common Stock in
the MCI/WorldCom Merger.

Based on the number of shares of MCI Common Stock outstanding as of January 20,
1998 and assumed MCI Exchange Ratios of 1.2439 and 1.7586, approximately
710,554,160 shares and 1,004,566,722 shares, respectively, of WorldCom Common
Stock would be issued in the MCI/WorldCom Merger. In addition, as of December
31, 1997, outstanding options to purchase shares of MCI Common Stock would be
converted in the MCI/WorldCom Merger to options to acquire an aggregate of
approximately 86,491,688 shares and 122,280,154 shares, respectively, of
WorldCom Common Stock, and the exercise price would be adjusted to reflect the
MCI Exchange Ratio, so that, on exercise, the holders would receive, in the
aggregate, the same number of shares of WorldCom Common Stock as they would have
received had they exercised prior to the MCI/WorldCom Merger, at the same
exercise price.

The MCI/WorldCom Merger was approved by the MCI stockholders and the WorldCom
shareholders at separate meetings held on March 11, 1998. The MCI/WorldCom
Merger is also subject to approvals from the FCC, the DOJ and various state
government bodies. In addition, the MCI/WorldCom Merger is subject to approval
by the European Commission. WorldCom anticipates that the MCI/WorldCom Merger
will close in mid-year 1998.

Termination of the MCI/WorldCom Merger Agreement by MCI or WorldCom under
certain conditions will require MCI to pay WorldCom $750 million as a
termination fee and to reimburse WorldCom the $450 million alternative
transaction fee and certain related expenses paid by WorldCom to BT. Further,
termination of the MCI/WorldCom Merger Agreement by MCI or WorldCom under
certain conditions, will require WorldCom to pay MCI $1.635 billion as a
termination fee.

Pursuant to the BT Agreement among MCI, WorldCom and BT, the prior BT/MCI Merger
Agreement was terminated, and WorldCom agreed to pay BT an alternative
transaction fee of $450 million and expenses of $15 million payable to BT in
accordance with the BT/MCI Merger Agreement. These fees were paid on November
12, 1997. WorldCom also agreed to pay to BT an additional payment of $250
million in the event that WorldCom is required to make the $1.635 billion
payment to MCI in accordance with the MCI/WorldCom Merger Agreement. In
addition, pursuant to the BT Agreement, BT voted (or caused to be voted) its
shares of MCI Class A Common Stock in favor of the MCI/WorldCom Merger Agreement
and the approval of the other transactions contemplated by the MCI/WorldCom
Merger Agreement.

WorldCom is in the process of developing its plan to integrate the operations of
MCI which may include certain exit costs. As a result of this plan, a charge,
which may be material but which cannot now be quantified, is expected to be
recognized in the period in which such a restructuring occurs. WorldCom has also
undertaken a study to determine the allocation of the total purchase price to
the various assets to be acquired, including in-process research and
development, and the liabilities assumed. To the extent that a portion of the
purchase price is allocated to in-process research and development projects of
MCI, a charge, which may be material, would be recognized in the period in which
the MCI/WorldCom Merger occurs.

The Company's strategy is to become a fully integrated communications company
that would be well positioned to take advantage of growth opportunities in
global telecommunications. Consistent with this strategy, the Company believes
that transactions such as the CompuServe Merger, the AOL Transaction and, if
consummated, the MCI/WorldCom Merger enhance the combined entity's opportunities
for future growth, create a stronger competitor in the changing
telecommunications industry, allow provision of end-to-end bundled service over
global networks, and provide the opportunity for significant cost savings and
operating efficiencies for the combined organization.



