HC2 Holdings, Inc. – ‘S-4 POS’ on 8/2/99

On:  Monday, 8/2/99   ·   Effective:  8/2/99   ·   Accession #:  928385-99-2427   ·   File #:  333-76965

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Post-Effective Amendment to an S-4   —   Form S-4
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: S-4 POS     Post-Effective Amendment to an S-4                   232   1.23M 
 2: EX-10.14    Material Contract                                      1      4K 
 3: EX-21.1     Subsidiaries of the Registrant                         3      9K 

S-4 POS   —   Post-Effective Amendment to an S-4
Document Table of Contents

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As filed with the Securities and Exchange Commission on August 2, 1999      

                                                      Registration No. 333-76965

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

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

POST-EFFECTIVE AMENDMENT NO. 1      
TO
FORM S-4
REGISTRATION STATEMENT
Under 
THE SECURITIES ACT OF 1933

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

Primus Telecommunications Group, Incorporated 
(Exact name of registrant as specified in its charter)

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

Delaware                     4813                    54-1708481 
                     (Primary Standard               (I.R.S.
(State or Incorporation)          Industrial           EmployerIdentification   
                    Classification Code              Number)
Number) 

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

1700 Old Meadow Road, Suite 300 
McLean, Virginia 22102
(703) 902-2800
(Address, including zip code, and telephone number, 
including area code, of registrant's principal executive offices) 

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

K. Paul Singh 
Chairman, President and Chief Executive Officer 
1700 Old Meadow Road, Suite 300 
McLean, Virginia 22102
(703) 902-2800
(Name, address, including zip code, and telephone number, 
including area code, of agent for service)

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

With a Copy to:     
James D. Epstein, Esquire 
Pepper Hamilton LLP 
3000 Two Logan Square 
18th and Arch Streets 
Philadelphia, Pennsylvania 19103
(215) 981-4000

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

 Approximate Date of Commencement of Proposed Sale to the Public: As soon as
practicable after this Registration Statement becomes effective.                

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

If the securities being registered on this form are being offered in      
connection with the formation of a holding company and there is compliance with 
General Instruction G, check the following box. [_]                             

If this form is filed to register additional securities for an offering   
pursuant to Rule 462(b) under the Securities Act, check the following box and   
list the Securities Act registration statement number of the earlier effective  
registration statement for the same offering. [_]                               

If this form is a post-effective amendment filed pursuant to Rule 462(d)  
under the Securities Act, check the following box and list the Securities Act   
registration statement number of the earlier effective registration statement   
for the same offering. [_]                                                      

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

The Registrant hereby amends this Registration Statement on such date or  
dates as may be necessary to delay its effective date until the Registrant      
shall file a further amendment which specifically states that this Registration 
Statement shall thereafter become effective in accordance with Section 8(a) of  
the Securities Act of 1933 or until the Registration Statement shall become     
effective on such date as the Securities and Exchange Commission, acting        
pursuant to said Section 8(a), may determine.                                   

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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+                                                                              +
+The information in this prospectus is not complete and may be changed. This   +
+prospectus is not an offer to sell these securities and is not soliciting an  +
+offer to buy these securities in any state where the offer or sale is not     +
+permitted.                                                                    +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

Subject to completion, dated August 2, 1999       

PROSPECTUS                                                                      

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

Offer to exchange all outstanding 

11 1/4% Senior Notes due 2009 for 

11 1/4% Senior Notes due 2009 

which have been registered under

the Securities Act of 1933

Primus Telecommunications Group, Incorporated 

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

Primus Telecommunications Group, Incorporated offers to exchange all of its 
outstanding 11 1/4% Senior Notes due 2009 for 11 1/4% Senior Notes due 2009     
which are registered under the Securities Act. The terms of the new notes are   
substantially identical to the existing notes, except that the new notes will   
be freely tradeable.                                                            

Investing in the new notes involves risks. "Risk Factors" begin on page 10. 

The Exchange Offer expires at 5:00 p.m., New York City time, on August 12,  
1999, unless extended. All unregistered notes that are validly tendered and not 
withdrawn will be exchanged. Tenders of unregistered notes may be withdrawn at  
any time prior to the expiration of the Exchange Offer.                         

We will not receive any proceeds from the Exchange Offer.                   

Neither the Securities and Exchange Commission nor any state securities     
commission has approved or disapproved the new notes or determined if this      
prospectus is truthful or complete. Any representation to the contrary is a     
criminal offense.                                                               

The date of this prospectus is August    , 1999.      

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TABLE OF CONTENTS 

                                                                [Download Table]
                                                                               
Information Regarding Forward-Looking Statements..........................    i
Summary...................................................................    1
Risk Factors..............................................................   10
Use of Proceeds...........................................................   25
The Exchange Offer........................................................   26
Capitalization............................................................   36
Selected Financial Data...................................................   37
Unaudited Pro Forma Financial Data........................................   39
Management's Discussion and Analysis of Financial Condition and Results of     
 Operations...............................................................   40
Business..................................................................   54
                                                                [Download Table]
                                                                                
Management..................................................................  81
Transactions with Affiliates and Others.....................................  95
Principal Stockholders......................................................  98
Description of Other Indebtedness........................................... 101
Description of Exchange Notes............................................... 104
Federal Income Tax Considerations........................................... 137
Plan of Distribution........................................................ 140
Available Information....................................................... 141
Incorporation of Certain Documents by Reference............................. 141
Legal Matters............................................................... 141
Experts..................................................................... 141
Index to Financial Statements............................................... F-1

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

In this prospectus, we use: "dollars" and "$" to refer to United States   
dollars; "C$" to refer to Canadian dollars; "DM" to refer to deutsche marks;    
"(Yen)" to refer to Japanese yen; "FF" to refer to French francs; and "A$" to   
refer to Australian dollars.                                                    

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

 We have included in this prospectus "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the     
Securities and Exchange Act of 1934. These statements are statements other than 
historical information or statements of current condition, relate to future     
events and can be identified by the use of forward-looking terminology such as  
"believes," "estimates," "expects," "intends," "may," "will," "should," or      
"anticipates," or by the discussion of strategy. In addition, from time to      
time, we or our representatives have made or may make forward-looking           
statements, orally or in writing. Forward-looking statements also may be        
included in, but are not limited to, various filings that we have made with the 
Securities and Exchange Commission, in press releases or in oral statements     
made by or with the approval of one of our authorized executive officers.       
Forward-looking statements include, without limitation, statements regarding    
future margin performance, customer retention capabilities, future revenues,    
strategy, pricing of services and rates of "on-net" traffic. We wish to caution 
the reader that the forward-looking statements referred to above involve        
predictions. The inclusion of forward-looking statements in this prospectus     
should not be regarded as a representation by us or any person that our         
objectives or plans will be achieved or that our operating expectations will be 
realized. Actual events or results may differ materially as a result of risks   
facing us as more fully described in the "Risk Factors" section of this         
prospectus. Such risks include those associated with:                           
. changes in the telecommunications industry and the general economy;       
. the competition we face;                                                  
. changes in service offerings;                                             

. our limited operating history,                                            
particularly our limited experience                                     
as an Internet service provider;                                        

. our entry into developing markets;                                        

. our ability to manage rapid growth, including successfully integrating    
our recently acquired businesses;                                       

. our ability to make acquisitions and strategic investments;               
. international operations;                                                 
. our dependence on effective information and billing systems;              
. our ability to develop and manage our communications network; and         
. regulatory developments                                                   
 We undertake no obligation to update or revise publicly any forward-looking
statement, whether as a result of new information, future events or otherwise.  
All subsequent written and oral forward-looking statements attributable to us   
or persons acting on our behalf are expressly qualified in their entirety by    
the cautionary statements contained throughout this prospectus.                 

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SUMMARY 

 This summary highlights some of the information in this prospectus. Because
this is only a summary, it does not contain all of the information that may be  
important to you. To understand this Exchange Offer, the new notes and our      
business, you should read the entire prospectus, especially "Risk Factors" and  
the Consolidated Financial Statements and notes.                                

Primus

We are a facilities-based global telecommunications company. We offer     
international and domestic long distance, and other telecommunications services 
to business, residential and carrier customers located in North America and     
Europe and selected markets in the Asia-Pacific region. We seek to capitalize   
on the increasing demand for high-quality international telecommunications      
services which is being driven by the globalization of the world's economies,   
the worldwide trend toward telecommunications deregulation and the growth of    
global data and Internet traffic.                                               

 We are a full-service carrier with operations in the United States, Canada,
Australia, the United Kingdom, Germany, France, Switzerland, the Netherlands,   
Denmark, Italy, Japan and Hong Kong. We had net revenue and pro forma net       
revenue, after giving effect to our merger with TresCom International, Inc. and 
our acquisition of the global retail telecommunications business of Telegroup,  
Inc., including the acquisition of selected Telegroup foreign subsidiaries, as  
follows:                                                                        

                                                                [Download Table]

Year Ended                                                   Revenue    
----------                                                --------------
                                                                        
December 31, 1996                                         $173.0 million
December 31, 1997                                         $280.2 million
December 31, 1998                                         $421.6 million
December 31, 1998 (pro forma)                             $704.3 million

We primarily target customers with significant international long distance
usage, including small- and medium-sized businesses, multinational              
corporations, ethnic residential customers and other telecommunications         
carriers and resellers. Through our newly formed subsidiary, iPrimus.com, we    
are also beginning to target business and residential customers for data and    
Internet services. We provide our approximately 1.7 million customers with      
competitively priced services, including:                                       
  .international and domestic long distance services and private networks;

.prepaid and calling cards, toll-free services and reorigination      
services;                                                                   

 .local services in Australia, Canada, Puerto Rico and the United States
Virgin Islands;                                                             
.data, Internet and cellular services in Australia; and               

.Internet services in Canada and Germany.                             

In an effort to attract larger business customers in multiple markets, we 
intend to offer a broad array of services (including long distance voice,       
cellular, Internet and data services) in approximately 10 major markets,        
including the United States, Canada, Australia, the United Kingdom, Germany,    
France, Japan and Italy. We market our services through a variety of channels,  
including through our direct sales force, independent agents and direct         
marketing.                                                                      

Our Business Strategy     

Our objective is to become a leading global provider of international and 
domestic long distance voice, Internet, data and other services in our          
principal service regions. Key elements of our strategy to achieve this         
objective include the following:                                                

 .Focus on customers with significant international long distance usage;

.Pursue early entry into selected deregulating markets;               

.Expand our global network;                                           

.Provide a full portfolio of voice, data and Internet services;       

.Provide transmission for Internet and data services in developing    
countries;                                                                  

.Broaden retail customer base; and                                    

.Grow through selected acquisitions, joint ventures and strategic     
investments.                                                                

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Our Telecommunications Network

We have been able to reduce our costs, improve our service reliability and
increase our flexibility to introduce new products and services by constructing 
and expanding our telecommunications network. As a result, we increased our     
gross margin as a percentage of net revenue (after accounting for bad debt) to  
20.3% in the first quarter of 1999 from 6.8% in the first quarter of 1997. We   
believe that we should continue to improve our profitability as the volume of   
telecommunications traffic carried on our network increases and we realize      
economies of scale. Currently, 24 countries are connected directly to our       
network. We expect to continue to expand our network through additional         
investment in undersea and domestic fiber optic cable systems, international    
gateway and domestic switching facilities and international satellite earth     
stations as customer demand justifies the capital investment.                   

  Our network consists of 19 carrier-grade switches including 15 international
gateway switches. All of our switches are capable of transmitting both voice    
and data. We also have more than 100 points of presence (POPs) and Internet     
access nodes within our principal service regions worldwide. Our international  
gateway switches will serve as the base for the global expansion of our network 
into new countries when customer demand justifies such investment and as        
regulatory rules permit us to compete in new markets. We are currently          
installing an international gateway switch in France, which is expected to be   
operational during the second quarter of 1999. By the end of 2000, we intend to 
add up to 11 additional switches in Europe, one switch in North America and one 
switch in Japan.                                                                

We own and lease transmission capacity, including interests in 23 undersea
fiber optic cable systems, which connects our switches to each other and to the 
networks of other international and domestic telecommunications carriers. In    
September 1998, we entered into an agreement to purchase $20 million of fiber   
capacity from Qwest Communications International Inc., which will provide high  
speed connections among our U.S. gateway switches and future POPs. We expect to 
continue to acquire additional capacity on both existing and future             
international and domestic fiber optic cable systems as demand justifies such   
investments.                                                                    

We are constructing international satellite earth stations and purchasing 
capacity on international satellites in order to provide data and Internet      
transmission services, in addition to voice services, principally to and from   
post, telephone and telegraph operators, other telecommunications carriers and  
Internet service providers, in developing countries. We have completed the      
construction of an Intelsat earth station in London and have reserved capacity  
on the Intelsat-62(degrees) satellite. This earth station now is operational,   
and is able to carry voice, data and Internet traffic to and from countries in  
the Indian Ocean/Southeast Asia region, Eastern Africa and the Middle East.     
Global Crossing has agreed to purchase up to $25 million of capacity on our     
global satellite network. By the end of 1999, we expect to expand our global    
satellite coverage by leasing a satellite earth station on each of the east and 
west coasts of the United States and by reserving additional capacity on        
international satellites. These additional facilities will position us to       
provide voice, data and Internet transmission services to Latin America and the 
Pacific Rim.                                                                    

We enter into foreign carrier agreements with incumbent carriers or other 
service providers in a given country, permitting us to carry traffic into and   
receive return traffic from those countries where competition with the          
incumbent carriers is limited or prohibited.                                    

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Recent Developments     

Acquisition of Telegroup Retail Assets                                        

  Effective June 1, 1999, we acquired the global retail business of Telegroup,
including the acquisition of selected Telegroup foreign subsidiaries, which     
includes:                                                                       

. Telegroup's global retail business, which consists of approximately   
372,000 customers;                                                  

. Two carrier-grade switches, one located in the New York City area and 
one located in London;                                              

. 14 switching platforms and POPs located in the United Kingdom,        
Germany, France, the Netherlands, Denmark, Switzerland, Italy, Japan
and Hong Kong;                                                          

.Telegroup's global network of sales agents;                          

. A Web-based order-entry and provisioning system for agents; and       

. A global network operations center and call center.                   

  We expect that this acquisition will result in approximately $150 million of
sustainable retail revenues annually, after taking into account attrition in    
Telegroup's customer base which began to occur prior to the Telegroup           
acquisition and which we expect to continue for the near future.                

Acquisition of AT&T Canada Consumer Business                                  

In May 1999, we purchased the residential long distance customer base from
AT&T Canada and ACC Telenterprises. This acquisition included approximately     
428,000 retail customers, customer support assets, including approximately      
28,000 residential Internet customers, and related POPs. As part of the         
acquisition, we entered into a strategic alliance with AT&T Canada whereby AT&T 
Canada agreed to provide us with, among other things, network services in       
Canada for five years as well as customer support services for 12 months. With  
this acquisition, we believe we are now the second largest alternative long     
distance carrier in Canada based on revenue.                                    

Global Crossing Reciprical Capacity Purchase Agreement                        

In May 1999, we entered into a reciprocal capacity purchase agreement with
Global Crossing Holdings Ltd. Under this agreement, we agreed to purchase up to 
$50 million of fiber capacity from Global Crossing, and Global Crossing agreed  
to purchase up to $25 million of capacity on our global satellite network.      

Acquisition of London Telecom                                                 

 In March 1999, we acquired London Telecom and the assets of certain related
companies, which collectively provide domestic and international long distance  
services to approximately 162,000 residential and business customers in Canada. 

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

As of July 29, 1999, our equity market capitalization was $495,207,670,   
based upon a closing price of $17.25 per share and 28,707,691 shares of Common  
Stock outstanding.                                                              

 Our executive offices are located at 1700 Old Meadow Road, McLean, Virginia
22102, and our telephone number is (703) 902-2800.                              

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THE EXCHANGE OFFER

The Exchange Offer..........  We are offering to exchange $1,000 in principal   
                       amount of our 11 1/4% Senior Notes due 2009
                        registered under the Securities Act for each
                         $1,000 in principal amount of the outstanding
                             unregistered 11 1/4% Senior Notes due 2009. As of
                          the date of this prospectus, $200.0 million in
                          aggregate principal amount of the unregistered
 notes is outstanding.

Expiration Date.............  5:00 p.m., New York City time, on August 12,      
                      1999, unless we extend the Exchange Offer.

Conditions of the Exchange                                                      
Offer......................  The exchange offer is not conditioned upon any   
                          minimum principal amount of unregistered notes
                           being tendered for exchange. The exchange offer
                        is subject to the condition that it does not
                           violate any applicable law or interpretation of
                             the staff of the SEC. In addition, as a condition
                            to its participation in the Exchange Offer, each
                            holder of unregistered notes will be required to
                          furnish certain written representations to us.

Accrued Interest on the                                                         
Unregistered Notes.........  The new notes will bear interest at a rate equal 
                      to 11 1/4% per annum. We will pay to those
                             holders whose unregistered notes are accepted for
                             exchange the accrued interest on the unregistered
                           notes from the date of original issuance or the
                          last interest payment date, to, but excluding,
                       the date of issuance of the new notes. Such
                       interest is payable with the first interest
                     payment on the new notes. Interest on the
                           unregistered notes accepted for exchange, which
                          accrues at the rate of 11 1/4% per annum, will
                            cease to accrue on the day prior to the issuance
of the new notes.   

Procedures for Tendering                                                        
Initial Notes..............  Unless a tender of unregistered notes is effected
                     pursuant to the procedures for book-entry
                           transfer, to accept the exchange offer you must
                             complete and sign the letter of transmittal, have
                        your signature guaranteed if required by the
                          letter of transmittal, and mail or deliver the
                    letter of transmittal, together with the
                     unregistered notes and any other required
                           documents, to the exchange agent at the address
                    set forth on the back cover page of this
                        prospectus prior to 5:00 p.m., New York City
                        time, on the expiration date. If you are the
                            beneficial owner of unregistered notes which are
                          registered in the name of a nominee, such as a
                             broker, dealer, commercial bank or trust company,
                            and you wish to tender unregistered notes in the
                           exchange offer, you should instruct such entity
                           or person to promptly tender on your behalf. If
                           you tender unregistered notes for exchange, you
                          must represent to us that, among other things,

                               (i) neither you nor any beneficial owner is our
                           affiliate within Rule 405 under the
       Securities Act,

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                               (ii) any new notes to be received by you or any
                                    beneficial owner are being acquired in the
                          ordinary course of business, and

                              (iii) neither you nor any beneficial owner has
                                    an arrangement or understanding with any
                                     person to participate in the distribution
             of the new notes.

Guaranteed Delivery                                                             
Procedures.................  If you wish to tender your unregistered notes and

                               (i) your unregistered notes are not immediately
    available or

                               (ii) you cannot deliver your unregistered notes
                                or any other documents required by the
                               letter of transmittal to the exchange
                                   agent prior to the expiration date or you
                                 cannot complete the procedure for book-
                           entry transfer on a timely basis,

                            you may tender your unregistered notes according
                           to the guaranteed delivery procedures set forth
         in the letter of transmittal.
Acceptance of Unregistered                                                      
Notes and Delivery of New                                                     
Notes......................  We will accept for exchange any and all          
                            unregistered notes that are properly tendered in
                           the exchange offer prior to 5:00 p.m., New York
                            City time, on the expiration date. The new notes
                          will be delivered as soon as practicable after
the expiration date.

Withdrawal Rights...........  Tenders of unregistered notes may be withdrawn at 
                            any time prior to 5:00 p.m., New York City time,
   on the expiration date.

Federal Income Tax                                                              
Considerations.............  The exchange pursuant to the exchange offer will 
                         not be a taxable event for federal income tax
purposes.           

The Exchange Agent..........  First Union National Bank is the exchange agent   
                             for the exchange offer. The address and telephone
                         number of the Exchange Agent are set forth in
                    "The Exchange Offer--The Exchange Agent;
Assistance."        

Resales of the Exchange                                                         
Notes......................  Based on interpretations by the staff of the SEC 
                            in no-action letters issued to third parties, we
                         believe that new notes issued pursuant to the
                     exchange offer to you in exchange for the
                         unregistered notes may be offered for resale,
                           resold and otherwise transferred by you without
                           compliance with the registration and prospectus
                      delivery provisions of the Securities Act,
                            provided that you are acquiring the new notes in
                       the ordinary course of business and are not
                     participating, and have no arrangement or
                            understanding with any person to participate, in
                         a distribution of the new notes. However, the
                         foregoing is not applicable to you if you are

                     (i) a broker-dealer who purchased the
                               unregistered notes directly from us for
                              resale pursuant to Rule 144A under the
                             Securities Act or any other available
                             exemption under the Securities Act or

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                            (ii) our affiliate within Rule 405 under the
         Securities Act.

                          Each broker-dealer that receives new notes for
                        its own account in exchange for unregistered
                     notes, where such unregistered notes were
                         acquired by such broker as a result of market
                    making or other trading activities, must
                            acknowledge that it will deliver a prospectus in
                         connection with any resale of such new notes.

The New Notes 

Issuer......................  Primus Telecommunications Group, Incorporated.    

Notes Offered...............  $200 million in aggregate principal amount of 11  
       1/4% Senior Notes due 2009.

Maturity....................  January 15, 2009.                                 

Interest Payment Dates......  January 15 and July 15; the first interest        
                         payment date for the new notes is January 15,
                         2000. The first interest payment date for the
                     unregistered notes was July 15, 1999, and
                   interest was paid to the holders of the
          unregistered on July 15, 1999.

Ranking.....................  The new notes will rank senior in right of        
                     payment to all of our existing and future
                          obligations that are expressly subordinated in
                           right of payment to the new notes and will rank
                          pari passu in right of payment with all of our
                      other existing and future senior unsecured
                            obligations, including our trade payables. As of
                            March 31, 1999, after giving pro forma effect to
                             the offering of the new notes and our issuance of
                            $45.5 million of senior notes and a $4.6 million
                             short-term promissory note in connection with the
                    Telegroup acquisition, we would have had
                       outstanding approximately $651.8 million of
                            indebtedness on a consolidated basis. Because we
                            are a holding company that conducts our business
                             through our subsidiaries, all existing and future
                  indebtedness and other liabilities and
                             commitments of any of our subsidiaries, including
                          trade payables, will be structurally senior to
                    the new notes. As of March 31, 1999, our
                     consolidated subsidiaries had outstanding
                         aggregate liabilities of approximately $174.7
                    million, which included $28.6 million of
indebtedness.       

Optional Redemption.........  We may redeem some or all of the new notes at the 
                       redemption prices listed in "Description of
                            Exchange Notes--Optional Redemption" at any time
                            on or after January 15, 2004. Before January 15,
                         2002, we may redeem up to 35% of the original
                           principal amount of new notes at the redemption
                            price listed in "Description of Exchange Notes--
                           Optional Redemption" with the net cash proceeds
                   of one or more public equity offerings.

Change of Control...........  If we experience a change of control, each holder 
                          of new notes may require us to purchase all or
         any part of such holder's new

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                  notes at a purchase price of 101% of the
                           principal amount thereof, plus accrued and unpaid
                         interest and liquidated damages, if any, to the
date of purchase.     

Covenants..................  The indenture governing the new notes limits our   
                         ability and that of our restricted subsidiaries
to:                   

                   .incur additional indebtedness,

           .issue preferred stock,

                               .pay dividends or make other distributions,

                             .repurchase capital stock or subordinated
indebtedness,     

                            .make certain other restricted payments,

          .create certain liens,

                         .enter into certain transactions with
affiliates,       

 .sell assets,

                       .issue or sell capital stock of our
         restricted subsidiaries, or

                   .enter into certain mergers and
consolidations.   

Registration Rights........  If,                                                

                          .applicable law or SEC policy does not
                     permit us to effect the Exchange Offer,

                          .the Exchange Offer is not consummated
               within the prescribed periods, or

                              .certain holders of the unregistered notes
                             notify us they are not permitted to participate
                          in, or would not receive freely tradable are
                    notes pursuant to, the Exchange Offer,

                          we will use our reasonable best efforts to cause
                           the SEC to declare effective a shelf registration
                 statement with respect to resale of the
                 unrequested notes and to keep the shelf
                       registration statement continuously effective
                           until up to two years after the date on which the
                    unrequested notes were sold. If we fail to
                         satisfy these registration obligations, we will
                      be required to pay liquidated damages to the
                         holders of the unregistered notes under certain
circumstances.        

Use of Proceeds............  We will not receive any proceeds from the          
exchange offer.       

Risk Factors  

 Investing in the new notes involves risks. "Risk Factors" begin on page 10.

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Summary Historical and Pro Forma Data 

The summary financial data presented below should be read in conjunction  
with our consolidated financial statements, and the notes thereto, and with     
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations" contained elsewhere in this prospectus. The summary historical      
statement of operations data for the years ended December 31, 1995, 1996, 1997  
and 1998 have been derived from our audited financial statements, and the       
summary unaudited financial data for the three months ended March 31, 1998 and  
1999 have been derived from our unaudited consolidated financial statements     
which, in management's opinion, include all adjustments (consisting of only     
normal recurring adjustments) necessary for a fair presentation of the          
information set forth in this prospectus. The summary unaudited pro forma       
financial data have been derived from our audited financial statements for the  
year ended December 31, 1998, our unaudited financial data for three months     
ended March 31, 1999, the audited combined financial statements of Telegroup,   
Inc. and certain subsidiaries for the year ended December 31, 1998, the         
unaudited combined financial statements of Telegroup and certain subsidiaries   
for the three months ended March 31, 1999, and the unaudited financial          
statements of TresCom International, Inc. for the period from January 1, 1998   
through June 9, 1998, and should be read in conjunction with the unaudited pro  
forma financial data included elsewhere herein.                                 

                                                        [Enlarge/Download Table]

                                                                               Three Months       Pro Forma  
                                                                 Pro Forma         Ended         Three Months
                              Year Ended December 31,            Year Ended      March 31,          Ended    
                         -------------------------------------  December 31, ------------------   March 31,  
                          1995      1996      1997      1998      1998(1)      1998      1999      1999(2)   
                         -------  --------  --------  --------  ------------ --------  --------  ------------
                                        (Dollars in thousands, except per share amounts)                     
                                                                                                             
Statement of Operations                                                                                      
 Data:                                                                                                       
Net revenue(3).......... $ 1,167  $172,972  $280,197  $421,628   $ 704,260   $ 80,051  $131,228    $188,182  
Cost of revenue.........   1,384   158,845   252,731   353,016     582,158     68,722   104,596     143,319  
                         -------  --------  --------  --------   ---------   --------  --------    --------  
 Gross margin                                                                                                
  (deficit).............    (217)   14,127    27,466    68,612     122,102     11,329    26,632      44,863  
                         -------  --------  --------  --------   ---------   --------  --------    --------  
Operating expenses:                                                                                          
 Selling, general and                                                                                        
  administrative........   2,024    20,114    50,622    79,532     182,547     15,377    29,296      47,772  
 Depreciation and                                                                                            
  amortization..........     160     2,164     6,733    24,185      45,593      3,478     8,976      13,478  
                         -------  --------  --------  --------   ---------   --------  --------    --------  
   Total operating                                                                                           
    expenses............   2,184    22,278    57,355   103,717     228,140     18,855    38,272      61,250  
                         -------  --------  --------  --------   ---------   --------  --------    --------  
Loss from operations....  (2,401)   (8,151)  (29,889)  (35,105)   (106,038)    (7,526)  (11,640)    (16,387) 
Interest expense(4).....     (59)     (857)  (12,914)  (40,047)    (74,974)    (7,175)  (16,770)    (19,386) 
Interest income.........      35       785     6,238    11,504      13,910      2,384     3,255       3,400  
Other income (expense)..     --       (345)      407       --         (260)       --        --          215  
                         -------  --------  --------  --------   ---------   --------  --------    --------  
Loss before income                                                                                           
 taxes..................  (2,425)   (8,568)  (36,158)  (63,648)   (167,362)   (12,317)  (25,155)    (32,158) 
Income taxes............     --       (196)      (81)      --          (30)       --        --         (117) 
                         -------  --------  --------  --------   ---------   --------  --------    --------  
Net loss................ $(2,425) $ (8,764) $(36,239) $(63,648)  $(167,392)  $(12,317) $(25,155)   $(32,275) 
                         =======  ========  ========  ========   =========   ========  ========    ========  
Basic and diluted net                                                                                        
 loss per share ........ $ (0.48) $  (0.75) $  (1.99) $  (2.61)  $   (6.01)  $  (0.62) $  (0.89)   $  (1.14) 
                         =======  ========  ========  ========   =========   ========  ========    ========  
Weighted average number                                                                                      
 of share ..............   5,019    11,660    18,250    24,432      27,846     19,717    28,317      28,317  
                         =======  ========  ========  ========   =========   ========  ========    ========  
Ratio of earnings to                                                                                         
 fixed charges..........     --        --        --        --          --         --        --          --   
                         -------  --------  --------  --------   ---------   --------  --------    --------  
Geographic Data:                                                                                             
Net revenue:                                                                                                 
 North America(5)....... $ 1,167  $ 16,573  $ 74,359  $188,008               $ 26,310  $ 62,186              
 Asia-Pacific(6)........     --    151,253   183,126   172,757                 44,659    44,410              
 Europe(7)..............     --      5,146    22,712    60,863                  9,082    24,632              
                         -------  --------  --------  --------               --------  --------              
   Total................ $ 1,167  $172,972  $280,197  $421,628                 80,051   131,228              
                         =======  ========  ========  ========               ========  ========              
Other Data:                                                                                                  
Gross margin (deficit)                                                                                       
 as a percentage of net                                                                                      
 revenue................  (18.6)%      8.2%      9.8%     16.3%       17.3%     14.2%     20.3%        23.8% 
EBITDA(8)............... $(2,241) $ (5,987) $(23,156) $(10,920)  $ (60,445)  $(4,048)  $(2,664)    $ (2,909) 
Capital                                                                                                      
 expenditures(9)........ $   396  $ 12,745  $ 39,465  $ 75,983                $11,369   $16,391              
Number of switches......       1         1        11        16                     11        16              

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                                                                [Download Table]

                                                       March 31, 1999     
                                                  ------------------------
                                                  Actual   As Adjusted(10)
                                                  -------- ---------------
                                                         (in thousands)   
                                                                          
Balance Sheet Data:                                                       
Cash and cash equivalents........................ $268,530    $226,466    
Restricted investments (including current and                             
 long term)......................................   38,010      38,010    
Working capital(11)..............................  268,185     221,837    
Total assets.....................................  842,794     936,764    
Long-term obligations (including current                                  
 portion)........................................  601,709     651,768    
Stockholders' equity.............................   95,069      95,069    

--------                                                                        

(1) Gives pro forma effect to: (i) our merger with TresCom, and (ii)  the     
Telegroup acquisition, all as if they had occurred on January 1, 1998.
  Also gives pro forma effect to: (iii) the sale of $150 million of senior
   notes in May 1998, (iv) the sale of $200 million of unregistered notes in
January 1999 and the exchange offer contemplated hereby, and (v) the  
issuance of an additional $45.5 million of senior notes in June 1999  
 pursuant to the January 1999 indenture in connection with the Telegroup
acquisition, in each case less discounts, commissions and estimated   
  expenses of such offerings payable by us, all as if they had occurred on
January 1, 1998.                                                      

(2) Gives pro forma effect to the Telegroup acquisition as if it had occurred 
   on January 1, 1999. Also gives pro forma effect to:  (i) the sale of $200
million of unregistered notes in January 1999 and the exchange offer  
   contemplated hereby, and (ii) the issuance of an additional $45.5 million
of senior notes in June 1999 pursuant to the January 1999 indenture in
 connection with the Telegroup acquisition, in each case less discounts,
    commissions and estimated expenses of such offerings payable by us, all as
if they had occurred on January 1, 1999.                              

