SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-KA

(Mark One)

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

For the fiscal year ended SEPTEMBER 30, 1996

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

For the transition period from ----------- to -----------------

                         Commission file number 1-12866

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

                  Canada                             N/A
   ------------------------------------    --------------------------
       (State or other jurisdiction of     (IRS Employer Identification
       incorporation or organization)                Number)

               4317 N.E. Thurston Way, Vancouver, Washington 98662
--------------------------------------------------------------------------------
               (Address of Principal Executive Offices) (Zip Code)

       Registrant's telephone number, including area code: (360) 254-4700

           Securities registered pursuant to Section 12(b) of the Act:

                                                  Name of Each Exchange
     Title of Each Class                          On Which Registered
     -------------------                          -------------------

Common Shares, without par value                  American Stock Exchange

          Securities registered pursuant to Section 12(g) of the Act:

                                      None

                  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
<PAGE>

(or for such  shorter  period  that the  registrant  was  required  to file such
reports),  and (2) has been subject to such filing  requirements for the past 90
days.                                Yes   /X/    No  / /

                  Indicate  by check mark if  disclosure  of  delinquent  filers
pursuant to Item 405 of Regulation S-K is not contained herein,  and will not be
contained,  to the best of the  Registrant's  knowledge,  in definitive proxy or
information  statements  incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. / /

                  The  aggregate  market  value  at  December  27,  1996  of the
Registrant's  Common Shares,  without par value (based upon the closing price of
$8 5/16 per  share of such  Shares  on the  American  Stock  Exchange),  held by
non-affiliates of the Registrant was approximately $158,925,416.  Solely for the
purposes of this  calculation,  shares  held by  directors  and  officers of the
Registrant  have  been  excluded.   Such  exclusion   should  not  be  deemed  a
determination  or an admission by the Registrant that such  individuals  are, in
fact, affiliates of the Registrant.

                  Indicate  the  number  of  shares  outstanding  of each of the
issuer's classes of common stock, as of the latest practicable date: At December
20, 1996, there were outstanding  22,045,638 of the Registrant's  Common Shares,
without par value.

<PAGE>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

MANAGEMENT

         As of January 24, 1997,  the  executive  officers and  directors of GST
Telecommunications, Inc. (the "Company") are as follows:
<TABLE>
<CAPTION>
                                                        Present Position                  Director
Name                                        Age         With The Company                  Since
----                                        ---         ----------------                  -----
<S>                                          <C>        <C>                               <C>
JOHN WARTA                                   49         President, Chief                  March 30, 1995
                                                        Executive Officer and
                                                        Director of the Company

W. GORDON                                    46         Chairman of the Board of          January 11, 1994; also
BLANKSTEIN                                              the Company and GST               November 27, 1992 to
                                                        USA, Inc., a subsidiary           January 29, 1993
                                                        of the Company ("GST
                                                        USA")

STEPHEN IRWIN                                55         Vice-Chairman of the              September 21, 1995
                                                        Board, Secretary and
                                                        Director of the Company

ROBERT H. HANSON                             55         Senior Vice-President,            February 22, 1993
                                                        Corporate Development,
                                                        Chief Financial Officer
                                                        and Director of the
                                                        Company

THOMAS E. SAWYER                             64         Chief Technology Officer          July 22, 1995
                                                        and Director of the
                                                        Company; Chairman of
                                                        the Board Emeritus,
                                                        NACT
                                                        Telecommunications,
                                                        Inc., a subsidiary of the
                                                        Company ("NACT")

IAN WATSON                                   54         Director of the Company;          January 27, 1993
                                                        Vice-President of GST
                                                        USA

PETER E. LEGAULT                             52         Director of the Company           April 21, 1993

JACK G. ARMSTRONG                            62         Director of the Company           July 11, 1994

TAKASHI YOSHIDA(1)                           47         Director of the Company           February 14, 1995
</TABLE>


                                       -2-
<PAGE>
<TABLE>
<CAPTION>
                                                        Present Position                  Director
Name                                        Age         With The Company                  Since
----                                        ---         ----------------                  -----
<S>                                          <C>        <C>                               <C>
CLIFFORD V. SANDER                           60         Senior Vice President and         N.A.
                                                        Treasurer of the
                                                        Company
</TABLE>
---------------------------
(1)      Pursuant to a master financing agreement (the "Tomen Master Agreement")
         by and among the Company, GST Telecom Inc., a subsidiary of the Company
         ("GST Telecom"), Pacwest Network, L.L.C. ("Pacwest") and Tomen America,
         Inc.  ("Tomen  America,"  and  collective  with Tomen  Corporation,  TM
         Communications LLC and their affiliates, "Tomen") the Company agreed to
         nominate a representative  of Tomen for election to the Company's Board
         of Directors. Takashi Yoshida is Tomen's representative.

         The  following  information  concerning  the  directors  and  executive
officers of the Company has been furnished by each of them.

         JOHN WARTA has been President,  Chief Executive  Officer and a director
of the  Company  since March  1995.  Mr.  Warta is also a director of GST Global
Telecommunications,  Inc.  ("Global").  From June 1994 to April 1995, he was the
President  and Chief  Executive  Officer of GST  Telecom.  Mr.  Warta  cofounded
Electric Lightwave,  Inc., a fiber optic competitive access provider ("ELI"), in
1988,  which  operates  fiber optic  competitive  access  networks in  Portland,
Oregon,  Salt Lake City,  Utah,  Sacramento,  California,  Phoenix,  Arizona and
Seattle, Washington and served as its President and Chief Executive Officer from
June 1989 to June 1993.  From June 1993 to June 1994,  Mr. Warta was  developing
the competitive access networks of Pacwest.

         W.  GORDON  BLANKSTEIN  has been  Chairman  of the Board of the Company
since February 1995 and is a director of NACT and Global. He is a founder,  past
President and Chairman of the Board and former  director of ICG  Communications,
Inc. Mr.  Blankstein was the founder and a director of the Company from November
1992 to January 1993 and has been a director  since January 1994. He was elected
Vice Chairman of the Board in February 1994.

         STEPHEN IRWIN has been Vice Chairman of the Board and a director of the
Company  since  September  1995,  has been the  Secretary  of the Company  since
November 1992 and is a director of NACT.  Mr. Irwin is an attorney  specializing
in corporate matters,  including finance,  securities regulation,  international
business and mergers and  acquisitions,  and has been of counsel to the New York
law firm of Olshan Grundman Frome & Rosenzweig LLP since 1990.

         ROBERT H. HANSON has been a director of the Company since February 1993
and was appointed Senior Vice President,  Corporate  Development in October 1993
and Chief Financial  Officer of the Company in July 1994. From August 1991 until
September  1993, he was Vice President and Branch  Manager of the Cody,  Wyoming
office of D.A.  Davidson & Co., a regional  securities firm with headquarters in
Great Falls, Montana.

         CLIFFORD V. SANDER has been Senior Vice  President and Treasurer of the
Company  since  March  1995  and is a  director  of NACT.  He has also  been the
Executive Vice President and Chief  Financial  Officer of GST Telecom since June
1994. Mr. Sander is a member of the Finance  Committee of the Company's Board of
Directors.  From 1962 to 1994, Mr. Sander, who is a Certified Public Accountant,
was in private  accounting  practice in  Portland,  Oregon.  He was acting Chief
Financial Officer of ELI



                                       -3-
<PAGE>
during  its  formation in 1988 and continued to provide accounting and financial
consulting services to ELI through 1993.

