<PAGE>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q/A
                                 AMENDMENT NO. 1

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

                      FOR THE QUARTER ENDED MARCH 31, 1998

                        COMMISSION FILE NUMBER 000-22581

                          STAR TELECOMMUNICATIONS, INC.
             (Exact name of registrant as specified in its charter)

Delaware                                                  77-0362681

(State or Other Jurisdiction                              (IRS Employer
of Incorporation or Organization)                         Identification Number)

223 East De La Guerra, Santa Barbara, California, 93101

(Address of Principal Executive Offices)          (Zip Code)

Registrant's telephone number, including area code (805) 899-1962

                                      None

                        (Former name, former address and
                former fiscal year if changed since last report)

           Indicate by check mark whether the registrant (1) has filed all
reports 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 [ ]

As of January 13, 1999, the number of the registrant's Common Shares of $.001 
par value outstanding was 42,246,521.

<PAGE>

     The undersigned Registrant hereby amends the following items of its 
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, as set 
forth below:




                                       2
<PAGE>

ITEM 1. FINANCIAL STATEMENTS

                 STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                              December 31,      March 31,
                                                                  1997             1998
                                                               ---------        ---------
                                                                               (Unaudited)
<S>                                                            <C>              <C>      
Current Assets:
   Cash and cash equivalents                                   $   1,903        $   5,285
   Short-term investments                                         18,631            2,978
   Accounts receivable, net                                       46,675           51,024
   Receivable from related parties                                    --              303
   Other current assets                                           10,696           16,057
                                                               ---------        ---------
              Total current assets                                77,905           75,647
                                                               ---------        ---------
Property and equipment, net                                       35,959           67,814
Other assets                                                       6,452              851
                                                               ---------        ---------
              Total assets                                     $ 120,316        $ 144,312
                                                               ---------        ---------
                                                               ---------        ---------

Current Liabilities:
   Revolving lines of credit with stockholder                  $     138        $      82
   Current portion of long-term obligations                        3,259            6,314
   Accounts payable and other accrued expenses                    22,345           23,242
   Accrued network cost                                           38,403           37,667
                                                               ---------        ---------
              Total current liabilities                           64,145           67,305
                                                               ---------        ---------

Long-Term Liabilities:
   Long-term obligations, net of current portion                  12,107           25,902
   Other long-term liabilities                                       863              378
                                                               ---------        ---------
              Total long-term liabilities                         12,970           26,280
                                                               ---------        ---------

Stockholders' Equity:
   Common Stock $.001 par value:
     Authorized - 50,000,000 shares                                   35               36
   Additional paid-in capital                                     41,662           47,274
   Deferred compensation                                             (30)             (10)
   Retained earnings                                               1,534            3,427
                                                               ---------        ---------
              Total stockholders' equity                          43,201           50,727
                                                               ---------        ---------
              Total liabilities and stockholders' equity       $ 120,316        $ 144,312
                                                               ---------        ---------
                                                               ---------        ---------
</TABLE>

   See accompanying notes to the condensed consolidated financial statements.


                                       3
<PAGE>
                 STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES

                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME

                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                               Three Months Ended
                                                    March 31,
                                            --------------------------
                                               1997             1998
                                            ---------        ---------
                                                   (Unaudited)
<S>                                         <C>              <C>      
Revenue                                     $  84,827        $ 129,269
                                            ---------        ---------
Operating expenses:
        Cost of services                       73,726          111,593
        Selling, general
          and administrative expenses           7,720           11,561
        Depreciation and amortization             820            1,879
        Merger expense                             --              314
                                            ---------        ---------
                                               82,266          125,347
                                            ---------        ---------
        Income from operations                  2,561            3,922
                                            ---------        ---------