                                    Page 14


<PAGE>   15



The Company's profitability is dependent upon, among other things, its ability
to achieve line costs that are less than its revenues. The principal components
of line costs are access charges and transport charges and the most significant
portion of the Company's line costs is access charges, which are highly
regulated. The FCC revised its rules regarding access charges in a manner that
will, over time, revamp the access rate element structure and, over the near
term, reduce the overall access revenues collected by the ILECs. The FCC's rate
element restructuring is intended to align costs with the manner in which they
are incurred by the ILECs. As a result, the usage based system has been replaced
with a system composed of a combination of flat rate charges and usage based
charges. The FCC has also implemented subsidy systems for local telephone
services and services to schools, libraries, and hospitals. The subsidy systems
will result in additional charges being placed on all telecommunications
providers, which charges may be directly recovered from the end users. In
addition, various state regulatory agencies are considering adoption of subsidy
systems that could cause rate adjustments to the access services obtained by the
Company and to retail rates. The Company cannot predict what effect continued
regulation and increased competition between LECs and other IXCs will have on
future access charges or the Company's business. However, the Company believes
that it will be able to continue to reduce transport costs through effective
utilization of its network, favorable contracts with carriers and network
efficiencies made possible as a result of expansion of the Company's customer
base by acquisitions and internal growth.

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated the Company's statement
of operations as a percentage of its operating revenues.

<TABLE>
<CAPTION>

                                                                                            For the Three Months
                                                                                              Ended March 31,
                                                                                           ---------------------
                                                                                             1998         1997
                                                                                             ------       ------
<S>                                                                                             <C>          <C> 
         Revenues ......................................................................        100%         100%

         Line costs ....................................................................       48.8         54.3
         Selling, general and administrative ...........................................       20.4         22.9
         Depreciation and amortization .................................................       12.7         13.6
         Brooks Fiber merger costs .....................................................        3.0         --
         Charge for in-process research and development ................................       18.3         --
                                                                                             ------       ------
         Operating income (loss) .......................................................       (3.2)         9.2
         Other income (expense):
             Interest expense ..........................................................       (4.3)        (5.3)
             Miscellaneous .............................................................        0.5          0.8
                                                                                             ------       ------
         Income (loss) before income taxes and extraordinary item ......................       (7.0)         4.7
         Provision for income taxes ....................................................        4.9          3.2
                                                                                             ------       ------
         Net income (loss) before extraordinary item ...................................      (11.9)         1.5
         Extraordinary item ............................................................       (5.5)        --
                                                                                             ------       ------
         Net income (loss) .............................................................      (17.4)         1.5
         Preferred dividend requirement ................................................        0.3          0.4
                                                                                             ------       ------
         Net income (loss) applicable to common shareholders ...........................      (17.7)%        1.1%
                                                                                             ======       ======
</TABLE>

THREE MONTHS ENDED MARCH 31, 1998 VS.
  THREE MONTHS ENDED MARCH 31, 1997

Revenues for the three months ended March 31, 1998 increased 38% to $2.35
billion on 11.80 billion revenue minutes as compared to $1.70 billion on 8.59
billion revenue minutes for the three months ended March 31, 1997. The increase
in total revenues and minutes is primarily attributable to the internal growth
of the Company, the CompuServe Merger and the AOL Transaction as outlined in the
next paragraph. Prior year results have been restated to reflect the BFP Merger,
which was accounted for as a pooling-of-interests.

The following table highlights the source of WorldCom's internal growth by major
line of business. The pro forma and actual revenue increases for the three
months ended March 31, 1998 and 1997 reflect the following increases by category
(dollars in millions):



                                    Page 15


<PAGE>   16


<TABLE>
<CAPTION>

                               Three Months Ended March 31,
                          -------------------------------------
                           Actual     Pro Forma
                            1998         1997           Change
                          --------     --------        --------
<S>                       <C>          <C>                <C>
REVENUES
Domestic switched         $1,161.8     $  962.7           21%
Domestic private line        496.4        359.5           38%
International                259.7        163.8           59%
Internet                     392.2        216.0           82%
                          --------     --------
CORE REVENUES              2,310.1      1,702.0           36%
                          --------     --------
Other                         39.9         99.5          (60%)
                          --------     --------
TOTAL REVENUES            $2,350.0     $1,801.5           30%
                          ========     ========

</TABLE>

The following discusses the results of operations for the three months ended
March 31, 1998 as compared to pro forma results for the comparable prior year
period. The pro forma results assume that the CompuServe Merger and the AOL
Transaction occurred at the beginning of 1997. Changes in actual results of
operations are shown in the Consolidated Statements of Operations and the
foregoing tables and, as noted above, primarily reflect the CompuServe Merger,
AOL Transaction and the internal growth of the Company.