(3) Net revenue is after provision for bad debt.                              

(4) Pro forma interest expense for the year ended December 31, 1998 includes  
interest expense on the May 1998 senior notes, the $200 million of    
  unregistered notes and the exchange offer contemplated hereby, the $45.5
million of senior notes issued in connection with the Telegroup       
acquisition, and amortization of deferred financing costs. Pro forma  
interest expense for the three months ended March 31, 1999 includes   
    amortization of deferred financing costs, and includes interest expense on
all of the foregoing other than the May 1998 senior notes.            

(5) Consists primarily of net revenue from operations in the United States for
    all periods prior to 1997. Net revenue for periods ended subsequent to the
 year ended December 31, 1996 reflects our commencement of operations in
Canada in April 1997.                                                 

(6) Consists solely of net revenue from operations in Australia for the year  
  ended December 31, 1996. Net revenue for periods ended subsequent to the
 year ended December 31, 1996 reflects our commencement of operations in
Japan in October 1997.                                                

(7) Consists solely of net revenue from operations in the United Kingdom for  
    all periods prior to 1998. Net revenue for periods ended subsequent to the
 year ended December 31, 1997 reflects our commencement of operations in
Germany in August 1998.                                               

(8) As used herein, "EBITDA" is defined as income (loss) from operations plus 
depreciation and amortization expense. While EBITDA should not be     
construed as a substitute for operating income or a better measure of 
  liquidity than cash flow from operating activities, which are determined
in accordance with generally accepted accounting principles, it is    
  included to provide additional information regarding our ability to meet
our future debt service, capital expenditures and working capital     
  requirements. EBITDA is not necessarily a measure of our ability to fund
our cash needs and is not necessarily comparable to similarly titled  
measures of other companies.                                          

(9) Capital expenditures excludes assets acquired in business combinations and
under terms of capital leases.                                        

(10) Gives effect to the Telegroup acquisition, including the issuance of $45.5 
  million of senior notes and a $4.6 million short-term promissory note in
June 1999, and the payment of $43.9 million in cash, all in connection
    with the Telegroup acquisition, as if they had occurred on March 31, 1999.

(11) Consists of total current assets minus total current liabilities.          

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RISK FACTORS

 You should carefully consider the following risks, in addition to the other
information contained elsewhere in this prospectus, in evaluating whether to    
participate in the Exchange Offer.                                              

We Have Substantial Indebtedness                                                

We have substantial indebtedness and the indenture governing the new notes
and the unregistered notes limits, but does not prohibit, our incurrence of     
additional indebtedness. We expect that we will incur additional indebtedness   
in the future and our level of indebtedness could have important consequences   
to you, including the following:                                                

.  any additional indebtedness could make it more difficult for us to make  
payments of interest on our outstanding debt, including the new notes;

.  we may limit our ability to obtain any necessary financing in the future 
for working capital, capital expenditures or other purposes;          

.  we must dedicate a substantial portion of our cash flow from operations, 
  if any, to the payment of principal and interest on our indebtedness and
this cash flow will not be available for our use elsewhere in our     
business;                                                             

.  our flexibility in planning for, or reacting to, changes in our business 
could be limited;                                                     

.  we may be at a competitive disadvantage because we are more highly       
leveraged than some of our competitors; and                           

.  we may be more vulnerable in the event of a downturn in our business if  
we have a high level of indebtedness.                                 

We must substantially increase our net cash flow in order to meet our debt
service obligations and cannot assure you that we will be able to meet our debt 
service obligations, including our obligations under the new notes. The holders 
of such indebtedness can accelerate the maturity of such indebtedness if there  
is a default and that could cause defaults under our other indebtedness. Such   
defaults could result in a default on the new notes and could delay or preclude 
payments of interest or principal thereon.                                      

We Experienced Historical, and Will Experience Future Operating Losses,         
Negative EBITDA and Net Losses                                                  

  We expect to continue to incur operating losses, and negative cash flow from
operations as we expand our operations and build-out and upgrade our            
telecommunications network. Our net revenue growth in each of the last 16       
quarters should not be considered to be indicative of future net revenue        
growth. We cannot assure you that our net revenue will grow or be sustained in  
future periods or that we will be able to achieve or sustain profitability or   
generate positive cash flow from operations in any future period. If we cannot  
achieve and sustain operating profitability or positive cash flow from          
operations, we may not be able to meet our debt service or working capital      
requirements, including our obligations with respect to the new notes.          

We Must Obtain Additional Financing to Expand Our Service Offerings             

We continually evaluate the expansion of our service offerings and plan to
make further investments in and enhancements to our telecommunications network  
and in distribution channels. To fund these additional cash requirements, we    
anticipate that we will have to raise additional financing from public or       
private equity or debt sources. Additionally, we may be required to seek        
additional capital sooner than expected if:                                     

.  our plans or assumptions change or are inaccurate, including with        
respect to the development of our telecommunications network, the     
 expansion of our service offerings, the scope of our operations and our
operating cash flow;                                                  

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.  we consummate additional investments or acquisitions;                    

.  we experience unexpected costs or competitive pressures; or              

.  our existing cash and any other borrowings prove to be insufficient.     

We have agreed in the indenture and certain other agreements governing our      
indebtedness to restrictive covenants that will affect, and in many respects    
will limit or prohibit significantly, our ability to incur additional           
indebtedness and to create liens. If we do raise additional funds through the   
incurrence of debt, we would likely become subject to additional restrictive    
financial covenants. If we are unable to obtain additional capital at all or on 
acceptable terms, we may be required to reduce the scope of our expansion,      
including the expansion of iPRIMUS.com, which could adversely affect our        
business prospects and our ability to compete. We cannot assure you that we     
will be able to raise equity capital, obtain capital lease or bank financing or 
incur other borrowings on commercially reasonable terms, if at all, to fund any 
such expansion or otherwise.                                                    

We Operate Using a Holding Company Structure and Will Rely on Our Subsidiaries  
for Distributions to Service the New Notes                                      

We are a holding company and our principal assets are the stock of our    
operating subsidiaries. Dividends, intercompany loans and other permitted       
payments from our direct and indirect subsidiaries, and our own credit          
arrangements, are our sources of funds to meet our cash needs, including the    
payment of expenses and principal and interest on the new notes. Our            
subsidiaries are legally distinct from us and have no obligation to pay amounts 
due with respect to the new notes or to make funds available to us. Our         
subsidiaries will not guarantee the new notes. Many of our subsidiaries are     
organized in jurisdictions outside the United States. Their ability to pay      
dividends, repay intercompany loans or make other distributions may be          
restricted by, among other things, the availability of funds, the terms of      
various credit arrangements entered into by them, as well as statutory and      
other legal restrictions. Additionally, payments from our subsidiaries may      
result in adverse tax consequences. If we do not receive dividends,             
distributions and other payments from our subsidiaries, we would be restricted  
in our ability to pay interest and principal on the new notes and on our        
ability to utilize cash flow from one subsidiary to cover shortfalls in working 
capital at another subsidiary.                                                  

  Additionally, creditors of the holding company, including the holders of the
new notes, and the holding company itself will generally have subordinate       
claims against the assets of a particular subsidiary as compared to the         
creditors of such subsidiary. Accordingly, the new notes will be structurally   
subordinated to all existing and future indebtedness and other liabilities and  
commitments of our subsidiaries, including trade payables. Our right to receive 
assets of any subsidiary upon the liquidation or reorganization of such         
subsidiary (and the consequent rights of the holders of the new notes to        
participate in those assets) will be structurally subordinated to the claims of 
such subsidiary's creditors. However, if the holding company itself is          
recognized as a creditor, its claims would be subordinate to any secured        
indebtedness of such subsidiary and any indebtedness of such subsidiary that is 
senior to the holding company's claims. In addition, holders of our secured     
indebtedness have a claim on the assets securing such indebtedness that is      
prior to the claim of the holders of the new notes and would have a claim that  
is pari passu with the claim of the holders of the new notes to the extent such 
security did not satisfy such indebtedness. We have no significant assets other 
than the stock of our subsidiaries. If we were to enter into a bank credit      
facility or similar arrangement, we expect that the stock of the subsidiaries   
would be pledged to secure any such credit facility or arrangement.             

We Have Been Operating for Only a Limited Period of Time                        

We have limited experience in operating our business. Our company was     
founded in February 1994 and began generating operating revenues in March 1995. 
We intend to enter additional markets or businesses, including offering         
Internet services where we have limited or no operating experience.             
Accordingly, we cannot assure you that our future operations will generate      
operating or net income, and you must consider our prospects in light of the    
risks, expenses, problems and delays inherent in establishing a new business in 
a rapidly changing industry.                                                    

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We Cannot Assure You That Our Internet Business Will Be Successful              

We have recently begun targeting businesses and residential customers for 
Internet services through our newly formed subsidiary, iPRIMUS.com, and other   
recently acquired ISPs. We intend to expand our offering of data and Internet   
services worldwide. We have limited experience in the Internet business and     
cannot assure you that we will successfully establish or expand the business.   
Currently, we only provide Internet services to business and residential        
customers in Australia, Canada and Germany, and offer Internet transmission     
services in only the Indian Ocean/Southeast Asia regions through our satellite  
earth station in London.                                                        

The market for Internet connectivity and related services is extremely    
competitive. Our primary competitors include other ISPs that have a significant 
national or international presence and that focus on business customers. Many   
of these carriers have substantially greater resources, capital and operational 
experience than we do. We also expect we will experience increased competition  
from traditional telecommunications carriers that expand into the market for    
Internet services. In addition, we will require substantial additional capital  
to make investments in our Internet operations and we may not be able to obtain 
that capital on favorable terms.                                                

 Further, even if we are able to establish and expand our Internet business,
we will face numerous risks that may adversely affect the operations of our     
Internet business. These risks include:                                         

. competition in the market for Internet services;                          

. our limited operating history as an ISP;                                  

. rapid changes in technology related to our Internet business;             

. uncertainty relating to the adoption of the Internet as a medium of       
commerce and communications;                                            

. vulnerability to unauthorized access, computer viruses and other          
disruptive problems due to the accidental or intentional actions of     
others;                                                                 

. adverse regulatory developments and the potential liability for           
information disseminated over our network; and                          

. our need to manage the growth of our Internet business, including the     
need to enter into agreements with other providers of infrastructure    
capacity and equipment and to acquire other ISPs on acceptable terms.   

We Are Developing Our Network and Moving Traffic onto Our Network               

Our long-term success is dependent upon our ability to design, implement, 
operate, manage and maintain our telecommunications network, and our ability to 
generate and move traffic onto the network. We have limited experience in these 
activities. We have incurred additional fixed operating costs due to our        
acquisition of telecommunications equipment and other assets of TresCom, London 
Telecom, AT&T Canada, ACC Telenterprises and Telegroup. We will incur           
additional fixed operating costs as we further expand the network. These costs  
typically are in excess of the revenue attributable to the transmission         
capacity funded by such costs until we generate additional traffic volume for   
such capacity. We cannot guarantee that we will generate sufficient traffic to  
economically utilize our capacity or that we can complete our network in a      
timely manner or operate it efficiently. We also intend to expand our network   
as more countries deregulate their telecommunications industries. We cannot     
guarantee that we will be able to obtain the required licenses or purchase the  
necessary equipment on favorable terms or, if we do, that we will be able to    
successfully develop our network in those countries.                            

Managing Rapid Growth                                                           

Our continued growth and expansion places a significant strain on our     
management, operational and financial resources, and increases demands on our   
systems and controls. We continue to add switches and fiber                     

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optic cable and to expand our operations. We have expanded our retail           
operations through our recent acquisitions of TresCom, London Telecom, the      
consumer business of AT&T Canada, the residential long distance business of ACC 
Telenterprises and the retail business of Telegroup. We have also recently      
acquired several ISPs and created iPRIMUS.com, our subsidiary through which we  
intend to operate our Internet businesses. To manage our growth effectively, we 
must continue to implement and improve our operational and financial systems    
and controls, purchase and utilize other transmission facilities, and expand,   
train and manage our employee base. If we inaccurately forecast the movement of 
traffic onto our network, we could have insufficient or excessive transmission  
facilities and disproportionate fixed expenses. We cannot guarantee that we     
will be able to further develop our facilities-based network or expand at the   
rate presently planned, or that the existing regulatory barriers to such        
expansion will be reduced or eliminated. As we proceed with our development, we 
will place additional demands on our customer support, billing and management   
information systems, on our support, sales and marketing and administrative     
resources and on our network infrastructure. We cannot guarantee that our       
operating and financial control systems and infrastructure will be adequate to  
maintain and manage effectively our future growth.                              

Acquisition and Strategic Investment Risks                                      

A key element of our business strategy is to acquire or make strategic    
investments in complementary assets and businesses, and a major portion of our  
growth in recent years is as a result of such acquisitions. Acquisitions,       
including our recent TresCom, London Telecom, AT&T Canada, ACC Telenterprises,  
Telegroup, GlobalServe and TCP/IP acquisitions, and strategic investments       
involve financial and operational risks. We may incur indebtedness in order to  
effect an acquisition and will need to service that indebtedness. An            
acquisition may not provide the benefits originally anticipated while we        
continue to incur operating expenses. There may be difficulty in integrating    
the service offerings, distribution channels and networks gained through        
acquisitions and strategic investments with our own. In a strategic investment  
where we acquire a minority interest in a company, we may lack control over the 
operations and strategy of the business, and we cannot guarantee that such lack 
of control will not interfere with the integration of services and distribution 
channels of the business with our own. Although we attempt to minimize the risk 
of unexpected liabilities and contingencies associated with acquired businesses 
through planning, investigation and negotiation, such unexpected liabilities    
may nevertheless accompany such strategic investments and acquisitions. We      
cannot guarantee that we successfully will:                                     

.  identify attractive acquisition and strategic investment candidates;     

.  complete and finance additional acquisitions on favorable terms; or      

.  integrate the acquired businesses or assets into our own.                

We cannot guarantee that the integration of our business with any acquired
company's business, including the businesses of TresCom, London Telecom, AT&T   
Canada, ACC Telenterprises, Telegroup, GlobalServe and TCP/IP will be           
accomplished smoothly or successfully, if at all. If we encounter significant   
difficulties in the integration of the existing services or technologies or the 
development of new technologies, resources could be diverted from new service   
development, and delays in new service introductions could occur. We cannot     
guarantee that we will be able to take full advantage of the combined sales     
forces' efforts. Successful integration of operations and technologies requires 
the dedication of management and other personnel which may distract their       
attention from our day-to-day business, the development or acquisition of new   
technologies, and the pursuit of other business acquisition opportunities.      

We Experience Intense Domestic and International Competition                    

The long distance telecommunications industry is intensely competitive and
is significantly influenced by the marketing and pricing decisions of the       
larger industry participants. The industry has relatively limited barriers to   
entry in the more deregulated countries with numerous entities competing for    
the same customers. Customers frequently change long distance providers in      
response to the offering of lower rates or promotional incentives by            
competitors. Generally, customers can switch carriers at any time. We believe   
that competition in                                                             

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all of our markets is likely to increase and that competition in non-United     
States markets is likely to become more similar to competition in the United    
States market over time as the non-United States markets continue to experience 
deregulatory influences. Further deregulation in other countries such as        
Canada, the United Kingdom, Germany and Japan, could result in greater          
competition in telecommunications services offered in these countries. This     
increase in competition could adversely affect net revenue per minute and gross 
margin as a percentage of net revenue. We compete primarily on the basis of     
price, particularly with respect to our sales to other carriers, and also on    
the basis of customer service and our ability to provide a variety of           
telecommunications products and services. Prices for long distance calls in     
several of the markets in which we compete have declined in recent years and    
are likely to continue to decrease. We cannot guarantee that we will be able to 
compete successfully in the future.                                             

Many of our competitors are significantly larger than us, and many of our 
competitors have:                                                               

.  substantially greater financial, technical and marketing resources;  

.  larger networks;                                                     

.  a broader portfolio of services;                                     

.  controlled transmission lines;                                       

.  stronger name recognition and customer loyalty; and                  

.  long-standing relationships with our target customers.               

In addition, many of our competitors enjoy economies of scale that can result   
in a lower cost structure for transmission and related costs, which could cause 
significant pricing pressures within the industry. Several long distance        
carriers in the United States have introduced pricing strategies that provide   
for fixed, low rates for calls within the United States. If this strategy is    
widely adopted, it could have an adverse effect on our results of operations    
and financial condition if increases in telecommunications usage do not result  
or are insufficient to offset the effects of such price decreases.              

Recent and pending deregulation in various countries may encourage new    
entrants to compete, including Internet service providers, cable television     
companies and utilities. For example, the United States and 68 other countries  
have committed to open their telecommunications markets to competition pursuant 
an agreement under the World Trade Organization which began on January 1, 1998. 
Further, in the United States once certain conditions are met under the United  
States Telecommunications Act of 1996, the regional bell operating companies    
will be allowed to enter the domestic long distance market, AT&T, MCI/WorldCom  
and other long distance carriers will be allowed to enter the local telephone   
services market, and any entity, including cable television companies and       
utilities, will be allowed to enter both the local service and long distance    
telecommunications markets. In addition, we could experience additional         
competition in the Australian market from newly licensed telecommunications     
carriers with the ongoing deregulation of the Australian telecommunications     
market and the granting of additional carrier licenses.                         

We Depend on Transmission Facilities-Based Carriers                             

We primarily connect our customers' telephone calls through transmission  
lines that we lease under a variety of arrangements with other facilities-based 
long distance carriers. Many of these carriers are, or may become, our          
competitors. Our ability to maintain and expand our business is dependent upon  
whether we continue to maintain favorable relationships with the facilities-    
based carriers from which we lease transmission lines. If our relationship with 
one or more of these carriers were to deteriorate or terminate, it could have a 
material adverse effect upon our cost structure, service quality, network       
diversity, results of operations and financial condition. Moreover, we lease    
transmission lines from some vendors that currently are subject to tariff       
controls and other price constraints which in the future may be changed.        

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Risks Associated With International Operations                                  

A key element of our business strategy is to expand in international      
markets. In many international markets, the existing incumbent carrier has      
certain advantages, including:                                                  

.  controlling access to the local networks;                            

.  enjoying better brand recognition and brand and customer loyalty;    
and                                                               

.  having significant operational economies, including a larger         
  backbone network and foreign carrier agreements with other incumbent
carriers and other service providers.                             

Moreover, the incumbent carrier may take many months to allow competitors to    
interconnect to its switches. To achieve our objective of pursuing growth       
opportunities in international markets, we may have to make significant         
investments for an extended period before returns, if any, on such investments  
are realized. In addition, we cannot guarantee that we will be able to obtain   
the permits and operating licenses required by us to:                           

.  operate our own transmission facilities or switches;                 

.  obtain access to local transmission facilities; or                   

.  market, sell and deliver competitive services in these markets.      

In addition, such permits and operating licenses, if we obtain them, may not be 
obtained in the time frame that we currently contemplate.                       

There are additional risks inherent in doing business on an international 
level which could materially adversely impact our international operations.     
These risks include:                                                            

.  unexpected changes in regulatory requirements, tariffs, customs,     
duties and other trade barriers;                                  

.  difficulties in staffing and managing foreign operations;            

.  problems in collecting accounts receivable;                          

.  political risks;                                                     

.  fluctuations in currency exchange rates;                             

.  foreign exchange controls which restrict or prohibit repatriation of 
funds;                                                            

.  technology export and import restrictions or prohibitions;           

.  delays from customs brokers or government agencies;                  

.  seasonal reductions in business activity during the summer months    
and holiday periods; and                                          

.  potentially adverse tax consequences resulting from operating in     
multiple jurisdictions with different tax laws.                   

A significant portion of our net revenue and expenses is denominated, and is    
expected to continue to be denominated, in currencies other than United States  
dollars. Changes in exchange rates may have a significant effect on our results 
of operations. We have not historically engaged in hedging transactions, and do 
not currently contemplate engaging in hedging transactions to mitigate foreign  
exchange risk.                                                                  

On January 1, 1999, 11 member countries of the European Union established 
fixed conversion rates between their national currencies and the "euro". At     
that time, the euro began trading on currency exchanges and became usable for   
non- cash transactions. However, traditional currencies will continue to be     
used until at least January 1, 2002. Given the extent of our current and        
expected services in continental Europe and the nature of those services, we do 
not currently expect euro conversion to have a material impact on operations or 
cash flows. However, uncertainties exist as to the effects of euro conversion   
on certain European customers and on the economies of the participating         
countries. Euro conversion will also cause a better ability to compare          

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prices in different countries which may negatively impact pricing strategies in 
different participating countries. We plan to continue to evaluate the impact   
of euro conversion on our computer and financial systems, business processes,   
market risk and price competition.                                              

We Depend on Effective Information Systems                                      

To bill our customers, we must record and process massive amounts of data 
quickly and accurately. We believe that our management information system will  
have to grow as our business expands and it will have to change as new          
technological developments occur. We believe that the successful implementation 
and integration of new information systems and backroom support will be         
important to our ability to                                                     

.  develop and grow our business,                                       

.  monitor and control costs,                                           

.  bill our customers accurately and in a timely fashion, and           

.  achieve operating efficiencies.                                      

We cannot guarantee that we will not encounter delays or cost-overruns or       
suffer adverse consequences in implementing these systems. Any such delay or    
other malfunction of our management information systems could have a material   
adverse effect on our business, financial condition and results of operations.  

We Must Modify our Systems to be Year 2000 Compliant                            

 In 1998, we began a comprehensive inventory and Year 2000 assessment of our
principal computer systems, network elements, software applications and other   
business systems throughout the world. The Year 2000 problem is the result of   
computer programs being written using two digits, rather than four digits, to   
define the applicable year. Any of our systems, elements or applications that   
have time-sensitive software may recognize a date using "00" as the year 1900   
rather than the year 2000. This could result in improperly routed traffic, a    
major system failure or miscalculations in invoices. We have completed our      
inventory assessment and have begun repairing or replacing the most critical    
items that we have determined not to be Year 2000 compliant. We expect to       
complete the repair, replacement, testing and certification of substantially    
all non-compliant network elements by September 30, 1999. We are using both     
internal and external resources to identify, correct or reprogram, and test our 
systems for Year 2000 compliance. In addition, we are contacting third party    
suppliers of major equipment, software, systems and services that we use to     
identify and, to the extent possible, to resolve issues involving Year 2000     
compliance. However, we have limited or no control over the actions of these    
third party suppliers. Consequently, we cannot guarantee that these suppliers   
will resolve any or all Year 2000 issues before the occurrence of a material    
disruption to our business or any of our customers.                             

We expect to incur in the aggregate approximately $3 to $5 million in     
expenditures during 1999 to complete our Year 2000 compliance program. These    
estimates do not include the cost of systems, software and equipment that are   
being replaced or upgraded in the normal course of business. The costs of       
modifying our network elements, software and systems for Year 2000 compliance   
are being funded from existing cash resources. If we do not achieve compliance  
prior to December 31, 1999, or if we fail to identify and remedy all critical   
Year 2000 problems, our results of operations or financial condition could be   
materially affected. We have begun to develop appropriate contingency plans to  
mitigate, to the extent possible, any significant Year 2000 noncompliance and   
expect to complete our contingency plans by September 30, 1999. If we are       
required to implement our contingency plans, the cost of Year 2000 compliance   
may be greater than the amount referenced above and cannot guarantee that these 
plans will be adequate.                                                         

We Experience Risks of Industry Changes That Affect Our Competitiveness and Our 
Financial Results                                                               

The international telecommunications industry is changing rapidly due to: 

.  deregulation;                                                        

.  privatization of incumbent carriers;                                 

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.  technological improvements;                                          

.  expansion of telecommunications infrastructure; and                  

.  the globalization of the world's economies.                          

In addition, deregulation in any particular market may cause such market to     
shift unpredictably. We cannot guarantee that we will be able to compete        
effectively or adjust our contemplated plan of development to meet changing     
market conditions.                                                              

The telecommunications industry generally is experiencing a rapid         
technological evolution. New products and service offerings are being           
introduced. Satellite and undersea cable transmission capacity is increasingly  
available for services similar to those we provide. Potential developments that 
could adversely affect us if we do not anticipate them or appropriately respond 
to them include:                                                                

.  improvements in transmission equipment;                              

.  development of switching technology allowing voice/data/video        
multimedia transmission simultaneously; and                       

.  commercial availability of competitively-priced Internet-based       
domestic and international switched voice/data/video services.    

Our profitability will depend on our ability to anticipate, assess and adapt to 
rapid technological changes and our ability to offer, on a timely and cost-     
effective basis, services that meet evolving industry standards. We cannot      
guarantee that we will be able to assess or adapt to such technological changes 
at a competitive price, maintain competitive services or obtain new             
technologies on a timely basis or on satisfactory terms.                        

We May Be Affected by Natural Disasters                                         

Many of the geographic areas where we conduct our business may be affected
by natural disasters, including hurricanes and tropical storms. Hurricanes,     
tropical storms and other natural disasters could have a material adverse       
effect on our business by damaging our network facilities or curtailing         
telephone traffic as a result of the effects of such events, such as            
destruction of homes and businesses.                                            

We Depend on Key Personnel                                                      

We depend upon the efforts of our management team and our key technical,  
marketing and sales personnel, particularly those of K. Paul Singh, our         
Chairman and Chief Executive Officer. If we lose the services of one or more of 
these key individuals, particularly Mr. Singh, our business and its future      
prospects could be materially and adversely affected. We have entered into an   
employment agreement with Mr. Singh, which continues until May 30, 2000, and    
from year to year thereafter unless terminated. We do not maintain any key      
person life insurance on the lives of any officer, director or key employee.    
Our future success will also depend on our ability to attract and retain        
additional key management and technical and sales personnel required in         
connection with the growth and development of our business. The competition to  
hire qualified employees and personnel in the telecommunications and Internet   
industries is intense, particularly in non-U.S. markets, and there are a        
limited number of persons with knowledge of and experience in particular        
sectors of the telecommunications industry. We cannot guarantee that we will be 
successful in attracting and retaining such executives and personnel.           

We are Subject to Potential Adverse Effects of Regulation                       

As a multinational telecommunications company, we are subject to varying  
degrees of regulation in each of the jurisdictions in which we provide, or      
expect to provide, our services. Local laws and regulations, and the            
interpretation of such laws and regulations, differ significantly among the     
jurisdictions in which we operate. There can be no assurance that future        
regulatory, judicial and legislative changes will not have a material           

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adverse effect on us, that domestic or international regulators or third        
parties will not raise material issues with regard to our compliance or         
noncompliance with applicable regulations.                                      

United States. In the United States, our services are subject to the      
provisions of the United States Communications Act of 1934, as amended by the   
United States 1996 Telecommunications Act, and the Federal Communications       
Commission regulations thereunder, as well as the applicable laws and           
regulations of the various states administered by the relevant state public     
service commissions. The recent trend in the United States has been in the      
direction of reduced regulation which has also given AT&T, the largest          
international and domestic long distance carrier in the United States,          
increased pricing and market entry flexibility that has permitted it to compete 
more effectively with smaller carriers, such as us. In addition, the 1996       
Telecommunications Act has opened the United States market to increased         
competition.                                                                    

 The FCC and relevant state public service commissions exercise authority to
regulate ownership of transmission facilities, provision of services and the    
terms and conditions under which our services are provided. In addition, we     
file tariffs listing the rates, terms and conditions of the services we         
provide. Any failure to maintain proper federal and state tariffs or            
certification, or any finding by the federal or state agencies that we are not  
operating under permissible terms and conditions, may result in an enforcement  
action or investigation.                                                        

To originate and terminate calls, long distance carriers such as us must  
purchase "access" from the local exchange carriers. Access charges represent a  
significant portion of our cost of revenue and, generally, such access charges  
are regulated by the FCC. Under new FCC rules, local exchange carriers will be  
permitted to allow certain volume discounts in the pricing of access charges.   
It is possible that many long distance carriers, including us, could be placed  
at a significant cost disadvantage to larger competitors. We also contribute to 
universal service funds based on revenues collected in the United States. In a  
pending rulemaking, the FCC may amend its rules to require us to contribute     
based on foreign revenues as well as domestic revenues.                         