Other income (expense):
        Interest income                            21              283
        Interest expense                         (398)            (618)
        Other                                      51             (160)
                                            ---------        ---------
                                                 (326)            (495)
                                            ---------        ---------
        Income before provision
          for income taxes                      2,235            3,427
Provision for income taxes                        341            1,534
                                            ---------        ---------
Net income                                  $   1,894        $   1,893
                                            ---------        ---------
                                            ---------        ---------
        Income before provision
          for income taxes                      2,235
Pro forma income taxes                            888
                                            ---------
Pro forma net income                        $   1,347
                                            ---------
                                            ---------
Basic income per share                      $    0.08        $    0.05
                                            ---------        ---------
                                            ---------        ---------
Diluted income per share                    $    0.07        $    0.05
                                            ---------        ---------
                                            ---------        ---------
Pro forma basic income per share            $    0.05
                                            ---------
                                            ---------
Pro forma diluted income per share          $    0.05
                                            ---------
                                            ---------

</TABLE>



   See accompanying notes to the condensed consolidated financial statements.



                                       4
<PAGE>
                 STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)


<TABLE>
<CAPTION>
                                                                         Three Months Ended
                                                                              March 31,
                                                                       ------------------------
                                                                         1997            1998
                                                                       --------        --------
                                                                             (Unaudited)
<S>                                                                    <C>             <C>     
Cash Flows From Operating Activities:
     Net income                                                        $  1,894        $  1,893
     Adjustments to reconcile net income to
     net cash provided by operating activities:
         Depreciation and amortization                                      820           1,879
         Loss on disposal of equipment                                       42              --
         Compensation expense relating to stock options                      20              20
         Provision for doubtful accounts                                  1,128           1,017
         Deferred income taxes                                               --          (1,411)
         Deferred compensation                                              (81)             50
         Decrease (increase) in assets:
            Accounts receivable                                          (6,315)         (5,366)
            Receivable from related parties                                 (14)           (303)
            Other assets                                                   (207)          6,294
         Increase (decrease) in liabilities:
            Accounts payable and accrued expenses                         9,169             897
            Accrued network cost                                         (3,599)           (736)
            Other liabilities                                               287            (535)
                                                                       --------        --------
                Net cash provided by
                     operating activities                                 3,144           3,699
                                                                       --------        --------

Cash Flows From Investing Activities:
     Capital expenditures                                                (2,324)        (15,636)
     Investments                                                            (93)             --
     Short-term investments, net                                          1,656          15,653
     Proceeds from the sale of assets                                        18              --
                                                                       --------        --------
                Net cash provided (used) by investing activities       $   (743)       $     17
                                                                       --------        --------
                                                                       --------        --------

</TABLE>



   See accompanying notes to the condensed consolidated financial statements.


                                       5
<PAGE>
                 STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)


<TABLE>
<CAPTION>
                                                                  Three Months Ended
                                                                       March 31,
                                                                 ----------------------
                                                                   1997           1998
                                                                 -------        -------
                                                                       (Unaudited)
<S>                                                              <C>            <C>    
Cash Flows From Financing Activities:
     Repayments under lines of credit                             (2,472)            --
     Repayments under lines of credit with stockholder               (26)           (56)
     Payments under long-term debt                                  (101)          (187)
     Payments under capital lease obligations                        (67)        (1,061)
     Other financing activities                                     (467)            --
     Stock options exercised                                          --            970
                                                                 -------        -------
                     Net cash used in financing activities        (3,133)          (334)
                                                                 -------        -------
Increase (decrease) in cash and cash equivalents                    (732)         3,382
Cash and cash equivalents, beginning of period                     1,844          1,903
                                                                 -------        -------
Cash and cash equivalents, end of period                         $ 1,112        $ 5,285
                                                                 -------        -------
                                                                 -------        -------

</TABLE>


   See accompanying notes to the condensed consolidated financial statements.



