<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 JUNE 30, 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 June 30, 1998, as set 
forth below:


                                       2
<PAGE>

ITEM 1. FINANCIAL STATEMENTS

                 STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                      (In thousands, except for share data)


<TABLE>
<CAPTION>
                                                             December 31,      June 30,
                                                                 1997            1998
                                                             ------------     ----------
                                                                              (Unaudited)
<S>                                                          <C>              <C>       
Current Assets:
   Cash and cash equivalents                                  $    1,903      $    9,161
   Short-term investments                                         18,631         114,421
   Accounts receivable, net                                       46,675          66,119
   Receivable from related parties                                    --           5,076
   Other current assets                                           10,696          19,818
                                                              ----------      ----------
              Total current assets                                77,905         214,595
                                                              ----------      ----------
Property and equipment, net                                       35,959         101,287
Other assets                                                       6,452           2,045
                                                              ----------      ----------
              Total assets                                    $  120,316      $  317,927
                                                              ==========      ==========
Current Liabilities:
   Revolving lines of credit with stockholder                 $      138      $       73
   Current portion of long-term obligations                        3,259           7,319
   Accounts payable and other accrued expenses                    22,345          35,309
   Accrued network cost                                           38,403          47,942
                                                              ----------      ----------
              Total current liabilities                           64,145          90,643
                                                              ----------      ----------
Long-Term Liabilities:
   Long-term obligations, net of current portion                  12,107          26,528
   Other long-term liabilities                                       863           1,247
                                                              ----------      ----------
              Total long-term liabilities                         12,970          27,775
                                                              ----------      ----------
Stockholders' Equity:
   Common Stock $.001 par value:
   Authorized - 50,000,000 shares                                     35              42
   Additional paid-in capital                                     41,662         192,823
   Deferred compensation                                             (30)             --
   Retained earnings                                               1,534           6,644
                                                              ----------      ----------
              Total stockholders' equity                          43,201         199,509
                                                              ----------      ----------
              Total liabilities and stockholders' equity      $  120,316      $  317,927
                                                              ==========      ==========
</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                Six Months Ended
                                                    June 30,                         June 30,
                                          ---------------------------       ---------------------------
                                             1997             1998             1997             1998
                                          ----------       ----------       ----------       ----------
                                                  (Unaudited)                       (Unaudited)
<S>                                       <C>              <C>              <C>              <C>       
Revenue                                   $   95,250       $  131,929       $  180,077       $  261,198
                                          ----------       ----------       ----------       ----------
Operating expenses:
       Cost of services                       82,886          112,877          156,612          224,470
       Selling, general
         and administrative expenses           8,500           11,371           16,220           22,931
       Depreciation and amortization             993            2,737            1,813            4,616
       Merger expense                             --               --               --              314
                                          ----------       ----------       ----------       ----------
                                              92,379          126,985          174,645          252,331
                                          ----------       ----------       ----------       ----------
       Income from operations                  2,871            4,944            5,432            8,867
                                          ----------       ----------       ----------       ----------
Other income (expense):
       Interest income                            53            1,389               74            1,672
       Interest expense                         (438)            (722)            (836)          (1,340)
       Other                                    (756)             (97)            (705)            (258)
                                          ----------       ----------       ----------       ----------
                                              (1,141)             570           (1,467)              74
                                          ----------       ----------       ----------       ----------
       Income before provision
         for income taxes                      1,730            5,514            3,965            8,941
Provision for income taxes                       810            2,296            1,151            3,831
                                          ----------       ----------       ----------       ----------
Net income                                $      920       $    3,218       $    2,814       $    5,110
                                          ==========       ==========       ==========       ==========
       Income before provision
         for income taxes                      1,730                             3,965
Pro forma income taxes                           693                             1,581
                                          ----------                        ----------
Pro forma net income                      $    1,037                        $    2,384
                                          ==========                        ==========
Basic income per share                    $     0.03       $     0.08       $     0.10       $     0.14
                                          ==========       ==========       ==========       ==========
Diluted income per share                  $     0.03       $     0.08       $     0.10       $     0.13
                                          ==========       ==========       ==========       ==========
Pro forma basic income per share          $     0.04                        $     0.09
                                          ==========                        ==========
Pro forma diluted income per share        $     0.03                        $     0.08
                                          ==========                        ==========
</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>
                                                                   Six Months Ended
                                                                       June 30,
                                                             ---------------------------
                                                                1997             1998
                                                             ----------       ----------
                                                                     (Unaudited)
<S>                                                          <C>              <C>       
Cash Flows From Operating Activities:
     Net income                                              $    2,814       $    5,110
     Adjustments to reconcile net income to
     net cash provided by operating activities:
         Depreciation and amortization                            1,813            4,616
         Loss on disposal of equipment                               42               --
         Compensation expense relating to stock options              40               30
         Provision for doubtful accounts                          2,737            1,067
         Deferred income taxes                                       --           (2,234)
         Deferred compensation                                      (73)              52
         Decrease (increase) in assets:
            Accounts receivable                                  (9,560)         (20,511)
            Receivable from related parties                         100           (5,076)
            Other assets                                         (3,090)           2,485
         Increase (decrease) in liabilities:
            Accounts payable and other accrued expenses          (3,020)          12,964
            Accrued network cost                                  9,272            9,539
            Other liabilities                                        65              682
                                                             ----------       ----------
                Net cash provided by
                     operating activities                         1,140            8,724
                                                             ----------       ----------
Cash Flows From Investing Activities:
     Capital expenditures                                        (3,746)         (48,340)
     Short-term investments, net                                (15,314)         (95,790)
     Proceeds from the sale of assets                                18               --
                                                             ----------       ----------
                Net cash used in investing activities           (19,042)        (144,130)
                                                             ----------       ----------
</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>
                                                           Six Months Ended
                                                                June 30,
                                                      ---------------------------
                                                         1997             1998
                                                      ----------       ----------
                                                              (Unaudited)
<S>                                                   <C>              <C>       
Cash Flows From Financing Activities:
     Repayments under lines of credit                     (7,814)              --
     Repayments under lines of credit 
       with stockholder                                       77              (65)
     Payments under long-term debt and 
       capital lease obligations                          (1,987)          (3,473)
     Stockholder distributions for LDS                      (595)              --
     Issuance of common stock                             30,981          144,743
     Other financing activities                              426              (11)
     Stock options exercised                                  --            1,470
                                                      ----------       ----------
           Net cash used in financing activities          21,088          142,664
                                                      ----------       ----------
Increase (decrease) in cash and cash equivalents           3,186            7,258
Cash and cash equivalents, beginning of period             1,845            1,903
                                                      ----------       ----------
Cash and cash equivalents, end of period              $    5,031       $    9,161
                                                      ==========       ==========
</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 STAR Telecommunications, Inc. ("STAR" or the "Company") Annual Report on
Form 10-K. The results for the three and six month periods ended June 30, 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 a
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.