         THOMAS E. SAWYER has been the Chief  Technology  Officer of the Company
since  December 1993 and a director of the Company  since July 1995.  Dr. Sawyer
has been the Chairman of the Board  Emeritus of NACT since  November 1996, was a
director of NACT from 1982 to November  1996,  the Chairman of the Board of NACT
from October 1985 to November 1996 and was the Chief  Executive  Officer of NACT
from October 1988 to March 1996. Dr. Sawyer is also Vice President of GST USA.

         IAN WATSON has been a director of the Company since  January 1993,  was
appointed Chairman of the Board of the Company in January 1993 and President and
Chief  Executive  Officer in July 1993.  In March 1995, he resigned as President
and Chief Executive  Officer but retained the position of Chairman of the Board.
In  September  1995,  he resigned as Chairman of the Board,  but remained a Vice
President  of GST USA.  Mr.  Watson has been the Chairman of the Board and Chief
Executive  Officer of Combined Metals  Reduction  Company since April 1996. From
1985 until January 1993, Mr. Watson was engaged as a private investor in various
activities. Mr. Watson is also a director of Global.

         PETER E.  LEGAULT has been a director of the Company  since April 1993.
Mr.  Legault has been a director and Vice  President of Thomson  Kernaghan & Co.
Ltd. ("Thomson Kernaghan"),  a member firm of The Toronto Stock Exchange and The
Montreal  Exchange,  since October 19, 1987.  Mr.  Legault is also a director of
Global.

         JACK G.  ARMSTRONG  has been a director of the Company since July 1994.
Mr. Armstrong, who is a Chartered Accountant,  has served as a principal of J.G.
Armstrong  Consulting,  Inc., a consulting firm offering corporate and financial
consulting  services to  corporations,  municipalities  and  university  related
agencies since 1987.

         TAKASHI  YOSHIDA has been a director of the Company since February 1995
and a  director  of GST  Pacific  Lightwave,  Inc.,  formerly  known as  Pacific
Lightwave,  Inc.  ("GST  Pacific"),  a subsidiary of the Company,  since October
1994. He has been  principally  employed as a Vice President and General Manager
-- Electronics and Telecommunications Department of Tomen America since February
1994. From April 1991 through January 1994, Mr. Yoshida was the Tokyo Manager of
Tomen.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Section  16(a) of the  Securities  Exchange  Act of 1934,  as  amended,
requires the Company's officers and directors, and persons who own more than ten
percent  of a  registered  class of the  Company's  equity  securities,  to file
reports of ownership and changes in ownership  with the  Securities and Exchange
Commission (the "Commission").  Officers, directors and greater than ten percent
shareholders are required by the Commission's regulations to furnish the Company
with copies of all Section 16(a) forms they file.

         Based  solely  on  review of  copies  of such  forms  furnished  to the
Company, or written  representations that no Form 5s were required,  the Company
believes that during the year ended September 30, 1996 ("Fiscal  1996"),  except
as described  below,  all Section  16(a) filing  requirements  applicable to its
officers, directors and greater than ten-percent beneficial owners were complied
with.

         Two Form 4s for Peter E. Legault, a director of the Company, were filed
late with the Commission in Fiscal 1996.



                                       -4-
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.

SUMMARY COMPENSATION TABLE

         The following table discloses the compensation  paid by the Company and
its  subsidiaries  during the previous three fiscal years to the Company's Chief
Executive Officer and the six next highest paid executive officers.

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
====================================================================================================================================
                                      Annual Compensation                            Long Term Compensation
                           ------------------------------------------   ------------------------------------------------
                                                                          Awards                              Payouts
                                                                        ------------------------------------------------
                                                                          Restricted     Securities
                                                                          Shares or      Underlying                      All Other
Name and                                               Other Annual       Restricted     Options/           LTIP         Compen-
Principal                       Salary      Bonus      Compensation       Share Units    SARs Granted       Payouts      sation
Position           Year          (US$)      (US$)      (US$)(1)           (US$)          (#)                (US$)        (US$)
------------------------------------------------------------------------------------------------------------------------------------
<S>              <C>         <C>          <C>          <C>                <C>            <C>                <C>            <C>
John M.          1996        200,000                   156,000(2)                        200,000                         105,417(3)
Warta,           1995        126,667                   200,304(4)                         85,000                              --
Chief            1994         30,000                         --                           40,000                              --
Executive
Officer
------------------------------------------------------------------------------------------------------------------------------------
W. Gordon        1996        190,000                        --                           200,000                         105,417(3)
Blankstein,      1995        125,833                   20,000(5)                          85,000                              --
Chairman         1994         20,000                        --                            92,500                              --
------------------------------------------------------------------------------------------------------------------------------------
Stephen
Irwin,           1996        280,000                                                     500,000                         105,417(3)
Vice             1995             --                        --                           100,000                              --
Chairman         1994             --                        --                            15,000                              --
------------------------------------------------------------------------------------------------------------------------------------
Clifford V.
Sander,
Senior V.P.      1996        120,000                   39,000(2)                          28,000                           5,104(6)
and              1995        101,667                   65,076(7)                          35,000                              --
Treasurer        1994         25,000                        --                            20,000                              --
------------------------------------------------------------------------------------------------------------------------------------
Thomas E.
Sawyer,
Chief            1996        222,556      2,066          5,608(8)                          5,000                           5,403(9)
Technology       1995        136,000      2,200        172,037(10)                       120,000                           4,366(11)
Officer          1994        131,505      6,723         12,915(8)                         35,000                           3,455(11)
------------------------------------------------------------------------------------------------------------------------------------
Robert
Hanson,
Senior V.P.
and Chief        1996        120,000                        --                            15,000                              --
Financial        1995        101,667                   20,000(5)                          50,000                           2,734(6)
Officer          1994         87,333                        --                            50,000                              --
------------------------------------------------------------------------------------------------------------------------------------
Ian Watson,
Vice             1996        120,000                        --                                --
President of     1995        120,000                   20,000(5)                              --
GST USA          1994        120,000                        --                            92,500
====================================================================================================================================
</TABLE>


                                       -5-
<PAGE>
------------------
(1)      Excludes certain perquisites that do not exceed the lesser of US$50,000
         or 10% of the named individual's aggregate salary and bonus.
(2)      Represents  a fee for money  borrowed  and equity  purchased  under the
         Tomen Master Agreement (the "Pacwest Fee").
(3)      Represents an accrual of compensation cost for options vesting based on
         share price performance.
(4)      Includes (i) 5,000 of the Company's common shares (the "Common Shares")
         valued at US$4.00 per share issued as consideration  for such officers'
         guarantee of certain  indebtedness of the Company,  which  indebtedness
         was subsequently  repaid (the "Guaranty Shares") and (ii) US$180,304 in
         payments on account of the Pacwest Fee.
(5)      Represents Guaranty Shares.
(6)      Represents an accrual of compensation cost for options granted at below
         the market price of the Company's Common Shares on the date of grant.
(7)      Includes  the Guaranty  Shares and  US$45,076 in payments on account of
         the Pacwest Fee.
(8)      Represents payments made pursuant to NACT's profit sharing plan.
(9)      Represents (i) US$4,492 in matching contributions by NACT to its 401(k)
         Plan (the "NACT 401(k)  Plan") and (ii) US$911 in accrued  compensation
         cost for options  granted at below the market price of Common Shares on
         the date of grant.
(10)     Represents  (i) US$151,365  accrued in respect of an annuity  purchased
         for Dr. Sawyer,  which is based upon  compensation due to Dr. Sawyer in
         prior  years and  deferred  by him at the  Company's  request  and (ii)
         US$20,672 in payments made pursuant to NACT's profit sharing plan.
(11)     Represents matching contributions by NACT to the NACT 401(k) Plan.