Domestic switched services revenue increased 21% for the three months ended
March 31, 1998. Strong long distance volume gains in all domestic sales
channels, combined with an increasing mix of local, were the primary
contributors to this increase. The strong volume growth was offset partially by
access charge reform pass throughs and changing product mix. Domestic switched
revenues include both long distance and local switched revenues. While the
Company continues to show significant percentage gains in switched local, it is
still a relatively small component of total Company revenues. However, the
Company expects that due to its local initiatives, and, if consummated, the
MCI/WorldCom Merger, revenues attributable to local switched services will grow
rapidly during the remainder of 1998 and beyond.

Domestic private line revenues increased 38% for the three months ended March
31, 1998. The particularly strong revenue growth for private line and frame
relay services continues to be fueled by tremendous commercial end-user demand
for high-speed data and by Internet-related growth on both a local and long-haul
basis. Domestic private line includes both long distance and local dedicated
bandwidth sales. As of March 31, 1998, the Company had 11.7 million domestic
local voice grade equivalents and 27,185 connected buildings. Local route miles
of connected fiber are in excess of 6,500 and domestic long distance route miles
are in excess of 20,000. The combination of MCI and WorldCom's operations is
expected to enhance WorldCom's local presence.

International revenues - those revenues originating outside of the U.S. - were
up 59% to $260 million for the three months ended March 31, 1998. During the
first quarter of 1998, over 4,000 miles of transatlantic cable was commissioned
for service and now provides WorldCom the capability to connect from end-to-end
over 4,000 buildings in Europe with over 27,000 buildings in the U.S. - all over
Company-owned high capacity circuits. In Europe, the Company has over 400 route
miles of local fiber and over 1,500 long distance route miles.

Internet revenues for the first quarter were $392 million. CNS and ANS revenues
were included following the completion of the transactions on January 31, 1998.
On a pro forma basis, including CNS/ANS for the same time period in both years,
Internet revenues increased 82%. On an internal growth basis, Internet revenues
would have been $230 million, up 107% year-over-year.

Other revenues for the first quarter of 1998 were $40 million, down 60% compared
with first quarter 1997. Other revenues include MFS Network Technologies of $32
million and systems and consulting sales of $8 million. Operator services and
broadcast operations were sold in the third quarter 1997. On a recast basis,
excluding the results of the operator services and broadcast operations
divisions in both periods, other revenues were down 32% for the first quarter
due to the timing of transportation construction contracts within the Network
Technologies group.

In April 1998, the Company entered into an Agreement and Plan of Merger,
pursuant to which WorldCom will sell the Network Technologies group to Able
Telcom Holding Corp. The transaction is conditioned upon, among other


                                    Page 16


<PAGE>   17



things, the expiration or termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. Closing is
expected to occur as soon as practicable after satisfaction or waiver of
customary closing conditions.

Line costs as a percentage of revenues for the three months ended March 31, 1998
was 48.8% as compared to 54.3% reported for the same period of the prior year.
These decreases are attributable to changes in the product mix and synergies and
economies of scale resulting from network efficiencies achieved from the
assimilation of CNS and ANS into the Company's operations and were offset in
part by universal service fund costs recorded in the first quarter of 1998.
Additionally, access charge reductions beginning in July 1997 reduced total line
cost expense by approximately $29 million for the first three months in 1998.
While access charge reductions were primarily passed through to the customer,
line costs as a percentage of revenues was positively affected by more than half
of a percentage point.

