<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 SEPTEMBER 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 September 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,       September 30,
                                                                       1997               1998
                                                                  -------------       -------------
                                                                                       (Unaudited)
<S>                                                               <C>                 <C>
Current Assets:
   Cash and cash equivalents                                      $       1,903       $      11,808
   Short-term investments                                                18,631              92,390
   Accounts and notes receivable, net                                    46,675              80,721
   Receivable from related parties                                         --                   330
   Other current assets                                                  10,696              27,580
                                                                  -------------       -------------
              Total current assets                                       77,905             212,829
                                                                  -------------       -------------
Property and equipment, net                                              35,959             113,851
Other assets                                                              6,452               7,340
                                                                  -------------       -------------
              Total assets                                        $     120,316       $     334,020
                                                                  -------------       -------------
                                                                  -------------       -------------

Current Liabilities:
   Revolving lines of credit with stockholder                     $         138       $           5
   Current portion of long-term obligations                               3,259               7,595
   Accounts payable and other accrued expenses                           22,345              36,200
   Accrued network cost                                                  38,403              52,464
                                                                  -------------       -------------
              Total current liabilities                                  64,145              96,264
                                                                  -------------       -------------

Long-Term Liabilities:
   Long-term obligations, net of current portion                         12,107              31,053
   Other long-term liabilities                                              863               1,638
                                                                  -------------       -------------
              Total long-term liabilities                                12,970              32,691
                                                                  -------------       -------------

Stockholders' Equity:
   Common Stock $.001 par value:
   Authorized - 100,000,000 shares                                           35                  42
   Additional paid-in capital                                            41,662             194,138
   Deferred compensation                                                    (30)               --
   Accumulated other comprehensive income                                  --                   219
   Retained earnings                                                      1,534              10,666
                                                                  -------------       -------------
              Total stockholders' equity                                 43,201             205,065
                                                                  -------------       -------------
              Total liabilities and stockholders' equity          $     120,316       $     334,020
                                                                  -------------       -------------
                                                                  -------------       -------------

</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                  Nine Months Ended
                                                       September 30,                      September 30,
                                             --------------------------------   --------------------------------
                                                 1997                1998                1997            1998
                                             --------------------------------   --------------------------------
                                                      (Unaudited)                              (Unaudited)
<S>                                          <C>                 <C>            <C>                     <C>
Revenue                                      $    103,297        $    164,333        $    283,374      $  425,531
Operating expenses:
      Cost of services                             90,100             139,324             246,712         363,794
      Selling, general and
        administrative expenses                     8,898              15,922              25,118          38,853
      Depreciation and amortization                 1,227               3,439               3,040           8,055
      Merger expense                                 --                  --                  --               314
                                             ------------        ------------        ------------      ----------
                                                  100,225             158,685             274,870         411,016
                                             ------------        ------------        ------------      ----------
      Income from operations                        3,072               5,648               8,504          14,515
                                             ------------        ------------        ------------      ----------

Other income (expense):
      Interest income                                 293               1,839                 367           3,511
      Interest expense                               (453)               (740)             (1,289)         (2,080)
      Other                                          (794)                 87              (1,499)           (171)
                                             ------------        ------------        ------------      ----------
                                                     (954)              1,186              (2,421)          1,260
                                             ------------        ------------        ------------      ----------
      Income before provision
        for income taxes                            2,118               6,834               6,083          15,775
Provision for income taxes                          1,255               2,812               2,406           6,643
                                             ------------        ------------        ------------      ----------
Net income                                   $        863        $      4,022        $      3,677      $    9,132
                                             ------------        ------------        ------------      ----------
                                             ------------        ------------        ------------      ----------
      Income before provision
        for income taxes                            2,118                                   6,083
Pro forma income taxes                              1,137                                   2,718
                                             ------------                            ------------
                                             ------------                            ------------
Pro forma net income                         $        981                            $      3,365
                                             ------------        ------------        ------------      ----------
                                             ------------        ------------        ------------      ----------
Basic income per share                       $       0.02        $       0.10        $       0.13      $     0.23
                                             ------------        ------------        ------------      ----------
                                             ------------        ------------        ------------      ----------
Diluted income per share                     $       0.02        $       0.09        $       0.12      $     0.22
                                             ------------        ------------        ------------      ----------
                                             ------------        ------------        ------------      ----------
Pro forma basic income per share             $       0.03                            $       0.12
                                             ------------                            ------------
                                             ------------                            ------------
Pro forma diluted income per share           $       0.03                            $       0.11
                                             ------------                            ------------
                                             ------------                            ------------