                                       6
<PAGE>

                 STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   (Unaudited)

(1) GENERAL

The financial statements included herein are unaudited and have been prepared 
in accordance with generally accepted accounting principles for interim 
financial reporting and Securities 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 management's opinion, the financial statements reflect all 
adjustments (of a normal and recurring nature) which are necessary to present 
fairly the financial position, results of operations, stockholders' equity 
and cash flows for the interim periods. These financial statements should be 
read in conjunction with the audited financial statements for the year ended 
December 31, 1997, as set forth in the Registration Statement on Form S-1 of 
STAR Telecommunications, Inc. ("STAR" or the "Company") Registration No. 
333-48559, as amended, which was filed with the SEC on March 24, 1998. 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.

In March 1998, the Company consummated a merger with T-One Corp. ("T-One"). 
The merger constituted a tax-free reorganization and has been accounted for 
as pooling of interests under Accounting Principles Board Opinion No. 16. 
Accordingly, all prior period consolidated financial statements presented 
have been restated to include the results of operations, financial position, 
and cash flows of T-One.

On March 31, 1998, the Company effected a 2.05 for 1 stock split in the 
nature of a stock dividend with payment to the holders of the shares of 
common stock outstanding on February 20, 1998. The stock split has been 
retroactively reflected in the condensed consolidated financial statements 
for all periods presented.

(2) BUSINESS AND PURPOSE

STAR is an international long distance service provider offering low cost 
switched voice services on a wholesale basis primarily to U. S.-based long 
distance carriers. In addition, STAR provides domestic commercial 
long-distance services through its subsidiary, LD Services, Inc. ("LDS").

(3) NET INCOME PER COMMON SHARE

In February 1997, the Financial Accounting Standards Board ("FASB") issued 
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per 
Share". The statement replaces primary EPS with basic EPS, which is computed 
by dividing reported earnings available to common stockholders by weighted 
average shares outstanding. The provision requires the calculation of diluted 
EPS. The Company adopted this statement in 1997.

                                       7
<PAGE>

The following schedule summarizes the information used to compute net income 
per common share for the three months ended March 31, 1997 and 1998 (in 
thousands):

<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED
                                                                       MARCH 31,
                                                                  -------------------
                                                                   1997         1998
                                                                  ------       ------
<S>                                                               <C>          <C>   
Weighted number of common shares used to compute
     basic earnings per share                                     24,577       35,629
Weighted common share equivalents                                  3,917        2,085
                                                                  ------       ------
Weighted number of common share and share
     equivalents used to compute diluted earnings per share       28,494       37,714
                                                                  ------       ------
                                                                  ------       ------

</TABLE>


(4) PRO FORMA INCOME TAXES

The results of operations and provision for income taxes for the three months
ended March 31, 1997 reflects LDS' status as an S-Corporation prior to the
merger with STAR. The pro-forma income taxes, pro-forma net income, and
pro-forma earnings per share information reflected in the condensed consolidated
statements of income assumes that both STAR and LDS were taxed as C-Corporations
for all periods presented.

(5) COMPREHENSIVE INCOME

On January 1, 1998, the Company adopted SFAS No. 130, "Reporting 
Comprehensive Income". For year end financial statements SFAS 130 requires 
that comprehensive income, which is the total of net income and all other 
non-owner changes in equity, be displayed in a financial statement with the 
same prominence as other consolidated financial statements. In addition, the 
standard encourages companies to display the components of other 
comprehensive income below the total for net income. During the quarters 
ended March 31, 1997 and 1998, comprehensive income equaled net income.

(6) SIGNIFICANT EVENTS

In March 1998, the Company acquired T-One, an international wholesale long 
distance telecommunications provider based in New York, in a transaction that 
was accounted for as a pooling of interests. The Company issued 1,353,000 
shares of its common stock to T-One's shareholders in exchange for all 
outstanding T-One shares. The accompanying consolidated financial statements 
are restated to include the financial position and result of operations of 
T-One for all periods presented. Net sales and historical net income (loss) 
of the combining companies for the three months ended March 31, 1997 and 
1998, are as follows (in thousands):