EMPLOYMENT AND OTHER AGREEMENTS

         John  Warta  is  employed  by GST  Telecom  pursuant  to an  employment
agreement dated as of March 1, 1994 and amended effective September 1, 1995, for
a term ending on February 28, 1999.  The agreement  provides for an initial base
salary of  US$120,000  annually  (which was  increased  to  US$200,000  annually
effective September 1, 1995) and incentive  compensation as awarded by the Board
of Directors of the Company from time to time. In the event of Mr. Warta's death
while employed by the Company, the agreement provides for a payment of one and a
half times his then  current base annual  salary,  over a period of one and half
years, to his designated beneficiary.  In the event of his disability, Mr. Warta
is to receive the full  amount of his base  salary for six  months.  If such six
month period ends prior to February 28, 1999, he is to receive  salary at a rate
of one-half  his then  current  base salary for a further  period  ending on the
earlier of one year  thereafter  or February 28, 1999.  The  agreement  contains
covenants  restricting Mr. Warta's  ability to engage in activities  competitive
with those of the Company for a period  ending on the earlier of two years after
his  termination  or February 28, 2000.  Upon a change of control of the Company
that results in Mr.  Warta's  removal from the Company's  Board of Directors,  a
significant  change in the  conditions of his  employment or other breach of the
agreement,  he is to receive  liquidated  damages  equal to 2.99 times the "base
amount,"  as defined in the United  States  Internal  Revenue  Code of 1986,  as
amended (the "Code"), of his compensation.

         The  Company has  entered  into a  consulting  agreement  with  Sunwest
Ventures Ltd. ("Sunwest"),  a private company of which W. Gordon Blankstein, the
Chairman of the Board of the Company, is a principal,  pursuant to which Sunwest
(through Mr.  Blankstein) is to provide consulting  services to the Company,  on
terms  substantially  the same as those  contained  in John  Warta's  employment
agreement.  Effective  September 1, 1995,  the Board of Directors  increased the
annual payment to Sunwest from US$120,000 to US$190,000.

                                       -6-
<PAGE>

         GST USA has entered  into a personal  services  agreement  with Stephen
Irwin,  Vice-Chairman of the Board and Secretary of the Company and Secretary of
GST USA, for the term  commencing  on October 1, 1995 and ending on February 28,
1999,   providing,   among  other  things,  that  (i)  Mr.  Irwin  shall  devote
approximately  one-half of his working time  rendering  services to the Company,
(ii) in  consideration  for such services and in lieu of billing legal  services
directly or through a law firm, Mr. Irwin shall receive a retainer of US$280,000
per annum or such greater  amount as may be determined by the Board of Directors
of the Company,  payable in equal semi-monthly  installments and (iii) Mr. Irwin
is entitled to such  benefits as are available to senior  executive  officers of
the Company and GST USA and to a payment upon a change of control and subsequent
breach by the Company of the agreement in accordance with the formula  described
above for John Warta. In connection therewith, the Company issued to Mr. Irwin a
five year warrant to purchase 300,000 common shares of the Company at a price of
US$6.75 per share,  such  warrant to become  exercisable  in three equal  annual
installments on October 1, 1996, 1997 and 1998.

         Effective as of March 1, 1994,  GST Telecom  entered into an employment
agreement  with  Clifford V. Sander on terms  substantially  similar to those of
John Warta's  employment  agreement.  Mr.  Sander's  agreement  provides for his
employment  by GST  Telecom as its Chief  Financial  Officer at an initial  base
salary of  US$100,000  annually,  which was  increased to  US$120,000  effective
September 1, 1995.

         Robert H.  Hanson is  employed  by GST USA  pursuant  to an  employment
agreement  effective  as of August 1, 1994,  on terms  substantially  similar to
those contained in John Warta's  employment  agreement.  Mr. Hanson's  agreement
provides for an initial base salary of US$100,000 annually,  which was increased
to US$120,000 effective September 1, 1995.

         Ian Watson is  employed by GST USA as a  Vice-President  pursuant to an
employment  agreement  effective  as of  October  1,  1995 for a term  ending on
September 30, 1998.  The agreement  provides for a salary of US$120,000  for the
first year of the agreement,  US$50,000 for the second year of the agreement and
US$10,000 for the third year of the agreement.  The agreement contains covenants
restricting Mr. Watson's ability to engage in activities  competitive with those
of the Company during the term of his employment and for two years thereafter if
he is terminated for "cause" or he voluntarily terminates his employment for any
reason other than a breach by GST USA of the agreement.

         GST USA and GST Telecom have entered into a consulting  agreement dated
April 1, 1996 with Infotec  Consulting,  Inc.  ("Infotec") under which Thomas E.
Sawyer is to provide personal  services to the Company at the rate of US$125 per
hour for hours invoiced  monthly until June 30, 1997. Such consulting  agreement
also contains covenants restricting Dr. Sawyer's ability to engage in activities
competitive with those of the Company and its  subsidiaries.  The agreement also
provides  for a payment  of one and one half  times the  amount  paid to Infotec
during the six months  preceding Dr. Sawyer's death in the event of Dr. Sawyer's
death during the term of the agreement.  Previously,  Dr. Sawyer was employed by
NACT pursuant to an employment agreement effective September 1, 1993, for a term
that ended on March 31, 1996.  The  agreement  provided for an annual  salary of
US$168,000 and contains covenants  restricting Dr. Sawyer's ability to engage in
activities competitive with those of the Company for a period ending three years
from his  termination.  In addition,  pursuant to the agreement,  an annuity has
been purchased for  US$144,000  for the benefit of Dr.  Sawyer.  On November 26,
1996,  NACT granted Dr. Sawyer an option to purchase 60,000 shares of the Common
Stock of NACT at an exercise price of US$9.35 per share.



                                       -7-
<PAGE>
COMPENSATION OF DIRECTORS

         Except as described  above,  the Company does not have any arrangements
pursuant to which directors are  remunerated by the Company or its  subsidiaries
for their  services in their  capacities  as directors,  consultants  or experts
other than stock options to purchase  shares of the Company which are granted to
the Company's directors from time to time.