The FCC and certain state agencies also impose prior approval requirements
on transfers of control, including pro forma transfers of control resulting     
from corporate reorganizations, and assignments of regulatory authorizations.   
Applicable prior approval requirements may delay, prevent or deter a change in  
our control. The FCC has established and administered a variety of              
international service regulations, including the International Settlements      
Policy which governs the settlement between U.S. carriers and their foreign     
correspondents of the cost of terminating traffic over each other's networks,   
the "benchmark" settlement rates for such settlement and permissible exceptions 
to these policies. The FCC recently approved rules that, when effective, will   
remove the International Settlements Policy with respect to arrangements with   
foreign carriers. To the extent that the International Settlements Policy still 
applies, the FCC could find that, absent a waiver, certain terms of our foreign 
carrier agreements do not meet the requirements of the International            
Settlements Policy. The FCC could, among other things, issue a cease and desist 
order or impose fines if it finds that these agreements conflict with the       
International Settlements Policy. We do not believe that any such fine or order 
would have a material adverse effect on us. The FCC also regulates the nature   
and extent of foreign ownership in radio licenses and our foreign carrier       
affiliations.                                                                   

Regulatory requirements pertinent to our operations have recently changed 
and will continue to change as a result of the World Trade Organization         
Agreement, federal legislation, court decisions, and new and revised policies   
of the FCC and state public service commissions. In particular, the FCC         
continues to refine its international service rules to promote competition,     
reflect and encourage liberalization in foreign countries, and reduce           
international accounting rates toward cost. Among other things, such changes    
may increase competition and alter our ability to compete with other service    
providers, to continue providing the same services, or to introduce services    
currently planned for the future. The impact of any changes in applicable       
regulatory requirements on our operations cannot be predicted.                  

Canada. In Canada, the operations of telecommunications carriers are      
regulated by the Canadian regulatory agency known as the Canadian Radio-        
television and Telecommunications Commission. The CRTC has recently established 
a new competitive regulatory framework governing the international segment of   
the                                                                             

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long-distance market, eliminating certain barriers to competition. In addition, 
foreign ownership rules for facilities-based carriers have now been waived in   
relation to ownership of international submarine cables landed in Canada and    
satellite earth stations used for telecommunication purposes. Effective January 
1, 1999 all international service providers must be licensed by the CRTC under  
the Canadian Telecommunications Act of 1993. Our operations will remain subject 
to conditions of our CRTC license, which address matters such as competitive    
conduct and consumer safeguards, and to a regime of contribution charges        
(roughly the equivalent of access charges in the United States). There can be   
no assurance that the new regulatory framework, once implemented in Canada,     
will allow us to compete effectively in offering telecommunications services.   
In addition, there can be no assurance that any future changes in or additions  
to law, regulations, government policy or administrative rulings will not have  
a material adverse impact on our competitive position, growth and financial     
performance.                                                                    

  Australia. In Australia, the provision of our services is subject to federal
regulation pursuant to the Australian Telecommunications Act 1997 and the       
Australian Trade Practices Act 1974. We are licensed under the Australian       
Telecommunications Act of 1997 to own and operate transmission facilities in    
Australia. Under the regulatory framework, we must comply with legislated       
"service provider" rules contained in the Telecom Act covering matters such as  
compliance with the Telecom Act, operator services, regulation of access,       
directory assistance, provision of information to allow maintenance of an       
integrated public number database, and itemized billing.                        

 The Australian Communications Authority regulates the licensing of carriers
and certain technical matters, and the Australian Competition and Consumer      
Commission has the role of promotion of competition and consumer protection. As 
a licensed carrier, we are required to comply with our own license and are      
under the regulatory control of the Australian Communications Authority and the 
Australian Competition and Consumer Commission. Anti-competitive practices will 
also continue to be regulated by the Trade Practices Act. In addition, other    
federal legislation, various regulations pursuant to delegated authority and    
legislation, ministerial declarations, codes, directions, licenses, statements  
of Commonwealth Government policy and court decisions affecting                 
telecommunications carriers also apply to us. There can be no assurance that    
future declarations, codes, directions, licenses, regulations, and judicial and 
legislative changes will not have a material adverse effect on us.              

Carriers must also meet the universal service obligation to assist in     
providing all Australians, particularly those living in remote areas, with      
reasonable access to standard telephone services. Telstra, as the only          
universal service provider, has submitted a claim to the Australian             
Communications Authority that, if adopted, could result in material charges to  
carriers such as us. The Australian government has not accepted Telstra's model 
and has referred the model and the criteria for determining the size of this    
obligation to the Australian Communications Authority for review. The outcome   
from the Australian Communications Authority's assessment and the Australian    
government's policy considerations is expected to result in a levy that will    
not be material for us. However, there can be no assurance that the Australian  
Communications Authority will not make an assessment of a universal service     
charge that would be material.                                                  

United Kingdom. In the United Kingdom, the provision of our services is   
subject to and affected by regulations introduced by the United Kingdom         
telecommunications regulatory authority, the Office of Telecommunications under 
the United Kingdom Telecommunications Act of 1984. Since the break up of the    
United Kingdom telecommunications duopoly consisting of British Telecom and     
Mercury in 1991, it has been the stated goal of Oftel to create a competitive   
marketplace from which detailed regulation could eventually be withdrawn. The   
regulatory regime currently being introduced by Oftel has a direct and material 
effect on our ability to conduct our business. Oftel has imposed mandatory rate 
reductions on British Telecom in the past, which reductions are expected to     
continue for the foreseeable future, and this has had, and may continue to      
have, the effect of reducing the prices we can charge our customers. There can  
be no assurance that future changes in regulation and government will not have  
a material adverse effect on our business, results of operations and financial  
condition.                                                                      

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Japan. Our services in Japan are subject to regulation by the Ministry of 
Post and Telecommunications under the Japanese Telecommunications Business Law. 
We have obtained licenses as a Type I business, which allows us to provide      
telecommunications services using our own facilities, and as a Special Type II  
business, which allows us to provide telecommunications services over           
international circuits leased from another carrier, or domestic service in      
Japan over leased circuits if the volume of traffic exceeds a certain amount.   
We may also provide over leased lines basic telecommunications services, value- 
added services and services to closed user groups. There can be no guarantee    
that the Japanese regulatory environment will allow us to provide services in   
Japan at competitive rates.                                                     

Germany. Our services in Germany are governed by the German               
Telecommunications Act of 1996, which, with respect to most of its provisions,  
became effective at the end of July 1996, while all of its market liberalizing  
provisions took effect on January 1, 1998. A change in regulatory policy has    
taken place which will require us to invest in additional points of presence    
and transmission lines in order to continue to receive the lowest available     
interconnection rates. However, the build-out of our German network is          
currently hindered by Deutsche Telekom's insufficient capacities and consequent 
order backlog of points of presence. Further changes in regulatory policy or    
court decisions could result in our having to pay less favorable                
interconnection prices and/or having to invest into a Germany-wide license to   
be able to continue our current services. The Regulierungsbehorde fur           
Telekommunikation und Post (RegTP) has in particular invited Deutsche Telekom   
to launch a regulatory authorization of additional interconnection fees to be   
paid by small network operators for so called "atypical traffic", a designation 
applicable to most of our traffic. Moreover, we are subject to certain          
regulatory requirements when we operate under our license, including the        
requirement that we present our standard terms and conditions to German         
regulators and possibly that we contribute to universal service mechanisms.     

Deutsche Telekom has exercised its option to terminate its current        
interconnection agreement with us as of the end of 1999 and has asked that      
renegotiations be commenced. Deutsche Telekom has at the same time presented us 
with a new draft interconnection agreement containing terms less favorable than 
in the current agreement. Such less favorable terms include, among other        
things, higher interconnection fees; higher resale fees for certain             
interconnecting calls; minimum traffic volume requirements; and the requirement 
to extend our license to a Germany-wide license. Most of these new terms have   
not been accepted by the RegTP for the period of the current interconnection    
regime until the end of 1999. The same terms may, however, be introduced as of  
the year 2000 and may adversely affect our business.                            

There can be no assurance that the regulatory environment in Germany      
generally or the applicable interconnection rates with Deutsche Telekom will    
allow us to provide telecommunications services competitively with other        
providers.                                                                      

  Latin America. We may decide to install switches and other network equipment
in several Latin American countries. Some of these countries allow only limited 
competition to the incumbent telephone carrier, and others require prior        
authorization before providing competitive services. Others, such as El         
Salvador and Guatemala, do not require prior authorization but would require us 
to obtain numbers or interconnection with the incumbent carrier. We are         
currently providing to customers in certain Latin American countries            
international call reorigination or similar types of services that do not       
require us to have a presence in the foreign country. Some of these countries   
may prohibit some or all forms of call reorigination. There can be no guarantee 
that we will be able to obtain any authorizations or otherwise take the actions 
necessary to provide services in these countries.                               

Other Jurisdictions. We intend to expand our operations into other        
jurisdictions as such markets deregulate and we are able to offer a full range  
of switched public telephone services to our customers. In addition, in         
countries that enact legislation intended to deregulate the telecommunications  
sector or that have made commitments to open their markets to competition in    
the World Trade Organization Agreement, there may be significant delays in the  
adoption of implementing regulations and uncertainties as to the implementation 
of the deregulatory programs which could delay or make more expensive our entry 
into such                                                                       

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additional markets. Our ability to enter a particular market and provide        
telecommunications services is dependent upon the extent to which the           
regulations in a particular market permit new entrants. In some countries,      
regulators may make subjective judgments in awarding licenses and permits,      
without any legal recourse for unsuccessful applicants. In the event we are     
able to gain entry into such a market, no assurances can be given that we will  
be able to provide a full range of services in such market. In addition, we may 
have to modify significantly our operations to comply with changes in the       
regulatory environment in such market and any such changes may have a material  
adverse effect on our business, results of operations or financial condition.   

A Group of Our Stockholders Could Exercise Significant Influence Over Our       
Affairs                                                                         

  As of July 15, 1999, our executive officers and directors beneficially owned
9,942,992 shares of our common stock, representing 33.2% of the outstanding     
common stock. The executive officers and directors have also been granted       
options to purchase an additional 593,336 shares of our common stock which vest 
after July 15, 1999. Of these amounts, Mr. K. Paul Singh, our Chairman and      
Chief Executive Officer, beneficially owns 4,761,839 shares of our common       
stock, including options to purchase 371,433 shares of our common stock.        
Investors affiliated with E.M. Warburg, Pincus & Co., LLC beneficially own      
3,875,689 shares of our common stock. As a result, the executive officers,      
directors and Warburg, Pincus exercise significant influence over such matters  
as the election of our directors, amendments to our charter, other fundamental  
corporate transactions such as mergers and asset sales, and otherwise the       
direction of our business and affairs. Additionally, under the terms of a       
shareholders' agreement among Warburg, Pincus, Mr. Singh and us, entered into   
in connection with our merger with TresCom, we agreed to nominate one           
individual selected by Warburg, Pincus and reasonably acceptable to our non-    
employee directors, to serve as a member of our board of directors. This        
nomination right remains effective so long as Warburg, Pincus is the beneficial 
owner of 10% or more of our outstanding common stock. In June 1998, Douglas     
Karp joined our board of directors pursuant to the foregoing arrangement.       

There Could Be No Market for the New Notes                                      

The new notes are a new issue of securities, have no established trading  
market, and may not be widely distributed. We do not intend to list the new     
notes on any national securities exchange or to seek to have them admitted to   
trade on The Nasdaq Stock Market. We cannot guarantee that an active public or  
other market will develop for the new notes. If a trading market does not       
develop or is not maintained, holders of the new notes may experience           
difficulty in reselling the new notes or may be unable to sell them at all. If  
a market for the new notes develops, it may be discontinued at any time. If a   
public trading market develops for the new notes, future trading prices of the  
new notes will depend on many factors, including prevailing interest rates, our 
results of operations and the market for similar securities. The price at which 
the holders of new notes will be able to sell such new notes is not assured and 
the new notes could trade at a premium or discount to their purchase price or   
face value. Depending on prevailing interest rates, the market for similar      
securities and other facts, including our financial condition, the new notes    
may trade at a discount from their principal amount.                            

The liquidity of, and trading market for, the new notes also may be       
adversely affected by declines in the market for the 1997 Senior Notes,         
declines in the market for the 1998 Senior Notes and in general declines in the 
market for similar securities issued by other companies. Any such decline may   
adversely affect such liquidity and trading markets independent of our          
financial performance and prospects.                                            

The Notes Have Not Been Registered under State Securities Laws                  

The notes have not been registered or qualified under any state securities
laws. The Exchange Offer is being made both to U.S. institutional investors,    
pursuant to exemptions from such laws for sales to such investors, and to non-  
U.S. persons, as state securities laws do not apply to sales to persons who are 
not residents of any state. In order to acquire the unregistered notes, each    
holder was required to represent to us that it was either (i) a "qualified      
institutional buyer", (ii) an institutional "accredited investor" or (iii) a    
non-                                                                            

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U.S. person. Holders who wish to exchange their unregistered notes for notes    
pursuant to the Exchange Offer will be required to represent to us that they    
remain institutional investors or non-U.S. persons. Any holder who no longer    
qualifies as an institutional investor or who is no longer a non-U.S. person,   
will not be entitled to exchange its unregistered notes for notes in the        
Exchange Offer, unless another state securities law exemption is available. If  
no such exemption is available, the holder will continue to hold the            
unregistered notes, which will continue to be subject to the restrictions on    
transfer as set forth in the legend thereon.                                    

Consequences of Failure to Exchange                                             

Holders of unregistered notes who do not exchange their unregistered notes
for new notes pursuant to the Exchange Offer will continue to be subject to the 
restrictions on transfer of such unregistered notes as set forth in the legend  
thereon since the unregistered notes were issued pursuant to exemptions from,   
or in transactions not subject to, the registration requirements of the         
Securities Act and applicable state securities laws. In general, the            
unregistered notes may not be offered or sold, unless registered under the      
Securities Act, except pursuant to an exemption from, or in a transaction not   
subject to, the Securities Act and applicable state securities laws. We do not  
currently anticipate that we will register the unregistered notes for resale    
under the Securities Act. New notes issued pursuant to the Exchange Offer in    
exchange for unregistered notes may be offered for resale, resold or otherwise  
transferred by the holders without compliance with the registration and         
prospectus delivery provisions of the Securities Act provided that such new     
notes are acquired in the ordinary course of such holders' business and such    
holders have no arrangement with any person to participate in the distribution  
of such new notes. However, the foregoing is not applicable to any such holder  
which is our "affiliate" and other than any broker-dealer who purchased         
unregistered notes directly from us for resale pursuant to Rule 144A under the  
Securities Act or any other available exemption under the Securities Act. Each  
broker-dealer that acquired unregistered notes for its own account as a result  
of market making or other trading activities and that receives new notes for    
its own account pursuant to the Exchange Offer must acknowledge that it will    
deliver a prospectus in connection with any resale of such new notes. This      
prospectus may be used by a broker-dealer in connection with resales of new     
notes received in exchange for unregistered notes where such unregistered notes 
were acquired by such broker-dealer as a result of market-making activities or  
other trading activities. We have agreed that, for a period of 180 days after   
the effective date of this prospectus, we will make this prospectus available   
to any broker-dealer for use in connection with any such resale. However, to    
comply with the securities laws of certain jurisdictions, if applicable, the    
new notes may not be offered or sold unless they have been registered or        
qualified for sale in such jurisdictions or an exemption from registration or   
qualification is available and is complied with. To the extent that             
unregistered notes are tendered and accepted in the Exchange Offer, the trading 
market for untendered and tendered but unaccepted unregistered notes will be    
adversely affected.                                                             

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RECENT DEVELOPMENTS     

Acquisition of Telegroup Retail Assets                                        

  Effective June 1, 1999, we acquired the global retail business of Telegroup,
including the acquisition of selected foreign subsidiaries, which includes:     

. Telegroup's global retail business of approximately 372,000 customers;    

. Two carrier grade switches, one located in the New York City area and one 
located in London;                                                      

. 14 switching platforms and POPs located in the United Kingdom, Germany,   
France, the Netherlands, Denmark, Switzerland, Italy, Japan and Hong    
Kong;                                                                       

. Telegroup's global network of sales agents;                               

. A Web-based order-entry and provisioning system for agents; and           

. A global network operations center and call center.                       

We paid the $71.8 million purchase price, plus $22.2 million for certain  
current assets,by issuing $45.5 million in aggregate principal amount of our 11 
1/4% senior notes due 2009 and by issuing a $4.6 million short-term promissory  
note, and paying the remainder in cash. The purchase price is subject to        
adjustment. The acquisition had an effective date of June 1, 1999 such that the 
financial results of the acquired business will be included in the Company's    
results beginning June 1, 1999.                                                 

  We expect that this acquisition will result in approximately $150 million of
sustainable retail revenues annually after taking into account attrition in     
Telegroup's customer base, which began to occur prior to the Telegroup          
acquisition and which we expect to continue for the near future.                

Acquisition of AT&T Canada Consumer Business                                  

In May 1999, we purchased the residential long distance customer base and 
customer support assets and residential Internet customers and network of AT&T  
Canada and ACC Telenterprises for a purchase price of C$58.1 million            
(approximately $39.4 million as of May 31, 1999). We also entered into a        
strategic alliance pursuant to which AT&T Canada agreed to:                     

.  provide us with underlying network services in Canada for five years;    

.  provide Canadian domestic termination for our global customers;          

.  provide customer support services to the customer base transferred to us 
for up to twelve months after the purchase; and                       

.  license to us its bill face for six months after the purchase.           

We intend to integrate the assets and residential long distance customer base   
of AT&T Canada and ACC Telenterprises into Primus Canada, our wholly-owned      
operating subsidiary in Canada. With this transaction, we acquired              
approximately 428,000 retail customers, including 28,000 residential Internet   
customers and related POPs, and we believe we are now the second largest        
alternative carrier in Canada based on revenue.                                 

Internet and Data Services                                                    

  In May 1999, we organized our Internet and data services business into a new
subsidiary, iPRIMUS.com, which will provide services in some of the markets     
where we operate. We expect that iPRIMUS.com will use our existing global       
network infrastructure to offer a full range of Internet Protocol-based data    
and voice communications services. In February 1999, we acquired Globalserve    
Communications, a leading ISP in Canada, and we acquired the remaining 40%      
interest in Hotkey Internet Services that we did not previously own. In         
May 1999, we also acquired TCP/IP GmbH, an independent German ISP. TCP/IP       
operates the Contrib.Net Internet backbone. As a result of these acquisitions,  
we are now providing Internet services to business and residential customers in 
Australia, Canada and Germany. With our satellite earth station in London, we   
offer Internet transmission services in the Indian Ocean/Southeast Asia region. 

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Global Crossing Reciprocal Capacity Purchase Agreement                        

In May 1999, we entered into a reciprocal capacity purchase agreement with
Global Crossing Holdings Ltd. Under the agreement, we agreed to purchase up to  
$50 million of fiber capacity from Global Crossing and Global Crossing agreed   
to purchase up to $25 million of capacity on our global satellite network.      

Acquisition of London Telecom                                                 

In March 1999, we acquired London Telecom, a provider of domestic and     
international long distance services to approximately 162,000 residential and   
business customers in Canada and substantially all of the operating assets of   
Wintel CNC Communications, Inc. and Wintel CNT Communications, Inc., which are  
Canadian-based long distance telecommunications providers affiliated with the   
London Telecom companies, for C$76 million (approximately $50.4 million as of   
March 31, 1999) in cash. As part of this acquisition, we acquired network       
assets as well as call centers located in Toronto and Vancouver. We intend to   
continue marketing the London Telecom services under the London Telecom brand   
names.                                                                          

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USE OF PROCEEDS 

We will not receive any proceeds from the Exchange Offer.                 

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THE EXCHANGE OFFER

Purpose and Effect                                                              

 We sold the initial unregistered notes to the initial purchasers, including
Lehman Brothers, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and   
Morgan Stanley & Co. Incorporated, on January 29, 1999, pursuant to a purchase  
agreement entered into as of January 22, 1999 by and between us and the initial 
purchasers. The initial purchasers subsequently resold the initial notes in     
reliance on Rule 144A under the Securities Act and certain other exemptions     
under the Securities Act. We and the initial purchasers also entered into a     
registration rights agreement, pursuant to which we agreed, with respect to the 
initial notes, to                                                               

(i) cause to be filed with the Commission as promptly as practicable a  
registration statement under the Securities Act concerning the  
exchange offer,                                                 

(ii) use our reasonable best efforts to cause such registration         
  statement to be declared effective by the Commission on or prior
to June 28, 1998 and                                          

(iii) file all pre- and post-effective amendments necessary to cause    
 such registration statement to become effective and cause all
necessary filings in connection with the registration and   
    qualification of the new notes under the "blue sky" laws of such
jurisdictions as are necessary to consummate the exchange,  

(iv) use our reasonable best efforts to cause the exchange offer to be  
consummated on or before July 28, 1998, and                   

(v) deliver the new notes in the same aggregate principal amount as the 
   aggregate principal amount of the initial unregistered notes as are
tendered by holders thereof pursuant to the exchange offer.     

We also agreed to use our reasonable best efforts to keep the registration      
statement effective for no less than 20 days. This exchange offer is intended   
to satisfy our exchange offer obligations under the registration rights         
agreement.                                                                      

Terms of the Exchange Offer                                                     

We hereby offer, upon the terms and subject to the conditions set forth   
herein and in the accompanying Letter of Transmittal, to exchange $1,000 in     
principal amount of the new notes for each $1,000 in principal amount of the    
outstanding unregistered initial notes. We will accept for exchange any and all 
initial notes that are validly tendered on or prior to 5:00 p.m., New York City 
time, on August 12, 1999. Tenders of the initial notes may be withdrawn at any  
time prior to 5:00 p.m., New York City time, on August 12, 1999. This exchange  
offer is not conditioned upon any minimum principal amount of the initial notes 
being tendered for exchange. However, the exchange offer is subject to the      
conditions, terms and provisions of the registration rights agreement. The form 
and terms of the new notes will be identical in all material respects to the    
form and terms of the initial notes, except that                                

(i) the new notes have been registered under the Securities Act and,    
  therefore, will not bear legends restricting the transfer thereof,

(ii) subject to certain limited exceptions, holders of new notes will   
not be entitled to liquidated damages, and                    

(iii) holders of new notes will not be, and upon consummation of the    
exchange offer, holders of initial notes will no longer be, 
entitled to certain rights under the registration rights    
agreement intended for holders of unregistered securities.  

Initial notes may be tendered only in multiples of $1,000. Subject to the 
foregoing, holders may tender less than the aggregate principal amount          
represented by the initial notes held by them, provided that they               

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appropriately indicate this fact on the Letter of Transmittal accompanying the  
tendered initial notes (or so indicate pursuant to the procedures for book-     
entry transfer).                                                                

As of the date of this Prospectus, $200.0 million in aggregate principal  
amount of the initial notes is outstanding. As of July 29, 1999, CEDE was the   
sole registered holder of the initial notes and held $200.0 million of          
aggregate principal amount of the initial notes for 22 of its participants.     
Solely for reasons of administration (and for no other purpose), we have fixed  
the close of business on July 30, 1999, as the record date for purposes of      
determining the persons to whom this Prospectus and the Letter of Transmittal   
will be mailed initially. Only a holder of the initial notes (or such holder's  
legal representative or attorney-in-fact) may participate in the exchange       
offer. There will be no fixed record date for determining holders of the        
initial notes entitled to participate in the exchange offer. We believe that,   
as of the date of this Prospectus, no such the holder is our affiliate (as      
defined in Rule 405 under the Securities Act).                                  

 We shall be deemed to have accepted validly tendered initial notes when, as
and if we have given oral or written notice thereof to the exchange agent. The  
exchange agent will act as agent for the tendering holders of initial notes and 
for the purposes of receiving the new notes from us.                            

If any tendered initial notes are not accepted for exchange because of an 
invalid tender, the occurrence of certain other events set forth herein or      
otherwise, certificates for any such unaccepted initial notes will be returned, 
without expense, to the tendering holder thereof as promptly as practicable     
after the expiration date.                                                      

Expiration Date; Extensions; Amendments                                         

The expiration date of the exchange offer is August 12, 1999 at 5:00 p.m.,
New York City time, unless we, in our sole discretion, extend the exchange      
offer, in which case the expiration date shall be the latest date and time to   
which the exchange offer is extended.                                           

 In order to extend the exchange offer, we will notify the exchange agent of
any extension by oral or written notice and will make a public announcement     
thereof, each prior to 9:00 a.m., New York City time, on the next business day  
after the previously scheduled expiration date. Such notice and public          
announcement shall set forth the new expiration date of the exchange offer.     

We reserve the right, in our sole discretion,                             

(i) to delay accepting any initial notes,                               

(ii) to extend the exchange offer,                                      

(iii) if any of the conditions set forth below under "Conditions of the 
   Exchange Offer" shall not have been satisfied, to terminate the
  exchange offer by giving oral or written notice of such delay,
extension or termination to the exchange agent, and         

(iv) to amend the terms of the exchange offer in any manner.            

 If the exchange offer is amended in a manner determined by us to constitute
a material change, we will, in accordance with applicable law, file a post-     
effective amendment to the registration statement and resolicit the registered  
holders of the initial notes. If we file a post-effective amendment, we will    
notify the exchange agent of an extension of the exchange offer by oral or      
written notice, and will make a public announcement thereof, each prior to 9:00 
a.m., New York City time, on the next business day after the effectiveness of   
such post-effective amendment. Such notice and public announcement shall set    
forth the new expiration date, which new expiration date shall be no less than  
five days after the then applicable expiration date.                            

Conditions of the Exchange Offer                                                

The exchange offer is not conditioned upon any minimum principal amount of
initial notes being tendered for exchange. However, the exchange offer is       
subject to the condition that it does not violate any applicable law or         
interpretation of the staff of the Commission.                                  

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Further, as a condition to its participation in the exchange offer, each  
holder of initial notes (including, without limitation, any holder who is a     
broker-dealer) will be required to furnish a written representation to us       
(which may be contained in the Letter of Transmittal to the effect that such    
holder                                                                          

(i)  is not our affiliate,                                              

(ii) is not engaged in, or does not intend to engage in, and has no     
   arrangement or understanding with any person to participate in, a
  distribution of the new notes to be issued in the exchange offer
and                                                           

(iii) is acquiring the new notes in its ordinary course of business.    

Each holder using the exchange offer to participate in a distribution of the    
new notes will be required to acknowledge and agree that, if the resales are of 
new notes obtained by such holder in exchange for initial notes acquired        
directly from us or our affiliate, it (1) could not, under Commission policy as 
in effect on the date of the registration rights agreement, rely on the         
position of the Commission enunciated in Morgan Stanley and Co., Incorporated   
(available June 5, 1991) and Exxon Capital Holdings Corporation (available May  
13, 1988), as interpreted in the Commission's letter to Shearman & Sterling     
(available July 2, 1993) and K-III Communications Corporation (available May    
14, 1993), or similar no-action or interpretive letters, and (2) must comply    
with the registration and prospectus delivery requirements of the Exchange Act  
in connection with a secondary resale transaction and that such a secondary     
sale transaction must be covered by an effective registration statement         
containing the selling security holder information required by Item 507 or 508, 
as applicable, of Regulation S-K, unless an exemption from registration is      
otherwise available.                                                            

In addition, each holder of initial notes will be required to furnish a   
written representation to the Company (which may be contained in the Letter of  
Transmittal to the effect that such holder is either (A) a "qualified           
institutional buyer" within the meaning of Rule 144A under the Securities Act,  
(B) an institutional "accredited investor" within the meaning of subparagraph   
(a)(1), (2), (3) or (7) of Rule 501 under the Securities Act or (C) a non-U.S.  
person within the meaning of Regulation S under the Securities Act.             

Termination of Certain Rights                                                   

The registration rights agreement provides that, subject to certain       
exceptions, in the event of a registration default, holders of initial notes    
are entitled to receive liquidated damages, if                                  

(i) we fail to file with the Commission any of the registration         
statements required by the registration rights agreement on or  
before the date specified therein for such filing,              

(ii) any of such registration statements are not declared effective by  
the Commission on or prior to the date specified for such     
effectiveness in the registration rights agreement,           

(iii) the exchange offer has not been consummated within 30 days after  
    the effectiveness target date with respect to the exchange offer
registration statement or                                   

(iv) any registration statement required by the registration rights     
    agreement is filed and declared effective but thereafter ceases to
be effective or fails to be usable for its intended purpose   
without being succeeded within five business days by a post-  
    effective amendment to such registration statement that cures such
 failure and that is itself immediately declared effective (each
event referred to in clauses (i) through (iv) above being a   
 registration default), additional cash interest shall accrue to
 each holder of the notes commencing upon the occurrence of such
  registration default in an amount equal to .50% per annum of the
principal amount of notes held by such holder.                

The amount of liquidated damages will increase by an additional .50% per annum  
of the principal amount of notes with respect to each subsequent 90-day period  
(or portion thereof) until all registration defaults have been cured, up to a   
maximum rate of liquidated damages of 1.50% per annum of the principal amount   
of notes. All                                                                   

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accrued liquidated damages will be paid to holders by us in the same manner as  
interest is paid pursuant to the indenture. Following the cure of all           
registration defaults relating to any particular transfer restricted            
securities, the accrual of liquidated damages with respect to such transfer     
restricted securities will cease.                                               

Accrued Interest on the Initial Notes                                           

The new notes will bear interest at a rate equal to 11 1/4% per annum from
and including their date of issuance. Holders whose initial notes are accepted  
for exchange will have the right to receive interest accrued thereon from the   
date of their original issuance or the last interest payment date, as           
applicable to, but not including, the date of issuance of the new notes. Such   
interest will be payable with the first interest payment on the new notes.      
Interest on the initial notes accepted for exchange, which interest accrued at  
the rate of 11 1/4% per annum, will cease to accrue on the day prior to the     
issuance of the new notes.                                                      

Procedures for Tendering Initial Notes                                          

  The tender of a holder's initial notes as set forth below and the acceptance
thereof by us will constitute a binding agreement between the tendering holder  
and us upon the terms and subject to the conditions set forth in this           
Prospectus and in the accompanying Letter of Transmittal. Except as set forth   
below, a holder who wishes to tender initial notes for exchange pursuant to the 
exchange offer must transmit such initial notes, together with a properly       
completed and duly executed Letter of Transmittal, including all other          
documents required by such Letter of Transmittal, to the exchange agent at the  
address set forth on the back cover page of this Prospectus prior to 5:00 p.m., 
New York City time, on the expiration date.                                     