(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 subsidiaries, LD Services, Inc. ("LDS") and Arvilla
Telecommunications, Inc. ("CEO").

(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.

The following schedule summarizes the information used to compute net income per
common share for the three and six months ended June 30, 1997 and 1998 (in
thousands):


                                       7
<PAGE>

<TABLE>
<CAPTION>
                                                          THREE MONTHS             SIX MONTHS
                                                             ENDED                   ENDED
                                                            JUNE 30,                JUNE 30,
                                                       ------------------      ------------------
                                                        1997        1998        1997        1998
                                                       ------      ------      ------      ------
<S>                                                    <C>         <C>         <C>         <C>   
    Weighted number of common shares used to
        compute basic earnings per share               28,153      39,627      27,304      37,640
    Weighted average common share equivalents           1,625       1,994       1,596       2,009
                                                       ------      ------      ------      ------
    Weighted average number of common share and
        share equivalents used to compute diluted
        earnings per share                             29,778      41,621      28,900      39,649
                                                       ======      ======      ======      ======
</TABLE>

(4) PRO FORMA INCOME TAXES

The results of operations and provision for income taxes for the three and six
months ended June 30, 1997 reflect 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 equity 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 three and six month periods ended June 30, 1997
and 1998, comprehensive income equaled net income.

(6) SIGNIFICANT EVENTS

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. In June 1998, the Company signed a definitive agreement to
acquire PT-1 Communications, Inc. ("PT-1").

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.