Selling, general and administrative expenses for the first quarter of 1998 were
$478.1 million or 20.4% of revenues as compared to $388.2 million or 22.9% of
revenues as reported for same period of the prior year. The decrease in selling,
general and administrative expenses as a percentage of revenues for the first
quarter of 1998 results from the assimilation of recent acquisitions into the
Company's strategy of cost control.

Depreciation and amortization expense for 1998 increased to $298.6 million or
12.7% of revenues from $231.6 million or 13.6% of revenues for the first quarter
of 1997. This increase reflects increased amortization associated with the
CompuServe Merger and AOL Transaction and additional depreciation related to
capital expenditures. As a percentage of revenues, these costs decreased due to
the higher revenue base.

In the first quarter of 1998, the Company recorded a $69.5 million pre-tax
charge for employee severance, alignment charges and direct merger costs
associated with the BFP Merger. On an after-tax basis, this charge was $47.1
million and is reflected in operating loss for the three months ended March 31,
1998.

In the first quarter of 1998, the Company also recorded a $429 million charge
for in-process research and development related to the CompuServe Merger and AOL
Transaction. The charge is based on a valuation analysis of CNS and ANS
technologies including the companies' virtual private data networks, application
hosting products, security systems, next generation network architectures, and
certain other identified research and development projects purchased in the
CompuServe Merger and AOL Transaction. At the date of the CompuServe Merger and
AOL Transaction, the technological feasibility of the acquired technology had
not yet been established and the technology had no future alternative uses.

For the three months ended March 31, 1998, interest expense was $102.2 million
or 4.3% of revenues, as compared to $90.2 million or 5.3% of revenues for the
three months ended March 31, 1997. The increase in interest expense is
attributable to higher debt levels as the result of higher capital expenditures
and the 1997 fixed rate debt financings, offset by lower interest rates in
effect on the Company's variable rate long-term debt. For the three months ended
March 31, 1998 and 1997, weighted average annual interest rates on the Company's
total long-term debt were 7.3% and 7.4%, respectively, while weighted average
annual levels of borrowing were $7.88 billion, and $5.29 billion, respectively.

In the first quarter of 1998, the Company recorded an extraordinary item
totaling $128.7 million, net of income tax benefit of $77.6 million. The charge
was recorded in connection with the tender offers and related refinancings of
outstanding debt of BFP discussed below.

For the three months ended March 31, 1998, net income, before non-recurring
charges, increased to $192.7 million from $25.0 million in the comparable prior
year period. Diluted earnings per common share, before non-recurring charges
increased to $0.18 per share versus $0.02 per share for the comparable 1997
period. Including the non-recurring, after-tax charges, the Company reported a
net loss of $415.7 million or $0.41 per share for the first three months of
1998.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 1998, the Company's total debt was $8.34 billion, an increase of
$913.7 million from December 31,



                                    Page 17

<PAGE>   18



1997 as a result of the BFP Tender Offers and related refinancings (discussed
below) and increased capital expenditures.

In connection with the BFP Merger, the Company announced on February 27, 1998
that it had commenced an offer (the "Tender Offers") to purchase for cash each
of the following series of debt: the 10-7/8% Senior Discount Notes of BFP due
2006, the 11-7/8% Senior Discount Notes of BFP due 2006 and the 10% Senior Notes
of BFP due 2007 (collectively, the "BFP Notes"). WorldCom offered to pay each
registered holder of the BFP Notes, in the case of the 10-7/8% Senior Discount
Notes, 118.586% of their accreted value as of the date of the purchase, in the
case of the 11-7/8% Senior Discount Notes, 127.104% of their accreted value as
of the date of purchase, and in the case of the 10% Senior Notes, 117.615% of
their principal amount, plus accrued interest to the date of purchase. The
accreted value per $1,000 principal amount at stated maturity as of the tender
purchase date of March 27, 1998, was $733.42 for the 10-7/8% Senior Discount
Notes, and $660.57 for the 11-7/8% Senior Discount Notes. The accrued interest
of the 10% Senior Notes per $1,000 principal amount at stated maturity to such
date was $32.22. Concurrently with the Tender Offers, WorldCom obtained consents
to eliminate certain restrictive covenants and amend certain other provisions of
the respective indentures of the BFP Notes.