</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>
                                                                           Nine Months Ended
                                                                             September 30,
                                                                   --------------------------------
                                                                       1997                1998
                                                                   --------------------------------
                                                                              (Unaudited)
<S>                                                                <C>                 <C>
Cash Flows From Operating Activities:
     Net income                                                    $      3,677        $      9,132
     Adjustments to reconcile net income to
     net cash provided by operating activities:
         Depreciation and amortization                                    3,040               8,055
         Loss on disposal of equipment                                       42                --
         Compensation expense relating to stock options                      60                  30
         Provision for doubtful accounts                                  4,068               3,952
         Deferred income taxes                                             --                  (511)
         Deferred compensation                                              (66)                 62
         Increase in assets:
            Accounts and notes receivable                                (8,214)            (37,998)
            Receivable from related parties                                (174)               (330)
            Other assets                                                 (1,495)             (6,038)
         Increase (decrease) in liabilities:
            Accounts payable and other accrued expenses                  (1,470)             13,855
            Accrued network cost                                         13,042              14,061
            Other liabilities                                                63                  48
                                                                   ------------        ------------
                Net cash provided by operating activities                12,573               4,318
                                                                   ------------        ------------

Cash Flows From Investing Activities:
     Capital expenditures                                                (6,649)            (57,847)
     Short-term investments                                             (19,206)            (73,759)
     Other long term assets                                                 385              (5,084)
                                                                   ------------        ------------
                Net cash used in investing activities                   (25,470)           (136,690)
                                                                   ------------        ------------

</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>

                                                                               Nine Months Ended
                                                                                  September 30,
                                                                        --------------------------------
                                                                             1997                1998
                                                                        --------------------------------
                                                                                  (Unaudited)
<S>                                                                     <C>                    <C>
Cash Flows From Financing Activities:
  Borrowing under lines of credit                                             34,211                --
  Repayments under lines of credit                                           (42,025)               --
  Borrowing under lines of credit with stockholders                              583                --
  Repayments under lines of credit with stockholder                             (423)               (133)
  Payments under long-term debt and capital lease obligations                 (3,061)             (4,818)
  Stockholder distributions for LDS                                             (794)               --
  Issuance of common stock                                                    30,914             144,711
  Other financing activities                                                    --                   (12)
  Stock options exercised                                                         67               2,310
                                                                        ------------        ------------
                     Net cash provided by financing activities                19,472             142,058
                                                                        ------------        ------------
Effects Of Foreign Currency Translation                                         --                   219
Increase in cash and cash equivalents                                          6,575               9,905
Cash and cash equivalents, beginning of period                                 1,845               1,903
                                                                        ------------        ------------
Cash and cash equivalents, end of period                                $      8,420        $     11,808
                                                                        ------------        ------------
                                                                        ------------        ------------
</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 
nine month periods ended September 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 emerging multinational carrier focused primarily on the 
international long-distance market. The Company offers highly reliable, 
low-cost switched voice services through a flexible network comprised of 
foreign termination relationships, international gateway switches, leased and 
owned transmission facilities, and resale arrangements with other 
long-distance providers.

During 1996 and 1997, the Company established several wholly-owned foreign 
subsidiaries to further expand its international network. The Company made 
substantial investments to install switch facilities in two of these 
subsidiaries, Star Europe Limited (SEL) which is located in London, England, 
and Star Telecommunications Deutschland (GmbH) which is located in Frankfurt, 
Germany. The Company plans to use these switch facilities to decrease 
international traffic termination cost and to initiate outbound calls from 
these local markets.