In June 1998, the Company signed a 20 year, $70 million dollar agreement with
Qwest Communications International Inc. ("Qwest") to purchase the long-term
rights to use capacity over Qwest's domestic network.


                                       8
<PAGE>

(7) STATEMENTS OF CASH FLOWS

During the six month periods ended June 30, 1997 and 1998, cash paid for
interest was $876,000 and $1,253,000 respectively. For the same periods, cash
paid for income taxes amounted to $1,752,000 and $1,576,000 respectively.

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

<TABLE>
<CAPTION>
                                                          SIX MONTHS ENDED
                                                              JUNE 30,
                                                      ------------------------
                                                        1997           1998
                                                      ---------      ---------
<S>                                                   <C>            <C>      
    Equipment purchased through
         notes and capital leases                     $   6,053      $  21,604
    Tax benefits related to stock options                    --          4,966
                                                      ---------      ---------
                                                      $   6,053      $  26,570
                                                      =========      =========
</TABLE>

(8) SEGMENT INFORMATION

At June 30, 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 three months and
six months ended June 30, 1997 and 1998 are as follows (in thousands):

<TABLE>
<CAPTION>

THREE MONTHS ENDED, JUNE 30, 1997          WHOLESALE     COMMERCIAL       TOTAL
<S>                                        <C>           <C>             <C>
Revenue from external customers             $88,790       $ 6,460        $95,250
Interest income                                  53             0             53
Interest expense                                437             1            438
Depreciation and amortization                   989             4            993
Segment profit (loss)                         1,341          (421)           920
Segment assets                               93,834         5,032         98,866
</TABLE>

<TABLE>
<CAPTION>
THREE MONTHS ENDED, JUNE 30, 1998          WHOLESALE     COMMERCIAL       TOTAL
<S>                                        <C>           <C>             <C>
Revenue from external customers            $124,022      $  7,907       $131,929
Interest income                               1,382             7          1,389
Interest expense                                721             1            722
Depreciation and amortization                 2,714            23          2,737
Segment profit (loss)                         3,505          (287)         3,218
Segment assets                              309,061         8,866        317,927
</TABLE>


                                       9
<PAGE>

<TABLE>
<CAPTION>
SIX MONTHS ENDED, JUNE 30, 1997            WHOLESALE     COMMERCIAL       TOTAL
<S>                                        <C>           <C>             <C>
Revenue from external customers             $165,244      $ 14,833      $180,077
Interest income                                   74             0            74
Interest expense                                 834             2           836
Depreciation and amortization                  1,803            10         1,813
Segment profit                                 2,760            54         2,814
Segment assets                                93,834         5,032        98,866
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS ENDED, JUNE 30, 1998            WHOLESALE     COMMERCIAL       TOTAL
<S>                                        <C>           <C>             <C>
Revenue from external customers            $255,215      $  5,983       $261,198
Interest income                               1,663             9          1,672
Interest expense                              1,339             1          1,340
Depreciation and amortization                 4,590            26          4,616
Segment profit (loss)                         5,482          (372)         5,110
Segment assets                              309,061         8,866        317,927
</TABLE>

(9) NEW PRONOUNCEMENTS

In June 1998, the AICPA issued statement of Financial Accounting Standards No.
133 "Accounting For Derivative Instruments and Hedging Activities." The Company
has not yet analyzed the impact of this new standard. The Company will adopt the
standard in January of 2000.

(10) SUBSEQUENT EVENTS

On July 1, 1998, the Company's stockholders voted to amend and restate the 
certificate of incorporation to increase the number of shares of the 
Company's authorized common stock from 50 million shares to 100 million 
shares.