STOCK OPTION PLANS

         In January 1995,  the Board of Directors of the Company  established an
incentive  stock option plan (the "1995 Plan").  In September 1995, the Board of
Directors  increased the number of Common Shares reserved for issuance under the
1995 Plan from  750,000  to  1,750,000  shares.  In January  1996,  the Board of
Directors  established  the Company's  1996 Stock Option Plan (the "1996 Plan"),
whose terms are substantially similar to those of the 1995 Plan, except that the
number of Common Shares reserved for issuance  pursuant to options granted under
the 1996 Plan is  400,000  shares.  In  January  1997,  the  Board of  Directors
increased, subject to shareholder approval, the number of Common Shares reserved
for issuance  under the 1996 Plan from 400,000 to 700,000  shares.  At September
30,  1996,  options to purchase an aggregate  of  1,360,044  Common  Shares were
outstanding under the 1995 Plan and the 1996 Plan.

         On May 8, 1996,  the  Compensation  Committee of the Board of Directors
adopted, subject to shareholder approval, two additional stock option plans, the
1996 Senior  Executive  Stock  Option Plan (the  "Executive  Plan") and the 1996
Senior  Operating  Officer Stock Option Plan (the "Operating  Officer Plan," and
collectively  with the 1995  Plan,  the 1996 Plan and the  Executive  Plan,  the
"Option Plans") whose terms are substantially similar to those of the 1995 Plan,
except  that the number of Common  Shares  reserved  for  issuance  pursuant  to
options  granted  under the  Executive  Plan and the  Operating  Officer Plan is
600,000 shares and 900,000 shares, respectively.

         As of  January  24,  1997  there  were  options  outstanding  under the
Executive  Plan with respect to an aggregate of 600,000 shares of Common Shares.
Six-year  options to purchase  200,000 Common Shares have been granted under the
Executive  Plan to each of Messrs.  Warta,  Blankstein  and Irwin at an exercise
price  of  US$10.00  per  share.  Each of the  options  may be  exercised  as to
one-third of the shares  covered  thereby  following a period of 20  consecutive
trading  days during  which the closing  sale price of the Common  Shares on the
American Stock  Exchange  ("AMEX") has been at least  US$13.75,  as to a further
one-third  of such shares  following  a period of 20  consecutive  trading  days
during which the closing sale price of the Common Shares on the AMEX has been at
least  US$16.50,  and as to the remaining  one-third of such shares  following a
period of 20 consecutive trading days during which the closing sale price of the
Common Shares on the AMEX has been at least US$20.00.

         As of January 24,  1997,  the  Company has granted  options to purchase
714,000  Common  Shares under the  Operating  Officer  Plan, of which options to
purchase  13,000 Common Shares have been cancelled as a result of termination of
employment.  As a result,  options to  purchase  701,000  Common  Shares  remain
outstanding,  and 199,000 shares remain available for the grant of options under
the Operating  Officer Plan.  All of such options were granted on May 8, 1996 at
an exercise  price of US$10.00  per share.  Options  become  exercisable  to the
extent of  one-quarter  of the shares  covered  thereby on each of June 1, 1997,
1998, 1999 and 2000.



                                       -8-
<PAGE>
         In October 1995, the Board of Directors of the Company established, and
on February 15, 1996,  the Company's  shareholders  approved,  the 1996 Employee
Stock Purchase Plan (the "Purchase Plan" and collectively with the Option Plans,
the  "Plans"),  pursuant  to which an  eligible  employee  may  arrange  to have
withheld  up to 10% of his  wages  over a six  month  period  (to a  maximum  of
US$12,500) to purchase Common Shares.

         The  purpose of the Plans is to attract  and  motivate  the  directors,
officers and  employees of the Company and its  subsidiaries  (collectively  the
"Optionees")  and thereby  advance the  Company's  interests by  affording  such
persons with an opportunity to acquire an equity interest in the Company through
the stock options.

         The  Option  Plans  authorize  the Board of  Directors  to grant  stock
options to the Optionees on the following  terms (subject to certain  exceptions
set out in the Executive Plan and Operating Plan):

         1.       The number of shares  subject to each option is  determined by
                  the Board of Directors  provided that, at the time the options
                  are granted,  no Optionee  may hold  options to purchase  more
                  than five  percent of the issued  shares of the  Company.  The
                  aggregate  fair  market  value,  determined  as of the date of
                  grant,  of Common  Shares for which  incentive  stock  options
                  (within   the   meaning  of  Section  422  of  the  Code)  are
                  exercisable  for the first  time by any  Optionee  during  any
                  calendar  year under the Plans (and/or any other stock options
                  plans of the  Company  or any of its  subsidiaries)  shall not
                  exceed US$100,000.

         2.       The exercise  price of the options  cannot be set at less than
                  the minimum price permitted under the policies of the AMEX and
                  the Vancouver Stock Exchange  ("VSE") and, for incentive stock
                  options,  the exercise price must be at least equal to 100% of
                  the  fair  market  value of such  shares  on the date of grant
                  while for all other  options  the  exercise  price  must be at
                  least equal to 80% of the fair market  value of such shares on
                  the date of grant; PROVIDED,  HOWEVER, that an Optionee who is
                  a Canadian  taxpayer may require that any nonqualified  option
                  granted to him provide for the purchase of Common  Shares upon
                  exercise thereof at a price equal to the fair market value per
                  share on the date of  grant.  For any  Optionee  who owns more
                  than 10% of the  Company's  outstanding  shares,  the exercise
                  price of an incentive  stock option must not be less than 110%
                  of the fair market value on the date such option is granted.

         3.       The  options  may be  exercisable  for a period  of up to five
                  years.

         4.       Optionees may hold more than one option.

         5.       The option can only be  exercised  by the Optionee and only so
                  long as the Optionee is a director, officer or employee of the
                  Company or its  subsidiary or within a period of not more than
                  30 days after  ceasing to be a  director,  officer or employee
                  or, if the Optionee dies, within one year from the date of the
                  Optionee's death.

         Thomas Sawyer has been granted options to purchase 60,000 shares of the
Common Stock of NACT.


                                       -9-
<PAGE>
OPTION/SAR GRANTS

         The following  table  discloses the  particulars of options to purchase
Common  Shares or stock  appreciation  rights  ("SARs")  granted by the  Company
during Fiscal 1996 to the  Company's  Chief  Executive  Officer and the six next
highest paid executive officers:

        OPTION/SAR GRANTS DURING THE MOST RECENTLY COMPLETED FISCAL YEAR
                                INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
====================================================================================================================================
                                                                                              Potential Realizable Value at Assumed
                                                                                                   Annual Rates of Stock Price
                                                                                                     Appreciation for Option
                                     Individual Grants                                                    Term(US$)(1)
--------------------------------------------------------------------------------              --------------------------------------
                                                                   Market Value
                                                                  of Securities
                                     % of Total                     Underlying
                                    Options/SARs                   Options/SARs
                   Securities Under  Granted to     Exercise or   on the Date of
                     Options/SARs   Employees in    Base Price        Grant        Expira-
      Name            Granted (#)   Fiscal Year   (US$/Security)  (US$/Security)  tion Date   5%            10%           0%(2)
------------------------------------------------------------------------------------------------------------------------------------
<S>                <C>               <C>             <C>            <C>           <C>      <C>           <C>             <C>
John Warta,        200,000(3)/--     10.7%/--        10.00          11.75         5/7/02   1,149,225     2,163,168       350,000
Chief
Executive
Officer
------------------------------------------------------------------------------------------------------------------------------------
W. Gordon          200,000(3)/--     10.7%/--        10.00          11.75         5/7/02   1,149,225     2,163,168       350,000
Blankstein,
Chairman
------------------------------------------------------------------------------------------------------------------------------------
Stephen Irwin,     200,000(3)/--     10.7%/--        10.00          11.75         5/7/02   1,149,225     2,163,168       350,000
Vice Chairman      300,000(4)/--     16.1%/--         6.75           6.75         9/30/00    559,470     1,236,283          --
------------------------------------------------------------------------------------------------------------------------------------
Clifford V         28,000(5)/--      1.5%/--         10.00          11.75         5/7/02     160,891       302,844        49,000
Sander, Sr
V.P
------------------------------------------------------------------------------------------------------------------------------------
Thomas E           5,000(5)/--       0.3%/--         10.00          11.75         5/7/02      28,731        54,079         8,750
Sawyer, Chief
Technology
Officer
------------------------------------------------------------------------------------------------------------------------------------
Robert             15,000(5)/--      0.8%/--         10.00          11.75         5/7/02      86,192       162,238        26,250
Hanson,
Senior V.P
and Chief
Financial
Officer
------------------------------------------------------------------------------------------------------------------------------------
Ian Watson,        --/--             --/--              --             --             --         --            --            --
Vice President
of GST USA