In December 1997, the Company entered into the domestic long-distance market 
through the acquisition of L.D. Services, Inc. ("LDS"). In addition, the 
Company established a domestic long-distance provider Arvilla 
Telecommunication, Inc. ("Arvilla"). Effective September 25, 1998, LDS and 
Arvilla were merged into a wholly-owned subsidiary, CEO 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 and prior year earnings per 
share information has been restated to be consistent with SFAS No. 128.


                                    7

<PAGE>

The following schedule summarizes the information used to compute net income 
per common share for the three and nine months ended September 30, 1997 and 
1998 (in thousands):
<TABLE>
<CAPTION>
                                                               THREE MONTHS                    NINE MONTHS
                                                                   ENDED                          ENDED
                                                               SEPTEMBER 30,                  SEPTEMBER 30,
                                                       ---------------------------------------------------------
                                                           1997            1998            1997            1998
                                                       ------------    ------------    ------------ ------------
<S>                                                    <C>             <C>             <C>          <C>
Weighted number of common shares used to
    compute basic earnings per share                      34,589          42,087           28,650       39,147
Weighted average common share equivalents                  2,114           1,245            2,930        1,774
                                                          ------          ------           ------       ------
Weighted average number of common share and
    share equivalents used to compute diluted
    earnings per share                                    36,703          43,332           31,580       40,921
                                                          ------          ------           ------       ------
                                                          ------          ------           ------       ------
</TABLE>

(4) PRO FORMA INCOME TAXES

The results of operations and provision for income taxes for the three and 
nine months ended September 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 changes in equity, be displayed in a financial statement with the 
same prominence as other consolidated financial statements. Under SFAS No. 
130, the Company's foreign currency translation adjustments are considered to 
be components of other comprehensive income. During the three and nine month 
periods ended September 30, 1997, comprehensive income equaled net income. 
During the three and nine month periods ended September 30, 1998, 
comprehensive income equaled approximately $4,241,000 and $9,351,000, 
respectively.

(6) CHANGE IN ACCOUNTING ESTIMATE

As of July 1, 1998, the Company prospectively revised the remaining lives of 
certain operating equipment from five to ten years. The increase in the 
estimated life of these assets was based on the knowledge gained by the 
Company in making the transition from a reseller of telephone services to a 
facility based provider, as well as to the fact that the Company is 
purchasing more sophisticated telephone switches and has transitioned from a 
Stromberg platform to a Nortel based telecommunications platform. All such 
assets will be amortized over their respective useful lives. This change 
increased income before provision for income taxes for the three and 
nine-month periods ended September 30, 1998 by approximately one million 
dollars. The difference between depreciating all switch equipment over a 5 
year life versus a 10 year life since acquisition would represent 
approximately $945,000 for the 3 month period and $1,770,000 for the 9 month 
period, or 1 cent or 3 cent per diluted share for the 3 and 9 month periods, 
respectively.

(7) 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 August 1998, the Company signed an amended and 
restated agreement to acquire PT-1 Communications, Inc. ("PT-1") which will 
be accounted for as a purchase. The Company anticipates closing these 
transactions in the fourth quarter.

According to SFAS 52, "Foreign Currency Translation," the functional currency 
of a foreign subsidiary of a U.S. company ordinarily will be the currency of 
the country in which the entity is located or the U.S. dollar. The 
determination of the functional currency is basically a matter of fact. On 
July 1, 1998, due to changes in facts and circumstances, the Company changed 
the functional currency of it's German subsidiary from the U.S. dollar to the 
German mark.
                                       8
<PAGE>

(8) STATEMENTS OF CASH FLOWS

During the nine month periods ended September 30, 1997 and 1998, cash paid 
for interest was approximately $1,175,000 and $2,342,000, respectively. For 
the same periods, cash paid for income taxes amounted to approximately 
$2,693,000 and $2,545,000, respectively.