On March 27, 1998, the Company accepted all BFP Notes validly tendered. As of
the expiration of the offers at 11:59 p.m., New York City time, March 26, 1998,
WorldCom had received valid tenders and consents from holders of approximately
$424.9 million of principal amount at stated maturity of 10-7/8% Senior Discount
Notes due 2006 of BFP (or approximately 99.96% of total outstanding), from
holders of $400.0 million of principal amount at stated maturity of 11-7/8%
Senior Discount Notes due 2006 of BFP (or 100% of total outstanding), and from
holders of approximately $241.0 million of principal amount at stated maturity
of 10% Senior Notes due 2007 of BFP (or approximately 96.4% of total
outstanding).

The funds required to pay all amounts required under the Tender Offers were
obtained by WorldCom from available working capital and lines of credit. Such
lines of credit included a new $1.25 billion 364-day revolving credit facility
which became effective in February 1998. In connection with the Tender Offers
and related refinancings, WorldCom recorded an extraordinary accounting item of
$128.7 million, net of income tax benefit of $77.6 million in the first quarter
of 1998.

As of March 31, 1998, the Company had available liquidity of $1.42 billion under
its existing credit facilities (which are described in the Form 10-K) and from
available cash and marketable securities.

For the three months ended March 31, 1998, the Company's cash flow from
operations was $274.0 million, increasing 49% from $184.1 million in the
comparable period for 1997. The increase in cash flow from operations was
primarily attributable to internal growth and synergies and economies of scale
resulting from network efficiencies and selling, general and administrative cost
savings achieved from the assimilation of recent acquisitions into the Company's
operations.

In 1998, the Company's existing receivables purchase agreement generated
additional proceeds of $34.5 million, bringing the total amount outstanding to
$451.3 million. The Company used these proceeds to reduce outstanding debt under
the Company's existing credit facilities. As of March 31, 1998, the purchaser
owned an undivided interest in a $1.08 billion pool of receivables which
includes the $451.3 million sold.

Cash used in investing activities for the three months ended March 31, 1998
totaled $1.17 billion and included capital expenditures of $961.5 million and
acquisition and related costs of $40.2 million. Primary capital expenditures
include purchases of switching, transmission, communication and other equipment.
At least $3.3 billion is currently anticipated for transmission and
communications equipment, construction and other capital expenditures in 1998
without regard to pending or other possible future acquisitions. Acquisition and
related costs includes the costs associated with the CompuServe Merger and AOL
Transaction.

Included in cash flows from financing activities are payments of $6.6 million
for preferred dividend requirements. The Company has never paid cash dividends
on its Common Stock. The depositary shares ("Depository Shares"), each
representing 1/100th interest in a share of Series A 8% Cumulative Convertible
Preferred Stock of WorldCom



                                    Page 18


<PAGE>   19



("WorldCom Series A Preferred Stock"), are entitled to receive dividends, when,
as, and if they are declared by the Board of Directors, accruing at the rate of
$2.68 per share per annum, payable quarterly in arrears on each February 28, May
31, August 31 and November 30. Dividends are payable in cash or in shares of
WorldCom Common Stock, at the election of the Company. The Company paid the
dividends for the first quarter of 1998 and will pay the dividends for the
second quarter of 1998 in cash. Dividends on the Series B Convertible Preferred
Stock of WorldCom ("WorldCom Series B Preferred Stock") accrue at the rate per
share of $0.0775 per annum and are payable in cash. Dividends will be paid only
when, as and if declared by the Board of Directors of the Company. The Company
anticipates that dividends on the WorldCom Series B Preferred Stock will not be
declared but will continue to accrue. Upon conversion, accrued but unpaid
dividends are payable in cash or shares of WorldCom Common Stock at the
Company's election.