====================================================================================================================================
</TABLE>
-----------------------------
(1)      The potential  realizable  portion of the foregoing  table  illustrates
         value that might be realized upon exercise of options immediately prior
         to the expiration of their term,  assuming (for  illustrative  purposes
         only) the  specified  compounded  rates of  appreciation  of the Common
         Shares over the



                                      -10-
<PAGE>

         term  of  the option. These numbers do not take into account provisions
         providing  for  the  termination of the option following termination of
         employment, nontransferability or difference in vesting terms.

(2)      Value at grant date market price.

(3)      Options vest in one-third  increments  at such time as the market value
         of the  Company's  Common Shares  trades above  US$13.75,  US$16.50 and
         US$20.00 per share, respectively, for 20 consecutive trading days.

(4)      Represents  a warrant to purchase  shares that becomes  exercisable  in
         three equal installments on October 1, 1996, 1997 and 1998.

(5)      Options vest over four years.



                                      -11-
<PAGE>
OPTION/SAR EXERCISES

         The following table discloses the particulars of stock options
exercised during Fiscal 1996 by the Company's Chief Executive Officer and the
six next highest paid executive officers and of stock options held by such
persons at the end of Fiscal 1996.

                         AGGREGATED OPTION/SAR EXERCISES
                       DURING THE MOST RECENTLY COMPLETED

                FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES

<TABLE>
<CAPTION>
==================================================================================================================================
Name                      Securities                Aggregate               No. of Common             Value(1) of
                          Acquired on               Value Realized          Shares                    Unexercised in the
                          Exercise (#)              (US$)                   Underlying                Money
                                                                            Unexercised               Options/SARs at
                                                                            Options/SARs at           FY-End (US$)
                                                                            FY-End (#)
                                                                            Exercisable/              Exercisable/
                                                                            Unexercisable             Unexercisable
----------------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>                      <C>            <C>                       <C>
John Warta,                         --                       --             125,000/200,000           648,125/275,000
Chief Executive
Officer
----------------------------------------------------------------------------------------------------------------------------------
W. Gordon                           --                       --             177,500/200,000           1,052,188/275,000
Blankstein,
Chairman
----------------------------------------------------------------------------------------------------------------------------------
Stephen Irwin                       --                       --             115,000/500,000           569,375/1,662,500
Vice Chairman
----------------------------------------------------------------------------------------------------------------------------------
Clifford V.                         --                       --             55,000/28,000             289,375/38,500
Sander, Sr. V.P.
----------------------------------------------------------------------------------------------------------------------------------
Thomas E.                           --                       --             155,000/5,000             921,875/6,875
Sawyer, Chief
Technology
Officer
----------------------------------------------------------------------------------------------------------------------------------
Robert Hanson,                      --                       --             100,000/15,000            587,500/20,625
Sr. V.P. and
Chief Financial
Officer
----------------------------------------------------------------------------------------------------------------------------------
Ian Watson, Vice                    --                       --             92,500/0                  659,063/0
President of GST
USA

==================================================================================================================================
</TABLE>

                                      -12-
<PAGE>
--------------
(1)      Represents  the total gain that would be realized  if  all-in-the-money
         options  held at  September  30,  1996 were  exercised,  determined  by
         multiplying  the  number  of  shares  underlying  the  options  by  the
         difference  between the per share  option  exercise  price and the fair
         market value of US$11.38 per share at September  30, 1996. An option is
         in-the-money if the fair market value of the underlying  shares exceeds
         the exercise price of the option.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         During Fiscal 1996 the compensation of the Company's senior  management
was determined by a Compensation  Committee  consisting of Ian Watson,  Peter E.
Legault and Jack G. Armstrong.

         Of the Company's  Compensation  Committee,  Ian Watson was an executive
officer of the  Company  until  1995 and was and  continues  to be an  executive
officer of its subsidiary,  GST USA. Neither Mr. Armstrong nor Mr. Legault is an
executive officer of the Company. However, Thomas Kernaghan, a firm of which Mr.
Legault is a director  and Vice  President,  was engaged by the  Company  during
Fiscal 1996.

REPORT ON EXECUTIVE COMPENSATION

         COMPENSATION PHILOSOPHY

         The  Compensation  Committee is  responsible  for developing and making
recommendations  to the  Board  of  Directors  with  respect  to  the  Company's
executive compensation and stock option policies and practices. In addition, the
Compensation  Committee  determines  the  compensation  to be paid to the  Chief
Executive Officer and each of the other executive officers of the Company.

         The Company's executive  compensation  programs are designed to enhance
the value of the  Company  to its  shareholders.  This is  accomplished  through
policies  and  practices  that  facilitate  the  achievement  of  the  Company's
performance  objectives,  provide  compensation that will attract and retain the
superior  talent  required  by the  Company's  aggressive  goals  and  align the
executive officers' interests with the interests of its shareholders.

         The Company's approach to executive compensation, as implemented by the
Compensation Committee,  has been designed to provide a competitive compensation
program  that will enable the Company to  attract,  motivate,  reward and retain
individuals who possess the skills,  experience and talents necessary to advance
the growth and financial performance of the Company. The Company's  compensation
policies are based on the  principle  that each  executive's  financial  rewards
should be  aligned  with the  financial  interests  of the  shareholders  of the
Company. The Compensation  Committee also believes that the potential for equity
ownership by management is beneficial in aligning management's and shareholders'
interest in the  enhancement  of  shareholder  value.  The  Company's  executive
compensation has two key elements: (i) a long-term component consisting of stock
options and  participation  in the Purchase  Plan and (ii) an annual  component,
i.e.,  base salary,  with more emphasis being placed on the long-term  component
than on the annual  component.  The  Company has not  established  a policy with
regard to Section  162(m) of the Code  because  the Company has not to date paid
compensation in excess of $1 million per annum to any employee.