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

<TABLE>
<CAPTION>
                                                    NINE MONTHS ENDED
                                                       SEPTEMBER 30,
                                               -----------------------------
                                                    1997             1998
                                               ------------     ------------
<S>                                            <C>              <C>
Equipment purchased through
      notes and capital leases                 $     10,230     $     28,100
Tax benefits related to stock options                  --              5,474
                                               ------------     ------------
                                               $     10,230     $     33,574
                                               ------------     ------------
                                               ------------     ------------
</TABLE>

(9) SEGMENT INFORMATION

At September 30, 1998, STAR has two business segments, North American and 
European long distance telecommunications.

<TABLE>
<CAPTION>
                                                 NORTH
THREE MONTHS ENDED, SEPTEMBER 30, 1997          AMERICA            EUROPE              TOTAL
--------------------------------------      --------------     -------------     --------------
<S>                                          <C>               <C>                <C>
Revenue                                      $     103,297     $        --        $     103,297
Interest income                                        293              --                  293
Interest expense                                       356                97                453
Depreciation and amortization                        1,084               143              1,227
Segment profit (loss)                                1,451              (588)               863
Segment assets                               $     102,097     $       5,965      $     108,062

</TABLE>

<TABLE>
<CAPTION>
                                                 NORTH
THREE MONTHS ENDED, SEPTEMBER 30, 1998          AMERICA            EUROPE              TOTAL
--------------------------------------      --------------     -------------     --------------
<S>                                          <C>               <C>                <C>

Revenue                                      $     157,584     $       6,749      $     164,333
Interest income                                      1,814                25              1,839
Interest expense                                       356               384                740
Depreciation and amortization                        2,384             1,055              3,439
Segment profit (loss)                                9,733            (5,711)             4,022
Segment assets                               $     285,381     $      48,639      $     334,020

</TABLE>

                                                           9

<PAGE>

<TABLE>
<CAPTION>
                                                 NORTH
NINE MONTHS ENDED, SEPTEMBER 30, 1997           AMERICA            EUROPE              TOTAL
--------------------------------------      --------------     -------------     --------------
<S>                                          <C>               <C>                <C>

Revenue                                      $     283,374     $        --        $     283,374
Interest income                                        367              --                  367
Interest expense                                     1,153               136              1,289
Depreciation and amortization                        2,824               216              3,040
Segment profit (loss)                                4,895            (1,218)             3,677
Segment assets                               $     102,097     $       5,965      $     108,062

</TABLE>

<TABLE>
<CAPTION>
                                                 NORTH
NINE MONTHS ENDED, SEPTEMBER 30, 1998           AMERICA            EUROPE              TOTAL
--------------------------------------      --------------     -------------     --------------
<S>                                          <C>               <C>                <C>

Revenue                                      $     418,588     $       6,943      $     425,531
Interest income                                      3,486                25              3,511
Interest expense                                     1,116               964              2,080
Depreciation and amortization                        6,033             2,022              8,055
Segment profit (loss)                               19,944           (10,812)             9,132
Segment assets                               $     285,381     $      48,639      $     334,020

</TABLE>

The Company provides wholesale and commercial long distance telephone 
service. The commercial segment represents less than 10% of revenue, net 
income or assets of the Company for the periods presented.

(10) 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.

(11) SUBSEQUENT EVENTS

In November 1998, the Company signed a twenty year, $31 million dollar 
indefeasible right of use (IRU) agreement with IXC Communication, Inc. 
("IXC") to purchase capacity on IXC's U.S. based digital fiber network.