On May 15, 1998, the Company announced that it has elected to redeem on May 31,
1998 (the "Redemption Date"), all of the outstanding shares of WorldCom Series A
Preferred Stock and related Depositary Shares. On the Redemption Date, each
Depositary Share will be redeemed for 0.79511 shares of Common Stock. The
Company will pay cash in lieu of any fractional share of Common Stock. The
Depositary Shares are convertible into 3.44274 shares of Common Stock for each
Depositary Share plus payment of unpaid dividends at any time prior to the close
of business on the Redemption Date. Accordingly, WorldCom expects that all of
the holders of Depositary Shares will convert their shares into Common Stock
prior to redemption.

From and after the Redemption Date, (i) dividends on the WorldCom Series A
Preferred Stock and the Depositary Shares shall cease to accrue, (ii) the
WorldCom Series A Preferred Stock and the Depositary Shares shall no longer be
deemed to be outstanding and (iii) all rights of the holders of Receipts
evidencing Depositary Shares shall cease (except the rights to receive the
shares of Common Stock and cash in lieu of any fractional shares thereof payable
upon such redemption, without interest thereon, upon surrender and endorsement
of Receipts evidencing Depositary Shares).

The Call Price per Share of WorldCom Series A Preferred Stock and the Current
Market Price per share of Common Stock used for purposes of determining the
exchange rate were $3,417.00 and $42.975 respectively. The Current Market Price
is the lesser of (i) the average of the high and low sales prices of the Common
Stock as reported on The Nasdaq National Market for the 10 consecutive trading
days ending on and including the date of determination, which was May 14, 1998,
or (ii) the closing price of the Common Stock on The Nasdaq National Market on
the date of determination. The number of shares of Common Stock to be exchanged
for each outstanding share of WorldCom Series A Preferred Stock is the result of
dividing the Call Price by the Current Market Price.

In connection with the MCI/WorldCom Merger, WorldCom has agreed to pay BT $51.00
in cash without interest for each of the Class A Shares of MCI stock it owns, or
$6.94 billion in the aggregate. Additionally, WorldCom paid BT a fee of $465
million to induce BT to terminate the previously signed BT/MCI Merger Agreement
and to enter into the BT Agreement. WorldCom expects to fund the remaining
commitment through a combination of commercial bank and public debt financings.
The MCI/WorldCom Merger is expected to close by mid-year 1998, and therefore
funding of this commitment is not expected to occur until the second half of
1998. Increases in interest rates on WorldCom's debt would have an adverse
effect upon WorldCom's reported net income and cash flow. WorldCom believes that
the combined operations of WorldCom, CNS, ANS, and, upon consummation of the
MCI/WorldCom Merger, MCI, will generate sufficient cash flow to service
WorldCom's debt and capital requirements; however, economic downturns, increased
interest rates and other adverse developments, including factors beyond
WorldCom's control, could impair its ability to service its indebtedness. In
addition, the cash flow required to service WorldCom's debt may reduce its
ability to fund internal growth, additional acquisitions and capital
improvements.

The Company has historically utilized a combination of cash flow from operations
and debt to finance capital expenditures and a mixture of cash flow, debt and
stock to finance acquisitions. The Company expects to experience increased
capital intensity due to network expansion and merger related expenses as noted
above and believes that funding needs in excess of internally generated cash
flow and the Company's existing credit facilities will be met by accessing the
debt markets. The Company has filed shelf registration statements on Form S-3
with the SEC for the sale, from time to time, of one or more series of unsecured
debt securities having an aggregate value of $6.0 billion. The Company expects
to utilize the shelf registrations in connection with the MCI/WorldCom Merger
and the $6.94 billion payment to BT during 1998. No assurance can be given that
any public financing will be available on terms acceptable to the Company.