THE METHOD OF DELIVERY OF INITIAL NOTES, LETTERS OF TRANSMITTAL AND ALL   
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER. IF SUCH     
DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED,  
WITH RETURN RECEIPT REQUESTED, BE USED. INSTEAD OF DELIVERY BY MAIL, IT IS      
RECOMMENDED THAT THE HOLDER USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL   
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.             

 Each signature on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the initial notes surrendered for        
exchange pursuant hereto are tendered                                           

(i) by a registered holder of the initial notes who has not completed   
  either the box entitled "Special Exchange Instructions" or the box
entitled "Special Delivery Instructions" in the Letter of       
Transmittal or                                                  

(ii) by an eligible institution (as described below).                   

In the event that a signature on a Letter of Transmittal or a notice of         
withdrawal, as the case may be, is required to be guaranteed, such guarantee    
must be by a firm which is a member of a registered national securities         
exchange or The Nasdaq Stock Market, a commercial bank or trust company having  
an office or correspondent in the United States or otherwise be an "eligible    
guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange    
Act. If the Letter of Transmittal is signed by a person other than the          
registered holder of the initial notes, the initial notes surrendered for       
exchange must either                                                            

(i) be endorsed by the registered holder, with the signature thereon    
guaranteed by an eligible institution or                        

(ii) be accompanied by a bond power, in satisfactory form as determined 
by us in our sole discretion, duly executed by the registered 
holder, with the signature thereon guaranteed by an eligible  
institution.                                                  

The term "registered holder" as used herein with respect to the initial notes   
means any person in whose name the initial notes are registered on the books of 
the Registrar.                                                                  

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All questions as to the validity, form, eligibility (including time of    
receipt), acceptance and withdrawal of initial notes tendered for exchange will 
be determined by us in our sole discretion, which determination shall be final  
and binding. We reserve the absolute right to reject any and all initial notes  
not properly tendered and to reject any initial notes, our acceptance of which  
might, in our judgment or that of our counsel, be unlawful. We also reserve the 
absolute right to waive any defects or irregularities or conditions of the      
exchange offer as to particular initial notes either before or after the        
expiration date (including the right to waive the ineligibility of any holder   
who seeks to tender initial notes in the exchange offer). The interpretation of 
the terms and conditions of the exchange offer (including the Letter of         
Transmittal and the instructions thereto) by us shall be final and binding on   
all parties. Unless waived, any defects or irregularities in connection with    
tenders of initial notes for exchange must be cured within such period of time  
as we shall determine. We will use reasonable efforts to give notification of   
defects or irregularities with respect to tenders of initial notes for exchange 
but shall not incur any liability for failure to give such notification.        
Tenders of the initial notes will not be deemed to have been made until such    
irregularities have been cured or waived.                                       

 If any Letter of Transmittal, endorsement, bond power, power of attorney or
any other document required by the Letter of Transmittal is signed by a         
trustee, executor, corporation or other person acting in a fiduciary or         
representative capacity, such person should so indicate when signing, and,      
unless waived by us, proper evidence satisfactory to us, in our sole            
discretion, of such person's authority to so act must be submitted.             

  Any beneficial owner of the initial notes whose initial notes are registered
in the name of a broker, dealer, commercial bank, trust company or other        
nominee and who wishes to tender initial notes in the exchange offer should     
contact such registered holder promptly and instruct such registered holder to  
tender on such beneficial owner's behalf. If such beneficial owner wishes to    
tender directly, such beneficial owner must, prior to completing and executing  
the Letter of Transmittal and tendering initial notes, make appropriate         
arrangements to register ownership of the initial notes in such beneficial      
owner's name. Beneficial owners should be aware that the transfer of registered 
ownership may take considerable time.                                           

 By tendering, each registered holder will represent to us that, among other
things                                                                          

(i) the new notes to be acquired in connection with the exchange offer  
by the holder and each beneficial owner of the initial notes are
being acquired by the holder and each beneficial owner in the   
ordinary course of business of the holder and each beneficial   
owner,                                                          

(ii) the holder and each beneficial owner are not participating, do not 
 intend to participate, and have no arrangement or understanding
with any person to participate, in the distribution of the new
notes,                                                        

(iii) the holder and each beneficial owner acknowledge and agree that   
     any person participating in the exchange offer for the purpose of
    distributing the new notes must comply with the registration and
prospectus delivery requirements of the Securities Act in   
   connection with a secondary resale transaction of the new notes
  acquired by such person and cannot rely on the position of the
   staff of the Commission set forth in no-action letters that are
discussed herein under "Resales of the Exchange Notes,"     

(iv) that if the holder is a broker-dealer that acquired initial notes  
   as a result of market making or other trading activities, it will
 deliver a prospectus in connection with any resale of new notes
acquired in the exchange offer,                               

(v) the holder and each beneficial owner understand that a secondary    
resale transaction described in clause (iii) above should be    
covered by an effective registration statement containing the   
selling security holder information required by Item 507 of     
Regulation S-K of the Commission, and                           

(vi) neither the holder nor any beneficial owner is an "affiliate," as  
defined under Rule 405 of the Securities Act, of us except as 
otherwise disclosed to us in writing.                         

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In connection with a book-entry transfer, each participant will confirm that it 
makes the representations and warranties contained in the Letter of             
Transmittal.                                                                    

Guaranteed Delivery Procedures. Holders who wish to tender their initial  
notes and                                                                       

(i) whose initial notes are not immediately available or                

(ii) who cannot deliver their initial notes or any other documents      
   required by the Letter of Transmittal to the exchange agent prior
  to the expiration date (or complete the procedure for book-entry
transfer on a timely basis),                                  

may tender their initial notes according to the guaranteed delivery procedures  
set forth in the Letter of Transmittal. Pursuant to such procedures:            

(i) such tender must be made by or through an eligible institution and  
a Notice of Guaranteed Delivery (as defined in the Letter of    
Transmittal) must be signed by such holder,                     

(ii) on or prior to the expiration date, the exchange agent must have   
  received from the holder and the eligible institution a properly
completed and duly executed Notice of Guaranteed Delivery (by 
  facsimile transmission, mail or hand delivery) setting forth the
   name and address of the holder, the certificate number or numbers
of the tendered initial notes, and the principal amount of    
tendered initial notes, stating that the tender is being made 
 thereby and guaranteeing that, within three business days after
the date of delivery of the Notice of Guaranteed Delivery, the
   tendered initial notes, a duly executed Letter of Transmittal and
any other required documents will be deposited by the eligible
institution with the exchange agent, and                      

(iii) such properly completed and executed documents required by the    
  Letter of Transmittal and the tendered initial notes in proper
  form for transfer (or confirmation of a book-entry transfer of
such initial notes into the exchange agent's account at the 
   depositary) must be received by the exchange agent within three
business days after the expiration date.                    

Any holder who wishes to tender initial notes pursuant to the guaranteed        
delivery procedures described above must ensure that the exchange agent         
receives the Notice of Guaranteed Delivery and Letter of Transmittal relating   
to such initial notes prior to 5:00 p.m., New York City time, on the expiration 
date.                                                                           

Book-Entry Delivery. The exchange agent will establish an account with    
respect to the initial notes at the depositary. Such account is the Book-Entry  
Transfer Facility and will be established for purposes of the exchange offer    
promptly after the date of this Prospectus. Any financial institution that is a 
participant in the Book-Entry Transfer Facility's system may make book-entry    
delivery of the initial notes by causing such facility to transfer initial      
notes into the exchange agent's account in accordance with such facility's      
procedure for such transfer. Even though delivery of initial notes may be       
effected through book-entry transfer into the exchange agent's account at the   
Book-Entry Transfer Facility, a properly completed and duly executed Letter of  
Transmittal (or a manually signed facsimile thereof), with any required         
signature guarantees, or an agent's message (as described below) in connection  
with a book-entry transfer, and other documents required by the Letter of       
Transmittal, must, in any case, be transmitted to and received by the exchange  
agent at one of its addresses set forth on the back cover of this Prospectus    
before the expiration date, or the guaranteed delivery procedure set forth      
above must be followed. Delivery of the Letter of Transmittal and any other     
required documents to the Book-Entry Transfer Facility does not constitute      
delivery to the exchange agent. The term "agent's message" means a message      
transmitted by the Book-Entry Transfer Facility to, and received by, the        
exchange agent and forming a part of a book-entry confirmation, which states    
that such Book-Entry Transfer Facility has received an express acknowledgment   
from the participant in such Book-Entry Transfer Facility tendering the initial 
notes that such participant has received and agrees to be bound by the terms of 
the Letter of Transmittal and that we may enforce such agreement against such   
participant.                                                                    

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Acceptance of Initial Notes for Exchange; Delivery of Exchange Notes            

 Upon satisfaction or waiver of all the conditions to the exchange offer, we
will accept any and all initial notes that are properly tendered in the         
exchange offer prior to 5:00 p.m., New York City time, on the expiration date.  
The new notes issued pursuant to the exchange offer will be delivered as soon   
as practicable after acceptance of the initial notes. For purposes of the       
exchange offer, we shall be deemed to have accepted validly tendered initial    
notes, when, as, and if we have given oral or written notice thereof to the     
exchange agent.                                                                 

  In all cases, issuances of new notes for initial notes that are accepted for
exchange pursuant to the exchange offer will be made only after timely receipt  
by the exchange agent of such initial notes, a properly completed and duly      
executed Letter of Transmittal and all other required documents (or of          
confirmation of a book-entry transfer of such initial notes into the exchange   
agent's account at the Depositary); provided, however, that we reserve the      
absolute right to waive any defects or irregularities in the tender or          
conditions of the exchange offer. If any tendered initial notes are not         
accepted for any reason, such unaccepted initial notes will be returned without 
expense to the tendering holder thereof as promptly as practicable after the    
expiration or termination of the exchange offer.                                

Withdrawal Rights                                                               

Tenders of the initial notes may be withdrawn by delivery of a written    
notice to the exchange agent, at its address set forth on the back cover page   
of this Prospectus, at any time prior to 5:00 p.m., New York City time, on the  
expiration date. Any such notice of withdrawal must                             

(i) specify the name of the person having deposited the initial notes   
to be withdrawn,                                                

(ii) identify the initial notes to be withdrawn (including the          
    certificate number or numbers and principal amount of such initial
notes, as applicable),                                        

(iii) be signed by the holder in the same manner as the original        
signature on the Letter of Transmittal by which such initial
     notes were tendered (including any required signature guarantees)
or be accompanied by a bond power in the name of the person 
    withdrawing the tender, in satisfactory form as determined by us
   in our sole discretion, duly executed by the registered holder,
    with the signature thereon guaranteed by an eligible institution
   together with the other documents required upon transfer by the
indenture, and                                              

(iv) specify the name in which such initial notes are to be re-         
registered, if different from the depositor, pursuant to such 
documents of transfer.                                        

Any questions as to the validity, form and eligibility (including time of       
receipt) of such notices will be determined by us, in our sole discretion and   
such determination shall be final and binding. The initial notes so withdrawn   
will be deemed not to have been validly tendered for exchange for purposes of   
the exchange offer. Any initial notes which have been tendered for exchange but 
which are withdrawn will be returned to the holder thereof without cost to such 
holder as soon as practicable after withdrawal. Properly withdrawn initial      
notes may be retendered by following one of the procedures described under "The 
Exchange Offer--Procedures for Tendering Initial Notes" at any time on or prior 
to the expiration date.                                                         

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The Exchange Agent; Assistance                                                  

  First Union National Bank is the exchange agent. All tendered initial notes,
executed Letters of Transmittal and other related documents should be directed  
to the exchange agent. Questions and requests for assistance and requests for   
additional copies of the Prospectus, the Letter of Transmittal and other        
related documents should be addressed to the exchange agent as follows:         

BY MAIL, HAND OR OVERNIGHT DELIVERY:           FACSIMILE TRANSMISSION:        

First Union Customer Information Center        (704) 590-7628                 

Reorganization Department, 3C3-NC 1153                                        
1525 West W.T. Harris Boulevard                To confirm receipt: (704) 590- 
Charlotte, N.C. 28262                          7408                           

Solicitation of Tenders; Fees and Expenses                                      

No person has been authorized to give any information or to make any      
representation in connection with the exchange offer other than those contained 
in this Prospectus. If given or made, such information or representations       
should not be relied upon as having been authorized by us. Neither the delivery 
of this Prospectus nor any exchange made hereunder shall, under any             
circumstances, create any implication that there has been no change in our      
affairs since the respective dates as of which information is given herein. The 
exchange offer is not being made to (nor will offers be accepted from or on     
behalf of) holders of notes in any jurisdiction in which the making of the      
exchange offer or the acceptance thereof would not be in compliance with the    
laws of such jurisdiction. However, we may, at our discretion, take such action 
as we may deem necessary to make the exchange offer in any such jurisdiction    
and extend the exchange offer to holders of notes in such jurisdiction.         

All expenses incident to our consummation of the exchange offer and       
compliance with the registration rights agreement will be borne by us,          
including, without limitation:                                                  

(i) all registration and filing fees (including, without limitation,    
fees and expenses of compliance with state securities laws),    

(ii) printing expenses (including, without limitation, expenses of      
printing certificates for the new notes in a form eligible for
deposit with the depositary and of printing Prospectuses),    

(iii) messenger, telephone and delivery expenses,                       

(iv) fees and disbursements of our counsel,                             

(v) fees and disbursements of independent certified public accountants, 

(vi) rating agency fees,                                                

(vii) our internal expenses (including, without limitation, all         
  salaries and expenses of our officers and employees performing
legal or accounting duties), and                            

(viii) fees and expenses incurred in connection with the listing, if    
any, of the new notes on a securities exchange.           

We have not retained any dealer-manager in connection with the exchange   
offer and will not make any payments to brokers, dealers or others soliciting   
acceptance of the exchange offer. We will, however, pay the exchange agent      
reasonable and customary fees for its services and will reimburse it for its    
reasonable out-of-pocket expenses in connection therewith.                      

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Accounting Treatment                                                            

The new notes will be recorded at the same carrying value as the initial  
notes, as reflected in our accounting records on the date of the exchange.      
Accordingly, no gain or loss will be recognized by us for accounting purposes.  
The expenses of the exchange offer will be amortized over the term of the new   
notes.                                                                          

Resales of the Exchange Notes                                                   

Based on interpretations by the staff of the Commission set forth in no-  
action letters issued to third parties,we believe that the new notes issued     
pursuant to the exchange offer to a holder in exchange for initial notes may be 
offered for resale, resold and otherwise transferred by such holder (other than 
(i) a broker-dealer who purchased initial notes directly from us for resale     
pursuant to Rule 144A under the Securities Act or any other available exemption 
under the Securities Act, or (ii) a person that is our affiliate within the     
meaning of Rule 405 under the Securities Act) without compliance with the       
registration and prospectus delivery provisions of the Securities Act, provided 
that the holder is acquiring the new notes in the ordinary course of business   
and is not participating, and has no arrangement or understanding with any      
person to participate, in the distribution of the new notes. We have not        
requested or obtained an interpretive letter from the Commission staff with     
respect to this exchange offer, and we and the holders are not entitled to rely 
on interpretive advice provided by the staff to other persons, which advice was 
based on the facts and conditions represented in such letters. However, the     
exchange offer is being conducted in a manner intended to be consistent with    
the facts and conditions represented in such letters. If any holder acquires    
new notes in the exchange offer for the purpose of distributing or              
participating in a distribution of the new notes, such holder cannot rely on    
the position of the staff of the Commission enunciated in Morgan Stanley & Co., 
Incorporated (available June 5, 1991) and Exxon Capital Holdings Corporation    
(available May 13, 1988), as interpreted in the Commission's letters to         
Shearman and Sterling (available July 2, 1993) and K-III Communications         
Corporation (available May 14, 1993), or similar no-action or interpretive      
letters and must comply with the registration and prospectus delivery           
requirements of the Securities Act in connection with a secondary resale        
transaction, unless an exemption from registration is otherwise available. Each 
broker-dealer that receives new notes for its own account in exchange for       
initial notes, where such initial notes were acquired by such broker-dealer as  
a result of market making or other trading activities, must acknowledge that it 
will deliver a prospectus in connection with any resale of such new notes. We   
have agreed that for a period of 180 days after the effective date of this      
Prospectus, we will make this Prospectus, as amended and supplemented,          
available to any broker-dealer who receives new notes in the exchange offer for 
use in connection with any such resale. See "Plan of Distribution."             

Consequences of Failure to Exchange                                             

Holders of initial notes who do not exchange their initial notes for new  
notes pursuant to the exchange offer will continue to be subject to the         
restrictions on transfer of such initial notes as set forth in the legend       
thereon as a consequence of the offer or sale of the initial notes pursuant to  
an exemption from, or in a transaction not subject to, the registration         
requirements of the Securities Act and applicable state securities laws. In     
general, the initial notes may not be offered or sold, unless registered under  
the Securities Act, except pursuant to an exception from, or in a transaction   
not subject to, the Securities Act and applicable states securities laws. We do 
not currently anticipate that we will register the initial notes under the      
Securities Act.                                                                 

Other                                                                           

Participation in the exchange offer is voluntary, and holders of initial  
notes should carefully consider whether to participate. Holders of the initial  
notes are urged to consult their financial and tax advisers in making their own 
decisions on what action to take.                                               

As a result of the making of, and upon acceptance for exchange of all     
validly tendered initial notes pursuant to the terms of, this exchange offer,   
we will have fulfilled a covenant contained in the registration rights          
agreement. Holders of initial notes who do not tender their initial notes in    
the exchange offer will                                                         

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continue to hold such initial notes and will be entitled to all the rights, and 
limitations applicable thereto, under the indenture, except for any such rights 
under the registration rights agreement that by their terms terminate or cease  
to have further effectiveness as a result of the making of this exchange offer. 
All untendered initial notes will continue to be subject to the restrictions on 
transfer set forth in the indenture. To the extent that initial notes are       
tendered and accepted in the exchange offer, the trading market for untendered  
initial notes could be adversely affected.                                      

  We may in the future seek to acquire untendered initial notes in open market
or privately negotiated transactions, through subsequent exchange offers or     
otherwise. We have no present plan to acquire any initial notes which are not   
tendered in the exchange offer.                                                 

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CAPITALIZATION

The following table sets forth as of March 31, 1999:                      

.  our actual capitalization; and                                       

.  our actual capitalization adjusted to give effect to the issuance of 
  $45.5 million of 11 1/4% senior notes due 2009, the issuance of $4.6
million of additional short-term indebtedness, and the payment of 
 $43.9 million of cash in connection with the Telegroup acquisition.

This table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our financial    
statements, and notes thereto, included elsewhere in this prospectus.           

                                                                [Download Table]

                                                        As of March 31, 1999   
                                                      -------------------------
                                                       Actual    As Adjusted(1)
                                                      ---------  --------------
                                                       (Dollars in thousands,  
                                                         except share data)    
                                                                               
Cash and cash equivalents............................ $ 268,530    $ 224,573   
Restricted investments (including current and long-                            
 term)...............................................    38,010       38,010   
                                                      ---------    ---------   
  Total cash, cash equivalents and restricted                                  
   investments....................................... $ 306,540    $ 262,583   
                                                      =========    =========   
Debt and capital lease obligations:                                            
  11 3/4% Senior Notes due 2004......................  $223,069    $ 223,069   
  9 7/8% Senior Notes due 2008.......................   150,000      150,000   
  11 1/4% Senior Notes due 2009......................   200,000      245,467   
  Notes payable......................................       403        4,995   
  Capital lease obligations..........................    28,237       28,237   
                                                      ---------    ---------   
    Total debt and capital lease obligations.........   601,709      651,768   
Stockholders' equity:                                                          
  Common Stock, $.01 par value--80,000,000 shares                              
   authorized; 28,404,934 shares actual and as                                 
   adjusted, issued and outstanding..................       284          284   
  Additional paid-in capital.........................   238,569      238,569   
  Accumulated deficit................................  (136,808)    (136,808)  
  Accumulated other comprehensive loss...............    (6,976)      (6,976)  
                                                      ---------    ---------   
    Total stockholders' equity.......................    95,069       95,069   
                                                      ---------    ---------   
    Total capitalization............................. $ 696,778    $ 746,837   
                                                      =========    =========   

--------                                                                        

(1) Excludes (i) approximately C$43.9 of cash paid, and C$14.2 million of       
  indebtedness incurred, subsequent to March 31, 1999 in connection with the
AT&T Canada acquisition and (ii) approximately C$76 million of cash paid
subsequent to March 31, 1999 in connection with the London Telecom      
acquisition.                                                            

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SELECTED FINANCIAL DATA 

  The following selected financial data should be read in conjunction with the
consolidated financial statements, the notes thereto, and with "Management's    
Discussion and Analysis of Financial Condition and Results of Operations"       
contained elsewhere in this prospectus. The statement of operations data from   
inception to December 31, 1994, for the years ended December 31, 1995, 1996,    
1997, 1998 and the balance sheet data as of December 31, 1994, 1995, 1996, 1997 
and 1998 have been derived from the consolidated financial statements, which    
have been audited by Deloitte & Touche LLP, independent auditors. The statement 
of operations data for the three months ended March 31, 1998 and 1999, and the  
balance sheet data as of March 31, 1999, have been derived from the unaudited   
consolidated financial statements which, in management's opinion, include all   
adjustments (consisting of only normal recurring adjustments) necessary for a   
fair presentation of the information set forth therein.                         

                                                        [Enlarge/Download Table]

                         Period from                                                             
                          Inception               Year Ended                    Three Months     
                           through               December 31,                  Ended March 31,   
                         December 31, --------------------------------------  ------------------ 
                             1994      1995       1996      1997      1998      1998      1999   
                         ------------ -------   --------  --------  --------  --------  -------- 
                                         (Dollars in thousands, except per share data)           
                                                                                                 
Statement of Operations                                                                          
 Data:                                                                                           
Net revenue(1)..........    $  --     $ 1,167   $172,972  $280,197  $421,628  $ 80,051  $131,228 
Cost of revenue.........       --       1,384    158,845   252,731   353,016    68,722   104,596 
                            ------    -------   --------  --------  --------  --------  -------- 
 Gross margin                                                                                    
  (deficit).............       --        (217)    14,127    27,466    68,612    11,329    26,632 
Operating expenses:                                                                              
 Selling, general and                                                                            
  administrative........       557      2,024     20,114    50,622    79,532    15,377    29,296 
 Depreciation and                                                                                
  amortization..........        12        160      2,164     6,733    24,185     3,478     8,976 
                            ------    -------   --------  --------  --------  --------  -------- 
   Total operating                                                                               
    expenses............       569      2,184     22,278    57,355   103,717    18,855    38,272 
                            ------    -------   --------  --------  --------  --------  -------- 
Loss from operations....      (569)    (2,401)    (8,151)  (29,889)  (35,105)   (7,526)  (11,640)
Interest expense........       (13)       (59)      (857)  (12,914)  (40,047)   (7,175)  (16,770)
Interest income.........         5         35        785     6,238    11,504     2,384     3,255 
Other income (expense)..       --         --        (345)      407       --        --        --  
                            ------    -------   --------  --------  --------  --------  -------- 
Loss before income                                                                               
 taxes..................      (577)    (2,425)    (8,568)  (36,158)  (63,648)  (12,317)  (25,155)
Income taxes............       --         --        (196)      (81)      --        --        --  
                            ------    -------   --------  --------  --------  --------  -------- 
Net loss................    $ (577)   $(2,425)  $ (8,764) $(36,239) $(63,648) $(12,317) $(25,155)
                            ======    =======   ========  ========  ========  ========  ======== 
Basic and diluted net                                                                            
 loss per common shares                                                                          
 outstanding............    $(0.22)   $ (0.48)  $  (0.75) $  (1.99) $  (2.61) $  (0.62) $  (0.89)
                            ======    =======   ========  ========  ========  ========  ======== 
Weighted average number                                                                          
 of common shares                                                                                
 outstanding............     2,620      5,019     11,660    18,250    24,432    19,717    28,317 
                            ======    =======   ========  ========  ========  ========  ======== 
Ratio of earnings to                                                                             
 fixed charges(2).......       --         --         --        --        --        --        --  
                            ======    =======   ========  ========  ========  ========  ======== 
Geographic Data:                                                                                 
Net revenue                                                                                      
 North America(3).......    $  --     $ 1,167   $ 16,573  $ 74,359  $188,008  $ 26,310  $ 62,186 
 Asia-Pacific(4)........       --         --     151,253   183,126   172,757    44,659    44,410 
 Europe(5)..............       --         --       5,146    22,712    60,863     9,082    24,632 
                            ------    -------   --------  --------  --------  --------  -------- 
   Total................    $  --     $ 1,167   $172,972  $280,197  $421,628  $ 80,051  $131,228 
                            ======    =======   ========  ========  ========  ========  ======== 
Other Data:                                                                                      
Gross margin (deficit)                                                                           
 as a percentage of net                                                                          
 revenue................       --       (18.6)%      8.2%      9.8%     16.3%     14.2%     20.3%
EBITDA(6)...............    $ (557)   $(2,241)  $ (5,987) $(23,156) $(10,920)  $(4,048) $ (2,664)
Capital                                                                                          
 expenditures(7)........    $  106    $   396   $ 12,745  $ 39,465  $ 75,983    11,369   $16,391 
Number of switches......       --           1          1        11        16        11        16 

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                                                                [Download Table]

                                          December 31,                March 31,
                             ---------------------------------------- ---------
                             1994    1995    1996     1997     1998     1999   
                             -----  ------ -------- -------- -------- ---------
                                     (Dollars in thousands)                    
                                                                               
Balance Sheet Data:                                                            
Cash and cash equivalents..  $ 221  $2,296 $ 35,474 $115,232 $136,196 $268,530 
Restricted investments                                                         
 (including current and                                                        
 long-term)................    --      --       --    73,550   50,623   38,010 
Working capital (deficit)..   (264)  1,295   39,282  118,615  107,193  268,185 
Total assets...............    487   5,042  135,609  355,393  673,963  842,794 
Long-term obligations                                                          
 (including current                                                            
 portion)..................     13     528   17,248  231,211  420,174  601,709 
Stockholders' equity                                                           
 (deficit).................    (71)  2,562   76,440   42,526  114,917   95,069 

--------                                                                        
(1) Net revenue is after provision for bad debt.                                

(2) The ratio of earnings to fixed charges is computed by dividing pre-tax      
   income from operations before fixed charges by fixed charges. Fixed charges
 consist of interest charges and that portion of rental expense we believe
to be representative of interest. For the years ended December 31, 1994,
  1995, 1996, 1997 and 1998, and for the three month periods ended March 31,
1998 and 1999, earnings were insufficient to cover fixed charges by $0.6
million, $2.4 million, $8.6 million, $36.4 million, $63.6 million, $12.3
million, and $25.2 million, respectively.                               

(3) Consists primarily of net revenue from operations in the United States for  
  all periods prior to 1997. Net revenue for periods ended subsequent to the
year ended December 31, 1996 reflects our commencement of operations in 
Canada beginning in April, 1997.                                        

(4) Consists solely of net revenue from operations in Australia for the year    
December 31, 1996. Net revenue for periods ended subsequent to the year 
ended December 31, 1996 reflects our commencement of operations in Japan
beginning in October 1997.                                              

(5) Consists solely of net revenue from operations in the United Kingdom for    
  all periods prior to 1998. Net revenue for periods ended subsequent to the
year ended December 31, 1997 reflects our commencement of operations in 
Germany in August 1998.                                                 
(6) As used herein, "EBITDA" is defined as income (loss) from operations plus   
   depreciation and amortization expense. While EBITDA should not be construed
  as a substitute for operating income or a better measure of liquidity than
cash flow from operating activities, which are determined in accordance 
with generally accepted accounting principles, it is included to provide
 additional information regarding our ability to meet future debt service,
capital expenditures and working capital requirements. EBITDA is not    
necessarily a measure of our ability to fund our cash needs and is not  
necessarily comparable to similarly titled measures of other companies. 
(7) Capital expenditures excludes assets acquired in business combinations and  
under terms of capital leases.                                          

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UNAUDITED PRO FORMA FINANCIAL DATA      

The following unaudited pro forma consolidated financial statements are   
based on the historical presentation of our consolidated financial statements,  
the combined financial statements of Telegroup, Inc. and certain subsidiaries   
and the financial statements of TresCom.                                        

The Unaudited Pro Forma Consolidated Statement of Operations for the three
months ended March 31, 1999 gives effect to                                     

.  the sale of the $200 million of senior notes in January 1999 that are    
being exchanged hereby (less discounts and estimated expenses),       

.  our purchase of assets of Telegroup and the outstanding stock of certain 
Telegroup foreign subsidiaries, and                                   

.  the issuance of $45.5 million of senior notes in June 1999 in connection 
with the Telegroup acquisition,                                       

as if each had occurred on January 1, 1999.                                     

The Unaudited Pro Forma Consolidated Statement of Operations for the year 
ended December 31, 1998 gives effect to all of the items described in the       
preceding bullet points, and                                                    

.  our merger with TresCom, and                                             

.  the sale of $150 million of senior notes in May 1998 (less discounts and 
estimated expenses),                                                  

as if each had occurred on January 1, 1998.                                     

The Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 1999   
gives effect to                                                                 

.  our purchase of assets of Telegroup and the outstanding stock of certain 
Telegroup foreign subsidiaries, and                                   

.  the issuance of $45.5 million of senior notes and a $4.6 million short-  
term promissory note in connection with the Telegroup acquisition,    

as if each had occurred on March 31, 1999.                                      

 The unaudited pro forma consolidated financial statements should be read in
conjunction with the historical financial statements, including notes thereto,  
of Primus, TresCom and Telegroup included elsewhere herein.                     

  The unaudited pro forma consolidated financial statements do not give effect
to our acquisitions of the common stock of London Telecom (and the assets of    
certain related companies) and assets of AT&T Canada and ACC Telenterprises.    

The unaudited pro forma consolidated financial statements may not be      
indicative of the results that actually would have occurred if the transactions 
had occurred on the dates indicated or which may be obtained in the future.     