                                       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                       NINE MONTHS
                                                            ENDED SEPTEMBER 30,                ENDED SEPTEMBER 30,
                                                       ------------------------------      --------------------------
                                                           1997              1998              1997          1998
                                                       ------------      ------------      ------------  ------------
<S>                                                    <C>               <C>               <C>           <C>
Revenues                                                   100%              100%               100%          100%
Operating expenses:
     Cost of services                                     87.2              84.8               87.1          85.5
     Selling, general and administrative                   8.6               9.7                8.9           9.1
     Depreciation and amortization                         1.2               2.1                1.1           1.9
     Merger expense                                        --                --                 --            0.1
                                                         -----             -----              -----         -----
                                                          97.0              96.6               97.0          96.6
                                                         -----             -----              -----         -----
     Income from operations                                3.0               3.4                3.0           3.4
                                                         -----             -----              -----         -----
Other income (expense):
     Interest income                                       0.3               1.1                0.1           0.8
     Interest expense                                     (0.4)             (0.5)              (0.5)         (0.5)
     Other                                                (0.8)              0.1               (0.5)         (0.0)
                                                         -----             -----              -----         -----
                                                          (0.9)              0.7               (0.9)          0.3
     Income before provision for income taxes              2.1               4.2                2.1           3.7
                                                         -----             -----              -----         -----
Provision for income taxes                                 1.2               1.7                0.8           1.6
                                                         -----             -----              -----         -----
Net income                                                 0.8%              2.4%               1.3%          2.1%
                                                         -----             -----              -----         -----
                                                         -----             -----              -----         -----
</TABLE>

                                       11

<PAGE>

THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THREE MONTHS ENDED 
SEPTEMBER  30, 1997

Revenues: Total revenues increased 59.1% to $164.3 million in the third 
quarter of 1998 from $103.3 million in the third quarter of 1997. Total 
revenues for the third quarter of 1998 increased 24.6% from $131.9 million in 
the second quarter ended June 30, 1998.

Revenues from North American wholesale customers increased 54.2% to $149.4 
million from $96.9 million in the prior year quarter. Minutes of use 
generated by North American wholesale customers increased 97.2% to 475.1 
million minutes of use in the third quarter of 1998, as compared to 240.9 
million minutes of use in the comparable quarter of the year prior. This 
increase in revenues and minutes reflects growth in the number of North 
American wholesale customers to 175 at September 30, 1998, up from 137 
customers at September 30, 1997, as well as an increase in usage by existing 
customers, primarily resulting from the Company's expanding transmission 
capacity. The increase in revenues was partially offset by a decline in rates 
per minute, as the average North American wholesale rate per minute of use 
declined to $0.30 for the current quarter as compared to $0.40 for the 
quarter ended September 30, 1997, as well as the quarter ended June 30, 1998 
of $0.34, reflecting continued lower prices on competitive routes. The 
decline in rates per minute is also attributable to the change in country mix 
to include a larger proportion of lower rate per minute countries such as 
Mexico, Germany and the United Kingdom. The period to period decline in rates 
per minute was not a significant factor in the relative increase in minutes 
of use.

North American commercial revenues increased 28.1% to $8.2 million in the 
third quarter of 1998 from $6.4 million in the third quarter of 1997 
reflecting the continued success of new international rate plans that target 
ethnic markets for Latin America and the Pacific Rim. Traditionally, the 
telemarketing operation experiences declining minutes of use during the third 
quarter summer months due to the usage trends of its international users. On 
a quarter to quarter basis, the growth in North American commercial minutes 
and the average North American commercial rate per minute at $0.24 remained 
flat due to these trends.

The third quarter also includes revenues of $6.7 million dollars generated 
from the European operations, representing the initial realization of 
benefits from the Company's investment in the German telecommunications 
marketplace. Management believes that the prospects for growth in Germany 
remain strong as Star Telecommunications Deutschland GmbH is fully utilizing 
its interconnect with Deutsche Telekom, AG to lower the Company's cost of 
services and to grow its European commercial customer base.

Cost of Services (exclusive of depreciation and amortization): Cost of 
services  (exclusive of depreciation and amortization) increased 54.6% to 
$139.3 million in the third quarter of 1998 from $90.1 million in the third 
quarter of 1997 and decreased as a percentage of revenues for the same 
periods to 84.8% from 87.2%. The growth in cost of services (exclusive of 
depreciation and amortization) reflects the increase in minutes of use offset 
by an overall declining average cost per minute as well as an increase in 
leased private line cost. The average cost per minute declined as a result of 
changes in country mix to include a larger proportion of lower cost per 
minute countries, competitive pricing pressures as well as an increasing 
proportion on traffic routed over the Company's proprietary network. The 
Company currently routes to 43 countries on its global network up from 40 
countries in the quarter ended June 30, 1998. Management believes that 
countries will continue to be added to the Company's global network thereby 
contributing to an overall decline in cost per minute.