                                       8
<PAGE>

<TABLE>
<CAPTION>
                                                                        THREE MONTHS ENDED
                                                                             MARCH 31,
                                                                   ---------------------------
                                                                      1997              1998
                                                                   ---------         ---------
<S>                                                                <C>               <C>      
          Net Sales:
             STAR                                                  $  79,382         $ 117,899
             T-One                                                     5,528            11,788
             Elimination                                                 (83)             (418)
             Total                                                 $  84,827         $ 129,269

          Net Income (Loss):
             STAR                                                  $   1,907         $   1,981          
             T-One                                                       (13)              (88)
          Total                                                    $   1,894         $   1,893
                                                                   ---------         ---------
</TABLE>


In November 1997, the Company signed a merger agreement with United Digital 
Network, Inc. ("UDN"). The Company intends to account for the transaction as 
a pooling of interests.

On February 3, 1998, the Company announced a 2.05 for 1 stock split in the 
nature of a stock dividend. The Company effected the stock split on March 31, 
1998, which has been retroactively reflected in the accompanying consolidated 
financial statements for all periods presented.

(7) STATEMENTS OF CASH FLOWS

During the three month periods ended March 31, 1997 and 1998, cash paid for
interest was $357,000 and $585,000, respectively. For the same periods, cash 
paid for income taxes amounted to $212,000 and $1,575,000, respectively.


Non-cash investing and financing activities are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED
                                                                       MARCH 31,
                                                                ----------------------
                                                                  1997           1998
                                                                -------        -------
<S>                                                             <C>            <C>    
Equipment purchased through
     notes and capital leases                                   $   913        $18,098
Tax benefits related to stock options                                --          4,643
                                                                -------        -------
                                                                $   913        $22,741
                                                                -------        -------
                                                                -------        -------

</TABLE>


(8) SUBSEQUENT EVENTS

On May 4, 1998, the Company completed a public offering of 6,000,000 shares of
Common Stock of which 5,685,000 shares were sold by the Company and 315,000
shares were sold by a selling stockholder. The net proceeds to the Company
(after deducting underwriting discounts and offering expenses) from the sale of
such shares of Common Stock were approximately $145 million.


                                       9
<PAGE>

(9) SEGMENT INFORMATION

At March 31, 1998, STAR has two business segments, wholesale long distance 
and commercial long distance telecommunications. The wholesale segment 
provides long distance services to U.S. and foreign based telecommunications 
companies and the commercial segment provides commercial long distance 
services to small retailers throughout the United States.

Both segments are accounted for in accordance with Generally Accepted 
Accounting Principles or "GAAP". Reportable segment information for the 
periods ended March 31, 1997 and 1998 are as follows:

<TABLE>
<CAPTION>
           MARCH 31, 1997                             WHOLESALE          COMMERCIAL          TOTAL
<S>                                                  <C>                <C>             <C>       
Revenue from external customers                      $   76,454         $     8,373     $   84,827
Interest income                                              21                  --             21
Interest expense                                            397                   1            398
Depreciation and amortization                               814                   6            820
Segment profit                                            1,419                 475          1,894
Segment assets                                           63,546               5,181         68,727

</TABLE>


<TABLE>
<CAPTION>
           MARCH 31, 1998                             WHOLESALE          COMMERCIAL          TOTAL
<S>                                                   <C>                <C>             <C>      
Revenue from external customers                       $ 121,193          $    8,076      $ 129,269
Interest income                                             281                   2            283
Interest expense                                            618                  --            618
Depreciation and amortization                             1,876                   3          1,879
Segment profit (loss)                                     1,978                 (85)         1,893
Segment assets                                          137,678               6,634        144,312
</TABLE>