                                      -13-
<PAGE>
         SALARIES

         Base  salaries for the  Company's  executive  officers  are  determined
initially by evaluating the  responsibilities  associated with the position held
and the  experience  of the  individual,  and by  reference  to the  competitive
marketplace for management  talent,  including a comparison of base salaries for
comparable  positions at comparable  companies  within the  Company's  industry.
Adjustments in salary are determined by evaluating the competitive  marketplace,
the  performance  of the Company,  the  performance  of the  executive  officer,
particularly  with respect to the ability to manage  growth of the Company,  and
any increased  responsibilities  assumed by the executive officer.  As long term
compensation  such as stock  options  is the  more  important  component  of the
compensation  package,  much consideration is given to the stock options held by
such executive  officers in  determining  their cash  remuneration.  The Company
believes that its executive  officers' salaries are generally less than those of
its  competitors.  The Company  has  employment  agreements  with each of Messrs
Warta, Sander, Hanson and Watson,  consulting agreements with Mr. Blankstein and
Dr. Sawyer and a personal services agreement with Mr. Irwin, which initially set
the base salaries/retainer for such individuals.

         BONUSES

         The Company has not paid cash  bonuses and has no present  intention of
paying significant and regular cash bonuses to its executive  officers.  At such
time in the future as the  Company  were to  determine  to pay cash  bonuses and
incentive  compensation to its executive  officers,  the Compensation  Committee
would  consider the extent of  achievement  by the Company of its  strategic and
operating  goals,  the level of personal  achievement  by the executive  officer
(such as the level of cost  savings  achieved by such  executive  officer),  the
executive officer's ability to manage and motivate employees and the achievement
of projects for which the executive  officer is  responsible.  The  Compensation
Committee  would also take into  consideration  the extent of the Company's cash
reserves available for such payments.

         COMPENSATION OF CHIEF EXECUTIVE OFFICER

         In addition,  with respect to the  determination of the Chief Executive
Officer's  compensation,  the  Compensation  Committee made comparisons to other
companies in the  telecommunications  industry carrying on businesses similar to
those of the Company,  in particular the business of competitive  local exchange
carriers. The consideration accounted for approximately 50% of the determination
of the  Chief  Executive  Officer's  salary.  The  other  50% was  based  on the
Compensation  Committee's  determination  of  what  level  of  remuneration  was
necessary to attract and retain people having the  experience and ability of the
Company's Chief Executive Officer.

         STOCK OPTION PLANS

         The Option Plans  contribute  to the  Company's  ability to attract and
retain the best available  personnel.  It is the philosophy of the  Compensation
Committee to tie a significant  portion of an executive's  total opportunity for
financial  gain to  increases in the value of the Common  Shares.  In the belief
that employees who have a proprietary  interest in the Company will focus on its
long term success and on building shareholder wealth, the Compensation Committee
uses Option Plans as a basis to create a foundation  for the long term growth of
the Company and increased  shareholder value by providing executive officers and
key employees with an opportunity to obtain and build a meaningful  stake in the
Company's  future. In adherence to this philosophy,  the Compensation  Committee
has recommended to



                                      -14-
<PAGE>
the Board of  Directors  that the  number of shares  available  for the grant of
options  under the 1996 Plan be amended  and that the  Executive  and  Operating
Officer Plans be approved.

         All employees,  including  executive officers and part-time  employees,
consultants,  advisors  and  directors of the Company and its  subsidiaries  are
eligible  for  grants of stock  options  pursuant  to one or more of the  Option
Plans. During each fiscal year, the Compensation  Committee grants stock options
to employees, including executive officers, who are recommended by management as
being in a position  to  continue  to  contribute  to the  Company's  growth and
profitability.  The number of options granted to a particular  employee is based
on management's  assessment of his performance  and  contribution.  Options have
been granted to key  employees at all levels of the  Company's  management.  The
ultimate  value of the  options,  if any,  depends on the extent to which Common
Shares appreciate in market value.

         The  Compensation  Committee  granted  options  to the Chief  Executive
Officer and each of the six most highly  compensated  executive  officers of the
Company in May 1996. The size of these awards to each of such officers was based
generally  on the  factors  described  in the  "Salaries"  paragraph  above.  In
addition,  the  Compensation  Committee  considered the extensive nature and the
significant  services  rendered  by  such  executive  officers,  their  seasoned
managerial  skills and the fact that the executive  officers'  base salaries are
generally  less than  executive  officers  with similar  positions in comparable
companies.

         DATED this 28th day of January, 1997.

         (signed)
         Jack G. Armstrong
         Committee Chairman

         (signed)
         Ian Watson
         Director

         (signed)
         Peter Legault
         Director

PERFORMANCE GRAPH

         The  following  graph  compares  the  yearly  percentage  change in the
cumulative total  shareholder  return on the Common Shares (being the percentage
increase  (or  decrease) in the trading  price of the Common  Shares on a yearly
basis based on an  investment  in the Common  Shares on September  22, 1992 (the
last  date on  which  the  Common  Shares  traded  prior  to  entering  into the
telecommunications  business)) with the cumulative total  shareholder  return of
the American Stock Exchange Market Value Index and with a telephone  (other than
radio  telephone)  communication  industry index (which is shown on the graph as
the SIC Code Index). The Common Shares did not trade on the AMEX until March 11,
1994 and before that time were traded only on the VSE --  initially  in Canadian
dollars and on and after March 9, 1995 in U.S. dollars.  For comparison purposes
it is assumed  that  US$100 had been  invested  in the Common  Shares and in the
securities  contained in such indices on September 22, 1992. For the purposes of
this graph,  Canadian dollars have been converted into U.S. dollars on the basis
of Cdn. $1.00 = US$0.75.



                                      -15-
<PAGE>
                      COMPARISON OF CUMULATIVE TOTAL RETURN
                       AMONG GST TELECOMMUNICATIONS, INC.,
                      AMEX MARKET INDEX AND SIC CODE INDEX

                     COMPARISON OF CUMULATIVE TOTAL RETURN
                  OF COMPANY, INDUSTRY INDEX AND BROAD MARKET
<TABLE>
<CAPTION>
                                       FISCAL YEAR ENDING
                        ----------------------------------------------------------------------

COMPANY                  1992           1993           1994           1995            1996
<S>                      <C>            <C>            <C>            <C>             <C> 
GST TELECOMMU            100.00         611.11         712.59         962.96          1685.93
INDUSTRY INDEX           100.00         132.61         131.51         150.45           150.36
BROAD MARKET             100.00         117.39         119.64         144.16           150.03
</TABLE>



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The following  table sets forth certain  information  as of January 24,
1997 with respect to the  beneficial  ownership of the Common Shares by (i) each
person known to the Company to be the  beneficial  owner of five percent or more
thereof,  (ii) each director of the Company,  (iii) the Chief Executive  Officer
and each of the six most highly  compensated  executive  officers of the Company
other than the Chief  Executive  Officer  and (iv) all  executive  officers  and
directors as a group.  Each of the named persons has sole voting and  investment
power with respect to all Common Shares owned by him. All persons



                                      -16-
<PAGE>
identified  below as holding  options are deemed to be beneficial  owners of the
Common  Shares  subject to such options by reason of their right to acquire such
shares  within 60 days after  January 24,  1997,  through  the  exercise of such
options.