                                       10
<PAGE>   11

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                 SIX MONTHS
                                                       ENDED JUNE 30,              ENDED JUNE 30,
                                                   --------------------        --------------------
                                                    1997          1998          1997          1998
                                                   ------        ------        ------        ------
<S>                                                <C>           <C>           <C>           <C>   
Revenues                                            100.0%        100.0%        100.0%        100.0%
                                                   ------        ------        ------        ------
Operating expenses:
     Cost of services                                87.0          85.6          87.0          86.0
     Selling, general and administrative              8.9           8.6           9.0           8.8
     Depreciation and amortization                    1.0           2.1           1.0           1.8
     Merger Expense                                    --            --            --           0.1
                                                   ------        ------        ------        ------
                                                     97.0          96.3          97.0          96.7
                                                   ------        ------        ------        ------
     Income from operations                           3.0           3.7           3.0           3.3
                                                   ------        ------        ------        ------
Other income (expense):
     Interest income                                  0.1           1.1            --           0.6
     Interest expense                                (0.5)         (0.5)         (0.5)         (0.5)
     Other                                           (0.8)         (0.1)         (0.4)         (0.1)
                                                   ------        ------        ------        ------
                                                     (1.2)          0.5          (0.9)           --
     Income before provision for income taxes         1.8           4.2           2.1           3.3
                                                   ------        ------        ------        ------
Provision for income taxes                            0.9           1.7           0.6           1.4
                                                   ------        ------        ------        ------
Net income                                            1.0%          2.5%          1.5%          1.9%
                                                   ======        ======        ======        ======
</TABLE>


                                       11
<PAGE>

Three Months Ended June 30, 1998 Compared to Three Months Ended June 30, 1997.

Revenues: Revenues increased 38.5% to $131.9 million in the second quarter of
1998 from $95.3 million in the second quarter of 1997. Wholesale revenues
increased 39.7% to $124.0 million from $88.8 million in the prior year quarter.
Wholesale minutes of use increased 67.9% to 348.5 million in the second quarter
of 1998, as compared to 207.6 million minutes of use in the comparable quarter
of the year prior. This increase reflects growth in the number of wholesale
customers to 146 at the quarter ended June 30, 1998, up from 112 in the quarter
ended June 30, 1997, as well as an increase in usage by existing customers. The
average wholesale rate per minute of use declined to $0.34 for the current
quarter as compared to $0.43 for the quarter ended June 30, 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 increased 22.4% to $7.9 million in the second quarter of
1998 from $6.5 million in the second quarter of 1997 reflecting the success of
new international rate plans for targeting ethnic markets for Latin America and
the Pacific Rim. Commercial rate per minute decreased to $0.24 for the second
quarter of 1998 compared to $0.25 in the second quarter of 1997 as a result of
competitive pricing.

Cost of Services (exclusive of depreciation and amortization): On a 
consolidated basis cost of services (exclusive of depreciation and 
amortization) increased 36.2% to $112.9 million in the second quarter of 1998 
from $82.9 million in the second quarter of 1997. Consolidated cost of 
services (exclusive of depreciation and amortization) as a percentage of 
consolidated revenues, decreased to 85.6% in the second quarter of 1998 
compared to 87.0% in the same period of 1997. Wholesale cost of services 
(exclusive of depreciation and amortization) decreased to $107.4 million in 
1998 from $78.9 million for 1997. Wholesale cost of services (exclusive of 
depreciation and amortization) as a percentage of wholesale revenues decreased 
to 86.6% in the quarter from 88.9% in the prior year quarter. The Company 
currently routes to 40 countries on its network, up from 31 countries in the 
quarter ended March 31, 1998. Commercial cost of services (exclusive of 
depreciation and amortization) increased slightly to $5.5 million in the 
second quarter of 1998 from $4.0 million in the second quarter of 1997. 
Commercial cost of services (exclusive of depreciation and amortization) as a 
percentage of commercial revenues for the second quarter of 1998 increased to 
69.6% from 61.5% in the prior year quarter as a result of increased 
competition causing lower rates and one time charges related to moving LDS 
and CEO customer bases onto STAR's network.

Selling, General and Administrative: For the second quarter of 1998, selling, 
general and administrative expenses increased 33.8% to $11.4 million, from 
$8.5 million in the second quarter of 1997. Wholesale selling, general and 
administrative expenses increased to $8.7 million in the second quarter of 
1998 from $6.3 million in the second quarter of 1997, and decreased slightly 
as a percentage of wholesale revenues to 6.9% from 7.1% 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 $2.7 million in the 
second quarter of 1998 from $2.2 million in the second quarter of 1997. 
Commercial selling, general and administrative expenses increased as a 
percentage of commercial revenues to 34.4% from 33.5%, respectively, as LDS 
increased its telemarketing sales force to focus on new target markets. 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 $2.7 million for the second quarter of
1998 from $993,000 for the second quarter of 1997, and increased as a percentage
of revenues to 2.1% 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 continue to
increase as a percentage of revenues as the Company continues to expand its
global telecommunications network.