                                       10
<PAGE> 

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

This Quarterly Report on Form 10-Q contains certain "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. Forward-looking statements are statements other than historical 
information or statements of current condition. Some forward looking 
statements may be identified by use of such terms as "believes", 
"anticipates", "intends", or "expects". These forward-looking statements 
relate to the plans, objectives and expectations of the Company for future 
operations. In light of the risks and uncertainties inherent in all such 
projected operation matters, the inclusion of forward-looking statements in 
this report should not be regarded as a representation by the Company or any 
other person that the objectives or plans of the Company will be achieved or 
that any of the Company's operating expectations will be realized. The 
Company's revenues and results of operations are difficult to forecast and 
could differ materially from those projected in the forward-looking 
statements contained in this report as a result of numerous factors including 
among others, the following: (i) changes in customer rates per minute; (ii) 
foreign currency fluctuations; (iii) termination of certain service 
agreements or inability to enter into additional service agreements; (iv) 
inaccuracies in the Company's forecast of traffic growth; (v) changes in or 
developments under domestic or foreign laws, regulations, licensing 
requirements or telecommunications standards; (vi) foreign political or 
economic instability; (vii) changes in the availability of transmission 
facilities; (viii) loss of the services of key officers; (ix) loss of a 
customer which provides significant revenues to the Company; (x) highly 
competitive market conditions in the industry; and (xi) concentration of 
credit risk. The foregoing review of the important factors should not be 
considered as exhaustive; the Company undertakes no obligation to release 
publicly the results of any future revisions it may make to forward-looking 
statements to reflect events or circumstances after the date hereof or to 
reflect the occurrence of unanticipated events.

The following table sets forth income statement data as a percentage of 
revenues for the periods indicated.
<TABLE>
<CAPTION>
                                                          THREE MONTHS
                                                         ENDED MARCH 31,
                                                     ----------------------
                                                       1997            1998
                                                     ------          ------
<S>                                                  <C>             <C>   
Revenues                                              100.0%          100.0%
                                                     ------          ------
Operating expenses:
     Cost of services                                  86.9            86.3
     Selling, general and administrative                9.1             8.9
     Depreciation and amortization                      1.0             1.5
     Merger Expense                                      --             0.2
                                                     ------          ------
                                                       97.0            96.9
                                                     ------          ------
     Income from operations                             3.0             3.0

Other income (expense):
     Interest income                                     --             0.2
     Interest expense                                  (0.5)           (0.5)
     Other                                              0.1            (0.1)
                                                     ------          ------
     Income before provision for income taxes           2.6             2.7
Provision for income taxes                              0.4             1.2
                                                     ------          ------
Net income                                              2.2%            1.5%
                                                     ------          ------
                                                     ------          ------
</TABLE>

Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997.

Revenues: Revenues increased 52.4% to $129.3 million in the first quarter of
1998 from $84.8 million in the first quarter of 1997. Wholesale revenues
increased to $121.2 million (including $11.4 million of revenue from T-One) from
$76.5 million (including $5.4 million of revenue from T-One). Wholesale 

                                       11
<PAGE>

minutes of use increased 73.2% to 324.4 million in the first quarter of 1998, 
as compared to 187.3 million minutes of use in the comparable quarter of the 
year prior. This increase reflects growth in the number of wholesale 
customers from 100 in March of 1997 to 131 at the end of March 1998, as well 
as an increase in usage by existing customers. The average rate per minute of 
use declined to $0.37 for the current quarter as compared to $0.40 for the 
quarter ended March 31, 1997 reflecting the change in country mix to include 
a larger proportion of lower rate per minute countries as well as lower 
prices on competitive routes.

Commercial revenues decreased to $8.1 million in the first quarter of 1998 
from $8.4 million in the first quarter of 1997 reflecting the termination of 
the LDS customer base in California due to the 1997 settlements entered into 
by LDS with each of the California PUC and the District Attorney of Monterey, 
California.

Cost of Services (exclusive of depreciation and amortization): On a 
consolidated basis cost of services (exclusive of depreciation and 
amortization) increased 51.4% to $111.6 million in the first quarter of 1998 
from $73.7 million in the first quarter of 1997. Wholesale cost of services 
(exclusive of depreciation and amortization) increased to $106.9 million in 
1998 from $68.9 million for 1997 and decreased as a percentage of revenues to 
88.2% from 90.1%, respectively. Wholesale cost of services (exclusive of 
depreciation and amortization) expanded during the first quarter of 1998 as 
traffic was increasingly routed over the Company's proprietary international 
network. Without the inclusion of T-One in the Company's wholesale results 
cost of services (exclusive of depreciation and amortization) as a percentage 
of revenues would have been 87.5% and 89.8% for the quarters ending March 31, 
1998 and 1997, respectively.