                                                  AMOUNT AND
                                                  NATURE OF
                                                  BENEFICIAL
NAME AND ADDRESS OF BENEFICIAL OWNER(1)           OWNERSHIP        PERCENTAGE
------------------------------------              ---------        ----------
John Warta                                       1,672,468(2)         7.0%
Tomen Corporation and affiliates                 1,620,220(3)         6.8%
   1285 Avenue of the Americas
   New York, New York 10019
W. Gordon Blankstein                               399,300(4)         1.7%
Stephen Irwin                                      276,345(5)         1.2%
Ian Watson                                         460,100(6)         1.9%
Thomas E. Sawyer                                   384,004(7)         1.6%
Clifford V. Sander                                 419,100(8)         1.8%
Robert H. Hanson                                   167,214(9)         *
Peter E. Legault                                   126,056(10)        *
Jack G. Armstrong                                   50,000(11)        *
Takashi Yoshida                                          0(12)       --
Directors and Executive Officers
  of the Company as a
  Group (10 persons)                             3,954,587(13)       16.1%

----------------
* Less than 1%.

(1)      Unless  otherwise  indicated,  the  address  for each  person or entity
         listed below is the Company's principal executive offices.
(2)      Includes  125,000 Common Shares  issuable upon the exercise of options.
         Does not include  200,000  Common Shares  issuable upon the exercise of
         options that are not  exercisable  until the market price of the Common
         Shares  on the AMEX  reaches  certain  levels  for  certain  prescribed
         periods.
(3)      Includes  296,155 Common Shares  issuable upon the exercise of warrants
         held by Tomen.
(4)      Includes  (i)  177,500  Common  Shares  issuable  upon the  exercise of
         options  and (ii)  200,000  Common  Shares  held in escrow  pursuant to
         policies of the VSE. Does not include  200,000  Common Shares  issuable
         upon the exercise of options that are not exercisable  until the market
         price of the  Common  Shares on the AMEX  reaches  certain  levels  for
         certain prescribed periods.
(5)      Includes (i) 115,000  Common  Shares  issuable upon exercise of options
         and (ii) 100,000 Common Shares issuable upon exercise of an outstanding
         warrant.  Does not include  200,000  Common  Shares  issuable  upon the
         exercise of options that are not exercisable until the trading price of
         the  Common  Shares on the AMEX  reaches  certain  levels  for  certain
         prescribed periods.
(6)      Includes (i) 92,500 Common Shares issuable upon the exercise of options
         and (ii) 362,500  Common Shares held in escrow  pursuant to policies of
         the VSE.
(7)      Includes 155,000 Common Shares issuable upon the exercise of options.
(8)      Includes 55,000 Common Shares issuable upon the exercise of options.
(9)      Includes 100,000 Common Shares issuable upon the exercise of options.
(10)     Includes 40,000 Common Shares issuable upon the exercise of options.


                                      -17-
<PAGE>
(11)     Includes 30,000 Common Shares issuable upon the exercise of options.
(12)     Mr. Yoshida is an officer of Tomen America.  Does not include 1,620,220
         Common  Shares  beneficially  owned by Tomen  as to which  Mr.  Yoshida
         disclaims any beneficial ownership interest.
(13)     Includes  an  aggregate  of 890,000  Common  Shares  issuable  upon the
         exercise of options,  396,155 Common Shares  issuable upon the exercise
         of warrants and 562,500 Common Shares held in escrow.  Does not include
         600,000  Common  Shares  issuable upon the exercise of options that are
         not exercisable until the market price of the Common Shares on the AMEX
         reaches certain levels for certain prescribed periods.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         None of the  directors or officers of the  Company,  nor any person who
beneficially owns, directly or indirectly,  shares carrying more than 10% of the
voting  rights  attached  to all  outstanding  shares  of the  Company,  nor any
associate  or  affiliate of the  foregoing  persons has any  material  interest,
direct or indirect,  in any transaction since the commencement of Fiscal 1996 or
in any proposed  transaction which, in either case has or will materially affect
the Company except as follows or as disclosed herein.

         On June 23, 1994, the Company entered into agreements (the "GST Telecom
Agreements") with Pacwest (an entity controlled by John Warta, now the President
and Chief  Executive  Officer of each of the Company  and GST USA),  pursuant to
which the Company and Pacwest  formed a new  corporation,  GST Telecom,  for the
purpose  of  developing  telecommunications  networks.  Under  the  terms of the
agreements,  Pacwest contributed the stock of GST Pacific, GST Tucson Lightwave,
Inc. and Pacwest Telecommunications, Inc. (now GST Pacwest Telecom Hawaii, Inc.)
and the Company made certain funding commitments (all of which were subsequently
satisfied),  for which the Company  received 60% and Pacwest received 40% of the
capital stock of GST Telecom.  Effective June 1, 1995,  the Company  acquired an
additional  20%  ownership  interest in GST Telecom from Pacwest in exchange for
1,000,000  Common  Shares.  Effective  October 20,  1995,  the Company  acquired
Pacwest's  remaining  20% interest in GST Telecom for which Pacwest was eligible
to receive up to a maximum of 1,000,000  Common  Shares  (valued at US$10.00 per
Common Share) based upon the fair market value of a 20% interest in GST Telecom,
as determined by independent  appraisal.  The Company engaged Dillon Read & Co.,
Inc. to provide such appraisal,  which appraisal valued such 20% interest at not
less than US$10 million.  In November 1996,  1,000,000 Common Shares,  which had
been held in escrow since October 20, 1995, were distributed to the designees of
Pacwest, principally Messrs. Warta and Sander.

         Prior to his  employment  with  the  Company,  Mr.  Warta  served,  and
continues  to  serve,  as a  consultant  to  Tomen  for  which he is paid a fee.
Simultaneously  with  the  execution  of the  GST  Telecom  Agreements,  Pacwest
contracted  with the Company to receive a fee equal to 1% of the aggregate  debt
and equity financing provided by Tomen to the Company.  Mr. Sander,  Senior Vice
President and Treasurer of the Company,  is a member of Pacwest and participates
in such fees.  Through  September 30, 1996,  the Company has paid  US$420,380 of
such fees to Pacwest.

         The  Company,  GST Telecom and Pacwest are parties to the Tomen  Master
Agreement dated October 24, 1994 and amended May 24, 1996 with Tomen pursuant to
which Tomen agreed,  in its sole  discretion on a  project-by-project  basis, to
make   available   up  to  a  total  of  US$100   million   of   financing   for
telecommunications  network  projects  developed and constructed by the Company.
Under the terms of the Tomen Master Agreement,  Tomen has the exclusive right to
review the  Company's  proposed  network  projects for  purposes of  determining
whether to provide financing for such projects until Tomen has



                                      -18-
<PAGE>
extended US$100 million in debt financing or has refused three projects that the
Company subsequently finances.  Upon approval of a project by Tomen, Tomen is to
enter into a credit agreement (a "Project Credit Agreement") with the subsidiary
of the Company  developing  the  project (a  "Development  Company")  to provide
financing for 75% of the project's  costs (a "Project  Loan").  The first 25% of
such costs is to be contributed as equity by the Company prior to or at the same
time as the  receipt  of the  debt  financing.  Tomen  has the  right  to act as
procurement agent for each network project it finances.