                                    Page 19


<PAGE>   20



The Company believes that the CompuServe Merger and the AOL Transaction will
generate sufficient cash flow to adequately fund the capital requirements of
these businesses. As a result of the CompuServe Merger, the AOL Transaction and,
if consummated, the MCI/WorldCom Merger, the Company believes that the operating
and capital synergies from the integration of these acquisitions into WorldCom's
operations will further enhance the cash flow contribution for the Company.

Absent significant capital requirements for other acquisitions, the Company
believes that cash flow from operations and available liquidity, including $1.32
billion under its existing credit facilities, and funds anticipated to be
received from commercial bank debt and debt to be issued under the shelf
registration statements will be more than adequate to meet the Company's capital
needs for the remainder of 1998.

YEAR 2000 ISSUES

The Company is aware of the complexity and the significance of the "Year 2000"
issue. The Company has created a project team comprised of internal resources to
help identify products and systems where the Year 2000 problem may exist, and to
renovate, replace or retire those products or systems. At this time, the Company
believes that the cost of addressing Year 2000 issues is not material to its
future operating results or financial position. The Company is gathering
information concerning the Year 2000 compliance status of its suppliers. In the
event that any of the Company's significant suppliers do not successfully and
timely achieve Year 2000 compliance, the Company's business or operations could
be adversely affected.

ITEM 3.  Quantitative and Qualitative Disclosure About Market Risk

No material changes from December 31, 1997 to March 31, 1998.

PART II.   OTHER INFORMATION

Item 1.    Legal Proceedings.

           None

Item 2.    Changes in Securities and Use of Proceeds.

           None

Item 3.    Defaults upon Senior Securities.

           None

Item 4.    Submission of Matters to a Vote of Security Holders.

On March 11, 1998, the Company held a Special Meeting of Shareholders for the
purpose of considering and voting upon a proposal to approve the issuance of
Common Stock to shareholders of MCI in connection with the MCI/WorldCom Merger.
The tabulation of the voting is as follows:

For                                             718,873,666
Against                                           2,296,105
Abstentions and Broker Non-Votes                  2,607,853

Item 5.    Other Information.

           None



                                    Page 20

<PAGE>   21


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

           A.   Exhibits

                See Exhibit Index

           B.   Reports on Form 8-K

               (i)  Current Report on Form 8-K/A-1 dated November 9, 1997 (filed
                    January 27, 1998) reporting under Item 5, Other Events,
                    information related to the MCI/WorldCom Merger, the
                    CompuServe Merger, the AOL Transaction and the BFP Merger,
                    as well as the management and shareholders of WorldCom.

               (ii) Current Report on Form 8-K/A-2 dated November 9, 1997
                    (filed January 28, 1998) reporting under Item 5, Other
                    Events, information relating to MCI under Item 7(a)
                    Financial Statements of Businesses Acquired, the following
                    financial statements:

                         MCI  Communications Corporation and Subsidiaries
                                - for the fiscal years ended December 31,
                                    1994, 1995, and 1996:

                                      Consolidated Income Statements
                                      Consolidated Balance Sheets
                                      Consolidated Statements of Cash Flows
                                      Consolidated Statements of Stockholders' 
                                        Equity
                                      Management's Discussion and Analysis of 
                                        Financial Condition and Results of
                                         Operations

                         MCI  Communications Corporation and Subsidiaries
                                - for the nine month periods ended September
                                    30, 1996 and 1997 (unaudited):

                                      Consolidated Statements of Operations
                                      Consolidated Balance Sheets
                                      Consolidated Statements of Cash Flows
                                      Consolidated Statements of Stockholders' 
                                        Equity
                                      Notes to Interim Consolidated Financial 
                                        Statements
                                      Management's Discussion and Analysis of 
                                        Financial Condition and Results of
                                         Operations

                         WorldCom,  Inc. - for the nine month period ended
                                September 30, 1997 and for the fiscal year
                                    ended December 31, 1996:

                                      Pro Forma Financial Information
                                      Pro Forma Condensed Combined Balance 
                                        Sheet as of September 30, 1997
                                      Pro Forma Condensed Combined Statement of
                                        Operations for the nine months ended
                                          September 30, 1997
                                      Pro Forma Condensed Combined Statement 
                                        of Operations for the fiscal year ended
                                          December 31, 1996
                                      Notes to Pro Forma Financial Statements
                                      Additional Pro Forma Presentation

               (iii) Current Report on Form 8-K dated August 22, 1997 (filed
                     February 12, 1998) reporting under Item 2, Acquisition or
                     Disposition of Assets, Item 5, Other Events, and Item 7,
                     Financial Statements and Exhibits, information related to
                     the completion of the BFP Merger, the CompuServe Merger 
                     and the AOL Transaction.