Other Income (Expense): The Company reported other income of $570,000 in the
second quarter of 1998 as compared to other expense of $1.1 million in the
second quarter of 1997. Interest income earned on short-term investments
increased to $1.4 million in the second quarter of 1998 from $53,000 in the
second quarter of 1997 reflecting interest earned on cash generated by the
Company's secondary equity offering in May. Interest expense increased


                                       12
<PAGE>

to $722,000 in the second quarter of 1998 from $438,000 in the second quarter
of 1997 reflecting additional capital leases on new switches. Also included in
other expense in the second quarter of 1998 is $97,000 of foreign currency
losses related primarily to the balance in the inter-company account between
STAR and its foreign subsidiaries. In the second quarter of 1997 other expense
included $756,000 consisting primarily of a legal settlement at LDS.

Provision for Income Taxes: The Company's provision for income taxes increased
to $2.3 million in the second quarter of 1998 from $810,000 in the second
quarter of 1997 primarily due to the increase in profitability of the Company.

Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997.

Revenues: Revenues increased 45.0% to $261.2 million in the first half of 1998
up from $180.1 in the first half of 1997. Minutes of use increased to 720
million in the first half of 1998 from 448 million in the first half of 1997.
The increase was primarily the result of both increased sales to existing
wholesale customers and to an increase in the number of wholesale carrier
customers.

Cost of Services (exclusive of depreciation and amortization): Cost of 
services (exclusive of depreciation and amortization) increased 43.3% to 
$224.5 million during the six months ended June 30, 1998, up from 
$156.6 million for the comparable period of 1997, but decreased as a 
percentage of revenues to 86.0% from 87.0%, respectively. The decrease in 
cost of services (exclusive of depreciation and amortization) relative to 
revenues reflects the increasing amount of traffic terminated over STAR's 
owned network. Management believes that countries will continue to be added 
to STAR's global network thereby contributing to an overall decline in cost 
per minute.

Selling, General and Administrative: Selling, general and administrative
expenses increased 41.4% to $22.9 million during the first half of 1998 from
$16.2 million in the comparable period one year earlier, and decreased slightly
as a percentage of revenue to 8.8% from 9.0% in the prior period.

Depreciation: Depreciation increased to $4.6 million in the first half of 1998
from $1.8 million for the first half of 1997. Depreciation increased as a result
of the Company's continued expansion of its global transmission network.

Other Income (Expense): Other income, net increased to $74,000 in the first half
of 1998 from a net expense of $1.5 million in the first half of 1997. The swing
results from interest income earned on the proceeds from the secondary offering
of $1.7 million offset by interest expense incurred on capital leases of $1.3
million.

Provision for Income Taxes: The Company's provision for income taxes 
increased to $3.8 million in the first half of 1998 from $1.2 million in the 
first half of 1997. The effective tax rate increased to 42.8% in the first 
half of 1998 from 29.0% in the first half of 1997 reflecting the write-off of 
a customer accounts receivable in the first quarter of 1997.

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.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 1998, STAR had cash and cash equivalents of $9.2 million,
short-term investments of $114.4 million (as a result of the Company's secondary
equity offering) and a working capital surplus of $124.0 million.

As of June 30, 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
137.5 basis points and expires on July 1, 1999. 


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<PAGE>

However, available borrowings under the line of credit is reduced by outstanding
letters of credit in the amount of $4.2 million.

STAR generated net cash from operating activities of $8.7 million for the six
months ended June 30, 1998, primarily from net income plus depreciation and
amortization, as well as increases in accounts payable, accrued expenses and
accrued network costs offset by increases in accounts receivable. The Company's
investing activities used cash of $144.1 million during the six months ended
June 30, 1998, primarily from capital expenditures and the purchase of
short-term investments. 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 shares of Common Stock were approximately $144.7
million. The Company's financing activities generated cash of approximately
$142.7 million primarily from proceeds raised in the secondary stock offering as
well as stock options exercised, offset by payments under capital lease
obligations.

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.


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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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