         Until amended in May 1996, the Tomen Master Agreement had provided that
Tomen could purchase up to 10% (on a fully diluted basis) of the capital stock
of a Development Company to which it agreed to provide financing and Tomen had
purchased 10% of the equity of GST Pacific for the sum of US$615,000. In May
1996, the Company entered into a series of transactions pursuant to which (i)
GST Telecom purchased the shares of GST Pacific held by Tomen for $1,250,000,
(ii) the parties amended the Tomen Master Agreement to eliminate Tomen's right
to purchase 10% of the shares in Development Companies to which it provides a
Project Loan, (iii) the Company granted to Tomen in connection with each Project
Loan the right to purchase a number of Common Shares the aggregate value of
which based on their market price would equal 10% of the total equity
contribution by the Company to the Development Company and (iv) the parties
agreed that in connection with certain Project Loans, Tomen's purchase of Common
Shares would include, for no additional consideration, a specified number of
warrants to purchase additional Common Shares.

         The Tomen Master  Agreement  provides that each Project Loan is to bear
interest at LIBOR plus 3% and is to be amortized  in 24  quarterly  installments
beginning  after the project's  construction  period (which may not exceed three
years).  An  upfront  fee of 1.50% of the  aggregate  principal  amount  of each
Project  Loan and a commitment  fee of 0.50% per annum on the unused  portion of
each  Project  Loan is  payable  to  Tomen.  In  addition,  Pacwest,  an  entity
controlled by John Warta,  President and Chief Executive  Officer of each of the
Company and GST USA, is entitled to receive the Pacwest  Fee,  which is equal to
1% of the total debt and equity  financing  received  by the  Company  under the
Tomen Master Agreement.

         Pursuant  to a stock  purchase  agreement  (the "Tomen  Stock  Purchase
Agreement")  entered into in connection with the Tomen Master  Agreement,  Tomen
purchased (i) for an aggregate purchase price of US$2.3 million,  500,000 Common
Shares and warrants to purchase  250,000 Common Shares which have been exercised
(ii) for an aggregate of US$1.2  million,  250,000 Common Shares and warrants to
purchase  125,000 Common Share  exercisable  until April 26, 1997 at an exercise
price of US$5.62 per share, and (iii) for an aggregate of US$2,700,000,  250,000
Common Shares and warrants to purchase 125,000 Common Shares  exercisable  until
May 23, 1998 at an exercise  price of US$12.96 per share and (iv) pursuant to an
amendment to the Tomen Master  Agreement and the Tomen Stock Purchase  Agreement
for an aggregate of  US$800,000,  74,074  Common  Shares and 46,155  Warrants to
purchase Common Shares at an exercise price of US$12.96 per share.

         The first projects  financed under the Tomen Master  Agreement were the
San  Bernardino,  Ontario,  Tucson and  Albuquerque  networks,  for which  Tomen
provided,  pursuant to Project Credit Agreements,  approximately US$34.5 million
of financing in the aggregate.

         Tomen has  recently  agreed in  principle  to provide the Company  with
US$41.0  million of debt  financing for the upgrade of its Hawaiian  network and
the construction of the Hawaiian  inter-island network. The Company expects that
GST Telecom Hawaii, Inc., a subsidiary of the Company,  will enter into a credit
agreement  with Tomen  containing  substantially  similar  terms as the  Project
Credit


                                      -19-
<PAGE>
Agreements and in connection with such financing will purchase additional Common
Shares and warrants to purchase 75,000 additional Common Shares.

         The  operations of the Company's  Hawaiian  microwave  network  require
radio licenses from the Federal  Communications  Commission (the "FCC"). Pacwest
Network,  Inc. ("PNI"), an entity controlled by John Warta,  President and Chief
Executive Officer of each of the Company and GST USA, holds the Hawaii microwave
licenses.  Under agreements  between the Company and PNI, (i) the Company pays a
monthly fee to PNI to utilize the licensed facilities for communications traffic
and (ii) PNI pays an equal  monthly  fee to the Company for the right to utilize
the facilities for other communications traffic using up to 10% of PNI's license
capacity.

         Magnacom  Wireless,  LLC  ("Magnacom"),  a company  controlled  by John
Warta,  the Chief  Executive  Officer of the  Company,  has  applied for various
Personal  Communication  Services  ("PCS")  licenses.  Magnacom has been granted
30mhz (C Block) PCS licenses from the FCC for 5 cities and Guam/Saipan. Magnacom
also has  submitted  bids in the  FCC's  10mhz  (D, E and F block)  PCS  license
auctions for 14 additional cities.

         Magnacom and the Company  have  entered  into an agreement  pursuant to
which the  Company  has made  payments  to the FCC on behalf  of  Magnacom.  The
Company paid US$5,997,000 and US$2,970,000  during the third and fourth quarters
of Fiscal 1996 and made an additional  payment of US$5,426,000  after the end of
Fiscal 1996. In return, Magnacom agreed to allow the Company to provide switched
local and long distance services and manage Magnacom's networks in markets where
the Company has  operational  CLEC  networks.  The Company  agreed to purchase a
designated  amount of minutes from Magnacom at the most favorable  rates offered
to Magnacom  customers and the three  payments that the Company has made will be
applied as advances against such purchase. In addition,  the Company acquired an
option to purchase for nominal  consideration a 24% interest (to be increased to
a 99%  interest) in Magnacom.  The exercise of such option as to such  increased
interest is contingent upon, among other things, FCC approval.

         Magnacom  has  acquired  licenses  and bid for  additional  licenses in
cities  located  on  or  near  the  Company's  existing  and  planned  networks.
Management  of the Company  believes the  capability of the Company to provide a
wireless   telecommunications  service  is  consistent  with  and  enhances  the
Company's  strategy of providing a full array of services to its customers.  The
Magnacom agreement will increase product capability with wireless local loop and
wireless  Internet  access.  The Company  further  believes the  agreement  with
Magnacom will allow the Company to provide wireless  telecommunication  services
to its customers at competitive prices.

         Stephen Irwin, Vice-Chairman of the Board and Secretary of the Company,
is of counsel to the law firm of Olshan Grundman Frome & Rosenzweig LLP, counsel
to the Company.  In connection  with such  services,  such firm received fees of
approximately $1,820,000 for Fiscal 1996 and will receive fees for Fiscal 1997.

         Peter E.  Legault,  a director of the  Company,  is a director and Vice
President of Thomson  Kernaghan,  which was engaged by the Company during Fiscal
1996 to solicit sources of financing for the Company.

         None of the current or former directors,  executive  officers or senior
officers  of the Company or persons who were  directors,  executive  officers or
senior officers of the Company at any time during Fiscal


                                      -20-
<PAGE>
1996,  and none of the  affiliates  and  associates  (including  members  of the
immediate  families of such persons) are or have been indebted to the Company or
its  subsidiaries  at any time since the beginning of Fiscal 1996.  Furthermore,
none of such  persons  were  indebted to a third party  during such period where
their indebtedness was the subject of a guarantee,  support agreement, letter of
credit or other similar arrangement or understanding  provided by the Company or
its subsidiaries.

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Vancouver, State of Washington, on the 28th day of January, 1997.



                              GST TELECOMMUNICATIONS, INC.

                              By: /S/ STEPHEN IRWIN
                                  -----------------
                                  Stephen Irwin,
                                  Vice Chairman of the Board