                                    Page 21

<PAGE>   22



                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report on Form 10-Q to be signed on its behalf
by Scott D. Sullivan, thereunto duly authorized to sign on behalf of the
registrant and as the principal financial officer thereof.


                                   WORLDCOM, INC.



                                   By:   /s/ Scott D. Sullivan
                                         --------------------------------------
                                         Scott D. Sullivan
Dated:  May 15, 1998                     Chief Financial Officer




                                    Page 22


<PAGE>   23



                                  EXHIBIT INDEX

<TABLE>
<CAPTION>

Exhibit No.                   Description
-----------                   -----------

<S>  <C> 

2.1  Agreement and Plan of Merger dated as of November 9, 1997 among WorldCom.,
     Inc., TC Investments Corp. and MCI Communications Corporation (incorporated
     by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K
     dated November 9, 1997 (filed November 12, 1997))*

2.2  Agreement dated as of November 9, 1997 among British Telecommunications
     plc, WorldCom, Inc. and MCI Communications Corporation (incorporated by
     reference to Exhibit 99.1 to the Company's Current Report on Form 8-K dated
     November 9, 1997 (filed November 12, 1997))*))*

2.3  Agreement and Plan of Merger, dated as of September 7, 1997, by and among
     H&R Block, Inc., H&R Block Group, Inc., CompuServe Corporation, WorldCom,
     Inc., and Walnut Acquisition Company, L.L.C. (incorporated herein by
     reference to Exhibit 2.1 to the Company's Current Report on Form 8-K dated
     September 7, 1997 (File No. 0-11258))*

2.4  Purchase and Sale Agreement by and among America Online, Inc., ANS
     Communications, Inc. and WorldCom, Inc., dated as of September 7, 1997
     (incorporated herein by reference to Exhibit 2.4 to the Company's Current
     Report on Form 8-K dated September 7, 1997 (File No. 0-11258))*

2.5  Amended and Restated Agreement and Plan of Merger dated as of October 1,
     1997 by and among WorldCom, Inc., BV Acquisition, Inc. and Brooks Fiber
     Properties, Inc. ("BFP") (incorporated by reference to Exhibit 2.1 to
     WorldCom's Registration Statement on Form S-4 (File No. 333-43253))*

4.1  Second Amended and Restated Articles of Incorporation of WorldCom, Inc.
     (including preferred stock designations) as of December 31, 1996
     (incorporated herein by reference to Exhibit 3.1 to the Company's Current
     Report on Form 8-K dated December 31, 1996 (File No. 0-11258))

4.2  Restated Bylaws of WorldCom, Inc. (incorporated by reference to Exhibit 4.2
     to the Company's Annual Report on Form 10-K for the year ended December 31,
     1996 (File No. 0-11258))

10.1 364-Day Revolving Credit and Term Loan Agreement among WorldCom, Inc.,
     Borrower, NationsBank of Texas N.A., Administrative Agent and the lenders
     name therein, dated as of February 19, 1998 (incorporated by reference to
     Exhibit 10.3 to WorldCom's Annual Report on Form 10-K for the fiscal year
     ended December 31, 1997)*

27.1 Financial Data Schedule

27.2 Restated Financial Data Schedule - March 31, 1997

</TABLE>

*The registrant hereby agrees to furnish supplementally a copy of any omitted
schedules to this Agreement to the Securities and Exchange Commission.


                                    page 23