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PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED 

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1999     

(Dollars in thousands, except per share amounts)      

                                                        [Enlarge/Download Table]

                                                    Adjustments                       
                                                 ---------------------      Pro Forma 
                         Primus(1)  Telegroup(2) Telegroup    Offering     as Adjusted
                         ---------  ------------ ---------    --------     -----------
                                                                                      
Net revenue............. $131,228     $64,554     $(4,947)(3) $   --        $188,182  
                                                   (2,653)(4)                         
Cost of revenue.........  104,596      43,448      (4,725)(3)     --         143,319  
                         --------     -------     -------     -------       --------  
Gross margin............   26,632      21,106      (2,875)        --          44,863  
Operating expenses                                                                    
  Selling, general, and                                                               
   administrative.......   29,296      21,228         (99)(3)     --          47,772  
                                                   (2,653)(4)                         
  Depreciation and                                                                    
   amortization.........    8,976       3,499        (414)(6)     --          13,478  
                                                    1,417 (7)                         
                         --------     -------     -------     -------       --------  
    Total operating                                                                   
     expenses...........   38,272      24,727      (1,749)        --          61,250  
                         --------     -------     -------     -------       --------  
Gain/(loss) from                                                                      
 operations.............  (11,640)     (3,621)     (1,126)        --         (16,387) 
Interest expense........  (16,770)     (3,910)      3,910 (5)  (2,616)(8)    (19,386) 
Interest income.........    3,255         145         --          --           3,400  
Other income (expense)..      --          215         --          --             215  
                         --------     -------     -------     -------       --------  
Gain/(loss) before                                                                    
 income taxes...........  (25,155)     (7,171)      2,784      (2,616)       (32,158) 
Income taxes............      --         (117)        --          --            (117) 
                         --------     -------     -------     -------       --------  
Net loss................ $(25,155)    $(7,288)    $ 2,784     $(2,616)      $(32,275) 
                         ========     =======     =======     =======       ========  
Basic and diluted net                                                                 
 loss per share......... $  (0.89)                                          $  (1.14) 
                         ========                                           ========  
Weighted average number                                                               
 of shares..............   28,317                                             28,317  
                         ========                                           ========  

--------                                                                        

(1) Represents the historical results of operations of the Company for the      
three months ended March 31, 1999.                                      

(2) Reflects the historical results of operations of Telegroup for the three    
months ended March 31, 1999.                                            

Telegroup Adjustments:                                                          

(3) To eliminate wholesale net revenue, cost of revenue, and selling, general   
and administrative expenses, as this component of the Telegroup business
had been substantially eliminated prior to the purchase by Primus.      

(4) To reflect the reclassification of bad debt expenses from selling, general  
and administrative expenses to a reduction of net revenue to conform to 
Primus's accounting policies.                                           

(5) To eliminate interest expense on non-purchased obligations.                 

(6) To reverse amortization expense associated with Telegroup's previously      
   acquired customer list, the excess of purchase price over the fair value of
 net assets acquired, depreciation and amortization of non-purchased fixed
   and cable assets, and amortization expense related to debt financing costs.

(7) To record amortization expense associated with acquired customer list and   
the excess of purchase price over the fair value of net assets acquired.

Offering Adjustments:                                                           

(8) To reflect the interest expense and amortization of deferred financing      
costs on the $200 million of January 1999 senior notes being exchanged  
hereby, and the $45.5 million of senior notes issued in June 1999 in    
connection with the Telegroup acquisition.                              

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PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED     

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS      

FOR THE YEAR ENDED DECEMBER 31, 1998      

(Dollars in thousands, except per share amounts)      

                                                        [Enlarge/Download Table]

                                                                    Adjustments                                   
                                                            ------------------------------------      Pro Forma As
                         Primus(1)  TresCom(2) Telegroup(3) TresCom     Telegroup      Offerings        Adjusted  
                         ---------  ---------- ------------ -------     ---------      ---------      ------------
                                                                                                                  
Net revenue............. $421,628    $71,342    $ 359,932   $(1,817)(4) $(125,269)(8)  $    --          $704,260  
                                                                           (9,369)(9)                             
                                                             (5,957)(5)    (6,230)(10)                            
Cost of revenue.........  353,016     60,632      299,651    (5,957)(5)  (119,632)(8)                    582,158  
                                                                           (5,552)(10)                            
                         --------    -------    ---------   -------     ---------      --------        ---------  
Gross margin............   68,612     10,710       60,281    (1,817)      (15,684)          --           122,102  
Operating expenses:                                                                                               
 Selling, general, and                                                                                            
  administrative........   79,532     16,050      106,628    (1,817)(4)    (5,152)(8)                    182,547  
                                                                           (9,369)(9)                             
                                                                           (3,325)(13)                            
 Depreciation and                                                                                                 
  amortization..........   24,185      3,215       10,940    (1,046)(6)    (1,701)(14)                    45,593  
                                                              4,333 (7)     5,667 (15)                            
 Impairment of long-                                                                                              
  lived assets..........                           14,799                 (14,799)(11)                       --   
                         --------    -------    ---------   -------     ---------      --------        ---------  
 Total operating                                                                                                  
  expenses..............  103,717     19,265      132,367     1,470       (28,679)          --           228,140  
                         --------    -------    ---------   -------     ---------      --------        ---------  
Gain (loss) from                                                                                                  
 operations.............  (35,105)    (8,555)     (72,086)   (3,287)       12,995           --          (106,038) 
Interest expense........  (40,047)      (754)     (11,069)                 11,069 (12)  (34,173)(16)     (74,974) 
Interest income.........   11,504                   2,406                                                 13,910  
Other income (expense)..                 288         (548)                                                  (260) 
                         --------    -------    ---------   -------     ---------      --------        ---------  
Gain (loss) before                                                                                                
 income taxes...........  (63,648)    (9,021)     (81,297)   (3,287)       24,064       (34,173)        (167,362) 
Income taxes............                              (30)                                                   (30) 
                         --------    -------    ---------   -------     ---------      --------        ---------  
Net loss................ $(63,648)   $(9,021)   $ (81,327)  $(3,287)    $  24,064      $(34,173)       $(167,392) 
                         ========    =======    =========   =======     =========      ========        =========  
Basic and diluted net                                                                                             
 loss per share......... $  (2.61)                                                                     $   (6.01) 
                         ========                                                                      =========  
Weighted average number                                                                                           
 of shares..............   24,432                             3,414                                       27,846  
                         ========                           =======                                    =========  

--------                                                                        

(1) Reflects the historical results of our operations of Primus for the year  
ended December 31, 1998.                                              

(2) Reflects the historical results of operations of TresCom from January 1,  
1998 through June 9, 1998 (acquisition date).                         

(3) Reflects the historical results of operations of Telegroup for the year   
ended December 31, 1998.                                              

TresCom Adjustments:                                                            

(4) To reflect the reclassification of bad debt expense from selling, general 
 and administrative expenses to a reduction of net revenue to conform to
Primus's accounting policies.                                         

(5) To eliminate the effects of intercompany transactions between Primus and  
TresCom.                                                              

(6) To reverse amortization expense associated with TresCom's previously      
acquired customer list and the excess of purchase price over the fair 
value of net assets acquired.                                         

(7) To record amortization expense associated with acquired customer list and 
  the excess of purchase price over the fair value of net assets acquired.

Telegroup Adjustments:                                                          

(8) To eliminate wholesale net revenue, cost of revenue, and selling, general 
  and administrative expenses, as this component of the Telegroup business
had been substantially eliminated prior to the purchase by Primus.    

(9) To reflect the reclassification of bad debt expenses from selling, general
 and administrative expenses to a reduction of net revenue to conform to
Primus's accounting policies.                                         

(10) To eliminate the effects of intercompany transactions between Telegroup,   
Primus, and TresCom.                                                  

(11) To eliminate the write-down of non-purchased assets.                       

(12) To eliminate interest expense on non-purchased obligations.                

(13) To eliminate restructuring expenses and losses on non-purchased assets     
held for disposal.                                                    

(14) To reverse amortization expense associated with Telegroup's previously     
  acquired customer list, the excess of purchase price over the fair value
of net assets acquired, depreciation and amortization of non-purchased
    fixed and cable assets, and amortization expense related to debt financing
costs.                                                                

(15) To record amortization expense associated with acquired customer list and  
  the excess of purchase price over the fair value of net assets acquired.

Offerings Adjustments:                                                          

(16) To reflect the interest expense and amortization of deferred financing     
costs on the $150 million of 1998 senior notes, the $200 million of   
   January 1999 senior notes being exchanged hereby, and the 45.5 million of
senior notes issued in June 1999 in connection with the Telegroup     
acquisition.                                                          

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PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED 

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

AS OF MARCH 31, 1999      

(in thousands)      

                                                                [Download Table]

                                                       Acquisition              
                                Primus(1) Telegroup(1) Adjustments     Pro Forma
                                --------- ------------ -----------     ---------
                                                                                
ASSETS                                                                          
CURRENT ASSETS                                                                  
  Cash and cash equivalents.... $268,530    $ 14,119    $(43,956)(2)   $226,466 
                                                         (12,227)(3)            
  Restricted investments.......   27,464         --          --          27,464 
  Accounts receivable, net.....  102,510      40,624      (8,011)(4)    135,123 
  Prepaid expenses and other                                                    
   current assets..............   20,876      11,607         --          32,483 
                                --------    --------    --------       -------- 
    Total current assets.......  419,380      66,350     (64,194)       421,536 
RESTRICTED INVESTMENTS.........   10,546         --          --          10,546 
PROPERTY AND EQUIPMENT, net....  171,013      54,231     (36,000)(5)    189,244 
INTANGIBLES, net...............  214,347       7,976      (4,610)(6)    284,347 
                                                          (3,366)(7)            
                                                          70,000 (11)           
OTHER ASSETS...................   27,508       3,583         --          31,091 
                                --------    --------    --------       -------- 
    TOTAL ASSETS............... $842,794    $132,140    $(38,170)      $936,764 
                                ========    ========    ========       ======== 
LIABILITIES AND STOCKHOLDERS'                                                   
 EQUITY (DEFICIT)                                                               
CURRENT LIABILITIES                                                             
  Accounts payable............. $ 89,045    $ 81,538    $(45,379)(3)   $120,964 
                                                          (4,240)(4)            
  Accrued expenses and other                                                    
   current liabilities.........   42,658      10,758       1,234 (2)     54,650 
  Accrued interest.............   14,288       1,809      (1,809)(9)     14,288 
  Notes Payable................      --       25,234     (25,234)(8)        --  
  Current portion of long-term                                                  
   obligations.................    5,204     113,255       4,592 (2)      9,796 
                                                        (113,255)(9)            
                                --------    --------    --------       -------- 
    Total current liabilities..  151,195     232,594    (184,091)       199,698 
LONG TERM OBLIGATIONS..........  596,505         138      45,467 (2)    641,972 
                                                            (138)(9)            
OTHER LIABILITIES..............       25         --          --              25 
                                --------    --------    --------       -------- 
    Total liabilities..........  747,725     232,732    (138,762)       841,695 
                                --------    --------    --------       -------- 
COMMITMENTS AND CONTINGENCIES                                                   
TOTAL STOCKHOLDERS' EQUITY                                                      
 (Deficit).....................   95,069    (100,592)    100,592 (10)    95,069 
                                --------    --------    --------       -------- 
    TOTAL LIABILITIES AND                                                       
     STOCKHOLDERS' EQUITY                                                       
     (Deficit)................. $842,794    $132,140    $(38,170)      $936,764 
                                ========    ========    ========       ======== 

--------                                                                        

(1) Reflects the historical balance sheet at March 31, 1999.                  

(2) To record the purchase entries to reflect the cash paid, short-term and   
long-term notes issued, and other acquisition expenses accrued.       

(3) To eliminate cash and accounts payable related to Telegroup that were not 
purchased or assumed by Primus.                                       

(4) To eliminate accounts receivable and payable related to the wholesale     
business that were not purchased by Primus.                           

(5) To reflect the write down of property, plant, and equipment to estimated  
fair value, and removal of non-purchased assets.                      

(6) To eliminate the goodwill on Telegroup's balance sheet prior to           
acquisition.                                                          

(7) To eliminate the debt issuance costs on Telegroup's balance sheet.        

(8) To eliminate the notes payable on Telegroup's balance sheet not assumed by
Primus.                                                               

(9) To eliminate the long-term obligations (including the current portion and 
accrued interest) that were not assumed by Primus.                    

(10) To eliminate Telegroup's stockholders' equity.                             

(11) To record the excess purchase price over the estimated fair value of net   
assets acquired.                                                      

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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

  The following discussion and analysis should be read in conjunction with the
applicable consolidated financial statements and notes thereto contained        
elsewhere in this prospectus.                                                   

Overview                                                                        

We are a facilities-based global telecommunications company offering      
international and domestic long distance and other telecommunications services  
to business, residential and carrier customers. Our customers are primarily in  
North America, Europe and selected markets within both the Asia-Pacific region. 
We seek to capitalize on the increasing demand for high-quality international   
telecommunications services. The globalization of the world's economies, the    
worldwide trend toward telecommunications deregulation and the growth of data   
and Internet traffic fuels this demand. We provide services over our            
telecommunications network, which consists of (i) 19 carrier-grade switches,    
including 15 international gateway switches in the United States, Australia,    
Canada, Germany, Japan, Puerto Rico and the United Kingdom, (ii) four domestic  
switches in Australia, (iii) more than 100 POPs and Internet access nodes       
within our principal servicer regions, (iv) both owned and leased transmission  
capacity on undersea and land-based fiber optic cable systems and (v) an        
international satellite earth station located in London, together with the      
capacity we leased on an Intelsat satellite. Utilizing this network, along with 
resale arrangements and foreign carrier agreements, we offer quality service to 
approximately 1.7 million customers.                                            

  We were founded in February 1994, and through the first half of 1995 we were
a development stage enterprise involved in various start-up activities. These   
activities included:                                                            

.  raising capital,                                                     

.  obtaining licenses,                                                  

.  acquiring equipment,                                                 

.  leasing space,                                                       

.  developing markets and                                               

.  recruiting and training personnel.                                   

We began generating revenue during March 1995. On March 1, 1996 we acquired     
Axicorp Pty. Ltd., the fourth largest telecommunications provider in Australia. 
The Axicorp acquisition had a material effect on our results of operations for  
the year ended December 31, 1996. Our Australian operations generated           
approximately $177.6 million, or 89%, of our pro forma net revenue for the year 
ended December 31, 1996 assuming the Axicorp acquisition had occurred on        
January 1, 1996.                                                                

We have invested substantial resources to transform Axicorp's strategy and
operations to those of a facilities-based carrier focused on the provision of   
international and domestic long distance services. Prior to the acquisition,    
Axicorp was a reseller of long distance, local and cellular service and did not 
own any switches. Since the Axicorp acquisition, we have installed and begun to 
carry traffic on a five-switch network in Australia, have leased fiber capacity 
connecting Australia with the United States and, in July 1997, became one of    
the initial five licensed carriers permitted to own and operate transmission    
facilities in Australia. We have focused on migrating existing traffic onto our 
network while increasing the number of higher-margin, higher-volume business    
customers with significant international long distance traffic. As part of our  
focus on business customers, we have increased Axicorp's direct sales force and 
reduced its reliance on marketing through trade and professional associations.  
We have experienced and expect to continue to experience lower gross margin as  
a percentage of net revenue for Axicorp's local switched and cellular services, 
as compared to long distance services. We expect to continue to upgrade         
Axicorp's facilities, increase its traffic capacity and introduce new products  
and services. In that regard, we expanded our service offerings in Australia    
with our                                                                        

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March 1998 acquisition of a controlling interest in Hotkey Internet Services    
Pty. Ltd., an Australia-based Internet service provider, our April 1998         
acquisition of all the outstanding stock of Eclipse Telecommunications Pty.     
Ltd., an Australia-based data communications service provider and our February  
1999 acquisition of the remaining interest in Hotkey.                           

On June 9, 1998, we acquired the operations of TresCom. After giving pro  
forma effect to the TresCom merger, for the year ended December 31, 1998, we    
would have had net revenue of $485.2 million. The TresCom merger expands the    
scope and coverage of our telecommunications network, thereby providing         
additional opportunities to migrate traffic onto the network, resulting in      
better utilization of the network and reduced variable costs.                   

In September 1998, we announced a refinement of our strategic outlook. The
principal element of the revised strategy includes concentrating our immediate  
expansion plans in those markets that are more economically stable and are      
experiencing more rapid deregulation, such as continental Europe and Canada.    
Thereafter, we plan to expand in additional markets within our principal        
service regions, including Japan, other parts of the Asia-Pacific region and    
Latin America. As part of the refined strategy, we announced our intention to   
continue the development of our retail customer base in the United States, the  
United Kingdom and Australia, and to build the infrastructure to expand our     
retail customer base in select European countries (focusing on Germany in the   
immediate future). Finally, the refined strategy, as announced, also includes   
greater focus on data and Internet services.                                    

We began our implementation of this refined strategy by:                  

.  acquiring London Telecom, a Canadian long distance provider, and certain 
related companies;                                                    

.  purchasing a residential long distance customer base, customer support   
assets and residential Internet customers and network from AT&T Canada
and ACC Telenterprises;                                               

.  purchasing Telegroup's global retail customer businesses, which include  
retail customers primarily in North America and Europe; and           

.  organizing our Internet and data services business into a new            
subsidiary, iPRIMUS.com, and acquiring GlobalServe, a Canadian ISP,   
TCP/IP GmbH, an independent German ISP, and the remaining interest in 
Hotkey Internet Services.                                             

Net revenue is earned based on the number of minutes billable and is      
recorded upon completion of a call, adjusted for sales allowance. We generally  
price our services at a savings compared to the major carriers operating in our 
principal service regions. Our net revenue is derived from carrying a mix of    
business, residential and carrier long distance traffic, data and Internet      
traffic in Australia and Canada, and, in Australia, also from the provision of  
local and cellular services. We expect to continue to generate net revenue from 
internal growth through sales and marketing efforts focused on customers with   
significant international long-distance usage, including small- and medium-     
sized businesses, multinational corporations, ethnic residential customers and  
other telecommunications carriers and resellers.                                

Prices in the long distance industry in the United States and the United  
Kingdom have declined in recent years and, as competition continues to          
increase, we believe that prices are likely to continue to decrease.            
Additionally, we believe that because deregulatory influences only recently     
have begun to affect non-United States and non-United Kingdom                   
telecommunications markets, including Australia, the deregulatory trend in such 
markets is expected to result in greater competition which could adversely      
affect our net revenue per minute and gross margin as a percentage of net       
revenue. However, we believe that such decreases in prices will be at least     
partially offset by increased telecommunications usage and decreased costs.     

  Cost of revenue is primarily comprised of costs incurred from other domestic
and foreign telecommunications carriers to originate, transport and terminate   
calls. The majority of our cost of revenue is variable, based upon the number   
of minutes of use, with transmission and termination costs being our most       
significant expense. As we increase the portion of traffic transmitted over     
leased or owned facilities, cost of                                             

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revenue increasingly will be comprised of fixed costs. In order to manage such  
costs, we pursue a flexible approach with respect to the expansion of our       
network. In most instances, we initially obtain transmission capacity on a      
variable-cost, per-minute leased basis, next acquire additional capacity on a   
fixed-cost basis when traffic volume makes such a commitment cost-effective,    
and ultimately purchase and operate our own facilities when traffic levels      
justify such investment. We also seek to lower our cost of revenue through (i)  
optimizing the routing of calls over the least cost route, (ii) increasing      
volumes on our fixed cost leased and owned lines, thereby spreading the         
allocation of fixed costs over a larger number of minutes, (iii) negotiating    
lower variable usage based costs with domestic and foreign service providers    
and negotiating additional and lower cost foreign carrier agreements with the   
foreign incumbent carriers and others, and (iv) continuing to expand the        
network when we believe traffic volumes justify such investment.                

  We generally realize a higher gross margin as a percentage of net revenue on
our international as compared to our domestic long distance services and a      
higher gross margin as a percentage of net revenue on our services to both      
business and residential customers compared to those realized on our services   
to other telecommunications carriers. In addition, we generally realize a       
higher gross margin as a percentage of net revenue on our long distance         
services as compared to those realized on local switched and cellular services. 
Carrier services, which generate a lower gross margin as a percentage of net    
revenue than retail services, are an important part of our net revenue because  
the additional traffic volume of such carrier customers improves the            
utilization of the network and allows us to obtain greater volume discounts     
from our suppliers than we otherwise would realize. Our overall gross margin as 
a percentage of net revenue may fluctuate based on our relative volumes of      
international versus domestic long distance services, carrier services versus   
business and residential long distance services, and the proportion of traffic  
carried on our network versus resale of other carriers' services.               

 Our selling, general and administrative expenses are comprised primarily of
salaries and benefits, commissions, occupancy costs, sales and marketing        
expenses, advertising and administrative costs. These expenses have been        
increasing consistent with the expansion of our operations and the              
transformation of both Axicorp's and TresCom's operations. We expect this trend 
to continue and believe that we will incur additional selling, general and      
administrative expenses to support the expansion of sales and marketing efforts 
and operations in current markets as well as new markets in our principal       
service regions.                                                                

 Since the inception of our operations, we have made, and expect to continue
to make, significant investments in the development of our operations in our    
principal service regions and the development and expansion of our network. The 
costs of developing our operations and expanding our network, including the     
purchase and installation of switches, sales and marketing expenses and other   
organizational costs, are significant. In addition, our increased capital       
investment activity in the future can be expected to affect our operating       
results in the near term due to increased depreciation charges and interest     
expense in connection with borrowings to fund such expenditures. These costs    
will be incurred in advance of the realization of the expected improvements in  
operating results from such investments. Such costs and investment activities   
have resulted in negative cash flows and operating losses for us on an          
historical basis, which are expected to continue in the near future as we use   
the proceeds from the notes to accelerate the expansion of our business and the 
build-out of our network.                                                       

 Although our functional currency is the United States dollar, a significant
portion of our net revenue is derived from sales and operations outside the     
United States. In the future, we expect to continue to derive the majority of   
our net revenue and incur a significant portion of our operating costs from     
outside the United States and therefore changes in exchange rates may have a    
significant effect on our results of operations. We historically have not       
engaged in hedging transactions and do not currently contemplate engaging in    
hedging transactions to mitigate foreign exchange risks.                        

Other Financial and Operating Data. The following financial and operating 
data for the 11 quarters ended March 31, 1999 is provided for informational     
purposes and should be read in conjunction with the consolidated financial      
statements and the notes thereto contained elsewhere herein.                    

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                                                        [Enlarge/Download Table]

                                                     Three Months Ended                            
                          -------------------------------------------------------------------------
                          September 30, December 31, March 31, June 30,  September 30, December 31,
                              1996          1996       1997      1997        1997          1997    
                          ------------- ------------ --------- --------  ------------- ------------
                                       (in thousands, except gross margin percentage)              
                                                                                                   
Financial Data(1):                                                                                 
 Net revenue(2).........     $51,819      $55,738     $59,036  $ 70,045    $ 73,018      $ 78,098  
 Gross margin...........       4,609        4,266       4,002     5,867       7,752         9,845  
 Gross margin                                                                                      
  percentage............         8.9%         7.7%        6.8%      8.4%       10.6%         12.6% 
EBITDA(3)...............      (1,585)      (2,946)     (4,827)   (7,339)     (5,997)       (4,993) 
Minutes of Long Distance                                                                           
 Use:                                                                                              
International:                                                                                     
 North America..........       9,199       12,160      17,629    45,784      57,199        75,950  
 Asia-Pacific...........       1,967        1,876       2,384     6,222      11,844        18,944  
 Europe.................       1,713        3,192       4,253     5,131       9,852        17,403  
                             -------      -------     -------  --------    --------      --------  
   Total international..      12,879       17,228      24,266    57,137      78,895       112,297  
                             -------      -------     -------  --------    --------      --------  
Domestic:                                                                                          
 North America..........       3,972        5,533       6,346    18,498      17,131        17,653  
 Asia-Pacific...........      56,932       58,336      59,481    61,304      61,544        61,496  
 Europe.................       1,512        3,051       4,533     5,775       6,973         9,626  
                             -------      -------     -------  --------    --------      --------  
   Total domestic.......      62,416       66,920      70,360    85,577      85,648        88,775  
                             -------      -------     -------  --------    --------      --------  
Total minutes of long                                                                              
 distance use...........      75,295       84,148      94,626   142,714     164,543       201,072  
                             =======      =======     =======  ========    ========      ========  

                                                                [Download Table]

                                            Three Months Ended                     
                          ---------------------------------------------------------
                          March 31,  June 30,  September 30, December 31, March 31,
                            1998       1998        1998          1998       1999   
                          ---------  --------  ------------- ------------ ---------
                              (in thousands, except gross margin percentage)       
                                                                                   
Financial Data(1):                                                                 
 Net revenue(2).........  $ 80,051   $ 99,475    $116,047      $126,055   $131,228 
 Gross margin...........    11,329     15,349      19,490        22,444     26,632 
 Gross margin                                                                      
  percentage............      14.2%      15.4%       16.8%         17.8%      20.3%
EBITDA(3)...............    (4,048)    (3,641)     (3,532)          301     (2,664)
Minutes of Long Distance                                                           
 Use:                                                                              
International:                                                                     
 North America..........    78,950    111,029     152,701       197,069    205,194 
 Asia-Pacific...........    24,596     29,865      32,896        32,370     35,113 
 Europe.................    22,944     49,028      52,266        69,628     97,133 
                          --------   --------    --------      --------   -------- 
   Total international..   126,490    189,922     237,863       299,067    337,440 
                          --------   --------    --------      --------   -------- 
Domestic:                                                                          
 North America..........    20,138     36,590      86,113        73,019     67,958 
 Asia-Pacific...........    61,151     64,936      76,456        82,111     85,054 
 Europe.................    11,462     18,263      16,354        25,633     21,516 
                          --------   --------    --------      --------   -------- 
   Total domestic.......    92,751    119,789     178,923       180,763    174,528 
                          --------   --------    --------      --------   -------- 
Total minutes of long                                                              
 distance use...........   219,241    309,711     416,786       479,830    511,968 
                          ========   ========    ========      ========   ======== 

--------                                                                        

(1) Reflects the Axicorp acquisition in March 1996, the commencement of         
operations in Canada in April 1997, the TelePassport/USFI acquisition in
October 1997 and the TresCom merger in June 1998.                       
(2) Net revenue is after provision for bad debt.                                
(3) As used herein, "EBITDA" is defined as income (loss) from operations plus   
   depreciation and amortization expense. While EBITDA should not be construed
  as a substitute for operating income or a better measure of liquidity than
cash flow from operating activities, which are determined in accordance 
with generally accepted accounting principles, it is included herein to 
provide additional information regarding our ability to meet future debt
 service, capital expenditures and working capital requirements. EBITDA is
  not necessarily a measure of our ability to fund our cash needs and is not
necessarily comparable to similarly titled measures of other companies. 

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Results of Operations                                                           

For the three months ended March 31, 1999 as compared to the three months     
ended March 31, 1998                                                          

  Net revenue increased $51.1 million or 64%, from $80.1 million for the three
months ended March 31, 1998 to $131.2 million for the three months ended March  
31, 1999. Of the increase, $35.9 million was associated with our North American 
operations, which represents a growth rate of 136%. The growth reflects         
increased traffic volumes in business and ethnic residential retail operations  
and in carrier operations, and includes operations of TresCom in the 1999       
results. Our European net revenue increased $15.5 million from $9.1 million for 
the three months ended March 31, 1998 to $24.6 million for the three months     
ended March 31, 1999, a growth rate of 171%. Our European net revenue increase  
is attributable to increased traffic volumes in business and residential retail 
traffic operations, the addition of carrier operations in the United Kingdom    
and the addition of carrier and retail operations in Germany. Our Asia-Pacific  
net revenue decreased slightly from $44.7 million for the three months ended    
March 31, 1998 to $44.4 million for the three months ended March 31, 1999. Our  
Asia-Pacific net revenue decrease in United States dollar terms is a result of  
7% decrease in the Australian dollar's average exchange rate period over        
period. Net revenue of the Australian operations, in Australian dollar terms,   
grew as a result of increased traffic from retail residential and business      
customers and from the addition of data and Internet services.                  

  Cost of revenue increased $35.9 million, from $68.7 million, or 85.8% of net
revenue, for the three months ended March 31, 1998 to $104.6 million, or 79.7%  
of net revenue, for the three months ended March 31, 1999. The increase in the  
cost of revenue is attributable to the increase in traffic volumes and          
associated net revenue growth. Our cost of revenue as a percentage of net       
revenue decreased by 610 basis points as a result of the continuing expansion   
of our global network, a greater mix of retail versus carrier traffic, the      
continuing migration of existing and newly generated customer traffic onto our  
network and new higher margin product offerings such as data and Internet       
services.                                                                       

Selling, general and administrative expenses increased $13.9 million, from
$15.4 million for the three months ended March 31, 1998, to $29.3 million for   
the three months ended March 31, 1999. The increase is attributable to the      
addition of expense from acquired operations, including TresCom and GlobalServe 
Communications Inc. and increased advertising and promotional expenses          
associated with our retail marketing campaigns.                                 