Selling, General and Administrative: For the third quarter of 1998, selling, 
general and administrative expenses increased 78.9% to $15.9 million from 
$8.9 million in the third quarter of 1997 and increased as a percentage of 
revenues to 9.7% from 8.6% over the comparable periods. North American 
wholesale selling, general and administrative expenses increased to $10.1 
million in the third quarter of 1998 from $6.4 million in the comparable 
period of 1997 and increased as a percentage of North American wholesale 
revenue from 6.6% to 6.8%, respectively.

North American commercial selling, general and administrative expenses 
increased to $3.0 million during the period from $2.2 million in the third 
quarter of 1997. North American commercial selling, general and 
administrative expenses increased as a percentage of North American 
commercial revenues to 36.6% during the period from 34.4% in the third 
quarter of 1997, reflecting the expansion of the telemarketing sales force to 
focus on new ethnic markets.

                                       12

<PAGE>

Selling, general and administrative expenses related to the European 
operations amounted to $2.8 million in the third quarter of 1998, an increase 
from $348,000 in the third quarter of 1997 reflecting the start up of new 
business efforts in Europe. The Company expects overall selling, general and 
administrative expenses to continue to grow as a percentage of revenues as 
the Company adds personnel to become a carrier in additional European 
countries and continues to hire a sales force to expand its North American 
commercial customer base.

Depreciation and Amortization: Depreciation expense increased to $3.4 million 
for the third quarter of 1998 from $1.2 million for the third quarter of 
1997, and increased as a percentage of revenues to 2.1% from 1.2% over the 
comparable period in the prior year. Depreciation expense increased with the 
operation of new switch sites, the purchase of additional fiber capacity to 
connect the Company's expanding network and leasehold improvements. 
Depreciation attributable to North American assets amounted to $2.4 million. 
European operations realized total depreciation of $1.1 million. STAR expects 
depreciation expense to continue to increase as a percentage of revenues as 
it continues to expand its global telecommunications network. As of July 1, 
1998, STAR revised the remaining lives of certain operating equipment from 
five to ten years. This change increased income before income taxes by 
approximately $1.0 million.

Income from Operations: Income from operations increased to $5.6 million 
during the third quarter of 1998 from $3.1 million in the third quarter of 
1997 and operating margin increased to 3.4% from 3.0%, respectively. 
Operating margin is expanding overall as the Company continues to 
increasingly route traffic over its proprietary network. Offsetting the 
declining cost of services on a per minute basis were the startup costs of 
launching operations in new European countries and the expansion of the North 
American based commercial operations.

Other Income (Expense): The Company reported other income of $1.2 million in 
the third quarter of 1998 as compared to other expense of approximately $1.0 
million for the third quarter of 1997. Interest income earned on short-term 
investments increased to $1.8 million in the third quarter of 1998 from 
$293,000 in the third quarter of 1997 as a result of interest earned on 
investing the proceeds from the Company's secondary equity offering in May 
1998. Interest expense increased to $740,000 during the quarter from $453,000 
in the third quarter of 1997 in response to the additional capital leases for 
the financing of new switches. Included in other expense for the third 
quarter ended September 30, 1997 is approximately $700,000 for a legal 
settlement which relates to the dispute settled by L.D. Services, Inc. with 
the District Attorney of Monterey County.

Provision for Income Taxes: The Company's provision for income taxes 
increased to $2.8 million in the third quarter of 1998 from $1.3 million in 
the third quarter of 1997. The effective tax rate decreased to 41.1% in the 
third quarter of 1998 from 59.3% in the third quarter of 1997. The effective 
tax rate in the third quarter of 1997 includes the impact of the valuation 
reserve on the deferred tax asset created by foreign operating losses and 
other book/tax timing differences.

NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 
30, 1997

Revenues: Historically, STAR has increased revenues from quarter to quarter, 
often times by a significant percentage. STAR's North American wholesale 
minutes of use have also greatly increased from quarter to quarter, generally 
by amounts that exceed the relative increases in revenues. In the nine months 
ended September 30, 1998, revenues increased by 50.2% over revenues for the 
nine months ended September 30, 1997. Over the same period to period 
comparison, North American minutes of wholesale use increased by 73.0%. There 
are a variety of reasons for the growth in STAR's call volume, including the 
growth of STAR's North American customer base, which increased by 27.7% from 
the nine months ended September 30, 1997 compared to the same period in 1998, 
an increased usage by existing North American customers, and increased 
capacity over STAR's telecommunications network, with the addition of a 
number of switches and growth in available fiber optic lines.

The growth in North American wholesale minutes has been accompanied by a 
corresponding decline in North American rates per minute. For example, for 
the nine months ended September 30, 1998, such rates declined by 24.3% from 
wholesale rates per minute in the corresponding period in 1997. The decline 
in wholesale rates can be attributed to a number of factors, including a 
changing country mix that includes a growing number of minutes routed by STAR 
to lower rates per minute countries such as Mexico, Germany and the United 
Kingdom and, as the wholesale international long distance market continues to 
mature and evolve, a general downward trend in rates on competitive routes. 
STAR's pricing for wholesale minutes varies materially from customer to 
customer and is generally based on the time of day, the day of the week and 
the destination of the call. While STAR continues to route traffic to certain 
destinations at attractive rates, market conditions have forced STAR to 
reduce its overall wholesale rates per minute.

Accordingly, the Company believes that the growth in its revenues has been 
fueled almost entirely by its ability to increase the volume of North 
American wholesale minutes of use, for the reasons noted above.

At the same time, the general erosion in the rates per minute for such 
wholesale traffic has partially offset the contribution to the increase of 
revenues made by such increased volume of minutes.

STAR completed its acquisition of T-One in March 1998. Revenues from T-One's 
operations for the periods set forth below were not material to the overall 
result of operations of STAR during such periods.

North American wholesale minutes of use increased to 1.1 billion with an 
average rate per minute of $0.33 for the period ended September 30, 1998 as 
compared to minutes of use of 635.9 million at an average rate per minute of 
$0.41 in the comparable period of 1997. The volume growth was driven by an 
increase in sales to existing North American wholesale customers taking 
advantage of the Company's expanding transmission capacity and an increase in 
the number of North American wholesale carrier customers, which growth was 
partially offset by a decline in rates per minute from period to period. The 
relative decline in rates per minute was not a significant factor in the 
period to period increase in minutes of use.

Cost of Services (exclusive of depreciation and amortization): Cost of 
Services (exclusive of depreciation and amortization) increased 47.5% to 
$363.8 million during the nine months ended September 30, 1998, up from 
$246.7 million for the comparable period of 1997, but decreased as a 
percentage of revenues to 85.5% from 87.1%, respectively. The decrease in 
cost of services (exclusive of depreciation and amortization) relative to 
revenues reflects the increasing amount of traffic terminated over the 
Company'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.

                                       13

<PAGE>
Selling, General and Administrative: Selling, general and administrative 
expenses increased 54.7% to $38.9 million during the first nine months of 
1998 from $25.1 million in the comparable period of 1997 and increased as a 
percentage of revenues to 9.1% from 8.9%, respectively. The increase in these 
expenses both in absolute terms and as a percentage of revenues reflects the 
continued expansion of the STAR network in its North American and European 
operations.

Depreciation and Amortization: Depreciation expense increased to $8.1 million 
for the nine months ended September 30, 1998 from $3.0 million for the 
comparable period of 1997. Depreciation expense increased as a result of the 
Company's continued expansion of its global transmission network which 
involved the expansion and start-up of new switch sites, the purchase of 
fiber capacity and the build out of direct termination arrangements around 
the world. As of July 1, 1998, STAR revised the remaining lives of certain 
operating equipment from five to ten years. This change increased income 
before income taxes by approximately $1.0 million.