Selling, General and Administrative: For the first quarter of 1998, selling, 
general and administrative expenses increased 49.8% to $11.6 million, from 
$7.7 million in the first quarter of 1997. Wholesale selling, general and 
administrative expenses increased to $8.1 million in the first quarter of 
1998 from $4.7 million in the first quarter of 1997, and increased as a 
percentage of wholesale revenues to 6.7% from 6.1% over the comparable 
periods. Total expenses increased year to year in absolute dollars as STAR 
expanded its proprietary international network and employee base. Commercial 
selling, general and administrative expenses increased to $3.5 million in the 
first quarter of 1998 from $3.0 million in the first quarter of 1997 and 
increased as a percentage of commercial revenues to 42.4% from 36.3%, 
respectively, as LDS increased its telemarketing sales force to focus on new 
ethnic marketing programs. The Company expects selling, general and 
administrative expenses to expand in absolute dollars and as a percentage of 
revenues throughout fiscal year 1998, as the Company expands its network and 
employee base and in connection with the Company's development of the 
commercial market.

Depreciation: Depreciation increased to $1.9 million for the first quarter of
1998 from $820,000 for the first quarter of 1997, and increased as a percentage
of revenues to 1.5% from 1.0% in the prior period. Depreciation increased as a
result of STAR's continuing expansion of its proprietary international network
which includes purchases of switches, undersea cable and leasehold improvements
associated with switch sites. STAR expects depreciation expense to increase as
the Company continues to expand its global telecommunications network.

Other Income (Expense): Other expense, net, increased to $495,000 in the first
quarter of 1998 from $326,000 in the first quarter of 1997. This increase is
primarily due to interest expense of $618,000 incurred under various capital
leases and bank lines of credit. Interest income earned on short-term
investments increased to $283,000 in the first quarter of 1998 from $21,000 in
the first quarter of 1997 reflecting interest earned on cash generated by
operations. Also included in other expense is $171,000 in foreign currency
losses related to the intercompany account between STAR and its German
subsidiary.

Provision for Income Taxes: The provision for income taxes increased to $1.5 
million in the first quarter of 1998 from $341,000 in the first quarter of 
1997 ($888,000 pro forma), primarily due to the increase in profitability of 
the Company.

                                       12
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 1998, STAR had cash and cash equivalents of approximately 
$5.3 million, short-term investments of $3.0 million and a working capital 
surplus of $8.3 million.

As of March 31, 1998, STAR had no funds outstanding on its $25 million 
revolving line of credit, which bears interest at a rate of the bank's cost 
of funds plus 175 basis points and expires on July 1, 1999. However, the line 
of credit is reduced by outstanding letters of credit in the amount of $4.7 
million.

STAR generated net cash from operating activities of $3.7 million in the 
first quarter of 1997, primarily from net income plus depreciation and 
amortization and other assets offset by increases in receivables. The 
Company's investing activities provided cash of approximately $17,000 during 
the first quarter of 1998 primarily from the sale of marketable securities 
offset by investments made in additional undersea cables and switching 
equipment. The Company's financing activities used cash of approximately 
$335,000 during the first quarter of 1998 primarily from repayments under 
capital lease agreements offset by the exercise of employee stock options.

On May 4, 1998, the Company completed a secondary offering of 6,000,000 
shares of Common Stock of which 5,685,000 shares were sold by the Company and 
315,000 shares were sold by a selling stockholder. The net proceeds to the 
Company (after deducting underwriting discounts and offering expenses) from 
the sale of such shares of Common Stock were approximately $145 million.