Depreciation and amortization expense increased from $3.5 million for the 
three months ended March 31, 1998 to $9.0 million for the three months ended    
March 31, 1999. The increase is associated with increased amortization expense  
related to intangible assets arising from our acquisitions of TresCom,          
GlobalServe and Hotkey, and from increased depreciation expense related to      
capital expenditures for fiber optic cable, switching and other network         
equipment being placed into service.                                            

Interest expense increased from $7.2 million for the three months ended   
March 31, 1998 to $16.8 million for the three months ended March 31, 1999. The  
increase is primarily due to the additional debt incurred pursuant to the       
January 1999 senior notes and, to a lesser extent, additional capital lease     
financings.                                                                     

  Interest income increased from $2.4 million for the three months ended March
31, 1998 to $3.3 million for the three months ended March 31, 1999. The         
increase is a result of the investment of the net proceeds from our January     
1999 senior notes offering.                                                     

For the year ended December 31, 1998 as compared to the year ended December   
31, 1997                                                                      

Net revenue increased $141.4 million or 51% to $421.6 million for the year
ended December 31, 1998, from $280.2 million for the year ended December 31,    
1997. Of the net revenue increase, $113.7 million was associated with our North 
American operations, which represents a growth rate of approximately 153%. The  
growth reflects increased traffic volumes in business and ethnic residential    
retail operations and in carrier operations, and includes operations of TresCom 
(since the June 9, 1998 acquisition), and a full year's results of              

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the acquired Canadian operations and the acquired operations of TelePassport    
L.L.C./USFI, Inc. Our European net revenue increased from $22.7 million for the 
year ended December 31, 1997 to $60.9 million for the year ended December 31,   
1998, resulting from increased retail business and residential traffic and the  
addition of carrier services, both in the United Kingdom and Germany. Our Asia- 
Pacific net revenue decreased by $10.3 million or 5.7% to $172.8 million for    
the year ended December 31, 1998 from $183.1 million for the year ended         
December 31, 1997 primarily resulting from a 13% decrease in the Australian     
dollar average exchange rate. Net revenue of the Australian operations, in      
Australian dollar terms, grew 7% to Australian $259.5 million as a result of    
increased retail business and residential traffic growth and the addition of    
data and Internet services.                                                     

Cost of revenue increased $100.3 million, from $252.7 million, or 90.2% of
net revenue, for the year ended December 31, 1997 to $353.0 million, or 83.7%   
of net revenue, for the year ended December 31, 1998. The increase in the cost  
of revenue is primarily attributable to the increased traffic volumes and       
associated net revenue growth. The cost of revenue as a percentage of net       
revenue decreased by 650 percentage points as a result of the expansion of our  
global network, the continuing migration of existing and newly generated        
customer traffic onto our network, and new higher margin product offerings such 
as data and Internet services.                                                  

Selling, general and administrative expenses increased $28.9 million to   
$79.5 million for the year ended December 31, 1998 from $50.6 million for the   
year ended December 31, 1997. The increase is attributable to the addition of   
expenses from acquired operations including TresCom, Hotkey, Eclipse and the    
Canadian operations, the hiring of additional sales and marketing staff and     
network operations personnel and increased advertising and promotional expenses 
associated with our residential marketing campaigns.                            

  Depreciation and amortization increased from $6.7 million for the year ended
December 31, 1997 to $24.2 million for the year ended December 31, 1998. The    
increase is associated with increased amortization expense related to           
intangible assets arising from our acquisitions and with increased depreciation 
expense related to capital expenditures for fiber optic cable, switching and    
other network equipment being placed into service.                              

 Interest expense increased to $40.0 million for the year ended December 31,
1998 from $12.9 million for the year ended December 31, 1997. The increase is   
primarily attributable to the interest expense associated with our August 1997  
$225 million 11 3/4% senior notes offering, due 2004, and our May 1998 $150     
million 9 7/8% senior notes offering, due 2008, and, to a lesser extent, our    
Bank Revolving Credit Facility and additional capital lease financing.          

 Interest income increased from $6.2 million for the year ended December 31,
1997 to $11.5 million for the year ended December 31, 1998. The increase is a   
result of the investment of the net proceeds of our 1998 and 1997 Senior Note   
offerings.                                                                      

For the year ended December 31, 1997 as compared to the year ended December   
31, 1996                                                                      

Net revenue increased $107.2 million or 62%, from $173.0 million for the  
year ended December 31, 1996 to $280.2 million for the year ended December 31,  
1997 (the net revenue increase in 1997 was $80.9 million or 40.6% when compared 
to our net revenue during 1996 after giving pro forma effect to the acquisition 
of Axicorp as of January 1, 1996). Of the increase, $57.8 million was           
associated with our North American operations and reflects a growth rate of     
approximately 350% (approximately 300% exclusive of net revenue associated with 
the TelePassport/USFI acquisition and operations acquired in Canada during      
1997). The growth is a result of increased traffic volumes in wholesale carrier 
operations and, to a lesser extent, in ethnic residential and business customer 
traffic. The Asia-Pacific operations contributed $31.9 million to the year-     
over-year net revenue growth, resulting primarily from the residential customer 
marketing campaigns commenced in early 1997. The 1997 results also reflect a    
full year of the Australian operations as compared to ten months in 1996 as a   
result of the March 1, 1996 acquisition of these operations. The Asia-Pacific   
net revenue growth was negatively impacted by weakness in the Australian dollar 
during 1997 as compared to 1996. The remaining net revenue growth of $17.6      
million, a year-over-year growth rate in excess of 300%,                        

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came from the European operations as a result of expansion into the wholesale   
carrier marketplace during the third quarter of 1997 and continued growth in    
the ethnic residential and business marketplaces.                               

Cost of revenue increased $93.9 million, from $158.8 million, or 91.8% of 
net revenue, for the year ended December 31, 1996 to $252.7 million, or 90.2%   
of net revenue, for the year ended December 31, 1997. The increase in the cost  
of revenue is a direct reflection of the increase in traffic volumes. The       
decrease in the cost of revenue as a percentage of net revenue reflects our     
investments in the network and the associated migration of customer traffic     
onto our Network, particularly in Australia with the introduction of equal      
access in the second half of 1997.                                              

Gross margin increased $13.3 million, from $14.1 million, or 8.2% of net  
revenue, for the year ended December 31, 1996 to $27.5 million, or 9.8% of net  
revenue, for the year ended December 31, 1997.                                  

Selling, general and administrative expenses increased $30.5 million, from
$20.1 million or 11.6% of net revenue for the year ended December 31, 1996 to   
$50.6 million or 18.1% of net revenue for the year ended December 31, 1997, as  
compared to the year ended December 31, 1996 (the increase in 1997 was $28.4    
million when compared to our selling, general and administrative expenses       
during 1996 after giving pro forma effect to the acquisition of Axicorp as of   
January 1, 1996). The increase is attributable to the hiring of additional      
sales and marketing staff, additional operations and engineering personnel to   
operate our network; the TelePassport/USFI acquisition and operations acquired  
in Canada during 1997; a full year of our Australian operations versus ten      
months in the prior year; and increased advertising and promotional expenses    
associated with our residential marketing campaigns.                            

Depreciation and amortization increased $4.5 million or 211.1%, from $2.2 
million for the year ended December 31, 1996 to $6.7 million for the year ended 
December 31, 1997. The majority of the increase is associated with capital      
expenditures for international fiber, telephone switches and related            
transmission equipment being placed into service. Additionally, amortization    
expense increased as a result of the additional intangible assets associated    
with our acquisitions during 1997.                                              

Interest expense increased $12.0 million, from $0.9 million for the year  
ended December 31, 1996 to $12.9 million for the year ended December 31, 1997.  
The increase is attributable to the interest expense associated with our 1997   
Senior Notes issued in August 1997.                                             

  Interest income increased $5.4 million, from $0.8 million for the year ended
December 31, 1996 to $6.2 million for the year ended December 31, 1997. The     
increase is due to investment of the proceeds from our 1997 Senior Notes        
offering and our initial public equity offering.                                

  Other income (expense) for the year ended December 31, 1997 was $0.4 million
compared to an expense of $0.3 million for the year ended December 31, 1996.    
Other income (expense) is the result of foreign currency transaction            
gains/losses on Australian dollar-denominated debt incurred by us for the       
acquisition of Axicorp, due to the fluctuations of the Australian dollar        
against the United States dollar during the year. This debt was paid in full    
during 1997.                                                                    

Income taxes were attributable to the operations of our United Kingdom and
Australian subsidiaries.                                                        

Liquidity and Capital Resources                                                 

Our liquidity requirements arise from:                                    

.  net cash used in operating activities;                               

.  purchases of network equipment including switches, related           
transmission equipment, international and domestic fiber cable    
capacity, satellite earth stations and satellite transmission     
capacity;                                                         

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.  interest and principal payments on outstanding indebtedness; and     

.  acquisitions of and strategic investments in businesses.             

We have financed our growth to date through public offerings and private  
placements of debt and equity securities, bank debt and capital lease           
financing.                                                                      

  Net cash used in operating activities was $30.2 million for the three months
ended March 31, 1999 as compared to net cash used in operating activities of    
$17.1 million for the three months ended March 31, 1998. The increase in        
operating cash used is comprised primarily of an increase in net losses of      
$12.8 million.                                                                  

Net cash used in operating activities was $71.3 million for the year ended
December 31, 1998 as compared to net cash used in operating activities of $14.8 
million for the year ended December 31, 1997 and $6.9 million for the year      
ended December 31, 1996. The increase in cash used in operating activities for  
the year ended December 31, 1998 as compared to the year ended December 31,     
1997 is primarily comprised of an increase in net losses of $27.4 million and a 
decrease in accounts payable of $8.2 million (as compared to an increase in     
accounts payable of $30.2 million in 1997), partially offset by increased non-  
cash operating expenses of $21.5 million. The increase in cash used in          
operating activities for the year ended December 31, 1997 was primarily the     
result of the increase in the negative operating cash flow for the period as    
compared to the same period in 1996. The increased cash usage for the year      
ended December 31, 1996 was the result of an increase in net losses partially   
offset by increases in accounts payable and accrued expenses.                   

  Net cash used in investing activities was $11.6 million for the three months
ended March 31, 1999 compared to net cash used in investing activities of $0.9  
million for the three months ended March 31, 1998. Net cash used in investing   
activities during the three months ended March 31, 1999 includes $16.4 million  
of capital expenditures primarily for the expansion of our global network, $7.8 
million for business acquisitions, partially offset by $12.6 million of cash    
provided by the sale of restricted investments used to fund interest payments   
on the 1997 senior notes.                                                       

Net cash used in investing activities was $54.2 million for the year ended
December 31, 1998 compared to net cash used in investing activities of $104.2   
million for the year ended December 31, 1997 and $39.6 million for the year     
ended December 31, 1996. Net cash used in investing activities during the year  
ended December 31, 1998 includes $76.0 million of capital expenditures          
primarily for the expansion of our global network, partially offset by $22.9    
million of cash provided by the sale of restricted investments used to fund     
interest payments on the 1997 Senior Notes. Cash used in investing activities   
for the year ended December 31, 1997 was the result of capital expenditures     
made during the year of $39.5 million to expand our global network, the         
TelePassport/USFI acquisition and the acquisition of our Canadian operations    
net of cash acquired, and the purchase of $73.6 million of restricted           
investments with proceeds from the offering of the 1997 Senior Notes for        
escrowed interest payments, offset by the sale of $25.1 million of short term   
cash investments. The cash utilized during the year ended December 31, 1996     
includes $12.7 million for capital expenditures to expand our global network    
and $1.7 million for the purchase of Axicorp, net of cash acquired.             

Net cash provided by financing activities was $173.7 million for the three
months ended March 31, 1999 as compared to net cash provided by financing       
activities of $0.1 million during the three months ended March 31, 1998. Cash   
provided by financing activities in the three months ended March 31, 1999       
resulted primarily from $192.5 million of net proceeds of the January 1999      
senior notes offering, offset by the $17.8 million repayment of a bank          
revolving credit agreement.                                                     

Net cash provided by financing activities was $146.8 million for the year 
ended December 31, 1998 as compared to net cash provided by financing           
activities of $200.1 million during the year ended December 31, 1997 and $79.5  
million during the year ended December 31, 1996. Cash provided by financing     
activities in the year ended December 31, 1998 resulted primarily from $144.5   
million of net proceeds of the 1998 Senior Notes offering. Net cash provided by 
financing activities for the year ended December 31, 1997 resulted rimarily     
from the net proceeds of the offering of 1997 Senior Notes. In 1996, we         
completed private placements                                                    

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of Common Stock generating net proceeds of approximately $21.9 million, and in  
November 1996, we completed an initial public offering of our Common Stock and  
generated net proceeds of approximately $54.4 million.                          

We anticipate aggregate capital expenditures of approximately $60 million 
during the remainder of 1999. Such capital expenditures will be primarily for   
international and domestic switches and POPs, international and domestic fiber  
optic cable capacity for new and existing routes, satellite earth station       
facilities, other transmission equipment, and back office support systems. We   
recently installed an additional international gateway switch in Paris, which   
became operational during the third quarter of 1999. By the end of 2000, we     
intend to add up to one switch in North America, 11 additional switches in      
Europe and one switch in Japan.                                                 

 In January 1999, we entered into a supplemental indenture applicable to our
1997 senior notes in order to provide additional flexibility to incur           
indebtedness to fund our expansion, to make permitted investments in marketing  
channels and complementary telecommunications services and to secure additional 
bank debt. The supplemental indenture substantially conformed certain covenants 
applicable to the 1997 senior notes to the corresponding provisions of our      
other senior notes. We incurred fees and expenses of approximately $4.8 million 
in connection with securing consents to enter into the supplemental indenture.  

 In January 1999, we voluntarily repaid in full with a part of our available
cash, and delivered notice of our termination of, the TresCom credit facility.  
The TresCom credit facility, which provided for up to $25 million of revolving  
credit borrowings and which was due to mature on July 30, 2002, was acquired    
from TresCom upon the completion of the TresCom merger. In March 1999, the      
TresCom credit facility was terminated and we will no longer be able to borrow  
funds under it. The collateral securing the repayment obligations, consisting   
primarily of TresCom's receivables, has been released. We do not believe that   
the termination of the TresCom credit facility will have a material adverse     
effect on our liquidity and capital resources.                                  

In January 1999, we completed the offering of $200 million 11 1/4% senior 
notes due in 2009 which are being exchanged hereby. The $192.5 million of net   
proceeds of the January 1999 unregistered senior notes offering are to be used  
for continued expansion of our network and other general corporate purposes.    
The indenture under which these notes were issued permits us to issue up to $75 
million in additional notes of the same series, subject to the debt incurrence  
provisions thereunder.                                                          

In March 1999, we purchased the common stock of London Telecom and certain
related entities that provide long distance telecommunications services in      
Canada, for approximately C$54 million in cash (including payments made in      
exchange for certain non-competition agreements). In May 1999, we purchased     
substantially all of the operating assets of Wintel CNC Communications, Inc.    
and Wintel CNT Communications, Inc., which are Canada-based long distance       
telecommunications providers affiliated with the London Telecom companies, for  
C$22 million in cash.                                                           

In June 1999, we purchased Telegroup's global retail customer business,   
including the acquisition of selected foreign subsidiaries. We paid the $71.8   
million purchase price, plus $22.2 million for certain current assets, by       
issuing under the January 1999 indenture, an additional $45.5 million aggregate 
principal amount of our 11 1/4% senior notes due 2009, by issuing a $4.6        
million short-term promissory note and by paying $43.9 million in cash.         

In May 1999, we purchased the residential long distance customer base,    
consumer support assets and residential Internet customers and network from     
AT&T Canada and ACC Telenterprises for C$58.1 million.                          

In May 1999, we acquired TCP/IP GmbH, an independent German ISP. TCP/IP   
operates the Contrib.Net Internet backbone. Our newly formed subsidiary,        
iPRIMUS.com, will operate TCP/IP's Internet backbone.                           

We believe that the net proceeds from the notes to be exchanged, together 
with our existing cash and available capital lease financing and bank financing 
(subject to limitations in the 1999 indenture, the 1997                         

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indenture and 1998 indenture) will be sufficient to fund our operating losses,  
debt service requirements, capital expenditures and other cash needs for our    
operations for at least the next 12 months. The semi-annual interest payments   
due under the 1997 senior notes through August 1, 2000 have been pre-funded and 
will be paid from our restricted investments. We are continually evaluating the 
expansion of our service offerings and plan to make further investments in and  
enhancements to our switches and distribution channels in order to expand our   
service offerings. In order to fund these additional cash requirements, we      
anticipate that we will be required to raise additional financing from public   
or private equity or debt sources. Additionally, if our plans or assumptions    
change (including those with respect to the development of our network, the     
level of our operations and our operating cash flow), if our assumptions prove  
inaccurate, if we consummate additional investments or acquisitions or if we    
experience unexpected costs or competitive pressures, or if existing cash and   
any other borrowings prove to be insufficient, we may be required to seek       
additional capital sooner than expected.                                        

Since our inception through March 31, 1999, we have had negative cash flow
from operating activities of $125.7 million and negative EBITDA of $45.5        
million. In addition, we incurred net losses in 1995, 1996, 1997, 1998 and the  
three months ended March 31, 1999 of $2.4 million, $8.8 million, $36.2 million, 
$63.6 million and $25.2 million, respectively, and had an accumulated deficit   
of approximately $136.8 million as of March 31, 1999. On a pro forma basis,     
after giving effect to the offering of the 1998 senior notes, the January 1999  
senior notes, the TresCom merger and the Telegroup acquisition, including the   
issuance of $45.5 million of senior notes and a $4.6 million short-term         
promissory note in connection with the Telegroup acquisition, for the year      
ended December 31, 1998, we would have had a net loss of $167.4 million. On a   
pro forma basis, after giving effect to the January 1999 senior notes and the   
Telegroup acquisition, including the issuance of $45.5 million of senior notes  
and a $4.6 million short-term promissory note in connection with the Telegroup  
acquisition, for the three months ended March 31, 1999, we would have had a net 
loss of $32.3 million. Although we have experienced net revenue growth in each  
of our last 16 quarters, such growth should not be considered to be indicative  
of future net revenue growth, if any. We expect to continue to incur additional 
operating losses and negative cash flow from operations as we expand our        
operations and continue to build-out and upgrade our network. There can be no   
assurance that our revenue will grow or be sustained in future periods or that  
we will be able to achieve or sustain profitability or positive cash flow from  
operations in any future period. If we cannot achieve and sustain operating     
profitability or positive cash flow from operations, we may not be able to meet 
our debt service or working capital requirements (including our obligations     
with respect to the notes).                                                     

From time to time we evaluate acquisitions, joint ventures and strategic  
investments involving businesses which complement our business. Depending on    
the cash requirements of potential transactions, we may finance such            
transactions with bank borrowings, through other debt financing vehicles, or    
through the issuance of capital stock. However, we presently have no commitment 
or agreement with respect to any material acquisition, joint venture or         
strategic investment. There can be no assurance that if we were to pursue such  
an opportunity, any such transaction would occur or that the funds to finance   
any such transaction would be available on reasonable terms, if at all.         

Quantitative and Qualitative Disclosures About Market Risk                      

The Company's primary market risk exposures relate to changes in foreign  
currency exchange rates and to changes in interest rates.                       

Foreign currency. Although the Company's functional currency is the United
States dollar, a significant portion of the Company's net revenue is derived    
from its sales and operations outside the United States. In the future, the     
Company expects to continue to derive a significant portion of its net revenue  
and incur a significant portion of its operating costs outside the United       
States, and changes in foreign currency exchange rates may have a significant   
effect on the Company's results of operations. The operations of affiliates and 
subsidiaries in foreign countries have been funded with investments and other   
advances. Due to the long-term nature of such investments and advances, the     
Company accounts for any adjustments resulting from translation as a charge or  
credit to "accumulated other comprehensive loss" within the stockholders'       
equity section of the consolidated balance sheet. The Company historically has  
not engaged in hedging transactions.                                            

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Interest rates. The Company's financial instruments that are sensitive to 
changes in interest rates are its (i) 1997 $225 million 11 3/4% senior notes    
due August 2004, (ii) 1998 $150 million 9 7/8% senior notes due May 2008, and   
(iii) 1999 $200 million 11 1/4% senior notes due 2009. As of March 31, 1999,    
the aggregate fair value of the 1997, 1998 and 1999 senior notes approximates   
their face value.                                                               

Year 2000 Compliance                                                            

General. We are reviewing our network elements, computer systems, software
applications and other business systems in order to determine if any of these   
systems will not properly reflect or recognize the year 2000. Because many      
computer and computer applications define dates by the last two digits of the   
year, "00" could be interpreted to mean the year 1900, rather than the year     
2000. This error could result in miscalculations or system failures. Year 2000  
issues may also affect the systems and applications of our customers, vendors   
or resellers.                                                                   

Compliance Program. In 1998, we began a comprehensive inventory and Year  
2000 assessment of our principal computer systems, network elements, software   
applications and other business systems throughout the world. We have completed 
our inventory and assessment and have begun repairing or replacing the most     
critical items that we have determined not to be Year 2000 compliant. We expect 
to complete the repair, replacement, testing and certification of substantially 
all non-compliant network elements by September 30, 1999. We are using both     
internal and external resources to identify, correct or reprogram, and test our 
systems for Year 2000 compliance.                                               

Suppliers. We are currently and have been contacting third party suppliers
of major equipment, software, systems and services used by us to identify and,  
to the extent possible, to resolve issues involving Year 2000 compliance.       
However, we have limited or no control over the actions of these third party    
suppliers. Consequently, while we expect that we will be able to resolve any    
significant Year 2000 issues with regard to these systems and services, there   
can be no assurance that these suppliers will resolve any or all Year 2000      
issues before the occurrence of a material disruption to our business or any of 
our customers.                                                                  

  Costs. We expect to incur in the aggregate approximately $3 to $5 million in
expenditures in 1999 to complete our Year 2000 compliance program. These        
estimates do not include the costs of systems, software and equipment that are  
being replaced or upgraded in the normal course of business. The costs of       
modifying our network elements, software and systems for Year 2000 compliance   
are being funded from existing cash resources and are being charged as expenses 
as incurred.                                                                    

 Risks. We believe that we will substantially complete the implementation of
our Year 2000 program prior to December 31, 1999. Consequently, we do not       
believe that Year 2000 issues will have a material adverse effect on our        
business or results of operations. However, if we do not achieve compliance     
prior to December 31, 1999, if we fail to identify and remedy all critical Year 
2000 problems or if major suppliers or customers experience material Year 2000  
problems, our results of operations or financial condition could be materially  
affected. We have determined that non-compliant network elements may result in  
improperly routed traffic and that non-compliant, non-network systems may       
result in errors in customer billing and accounting records.                    

  Contingency Plans. We have begun to develop appropriate contingency plans to
mitigate, to the extent possible, any significant Year 2000 noncompliance. We   
expect to complete our contingency plans by September 30, 1999. If we are       
required to implement our contingency plans, the cost of Year 2000 compliance   
may be greater than the amount referenced above and there can be no assurance   
that these plans will be adequate.                                              

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BUSINESS

Primus                                                                          

We are a facilities-based global telecommunications company. We offer     
international and domestic long distance and other telecommunications services  
to business, residential and carrier customers located in North America, Europe 
and selected markets in the Asia-Pacific region. We seek to capitalize on the   
increasing demand for high-quality international telecommunications services    
which is being driven by the globalization of the world's economies, the        
worldwide trend toward telecommunications deregulation and the growth of global 
data and Internet traffic. We provide services over our network, which          
includes:                                                                       

.  15 international gateway switches in the United States, Australia,       
Canada, Germany, Japan, Puerto Rico and the United Kingdom;           

.  four domestic switches in Australia;                                     

.  both owned and leased transmission capacity on undersea and land-based   
fiber optic cable systems; and                                        

.  an international satellite earth station located in London.              

Utilizing our network, along with resale arrangements and foreign carrier 
agreements, we offer quality service to approximately 1.7 million customers.    

 We are a full-service carrier with operations in the United States, Canada,
Australia, the United Kingdom, Germany, France, Switzerland, the Netherlands,   
Denmark, Italy, Japan and Hong Kong. We had net revenue and pro forma net       
revenue, after giving effect to our merger with Trescom International, Inc. and 
the Telegroup acquisition, as follows:                                          

                                                                [Download Table]

Year Ended                                                       Revenue    
----------                                                       -------    
                                                                            
December 31, 1996............................................ $173.0 million
December 31, 1997............................................ $280.2 million
December 31, 1998............................................ $421.6 million
December 31, 1998 (pro forma)................................ $704.3 million

We primarily target customers with significant international long distance
usage, including                                                                

.  small- and medium-sized businesses;                                      

.  multinational corporations;                                              

.  ethnic residential customers; and                                        

.  other telecommunications carriers and resellers.                         

Through our newly formed subsidiary, iPrimus.com, we are also increasingly
targeting business and residential customers for data and Internet services.    

In an effort to attract larger business customers in multiple markets, we 
intend to offer a broad array of services (including long distance voice,       
cellular, Internet and data services) in approximately 10 major markets,        
including the United States, Canada, Australia, the United Kingdom, Germany,    
France, Japan and Italy. We provide competitively priced telecommunications     
services, including:                                                            

.  international and domestic long distance services and private networks;  

.  prepaid and calling cards, toll-free services and reorigination          
services;                                                             

.  local services in Australia, Canada, Puerto Rico and the United States   
Virgin Islands;                                                       

.  data, Internet and cellular services in Australia; and                   

.  Internet services in Canada and Germany.                                 

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 We market our services through a variety of channels, including through our
direct sales force, independent agents and direct marketing.                    

By constructing and expanding our network, we reduced costs, improved     
service reliability and increased flexibility to introduce new products and     
services. By carrying more traffic over our expanding network, we have          
increased gross margin as a percentage of net revenue (after accounting for bad 
debt) to 20.3% in the first quarter of 1999 from 6.8% in the first quarter of   
1997. We believe that, as the volume of telecommunications traffic carried on   
our network increases, we should continue to improve profitability as we more   
fully utilize our network capacity and realize economies of scale. Currently,   
29 countries are connected directly to our network. We expect to continue to    
expand our network through additional investment in undersea and domestic fiber 
optic cable systems, international gateway and domestic switching facilities    
and international satellite earth stations as customer demand justifies the     
capital investment. Major components of our network include the following:      

Switches and Points of Presence. Our network consists of 19 carrier-grade 
switches, including 15 international gateway switches and four domestic         
switches in Australia. We currently operate more than 100 POPs and Internet     
access nodes within our principal service regions. Here is further information  
about the location and type of our switches:                                    

                                                                [Download Table]

Location                                                   Type of Switch    
--------                                                ---------------------
                                                                             
New York City(3)....................................... International Gateway
Los Angeles............................................ International Gateway
Washington............................................. International Gateway
Fort Lauderdale........................................ International Gateway
Toronto................................................ International Gateway
Vancouver.............................................. International Gateway
London(2).............................................. International Gateway
Paris.................................................. International Gateway
Frankfurt.............................................. International Gateway
Sydney................................................. International Gateway
Tokyo.................................................. International Gateway
Puerto Rico............................................ International Gateway
Adelaide............................................... Domestic             
Brisbane............................................... Domestic             
Melbourne.............................................. Domestic             
Perth.................................................. Domestic             

Our international gateway switches will serve as the base for our global        
expansion of the network into new countries when customer demand justifies the  
investment and as regulatory rules permit us to compete in new markets. We are  
currently installing an international gateway switch in Paris, which is         
expected to be operational during the third quarter of 1999. By the end of      
2000, we intend to add up to 11 switches in Europe, one switch in North America 
and one switch in Japan.                                                        

Fiber Capacity. We own and lease transmission capacity which connects our 
switches to each other and to the networks of other international and domestic  
telecommunications carriers. Our ownership interests in fiber consist of        
minimum assignable ownership units and indefeasible rights of use in 23         
undersea fiber optic cable systems, including the CANTAT-3, TAT-12/TAT-13, TPC- 
5, Gemini, Atlantic Crossing-1, FLAG, Americas 1 and Columbus 2 systems.        

We also have entered into an agreement to purchase $20 million of fiber   
capacity from Qwest, which will provide connections among our U.S. gateway      
switches and future points of presence. By replacing existing leased lines in   
the U.S. with this Primus-owned high speed capacity, we expect to reduce our    
cost structure and provide improved service to customers on our high traffic    
routes. During the fourth quarter of 1998, we began                             

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using the first portion of this capacity--a DS-3 link between New York and Los  
Angeles. In May 1999 through a reciprocal capacity purchase agreement with      
Global Crossing Holdings Ltd., we agreed to purchase up to $50 million of fiber 
capacity on Global Crossing's undersea fiber network.                           

Satellite Earth Stations and Capacity. We are constructing international  
satellite earth stations and purchasing capacity on international satellites in 
order to provide data and Internet transmission services, in addition to voice  
services, principally to and from post, telephone and telegraph operators,      
other telecommunications carriers and Internet service providers, in developing 
countries. We have completed the construction of an Intelsat earth station in   
London and have reserved capacity on the Intelsat-62(degrees) satellite. This   
earth station now is operational, and is able to carry voice, data and Internet 
traffic to and from countries in the Indian Ocean/Southeast Asia region,        
Eastern Africa and the Middle East. Pursuant to our purchase agreement with     
Global Crossing, Global Crossing has agreed to purchase up to $25 million of    
services on our global satellite network. By the end of 1999, we expect to      
expand our global satellite coverage by leasing a satellite earth station on    
each of the east and west coasts of the United States and by reserving          
additional capacity on international satellites. These additional facilities    
will position us to provide voice, data and Internet transmission services to   
Latin America and the Pacific Rim.                                              

  Foreign Carrier Agreements. In selected countries where competition with the
traditional incumbent post, telephone and telegraph operators is limited or is  
not currently permitted, we have entered into foreign carrier agreements with   
post, telephone and telegraph operators or other service providers which permit 
us to carry traffic into and receive return traffic from these countries. We    
have existing foreign carrier agreements with post, telephone and telegraph     
operators in Cyprus, Greece, India, Iran, Italy and New Zealand, as well as     
additional carrier agreements with foreign service providers in other           
countries.                                                                      

Industry Overview                                                               

General. The international long distance industry, which involves the     
transmission of voice and data from one country to another, is undergoing a     
period of fundamental change. The change has resulted in, and is expected to    
continue to result in, significant growth in usage of international             
telecommunications services. According to TeleGeography, in 1997, the           
international long distance industry accounted for $66 billion in revenues and  
82 billion minutes of use. That is an increase from $27 billion in revenues and 
22 billion minutes of use in 1988. TeleGeography has estimated that, under one  
scenario, by the year 2001 this market will have expanded to $80 billion in     
revenues and 159 billion minutes of use.                                        

 We believe that the growth in international long distance services is being
driven by:                                                                      

.  globalization of the world's economies and the worldwide trend toward    
telecommunications deregulation;                                      

.  the growth of data and Internet traffic;                                 

.  declining prices and a wider choice of products and services driven by   
greater competition resulting from privatization and deregulation;    

.  increased telephone accessibility resulting from technological advances  
and greater investment in telecommunications infrastructure, including
deployment of wireless networks; and                                  

.  increased international business and leisure travel.                     