Income from Operations: Income from operations increased 70.7% to $14.5 
million during the nine months ended September 30, 1998 from $8.5 million 
during the same period of 1997. Operating margin increased to 3.4% from 3.0%, 
respectively. Operating margin will continue to expand as STAR continues to 
diversify its revenue base and as traffic is migrated from leased facilities 
onto STAR's owned network.

Other Income (Expense): Other income, net increased to $1.3 million in the 
nine months ended September 30, 1998 from a net expense of $2.4 million in 
the comparable period of 1997. This increase can be attributed to interest 
income of $3.5 million earned on the proceeds from the secondary offering 
offset by interest expense of $2.1 million incurred on capital leases for the 
nine months ended September 30, 1998. Other expense for the nine months ended 
September 30, 1997 included $1.6 million in legal settlements which relate to 
the disputes settled by L.D. Services, Inc. with the California PUC and the 
District Attorney of Monterey County.

Provision for Income Taxes: The Company's provision for income taxes 
increased to $6.6 million for the nine months ended September 30, 1998 from 
$2.4 million for the comparable period in 1997. The effective tax rate 
increased to 42.1% during the nine months ended September 30, 1998 from 39.6% 
during the comparable period in 1997. The lower effective tax rate for the 
period ended September 30, 1997 includes 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, the 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 Year 2000 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 system interfaces 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
                                       14
<PAGE>

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 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 the remainder of 1998 and throughout 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 the 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 could be the inability to route telephone 
traffic at current rates to desired locations for an indeterminable period of 
time, which could have a material adverse effect 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 September 30, 1998, STAR had cash and cash equivalents of $11.8 
million, short-term investments of $92.4 million and a working capital 
surplus of $116.6 million.

As of September 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. However, 
available borrowing under the line of credit are reduced by outstanding 
letters of credit in the amount of $4.9 million.

The Company has signed a merger agreement with United Digital Network, Inc. 
("UDN") and plans to account for this merger as a poolings of interests. The 
Company also signed a definitive agreement to acquire PT-1 Communications, 
Inc. ("PT-1") in a transaction to be accounted for as a purchase. The Company 
will issue 15.05 million shares of STAR common stock and $19.5 million cash 
for all of PT-1 common stock plus 250,000 shares to certain PT-1 
distributors. The Company expects to consummate these transactions by the end 
of 1998. The Company also entered into a 20 year commitment to purchase IRUs 
from IXC Communications, Inc. for approximately $31 million and a 20 year, 
$70 million agreement to purchase capacity on the Quest nationwide Macro 
Capacity (SM) Fiber network. As appropriate, STAR will use capital lease 
financing or raise additional debt or equity capital to finance new projects.

STAR generated net cash from operating activities of $4.3 million for the 
nine months ended September 30, 1998, primarily from net income plus 
depreciation and amortization, as well as increases in accounts payable and 
accrued expenses offset by increases in accounts and notes receivable. The 
increase in accounts and notes receivable was due to general increases in 
volume and extended payment terms for certain customers. The Company's 
investing activities used cash of $136.7 million during the nine months ended 
September 30, 1998, primarily from capital expenditures and the purchase of 
short-term investments. Cash generated from financing activities of $142.0 
million can be attributed to STAR's secondary offering of common stock, which 
generated net cash proceeds of $144.7 million.

At September 30, 1998, STAR had capital lease obligations of $37.7 million, 
and $0.9 million in term loans, relating to its switching facilities and 
operating equipment. STAR believes that the proceeds from its secondary stock 
offering and cash generated from operations, as well as funding under its 
bank line of credit, will satisfy STAR's current liquidity needs. 
Nevertheless, as STAR continues to expand its network facilities and pursues 
its strategy of growth through acquisition, STAR's liquidity needs may 
increase, perhaps significantly, which could require STAR to seek such 
additional financing or the expansion of its borrowing capacity under current 
or new lines of credit.

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.
                                       15
<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)