While the termination of the LDS customer base in California will result in a 
loss of commercial revenues from that state during 1998, management does not 
believe that the loss of such revenues will have a material impact on STAR's 
liquidity in the future.

YEAR 2000 COMPLIANCE: 

A significant percentage of the software that runs most of the computers in 
the United States relies on two-digit date codes to perform a number of 
computation and decision making functions. Commencing on January 1, 2000, 
these computer programs may fail from an inability to interpret date codes 
properly, misreading "00"  for the year 1900 instead of the year 2000. 

STAR has initiated a comprehensive program to identify, evaluate and address 
issues associated with the ability of its information technology and 
non-information technology systems to properly recognize the Year 2000 in 
order to avoid interruption of the operation of these systems and a material 
adverse effect on STAR's operations as a result of the century change. Each 
of the information technology software programs that STAR currently uses has 
either been certified by its respective vendor as Year 2000 compliant or will 
be replaced with software that is so certified prior to January 1, 1999. STAR 
intends to conduct comprehensive tests of all of its software programs for 
Year 2000 compliance as part of its Year 2000 readiness program. An integral 
part of STAR's non-information technology systems, its telecommunications 
switches, is not currently Year 2000 compliant. The respective vendors of 
STAR's twelve switches are in the process of upgrading the switches and have 
informed STAR that the switches will be compliant on or before February 28, 
1999. STAR does not believe that its other non-information technology systems 
will be affected by the Year 2000, but will not know definitively until STAR 
tests and evaluates such equipment during January 1999.

STAR's computer systems interface with the computers and technology of many 
different telecommunications companies, including those of foreign companies, 
on a daily basis. STAR considers the Year 2000 readiness of its foreign 
customers and vendors of particular importance given the general concern that 
the computer systems abroad may not be as prepared as those in domestic 
operations to handle the century change. As part of its Year 2000 compliance 
program, STAR intends to contact its significant vendors and customers to 
ascertain whether the systems used by such third parties are Year 2000 
compliant. STAR plans to have all Year 2000 compliance initial testing and 
any necessary conversions completed by July 1999.

Historically, STAR has not incurred any costs to date to reprogram, replace 
and test its information and non-information technology systems for Year 2000 
compliance. The costs associated with STAR's Year 2000 compliance efforts 
will be incurred during 1998 and 1999. STAR estimates the costs of the 
efforts will be between $70,000 and $150,000 over the life of the project; 
though such expenditures may increase materially following testing of 
non-information technology systems and evaluation of the Year 2000 compliance 
status of integral third party vendors and customers. Costs incurred in 
connection with STAR's Year 2000 compliance efforts will be expensed as 
incurred.

STAR currently anticipates that its information technology and 
non-information technology systems will be Year 2000 compliant before January 
1, 2000, though no assurances can be given that STAR's compliance testing 
will not detect unanticipated Year 2000 compliance problems. Furthermore, 
STAR does not yet know the Year 2000 compliance status of integral third 
parties and is therefore currently unable to assess the likelihood or the 
risk to STAR of third party system failures. However, a system failure by any 
of STAR's significant customers or vendors could have a material adverse 
effect on STAR's operations.

The Company believes that the most reasonably likely worst case scenario 
resulting from the century change will be its inability to route telephone 
traffic at current rates to desired locations for an indeterminable period of 
time. Such worst case scenario could have a material adverse affect on STAR's 
results of operations and liquidity.

STAR intends to develop contingency plans to handle a Year 2000 system 
failure experienced by its information and non-information technology systems 
and to handle any necessary interactions with the computers and technology of 
any integral non-complying third party.

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<PAGE>
                                   SIGNATURES



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


                                    STAR TELECOMMUNICATIONS, INC.

Dated:  January 15, 1999

                                    By: /s/ Kelly D. Enos
                                       -----------------------------------------
                                            Kelly D. Enos
                                            Chief Financial Officer
                                            (Principal Financial & Accounting 
                                            Officer)



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