We believe that growth of traffic originated in markets outside the United  
States will continue to be higher than growth in traffic originated within the  
United States due to recent deregulation in many foreign markets and increasing 
access to telecommunications facilities in emerging markets.                    

  The competition spurred by privatization and deregulation, which in turn has
prompted carriers to offer a wider choice of products and services, has lowered 
prices. In recent years, prices for long distance services have decreased       
substantially and are expected to continue to decrease in most of the markets   
in which we                                                                     

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currently compete. Several long distance carriers in the United States have     
introduced pricing strategies that provide fixed, low rates for both domestic   
and international calls originating in the United States. We believe that the   
lower-price environment and resulting revenue losses from increased competition 
have been more than offset by cost decreases, as well as an increase in         
telecommunications usage. For example, based on the most current Federal        
Communications Commission data which we believe is publicly available, for the  
period 1989 through 1996, per minute settlement payments by United States-based 
carriers to foreign post, telephone and telegraph operators fell 38.6%, from    
$0.70 per minute to $0.43 per minute. At the same time, per minute              
international billed revenue fell only 27.5%, from $1.02 in 1989 to $0.74 in    
1996. We believe that, as settlement rates and costs for leased capacity        
continue to decline, international long distance will continue to provide high  
revenue and gross profit per minute.                                            

Facilities-based Carriers. International long distance carriers generally 
can be categorized according to ownership and use of transmission facilities    
and switches. Although no carrier utilizes exclusively owned facilities for the 
transmission of all of its long distance traffic, carriers vary from being      
primarily facilities-based (i.e., they own and operate their own land based or  
undersea cable and switches) to those that are purely resellers of another      
carrier's transmission network.                                                 

Regulatory and Competitive Environment. Prior to deregulation, the long   
distance carriers in any particular country generally were government-owned     
monopoly carriers, such as British Telecom in the United Kingdom, France        
Telecom in France, Deutsche Telekom in Germany, Telstra in Australia, NTT in    
Japan, and Teleglobe in Canada. Deregulation of a particular telecommunications 
market typically has begun with the introduction of a second long distance      
carrier, followed by the governmental authorization of multiple carriers. In    
the United States, one of the first highly deregulated markets, deregulation    
began in the 1960's with MCI's authorization to provide long distance service   
and was followed in 1984 by AT&T's divestiture of the regional Bell operating   
companies and, most recently, by the passage of the 1996 Telecommunications     
Act. Deregulation has occurred elsewhere, such as in the United Kingdom, Canada 
and Australia, and is being implemented in other countries, including most EU   
countries, Japan and several Latin American countries, such as Chile,           
Guatemala, Peru, El Salvador and Mexico.                                        

On February 15, 1997, the United States and 68 other countries, including 
Australia, the United Kingdom, Canada, Germany and Japan, signed the World      
Trade Organization Agreement and agreed to open their telecommunications        
markets to competition and foreign ownership starting January 1, 1998. These 69 
countries generate a substantial majority of worldwide telecommunications       
traffic. We believe that the World Trade Organization Agreement has begun to,   
and will continue to, provide us with significant opportunities to compete in   
markets where we did not previously have access and will allow us to provide    
end-to-end, facilities-based services to and from these countries.              

  In addition, to implement the United States' "open market" commitments under
the World Trade Organization Agreement, the FCC has (i) eliminated the FCC's    
Effective Competitive Opportunities test for applicants affiliated with         
carriers in World Trade Organization member countries, while imposing new       
conditions on participation by dominant foreign carriers, (ii) allowed          
nondominant United States carriers to enter into exclusive arrangements with    
nondominant foreign carriers and scaled back the prohibition on exclusive       
arrangements with dominant carriers and (iii) adopted rules that will           
facilitate approval of flexible alternative settlement payment arrangements. We 
believe that the FCC order has had and will continue to have the following      
effects on United States carriers:                                              

.  reduce impediments to investment in United States carriers by foreign    
entities,                                                             

.  increase opportunities to enter into innovative traffic arrangements     
with foreign carriers located in World Trade Organization member      
countries,                                                            

.  add new opportunities to engage in international simple resale to        
additional foreign countries and                                      

.  modify settlement rates offered by foreign affiliates of United States   
carriers to United States carriers to comply with the FCC's settlement
rate benchmarks.                                                      

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International Traffic Dynamics. A long distance telephone call consists of
three parts: origination, transport and termination. Generally, a domestic long 
distance call originates on a local exchange network and is transported to the  
network of a long distance carrier, which in many countries is the same as the  
local carrier. The call is then carried along the long distance network to      
another local exchange network where the call is terminated. An international   
long distance call is similar to a domestic long distance call, but typically   
involves at least two long distance carriers with the first carrier             
transporting the call from the country of origination, and the second carrier   
terminating the call in the country of termination. These long distance         
telephone calls are classified as one of three types of traffic: outbound,      
inbound and international transit. Outbound traffic consists of calls going     
from a country of origination, and inbound traffic consists of calls going into 
a country of destination. For example, a call made from the United States to    
the United Kingdom is referred to as outbound traffic for the United States     
carrier and inbound traffic for the United Kingdom carrier. The third type of   
traffic, international transit traffic, originates and terminates outside a     
particular country, but is transported through that country on a carrier's      
network. Since most major international fiber optic cable systems are connected 
to the United States, and international long distance prices are substantially  
lower in the United States than in other countries, a large volume of           
international transit traffic is routed through the United States.              

International calls are transported by land based or undersea cable or via
satellites. A carrier can obtain voice circuits on cable systems either through 
ownership or leases. Ownership in cables is acquired either through             
indefeasible rights of use or minimum assignable ownership units. The           
fundamental difference between a holder of indefeasible rights of use and an    
owner of minimum assignable ownership units is that the indefeasible rights of  
use holder is not entitled to participate in management decisions relating to   
the cable system. Between two countries, a carrier from each country owns a     
"half-circuit" of a cable, essentially dividing the ownership of the cable into 
two equal components. Additionally, any carrier may generally lease circuits on 
a cable from another carrier. Unless a carrier owns a satellite, satellite      
circuits also must be leased from one of several existing satellite systems.    

  Accounting Rate Mechanism. Under the accounting rate mechanism, which is the
traditional model for handling long distance traffic between international      
carriers, traffic is exchanged under bilateral carrier agreements, or operating 
agreements, between carriers in two countries. Foreign carrier agreements       
generally are three to five years in length and provide for the termination of  
traffic in, and return traffic to, the carriers' respective countries at a      
negotiated accounting rate, known as the total accounting rate. In addition,    
foreign carrier agreements provide for network coordination and accounting and  
settlement procedures between the carriers. Both carriers are responsible for   
costs and expenses related to operating their respective halves of the end-to-  
end international connection.                                                   

Settlement costs, which typically equal one-half of the total accounting  
rate, are the fees owed to another international carrier for transporting       
traffic on its facilities. Settlement costs are reciprocal between each party   
to a foreign carrier agreement at a negotiated rate (which must be the same for 
all United States-based carriers, unless the FCC approves an exception). For    
example, if a foreign carrier charges a United States carrier $0.30 per minute  
to terminate a call in the foreign country, the United States carrier would     
charge the foreign carrier the same $0.30 per minute to terminate a call in the 
United States. Additionally, the total accounting rate is the same for all      
carriers transporting traffic into a particular country, but varies from        
country to country. The term "settlement costs" arises because carriers         
essentially pay each other on a net basis determined by the difference between  
inbound and outbound traffic between them.                                      

Foreign carrier agreements typically provide that a carrier will return   
terminating traffic in proportion to the traffic it receives. Return traffic    
generally is more profitable than outgoing traffic because the settlement rate  
per minute is substantially greater than the incremental cost of terminating a  
call in the country due to the lack of marketing expense and billing costs, as  
well as the lower cost structure associated with terminating calls within       
country. Generally, there is a six-month lag between outbound traffic and the   
allocation of the corresponding return traffic and, in certain instances, a     
minimum volume commitment must be achieved before qualifying for receipt of     
return traffic.                                                                 

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  Alternative Calling Procedures. As the international long distance market is
being deregulated, long distance companies have devised alternative calling     
procedures in order to complete calls more economically than under the          
accounting rate mechanism. Some of the more significant alternative calling     
procedures include:                                                             

.  transit,                                                                 

.  refiling or "hubbing,"                                                   

.  international simple resale and                                          

.  reorigination.                                                           

The most common of the above methods is transit. The transit procedure    
allows traffic between two countries to be carried through a third country on   
another carrier's network. This procedure, which requires agreement among the   
particular long distance companies and the countries involved, generally is     
used either for overflow traffic during peak periods or where the direct        
circuit may not be available or justified based on traffic volume. Refiling or  
"hubbing" of traffic, which takes advantage of disparities in settlement rates  
between different countries, allows traffic to a particular country to be       
treated as if it originated in another country that enjoys lower settlement     
rates with the destination country, thereby resulting in lower overall costs on 
an end-to-end basis. United States-based carriers generally are beneficiaries   
of refiling on behalf of other carriers because of low international rates. The 
difference between transit and refiling is that, with respect to transit, the   
carrier in the destination country has a direct relationship with the           
originating carrier, while with refiling, the carrier in the destination        
country is likely not to even know the identity of the originating carrier. The 
choice between transit and refiling is determined primarily by cost. With       
international simple resale, a carrier may completely bypass the settlement     
system by connecting an international leased or owned line directly to the      
public-switched telephone network of a foreign country or directly to a         
customer premise through an international gateway switch deployed in the        
foreign country. International simple resale currently is allowed by applicable 
regulatory authorities between a limited number of international routes,        
including Canada-United Kingdom, United States-United Kingdom, United States-   
Sweden and United Kingdom-Australia and is currently experiencing increasing    
usage. Reorigination avoids the high international rates in a particular        
country of origin by providing dial tone in a second country with a lower rate, 
typically the United States.                                                    

Industry Strategies. Strategies to provide international long distance    
services are driven by the emergence of alternative calling procedures and the  
increased demand for seamless services on a global basis. First-tier service    
providers, which largely utilize their own network facilities, primarily        
utilize foreign carrier agreements in order to provide international service.   
Second-tier carrier and new entrants which, to a greater extent must rely on    
the network facilities of other carriers, primarily are utilizing alternative   
calling procedures and are developing networks to compete with the first-tier   
carriers and gain market share. Other entrants, including Primus, are           
establishing their own operations in multiple countries and, to the extent      
required to serve other selected markets, alliances or other arrangements with  
other carriers. In response, first-tier carriers have formed alliances to       
provide seamless services and one-stop shopping on a global basis.              

Strategy                                                                        

Our objective is to become a leading global provider of international and 
domestic long distance voice, Internet, data and other services in our          
principal service regions. Key elements of our strategy to achieve this         
objective include:                                                              

.  Focus on Customers with Significant International Long Distance          
  Usage. We primarily target customers with significant international long
distance usage, including small- and medium-sized businesses,         
multinational corporations, ethnic residential customers and other    
telecommunication carriers and resellers. We believe that the         
international long distance market offers an attractive business      
opportunity given its size and, as compared to the domestic long      
distance market, its higher revenue per minute, gross margin and      
expected growth rate.                                                 

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.  Pursue Early Entry into Selected Deregulating Markets. We seek to be an  
early entrant into selected deregulating telecommunications markets   
where we believe there is significant demand for international long   
  distance services as well as substantial growth and profit potential. We
further believe that early entrance into deregulating markets provides
  us with competitive advantages as we develop sales channels, establish a
customer base, hire personnel experienced in the telecommunications   
industry and achieve name recognition, prior to the entry into these  
markets by a large number of competitors. We intend to continue to    
  concentrate our immediate expansion plans in those markets that are more
economically stable and are experiencing more rapid deregulation, such
as continental Europe and Canada. Subsequently, we expect to expand in
additional markets within our principal service regions, including    
Japan, other parts of the Asia-Pacific region and Latin America.      

.  Expand Our Global Network. By constructing and expanding our network, we 
  have reduced operating costs, improved service reliability and increased
our flexibility to introduce new services. We expect that continued   
strategic development of our network will continue to lead to reduced 
transmission and other operating costs as a percentage of net revenue,
improved gross margins, reduced reliance on other carriers and more   
efficient network utilization. We own our own switching facilities,   
fiber optic cable capacity and a satellite earth station and purchase 
fiber optic cable capacity on an end-to-end basis and satellite       
 transmission capacity when we believe that current and expected traffic
levels justify such investment. We also expect to expand our network  
  capacity and offer voice, data and Internet services, all based on Cisco
Internet Protocol technology, enabling us to be selected as a Cisco   
powered network.                                                      

.  Provide Full Portfolio of Voice, Data and Internet Services. We          
 typically enter markets which are in the initial stages of deregulation
by first providing international long-distance services and, as the   
market deregulates further, by expanding our portfolio of service     
offerings within the particular market. We believe that international 
long distance generally offers attractive margins in markets in the   
early stage of deregulation and provides a platform for expanding our 
service offerings to our customers. In an effort to attract larger    
  business customers in multiple markets, we intend to offer a broad array
 of services (including long distance voice, Internet, data and cellular
services) in approximately 10 major markets, including the United     
States, Canada, Australia, the United Kingdom, Germany, France, Japan 
and Italy. In May 1999, we formed a new Internet and data subsidiary, 
 iPRIMUS.com, and anticipate offering a full range of Internet Protocol-
based data and voice communication over our existing global network   
infrastructure.                                                       

.  Provide Transmission for Internet and Data Services in Developing        
Countries. We plan to offer satellite-based broadband transmission    
capacity to post, telephone and telegraph operators, other            
telecommunications carriers, ISPs and multi-national corporations     
principally serving developing countries. We focus these services on  
developing countries due to their limited capacity to handle their    
rapidly-growing Internet and data traffic. Our satellite earth station
  in London enables us to offer Internet and data transmission services in
the Indian Ocean/Southeast Asia region. Additionally, we plan to      
replicate this strategy so as to offer such services in Latin America 
and the Pacific Rim by adding two additional satellite earth stations,
one on each of the east and west coasts of the United States.         

.  Broaden Retail Customer Base. By offering high quality services at       
competitive prices, providing high levels of customer service, and    
bundling a comprehensive selection of voice, cellular, data, Internet,
cellular and other value added services, we intend to further broaden 
our retail customer base. In order to offer our retail customers      
  international and domestic long distance services generally priced below
those of major carriers in our principal service regions, we intend to
maintain a low cost structure. In order to maintain high levels of    
customer service, we intend to continue to use trained and experienced
sales and service representatives and to provide customized billing   
services. By bundling our traditional voice services with data and    
Internet services, we intend not only to attract more retail customers
but also to reduce per customer sales and marketing costs and customer
turnover.                                                             

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.  Growth through Selected Acquisitions, Joint Ventures and Strategic       
Investments. As part of our business strategy, we frequently evaluate 
potential acquisitions, joint ventures and strategic investments. We  
 view acquisitions, joint ventures and strategic investments as means to
enter additional markets, add new products and market segments (for   
example, data and Internet), expand our operations within existing    
  markets and increase our customer and revenue base, thereby facilitating
  an acceleration of our business plan. Potential candidates include voice
and data service providers and ISPs with an established customer base,
complementary operations, telecommunications licenses, experienced    
management or network facilities in countries into which we seek to   
enter.                                                                

Description of Operating Markets                                                

The following is a summary of the market size, competitive dynamics and   
regulatory environments of the domestic and international long distance         
industries in the principal jurisdictions in which we provide our services and  
a description of our operations in each of our primary service regions:         

 North America. The United States long distance market is highly deregulated
and is the largest in the world. According to the FCC, in 1996 long distance    
telephone revenue in the United States was approximately $99.7 billion,         
including approximately $17.9 billion from international services (representing 
18.0% of the total market). AT&T is the largest long distance carrier in the    
United States market, with market share of approximately 49.9% of international 
outgoing minutes in 1996. MCI/WorldCom and Sprint had market shares of 28.1%    
and 14.4%, respectively in 1996. AT&T, MCI/WorldCom and Sprint constitute what  
generally is regarded as the first-tier in the United States long distance      
market. Other large long distance companies with more limited ownership of      
transmission capacity, such as Frontier and Qwest, constitute the second-tier   
of the industry. The remainder of the United States long distance market is     
comprised of several hundred smaller companies, largely resellers, which are    
known as third-tier carriers.                                                   

In the United States, we provide long distance services to small- and     
medium-sized businesses, residential customers, multinational corporations and  
other telecommunication carriers. We operate international gateway telephone    
switches in the New York City area, Washington, Fort Lauderdale and Los Angeles 
which are connected with countries in Europe, Latin America and the Asia-       
Pacific region through owned and leased international fiber cable systems. We   
maintain a direct sales organization in New York and Virginia to sell to        
business customers and have a telemarketing center for small business sales in  
Tampa. To reach residential customers, we advertise nationally in ethnic        
newspapers and other publications, offering discounted rates for international  
calls to targeted countries. We also utilize independent agents to reach and    
enhance sales to both business and residential customers and have established a 
direct sales force for marketing international services to other long distance  
carriers. Additionally, as a result of the TresCom merger, we have expanded our 
marketing activities to customers in the United States seeking to transmit      
international calls to Latin America, consisting principally of businesses with 
sales or operations in Latin America, as well as the growing Hispanic           
population in the United States. We maintain a national customer service center 
in Florida staffed with multi-lingual representatives and operate a 24-hour     
global network management control center in Virginia that monitors our network. 
We also operate network management control centers in London, Sydney and,       
following the Telegroup acquisition, in Cedar Rapids, Iowa. In addition to      
international long distance services, we provide local service in Puerto Rico   
and the United States Virgin Islands.                                           

According to the International Telecommunications Union, the total        
telecommunications market in Canada accounted for approximately $13.2 billion   
in revenues in 1996. In Canada, Stentor, a partnership of Canadian regional     
telephone companies, was the largest provider of long distance services prior   
to 1999. The Stentor partnership was discontinued on January 1, 1999, and the   
former Stentor partner companies such as Bell Canada and BCT.Telus              
Communications now compete against one another for the first time. Two other    
types of long distance providers also compete against the former Stentor        
partner companies. The first, which includes AT&T Canada and Call-Net           
Enterprises (Sprint Canada), owns and operates interexchange circuits and       
offers essentially the same services as the former Stentor partner companies.   
The second type of competitor consists of other long distance providers that    
lease but do not own interexchange circuits and sell their services primarily   
to distinct niche markets, such as ethnic communities, affinity associations or 
small business                                                                  

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associations. In Canada, we provide long distance services to small- and        
medium-sized businesses, residential customers and other telecommunication      
carriers and have sales and customer service offices in Vancouver, Toronto and  
Montreal. We operate international gateway switches in Toronto and Vancouver,   
maintain points-of-presence in Ottawa, Montreal and Calgary and lease           
interexchange circuits in Canada. In Canada, we offer Internet access services  
through our February 1999 acquisition of GlobalServe Communications, Inc. In    
March 1999, we acquired London Telecom Network, Inc. and certain related        
entities which provide long distance telecommunications services in Canada.     
With this acquisition and the completion of the acquisition of the related      
Wintel companies, we believe we are the third largest long distance provider in 
Canada among competitors to the former Stentor partner companies based on       
revenues. In June 1999, we acquired Telephone Savings Network Ltd., a reseller  
of local services to small- and medium-sized business customers in Canada.      

According to the International Telecommunications Union, the total        
telecommunications market in Mexico accounted for approximately $6.9 billion in 
1996. As of January 1, 1997, the local and long distance market was opened to   
facilities-based competition in Mexico. Mexico, however, imposes foreign        
ownership restrictions that limit the ownership of facilities-based carriers by 
non-Mexican persons to below 50%. The Mexican government has granted licenses   
to 10 companies (many of them affiliated with U.S.-based long distance carriers 
such as AT&T and MCI/WorldCom) to operate as facilities-based long distance     
carriers. Resale of basic switched voice long distance services, however, is    
still not allowed in Mexico. We provide customers with United States-Mexico     
cross border private line services, but are prohibited by the private ownership 
limitations from providing other services.                                      

As of June 30, 1999, we had approximately 385,000 business customers and  
875,000 residential customers in North America.                                 

Asia-Pacific. According to the International Telecommunications Union, in 
1996, the total telecommunications market in Australia accounted for            
approximately $13.4 billion in revenues. Telstra and Cable & Wireless Optus,    
the leading full-service carriers in Australia, own and operate local, national 
and international transmission networks. Telstra, which is majority-owned by    
the Australian government, is a traditional facilities-based carrier with a     
majority of the telecommunications market share. In addition to Cable &         
Wireless Optus and us, Telstra currently competes against other facilities-     
based carriers (such as AAPT), several switchless resellers and call-back       
service providers (including CorpTel), and mobile telecommunications carriers   
(such as Vodafone). Australia has further deregulated its long-distance market  
by allowing service providers other than Telstra and Cable & Wireless Optus to  
own domestic transmission facilities and mandating that Telstra provide equal   
(non-code) access to customers of select service providers such as us. We are a 
licensed carrier permitted to own and operate transmission facilities in        
Australia.                                                                      

We are the fourth largest long distance company in Australia based on     
revenues, providing domestic and international long distance services, data and 
Internet access services, as well as local and cellular service on a resale     
basis, to small- and medium-sized business customers and ethnic residential     
customers. We have invested substantial resources over the past three years to  
build a domestic and international long distance network to transform our       
Australian operations into a facilities-based telecommunications carrier.       
During 1997, we installed and began operating a five-city switched network      
using Northern Telecom switches in Sydney, Melbourne, Perth, Adelaide, and      
Brisbane. We purchased international fiber cable capacity during 1997 and       
linked the Australian network to the United States via the TPC-5, APCN, and     
Jasaurus cable systems, as well as to New Zealand. We became a fully licensed   
facilities-based telecommunications carrier on July 1, 1997. In August 1997,    
equal access was introduced in Australia, and we began the process of migrating 
and connecting customers directly onto our own network. We maintain both a 24-  
hour customer service center and a network management control center in         
Australia.                                                                      

 In March 1998, we purchased a controlling interest in Hotkey, an Australia-
based ISP, and in April 1998, we acquired all of the outstanding stock of       
Eclipse, an Australia-based data communications service provider. In February   
1999, we purchased the remaining stock in Hotkey. The Hotkey and Eclipse        
acquisitions positioned us to offer a complete range of telecommunications      
services for corporate customers in Australia,                                  

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including fully integrated voice and data networks, as well as Internet access. 
We market our services through a combination of direct sales to small- and      
medium-sized business customers, independent agents which market to business    
and residential customers, and media advertising aimed at ethnic residential    
customers living in Australia who make a high volume of international calls.    

We entered the Japanese market in late 1997 through the TelePassport/USFI 
acquisition. According to the International Telecommunications Union, in 1997,  
the total telecommunications market in Japan accounted for approximately $86.5  
billion in revenues. We maintain an office in downtown Tokyo and operate an     
international gateway switch to provide international calling services to       
resellers and small businesses. We interconnected our Tokyo switch to Los       
Angeles via the TPC-5 fiber cable system. We have a Type I carrier license,     
which permits us to provide selected telecommunications services using our own  
facilities in Japan. We plan to market our services in Japan through direct     
sales and relationships that we are establishing with business partners.        

As of June 30, 1999, we had approximately 29,250 business customers and   
294,110 residential customers in the Asia-Pacific region.                       

  Europe. According to the International Telecommunications Union, in 1997 the
total telecommunications market in the United Kingdom accounted for             
approximately $32.4 billion in revenue. In the United Kingdom, British Telecom  
historically has dominated the telecommunications market and is the largest     
carrier. Mercury, which owns and operates interexchange transmission            
facilities, is the second largest carrier. The remainder of the United Kingdom  
long distance market is comprised of an emerging market of licensed             
telecommunications service providers, such as Energis, and switch-based         
resellers, such as AT&T, MCI/WorldCom, ACC and GTS/Esprit.                      

We are a fully-licensed carrier in the United Kingdom and provide domestic
and international long distance services to residential customers, small        
businesses, and other telecommunications carriers. We operate an Ericsson AXE-  
10 international gateway telephone switch in London, which is directly          
connected to the United States and is directly connected to continental Europe  
via our international gateway switch in Frankfurt, Germany. In addition, we     
have completed the construction in London of an Intelsat earth station and      
lease capacity on the Intelsat-62(degrees) satellite. This new earth station is 
operational and is able to carry voice, data and Internet traffic to and from   
countries in the Indian Ocean/Southeast Asia region. Our European operations    
are headquartered in London, where we maintain both a 24-hour customer service  
call center and a 24-hour network management control center which monitors our  
network in the United Kingdom. We market our services in the United Kingdom     
using a combination of direct sales, agents, and direct media advertising       
primarily to ethnic customers who make a higher-than-average percentage of      
international calls.                                                            

We are in the process of expanding our services and network to continental
Europe which has recently begun the process of deregulation of its              
telecommunications markets. We currently hold a Class-4 switched voice          
telephone license in Germany, an L34.1 switched voice license in France and a   
voice services license in Switzerland. According to the International           
Telecommunications Union, in 1997, the German telecommunications market         
generated approximately $46.1 billion in revenues and the French                
telecommunications market generated approximately $26.9 billion in revenues.    
Our international gateway switch in Paris recently became operational, and by   
the end of the second quarter of 2000, our network in Europe is expected to     
include the Frankfurt international gateway switch which is currently           
operational, and up to 11 additional switches in various countries. Through the 
TelePassport/USFI acquisition, we acquired a base of small business customers   
in Germany to whom we provide reorigination services, establishing a platform   
for our expansion into that market. Additionally, we have opened our first      
continental European sales office in Frankfurt and are in the process of        
building a direct sales force and engaging independent sales agents to market   
our services.                                                                   

As of June 30, 1999, we had approximately 1,020 business customers and    
43,900 residential customers in the United Kingdom.                             

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Services                                                                        

We offer a broad array of telecommunications services through our network 
and through interconnection with the networks of other carriers. Our decision   
to offer certain services in a market is based on competitive factors and       
regulatory restraints within the market. Below is a summary of services we      
offer:                                                                          

.  International and Domestic Long Distance. We provide international long  
 distance voice services terminating in approximately 230 countries, and
 provide domestic long distance voice services within selected countries
within our principal service regions. Access methods required to      
originate a call vary according to regulatory requirements and the    
existing domestic telecommunications infrastructure.                  

.  Private Network Services. For business customers, we design and          
implement international private network services that may be used for 
voice, data and video applications.                                   

.  Reorigination Services. In selected countries, we provide call           
 reorigination services which allow non-United States country to country
  calling to originate from the United States, thereby taking advantage of
lower United States accounting rates.                                 

.  Local Switched Services. We intend to provide local service on a resale  
basis as part of our "multi-service" marketing approach, subject to   
 commercial feasibility and regulatory limitations. We currently provide
local service in Australia, Puerto Rico and the United States Virgin  
Islands.                                                              

.  Toll-free Services. We offer domestic and international toll-free        
  services within selected countries within our principal service regions.

.  Data and Internet Services. In Australia, we offer data services over    
  asynchronous transfer mode (ATM) and frame relay networks in addition to
other data services including Internet access. In Canada, we offer    
Internet access services through our February 1999 acquisition of     
GlobalServe and our May 1999 acquisition of ACC Telenterprises. In    
Germany, we offer Internet access services through our May 1999       
 acquisition of TCP/IP. Our satellite earth station in London enables us
to offer Internet and data transmission services in the Indian        
Ocean/Southeast Asian region. We plan to replicate this strategy so as
to offer such services in Latin America and the Pacific Rim by adding 
two additional satellite earth stations, one on each of the east and  
west coasts of the United States.                                     

.  Cellular Services. We resell Telstra analog and digital cellular         
services in Australia.                                                

.  Prepaid and Calling Cards. We offer prepaid and calling cards that may   
  be used by customers for domestic and international telephone calls both
within and outside of their home country.                             

Network                                                                         

General. Since our inception in 1994, we have been deploying a global     
intelligent telecommunications network consisting of international and domestic 
switches, related peripheral equipment, undersea fiber optic cable systems and  
leased satellite and cable capacity. We believe that our network allows us to   
control both the quality and cost of the on-net telecommunications services we  
provide to our customers. To ensure high-quality telecommunications services,   
our network employs digital switching and fiber optic technologies, uses SS7    
signaling and is supported by comprehensive monitoring and technical services.  
Our network consists of:                                                        

.  a global backbone network connecting intelligent gateway switches in our 
principal service regions;                                            

.  a domestic long distance network presence within certain countries       
within our principal service regions; and                             

.  a combination of owned and leased transmission facilities, resale        
arrangements and foreign carrier agreements.                          

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 Each of our international gateway switches is connected to our domestic and
international networks as well as those of other carriers in a particular       
market, allowing us to:                                                         

.  provide seamless service;                                                

.  package and market the voice and data services purchased from other      
carriers under the "Primus" brand name; and                           

.  maintain a substantial portion of each market's United States-bound      
  return traffic through our integrated communications network to maintain
quality service and cost efficiencies and increase gross margins.     

We have targeted North America, the United Kingdom and continental Europe 
for the immediate development of our network due to their economic stability    
and the more rapid pace of deregulation as compared to other areas of the       
world. We expect to expand our network into additional markets within our       
principal service regions, including in Japan and other parts of the Asia-      
Pacific region and Latin America. We are using our United Kingdom operations to 
coordinate efforts to enter other major markets in Europe in conjunction with   
the deregulation of the telecommunications industry in certain EU countries     
which began in 1998. This expansion commenced with our installation of an       
international gateway switch in Frankfurt, and is continuing with our           
international gateway switch in Paris, which has recently become operational,   
and with our acquisition of an international gateway switch in London from a    
European subsidiary of Telegroup.                                               

International Gateway and Domestic Switches. Our network consists of 19   
carrier-grade switches, including 15 international gateway switches (three in   
the New York City area, two in London and one in each of Los Angeles,           
Washington, Fort Lauderdale, Toronto, Vancouver, London, Paris, Frankfurt,      
Sydney, Tokyo and Puerto Rico), and four domestic switches in Australia         
(Adelaide, Brisbane, Melbourne and Perth). We currently operate more than 100   
POPs and Internet access nodes within our principal service regions. All of our 
switches were manufactured by Nortel or Ericsson, except for the Washington and 
Canadian switches.                                                              

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 Fiber Optic Cable Systems. Where our customer base has developed sufficient
traffic, we have purchased and leased undersea and land-based fiber optic cable 
transmission capacity to connect to our various switches. Where traffic is      
light or moderate, we obtain capacity to transmit traffic on a per-minute       
variable cost basis. When traffic volume increases and such commitments are     
cost effective, we either purchase lines or lease lines on a monthly or longer  
term basis at a fixed cost and acquire economic interests in transmission       
capacity through minimum assignable ownership units and indefeasible rights of  
use to international traffic destinations. The following chart sets forth a     
listing of the undersea fiber optic cable systems in which we have capacity     
(which includes both minimum assignable ownership units and indefeasible rights 
of use):                                                                        

                                                                [Download Table]

Cable System                   Countries Served                   Status      
------------                   ----------------                   ------      
                                                                              
TAT 12/13           United States--United Kingdom           Existing          
Gemini              United States--United Kingdom           Existing          
CANTAT              United States--Germany                  Existing          
                    United States--Canada                   Existing          
CANUS               United States--Canada                   Existing          
FLAG                United Kingdom--Italy                   Existing          
                    United Kingdom--Israel                  Existing          
UK--France 5        United Kingdom--France                  Existing          
Arianne             France--Greece                          Existing          
CIOS                United Kingdom--Israel                  Existing          
Aphrodite           United Kingdom--Cyprus                  Existing          
TPC 5               United States--Japan                    Existing          
APCN                Japan--Indonesia                        Existing          
Jasaurus            Indonesia--Australia                    Existing          
Atlantic Crossing-1 United States--United Kingdom           Existing          
Columbus II         United States--Mexico                   Existing          
Americas I          United States--Brazil                   Existing          
                    United States--United States Virgin                       
                    Islands                                 Existing          
                    United States Virgin Islands--                            
                    Trinidad                                Existing          
                    United States--United States Virgin                       
PTAT-1              Islands                                 Existing          
                    United States--United States Virgin                       
CARAC               Islands                                 Existing          
                    United States Virgin Islands--Puerto                      
Taino--Carib        Rico                                    Existing          
Bahamas I           United States--Bahamas                  Existing          
ECMS                United States Virgin Islands--          Existing          
                    Antigua--St. Martin--St. Kitts                            
                    --Martinique--Guyana                                      
CANTAT 3            United States--Denmark                  Existing          
ODIN                Netherlands--Denmark                    Existing          
RIOJA               Netherlands--Belgium                    Existing          
Southern Cross      United States--Australia                Under Construction
JPN--US             United States--Japan                    Under Construction
Americas II         United States--Argentina                Under Construction
Columbus III        United States--Spain                    Under Construction
Pan American        United States Virgin Islands--Aruba--   Under Construction
                    Venezuela--Panama                                         
                    --Colombia--Ecuador--Peru--Chile--                        
                    Panama                                                    
Bahamas 2           United States--Bahamas                  Under Construction
MONA                Puerto Rico--Dominican Republic         Under Construction
Antillas 1          Puerto Rico--Dominican Republic         Under Construction

We have also entered into an agreement to purchase $20 million of fiber   
capacity from Qwest, which will provide connections among our U.S. gateway      
switches and future points of presence. By replacing existing leased lines in   
the U.S. with this Primus-owned high speed capacity, we expect to reduce our    
cost structure and provide improved service to customers on our high traffic    
routes. During the fourth quarter of 1998, we began using the first portion of  
this capacity--a DS-3 link between New York and Los Angeles. In May, 1999       

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through a reciprocal capacity purchase agreement with Global Crossing Holdings  
Ltd., we agreed to purchase up to $50 million of fiber capacity on Global       
Crossing's undersea fiber network.                                              

Satellite Earth Stations and Capacity. We are constructing international  
satellite earth stations and purchasing capacity on international satellites in 
order to provide data and Internet transmission services, in addition to voice  
services, principally to and from post, telephone and telegraph operators,      
other telecommunications carriers and Internet service providers, in developing 
countries. We have completed the construction in London of an Intelsat earth    
station and lease capacity on the Intelsat-62(degrees) satellite. This earth    
station is now operational and is able to carry voice, data and Internet        
traffic to and from countries in the Indian Ocean/Southeast Asia region,        
Eastern Africa and the Middle East. Pursuant to our purchase agreement with     
Global Crossing, Global Crossing has agreed to purchase up to $25 million of    
capacity on our global satellite network.                                       

  Foreign Carrier Agreements. In selected countries where competition with the
traditional incumbent post, telephone and telegraph operators is limited or is  
not currently permitted, we have entered into foreign carrier agreements with   
post, telephone and telegraph and other licensed operators or other service     
providers which permit us to provide traffic into and receive return traffic    
from these countries. We have existing foreign carrier agreements with post,    
telephone and telegraph operators in Cyprus, Greece, India, Iran, Italy, New    
Zealand, the Philippines, Belgium, Denmark, Israel, Ireland, Singapore,         
Malaysia, Japan, Australia, France, Switzerland, Argentina, the Bahamas and the 
Dominican Republic and maintain additional agreements with other foreign        
carriers in other countries.                                                    

Network Management and Control. We own and operate network management     
control centers in McLean, Virginia, London and Sydney and, with the Telegroup  
acquisition, in Cedar Rapids, Iowa, which are used to monitor and control a     
majority of the switches and other transmission equipment used in our network.  
These network management control centers operate seven days a week, 24 hours    
per day, 365 days a year. In Canada, Tokyo and Frankfurt, we currently monitor  
and control each switch locally. We are using a portion of the net proceeds of  
the offering of the notes to be exchanged to upgrade the existing network       
management control centers so that they can monitor all of our switching and    
other transmission equipment throughout the entire network.                     

 Planned Expansion of Network. We recently installed and commenced operating
an international gateway switch in Paris. By the end of 2000, we intend to add  
up to 11 additional switches in Europe, one switch in North America and one     
switch in Japan. Additionally, we intend to continue to invest in additional    
switches and points of presence in major metropolitan areas of our principal    
service regions as the traffic usage warrants the expenditure. We also intend   
to acquire capacity in terrestrial and undersea fiber optic cable systems in    
our principal service regions, particularly in North America and Europe, by the 
end of 1999.                                                                    

Customers                                                                       

As of June 30, 1999, Primus had approximately 1.7 million customers. Set  
forth below is a description of our customer base:                              

.  Businesses. Historically, our business sales and marketing efforts       
targeted small- and medium-sized businesses with significant          
international long distance traffic. More recently, we have also      
  targeted larger multi-national businesses. In an effort to attract these
larger business customers in multiple markets, we intend to offer a   
broad array of services (including long distance voice, Internet, data
 and cellular services) in approximately 10 major markets, including the
United States, Canada, Australia, the United Kingdom, Germany, France,
 Japan and Italy. We believe that these businesses are and will continue
to be attracted to us primarily due to price savings compared to      
 traditional carriers and, secondarily, due to our personalized approach
to customer service and support, including customized billing and     
bundled service offerings.                                            

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.  Residential Customers. Our residential sales and marketing strategy      
targets ethnic residential customers who generate high international  
traffic volumes. We believe that such customers are attracted to us   
  because of price savings as compared to traditional carriers, simplified
pricing structure, and multilingual customer service and support.     

.  Telecommunications Carriers and Resellers. We compete for the business   
of other telecommunications carriers and resellers primarily on the   
basis of price and service quality. Sales to other carriers and       
resellers help us maximize the utilization of our network and thereby 
reduce our fixed costs per minute of use.                             

.  Customer Service. We strive to provide personalized customer service and 
believe that the quality of our customer service is one of our        
competitive advantages. Our larger customers are actively covered by  
dedicated account and service representatives who seek to identify,   
  prevent and solve problems. We provide toll-free, 24-hour a day customer
service in the United States, Canada, the United Kingdom and Australia
which can be accessed to complete collect, third party, person-to-    
person, station-to-station and credit card validation calls. We also  
provide a multi-lingual "Trouble Reporting Center" for our residential
 customers. As of June 30, 1999, we employed approximately 466 full-time
customer service employees, many of whom are multi-lingual.           

Sales and Marketing                                                             

We market our services through a variety of sales channels, as summarized 
below:                                                                          

.  Direct Sales Force. As of June 30, 1999, our direct sales force was      
comprised of 282 full-time employees who focus on business customers  
with substantial international traffic, including multinational       
 businesses and international governmental organizations. As of June 30,
 1999, we employed 213 full-time direct sales representatives focused on
ethnic residential consumers and direct sales representatives who     
 exclusively sell wholesale services to other long-distance carriers and
resellers. Direct sales personnel are compensated with a base salary  
 plus commissions. We currently have offices in New York City, Virginia,
Tampa, Puerto Rico, St. Thomas, Montreal, Toronto, Vancouver, Mexico  
City, London, Frankfurt, Adelaide, Brisbane, Melbourne, Perth, Sydney 
and Tokyo.                                                            

.  Independent Sales Agents. We also sell our services through independent  
sales agents and representatives, who typically focus on residential  
consumers and small- and medium-sized businesses. In June 1999, we    
significantly expanded our independent sales agent program through the
acquisition of Telegroup's global network of agents and its agent     
  support systems. These support systems include RepLink, a World Wide Web
  interface that allows agents to send customer information directly to us
via the Internet for fully automated provisioning. Through RepLink,   
agents also receive monthly usage reports, commission reports, reports
on new products and updates about the agent program.                  

An agent receives commissions based on revenue generated by       
customers obtained for us by the agent. We also provide additional      
incentives in the form of restricted stock to those agents that meet    
certain revenue growth targets. We usually grant only nonexclusive      
sales rights and require our agents and representatives to maintain     
minimum revenues. we also market our services through representatives   
of network marketing companies.                                         

.  Telemarketing. We employ full-time telemarketing sales personnel in our  
Tampa call center to supplement sales efforts to ethnic residential   
consumers and small- and medium-sized business customers.             

.  Media and Direct Mail. We use a variety of print, television and radio   
 advertising to increase name recognition and generate new customers. We
reach ethnic residential consumers by print advertising campaigns in  
ethnic newspapers, and by advertising on select radio and television  
programs.                                                             

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Management Information and Billing Systems                                      

 We use various management information, network and customer billing systems
in our different operating subsidiaries to support the functions of network and 
traffic management, customer service and customer billing. For financial        
reporting, we utilize a common system in each of our markets. For our billing   
requirements in the United States, we use a customer billing system developed   
by Electronic Data Systems Inc. (EDS) which supplies, operates and maintains    
this system and is responsible for providing backup facilities and disaster     
recovery. The EDS system is widely used in the telecommunications industry and  
has been customized to meet our specific needs. Elsewhere, we use other third   
party systems or systems developed in-house to handle our billing requirements. 
We bill all of our business, reseller and residential customers directly in all 
of our principal service regions.                                               

We believe that, subject to modifications which are necessary to make our 
systems Year 2000 compliant, our financial reporting and billing systems are    
generally adequate to meet our needs in the near term. However, as we continue  
to grow, we will need to invest additional capital to purchase hardware and     
software, license more specialized software, increase capacity and link our     
systems among different countries.                                              

Competition                                                                     

The international telecommunications industry is highly competitive and   
significantly affected by regulatory changes, marketing and pricing decisions   
of the larger industry participants and the introduction of new services made   
possible by technological advances. We believe that long distance service       
providers compete on the basis of price, customer service, product quality and  
breadth of services offered. In each country of operation, we have numerous     
competitors. We believe that as the international telecommunications markets    
continue to deregulate, competition in these markets will increase, similar to  
the competitive environment that has developed in the United States following   
the AT&T divestiture in 1984. Prices for long-distance voice calls in the       
markets in which we compete have declined historically and are likely to        
continue to decrease. In addition, many of our competitors are significantly    
larger, have substantially greater financial, technical and marketing resources 
and larger networks.                                                            

Privatization and deregulation have had, and are expected to continue to  
have, significant effects on competition in the industry. For example, as a     
result of legislation enacted in the United States, regional Bell operating     
companies will be allowed to enter the long distance market, AT&T, MCI/WorldCom 
and other long distance carriers will be allowed to enter the local telephone   
services market, and cable television companies and utilities will be allowed   
to enter both the local and long distance telecommunications markets. In        
addition, competition has begun to increase in the European Union               
telecommunications markets in connection with the deregulation of the           
telecommunications industry in most EU countries, which began in January 1998.  
This increase in competition could adversely affect net revenue per minute and  
gross margin as a percentage of net revenue.                                    

 The following is a brief summary of the competitive environment in selected
countries within each of its principal service regions:                         

.  North America. In the United States, which is the most competitive and   
among the most deregulated long distance markets in the world,        
competition primarily is based upon pricing, customer service, network
quality, and the ability to provide value-added services. AT&T is the 
  largest supplier of long distance services, with MCI/WorldCom and Sprint
being the next largest providers. In the future, under provisions of  
recently enacted federal legislation, we anticipate that we will also 
 compete with regional Bell operating companies, local exchange carriers
  and ISPs in providing domestic and international long-distance services.
The Canadian telecommunications market is highly competitive and is   
dominated by a few established carriers whose marketing and pricing   
decisions have a significant impact on the other industry participants
  including us. We compete with facilities-based carriers, other resellers
and rebillers, primarily on the basis of price. The principal         
facilities-based competitors include the former Stentor member        
companies, in particular, Bell Canada, the                            

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dominant supplier of local and long-distance services in Canada, and  
BCT.Telus Communications, the next largest Stentor company, as well as
 non-Stentor companies, AT&T Canada Corp., Teleglobe Canada and Call-Net
 Enterprises (Sprint Canada). Based upon current market share estimates,
the former Stentor member companies control approximately 70.0% of the
entire Canadian long distance market and approximately 66.0% of the   
business long distance market. The former Stentor member companies    
discontinued their alliance on January 1, 1999 and now compete against
one another for the first time.                                       

.  Asia-Pacific. Australia is one of the most deregulated and competitive   
telecommunications markets in the Asia-Pacific region. Our principal  
competitors in Australia are Telstra, the dominant carrier, Cable &   
Wireless Optus and AAPT and a number of other switchless resellers. We
 compete in Australia by offering a comprehensive menu of competitively-
priced products and services, including value-added services, and by  
providing superior customer service and support. We believe that      
competition in Australia will increase as more companies are awarded  
carrier licenses in the future. Our principal competitor in Japan is  
  KDD, the dominant carrier, as well as Japan Telecom, IDC and a number of
second tier carriers, including Cable & Wireless, MCI/WorldCom and    
ATNet.                                                                

.  Europe. Our principal competitors in the United Kingdom are British      
Telecom, the dominant supplier of telecommunications services in the  
United Kingdom, and Cable & Wireless Communications. Other competitors
in the United Kingdom include Colt, Energis, GTS/Esprit and RSL       
  Communications. We compete in the United Kingdom and continental Europe,
and expect to compete in other European countries, by offering        
competitively-priced bundled and stand-alone services, personalized   
customer service and value-added services. Our principal competitor in
 Germany is Deutsche Telekom, the dominant carrier. We also compete with
Mannesmann ARCOR/O.tel.o Communications, VIAG Interkom, MobilCom,     
Talkline, NTS/Colt, MCI/WorldCom and RSL Communications. Additionally,
 we also face competition from other licensed public telephone operators
that are constructing their own facilities-based networks, cable      
companies and switch-based resellers, including the emerging German   
local exchange carriers known as "City Carriers."                     

Government Regulation                                                           

As a global telecommunications company, we are subject to varying degrees 
of regulation in each of the jurisdictions in which we provide services. Local  
laws and regulations, and the interpretation of such laws and regulations,      
differ significantly among the jurisdictions in which we operate. There can be  
no assurance that future regulatory, judicial and legislative changes will not  
have a material adverse effect on us, that domestic or international            
regulators or third parties will not raise material issues with regard to our   
compliance or noncompliance with applicable regulations or that regulatory      
activities will not have a material adverse effect on us.                       

Regulation of the telecommunications industry is changing rapidly both    
domestically and globally. The Federal Communications Commission is             
considering a number of international service issues in the context of several  
policy rulemaking proceedings in response to specific petitions and             
applications filed by other international carriers. We are unable to predict    
how the FCC will resolve the pending international policy issues or how such    
resolution will effect its international business. In addition, the World       
Trade Organization Agreement, which reflects efforts to dismantle government-   
owned telecommunications monopolies throughout Europe and Asia may affect us.   
Although we believe that these deregulation efforts will create opportunities   
for new entrants in the telecommunications service industry, there can be no    
assurance that they will be implemented in a manner that would benefit us.      

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The regulatory framework in certain jurisdictions in which we provide     
services is described below:                                                    

United States                                                                 

In the United States, our services are subject to the provisions of the   
Communications Act of 1934, FCC regulations thereunder, as well as the          
applicable laws and regulations of the various states and state regulatory      
commissions.                                                                    

As a carrier offering services to the public, we must comply with the     
requirements of common carriage under the Communications Act, including the     
offering of service on a non-discriminatory basis at just and reasonable rates, 
and obtaining FCC approval prior to any assignment of authorizations or any     
transfer of de jure or de facto control of the company. We are classified as a  
non-dominant common carrier for domestic service and are not required to obtain 
specific prior FCC approval to initiate or expand domestic interstate services. 

 International Service Regulation. International common carriers like us are
required to obtain authority under Section 214 of the Communications Act and    
file a tariff containing the rates, terms, and conditions applicable to their   
services prior to initiating their international telecommunications services.   
We have obtained all required authorizations from the FCC to use, on a          
facilities and resale basis, various transmission media for the provision of    
international switched services and international private line services and     
have filed a tariff.                                                            

In addition to the general common carrier principles, we must conduct our 
international business in compliance with the FCC's International Settlements   
Policy, the rules that establish the permissible boundaries for U.S.-based      
carriers and their foreign correspondents to settle the cost of terminating     
each others' traffic over their respective networks.                            

Domestic Service Regulation. We are considered a non-dominant domestic    
interstate carrier subject to minimal regulation by the FCC. We are not         
required to obtain FCC authority to expand our domestic interstate operations,  
but we are required to maintain a tariff on file at the FCC, file various       
reports and pay various fees and assessments. Among other things, interstate    
common carriers must offer service on a nondiscriminatory basis at just and     
reasonable rates. As a nondominant carrier, we are subject to the FCC's         
complaint jurisdiction. In particular, we may be subject to complaint           
proceedings in conjunction with alleged noncompliance such as unauthorized      
changes in a customer's preferred carrier. The 1996 Telecommunications Act also 
addresses a wide range of other telecommunications issues that may potentially  
impact our operations.                                                          

  Our costs of providing long distance services will be affected by changes in
the access charge rates imposed by incumbent local exchange carriers for        
origination and termination of calls over local facilities. The FCC has         
significantly revised its access charge rules in recent years to permit         
incumbent local exchange carriers greater pricing flexibility and relaxed       
regulation of new switched access services in those markets where there are     
other providers of access services. The FCC continues to adjust its access      
charge rules and has indicated that it will promulgate additional rules         
sometime in 1999 that may grant certain local exchange carriers further         
flexibility.                                                                    

 The FCC has also significantly revised the universal service subsidy regime
to be funded by interstate carriers, such as us, and certain other entities.    
The FCC recently established new universal service funds to support qualifying  
schools, libraries, and rural health care providers and expanded subsidies for  
low income consumers. The FCC is continuing to revise its universal service     
rules which may result in further substantial increases in the overall cost of  
the subsidy program. The FCC order revising these funds is under appeal by the  
U.S. Court of Appeals for the Fifth Circuit. The outcome of these proceedings   
or their effect cannot be predicted.                                            

State Regulation. Our intrastate long distance operations are subject to  
various state laws and regulations, including, in most jurisdictions,           
certification and tariff filing requirements. Some states also require the      
filing of                                                                       

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periodic reports, the payment of various fees and surcharges and compliance     
with service standards and consumer protection rules. States often require      
pricing approval or notification for certain stock or asset transfers or, in    
several states, for the issuance of securities, debt or for name changes. We    
have received the necessary certificate and tariff approvals to provide         
intrastate long distance service in 48 states. Certificates of authority can    
generally be conditioned, modified, canceled, terminated, or revoked by state   
regulatory authorities for failure to comply with state law and/or the rules,   
regulations, and policies of the state regulatory authorities. Fines and other  
penalties also may be imposed for such violations. Public service commissions   
also regulate access charges and other pricing for telecommunications services  
within each state. The regional Bell operating companies and other local        
exchange carriers have been seeking reduction of state regulatory requirements, 
including greater pricing flexibility which, if granted, could subject us to    
increased price competition. We may also be required to contribute to universal 
service funds in some states.                                                   

  Wireless Service Regulations. Through TresCom, we hold a variety of wireless
licenses issued by the FCC. As a licensee authorized to provide microwave and   
satellite earth station services, we are subject to Title III of the 1934       
Communications Act and FCC regulations promulgated thereunder. All wireless     
licenses are subject to foreign ownership restrictions. However, the            
Communications Act permits licensees to seek a waiver of these restrictions     
allowing 25% or greater indirect foreign ownership.                             

Canada                                                                        

 The operations of telecommunications carriers are regulated by the Canadian
Radio-television and Telecommunications Commission (CRTC), which has recently   
established a new competitive regulatory framework governing the international  
segment of the long-distance market, eliminating certain barriers to            
competition, consistent with Canada's commitments in the World Trade            
Organization Agreement. As a result, full facilities-based and resale           
competition has been introduced in the provision of international services in   
Canada, effective October 1, 1998, coincident with the elimination of traffic   
routing limitations on switched hubbing through the United States. In addition, 
foreign ownership rules for facilities-based carriers have now been waived in   
relation to ownership of international submarine cables landed in Canada and    
satellite earth stations used for telecommunications purposes. Effective        
January 1, 1999, all international service providers must be licensed by the    
CRTC under the Telecommunications Act of 1993, and we received our              
international license as of December 23, 1998. Our international operations     
will remain subject to conditions of our CRTC license, which address matters    
such as competitive conduct and consumer safeguards, and to a regime of         
contribution charges (roughly the equivalent of access charges in the U.S.).    
The CRTC is currently conducting an examination of its international services   
contribution regime in light of its recent decision to move from a per circuit  
to a per minute contribution charge arrangement.                                

 Primus, as a reseller of domestic Canadian telecommunications, virtually is
unregulated by the CRTC. In particular, because we do not own or operate        
transmission facilities in Canada, we are not subject to the Canadian           
Telecommunications Act or the regulatory authority of the CRTC, except to the   
extent that our provision of international telecommunications services is       
subject to CRTC licensing and other regulations. Therefore we may provide       
resold Canadian domestic long distance service without rate, price or tariff    
regulation, ownership limitations, or other regulatory requirements.            

Competition. Long distance competition has been in place in Canada since  
1990 for long distance resellers and since 1992 for facilities-based carriers.  
Since 1994, the incumbent local exchange carriers have been required to provide 
"equal access" which eliminated the need for customers of competitive long      
distance providers to dial additional digits when placing long distance calls.  
In June 1992, the CRTC issued its ground-breaking Telecom Decision CRTC 92-12   
requiring the incumbent local exchange carriers to interconnect their networks  
with their facilities-based as well as resale competitors. However, these       
companies have now disbanded the Stentor alliance effective January 1, 1999,    
and have begun to compete against one another. Other nationwide providers are   
AT&T Canada Corp., and Sprint Canada. Additional long distance services         
competition is provided by a substantial resale long distance industry in       
Canada.                                                                         

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Foreign Ownership Restrictions. Under Canada's Telecommunications Act and 
certain regulations promulgated pursuant to such Act, foreign ownership         
restrictions are applicable to facilities-based carriers (known as "Canadian    
carriers"), but not resellers, which may be wholly foreign-owned and            
controlled. These restrictions limit the amount of direct foreign investment in 
Canadian carriers to no more than 20% of the voting equity of a Canadian        
carrier operating company and no more than 33 1/3% of the voting equity of a    
Canadian carrier holding company. The restrictions also limit the number of     
seats which may be occupied by non-Canadians on the board of directors of a     
Canadian carrier operating company to 20%. In addition, under Canadian law, a   
majority of Canadians must occupy the seats on the board of directors of a      
Canadian carrier holding company. Although it is possible for foreign investors 
to also hold non-voting equity in a Canadian carrier, the law requires that the 
Canadian carrier not be "controlled in fact" by non-Canadians.                  

Australia                                                                     

The provision of our services is subject to federal regulation. The two   
primary instruments of regulation are the Australian Telecommunications Act of  
1997 and federal regulation of anti-competitive practices pursuant to the       
Australian Trade Practices Act of 1974. The current regulatory framework came   
into effect in July 1997.                                                       

 We are licensed under the Telecommunications Act of 1997 to own and operate
transmission facilities in Australia. Under the regulatory framework, we are    
not required to maintain a carriage license in order to supply carriage         
services to the public using network facilities owned by another carrier.       
Instead, with respect to carriage services, we must comply with legislated      
"service provider" rules contained in the Telecommunications Act of 1997        
covering matters such as compliance with the Telecommunications Act of 1997,    
operator services, regulation of access, directory assistance, provision of     
information to allow maintenance of an integrated public number database, and   
itemized billing.                                                               

Two federal regulatory authorities exercise control over a broad range of 
issues affecting the operation of the Australian telecommunications industry.   
The Australian Communications Authority (ACA) is the authority regulating       
matters including the licensing of carriers and technical matters, and the      
Australian Competition and Consumer Commission (ACCC) has the role of promotion 
of competition and consumer protection. We are required to comply with the      
terms of our own license, are subject to the greater controls applicable to     
licensed facilities-based carriers and are under the regulatory control of the  
ACA and the ACCC. In addition, other federal legislation, various regulations   
pursuant to delegated authority and legislation, ministerial declarations,      
codes, directions, licenses, statements of Australian government policy and     
court decisions affecting telecommunications carriers also apply to us.         

  There is no limit to the number of carriers who may be licensed. Any company
that meets the relevant financial and technical standards and complies with the 
license application process can become a licensed carrier permitted to own and  
operate transmission facilities in Australia. Carriers are licensed             
individually, are subject to charges that are intended to cover the costs of    
regulating the telecommunications industry, and are obliged to comply with      
license conditions (including obligations to comply with the Telecommunications 
Act of 1997, with certain commitments made in their industry development plan   
and with the telecommunications access regime and related facilities access     
obligations). Carriers also must meet the universal service obligation, to      
assist in providing all Australians, particularly in remote areas, with         
reasonable access to standard telephone services. The levy required to be paid  
by in connection with this obligation has been set previously at a level that   
is not material. The levy is currently under review. The outcome from the       
Australian Communications Authority's assessment and the Australian             
Government's policy considerations is expected to result in a levy that will    
not be material for us. However, there can be no guarantee that the Australian  
Communications Authority will not make an assessment of a universal service     
levy that would be material or that the Australian Government will not          
legislate for an outcome that would be material.                                

Fair Trading Practices. The ACCC enforces legislation for the promotion of
competition and consumer protection, particularly rights of access (including   
pricing for access) and interconnection. The ACCC can issue                     

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a competition notice to a carrier which has engaged in anti-competitive         
conduct. Where a competition notice has been issued, the ACCC can seek          
pecuniary penalties, and other carriers can seek damages, if the carrier        
continues to engage in the specified conduct.                                   

The Telecommunications Act of 1997 package of legislation includes a      
telecommunications access regime that provides a framework for regulating       
access rights for specific carriage services and related services through the   
declaration of services by the ACCC. The regime establishes mechanisms within   
which the terms and conditions of access can be determined. The Australian      
government intends the access regime to reduce the power of Telstra and Cable & 
Wireless Optus (as the former protected fixed line carriers) and other carriers 
who may come to own or control important infrastructure or services necessary   
for competition.                                                                

The access regime establishes a mechanism for the industry to develop an  
access code containing model terms and conditions for access to particular      
declared services. Once approved by the ACCC, those model terms and conditions  
may be adopted in an undertaking by individual carriers who are under an access 
obligation.                                                                     

  In July 1997, the Australian government mandated that Telstra provide access
to its facilities at specified rates to other service providers including us.   
We have negotiated access arrangements with Telstra in substitution for certain 
mandated arrangements.                                                          

 Foreign Ownership Limitations. Foreign investment in Australia is regulated
by the Foreign Acquisitions and Takeovers Act 1975. We notified the Australian  
government of our proposed acquisition of Axicorp in 1996 and were informed at  
that time that there were no objections to the investment in terms of           
Australia's foreign investment policy. There can be no assurance, however, that 
additional foreign ownership restrictions will not be imposed on the            
telecommunications industry or other foreign investors, including us, in the    
future.                                                                         

Japan                                                                         

 Our services in Japan are subject to regulation by the Japanese Ministry of
Post and Telecommunications under the Japanese Telecommunications Business Law. 
We have obtained licenses as a Type I business, and as a Special Type II        
business, and also as a General Type II business through the Telegroup          
acquisition. Our licenses allow us to provide selected international            
telecommunications services using our own facilities, as well as leased         
facilities, and domestic telecommunications services using leased facilities.   
There can be no guarantee that the Japanese regulatory environment will allow   
us to provide service in Japan at competitive rates.                            

European Union                                                                

 In Europe, the regulation of the telecommunications industry is governed at
a supra national level by the European Commission, consisting of members from   
the following countries: Austria, Belgium, Denmark, Finland, France, Germany,   
Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden    
and the United Kingdom, which is responsible for creating pan-European policies 
and, through legislation, developing a regulatory framework to ensure an open,  
competitive telecommunications market.                                          

 In March 1996, the EU adopted the Full Competition Directive containing two
provisions which required EU member states to allow the creation of alternative 
telecommunications infrastructures by July 1, 1996, and which reaffirmed the    
obligations of EU member states to abolish the post, telephone and telegraph    
operators' monopolies in voice telephony by 1998. Certain EU countries were     
allowed to delay the abolition of the voice telephony monopoly based on         
derogations established in the Full Competition Directive. These countries      
include Luxembourg (July 1, 1998), Spain and Ireland (which were liberalized on 
December 1, 1998), Portugal (January 1, 2000) and Greece (December 31, 2000).   

Each EU member state in which we currently conduct or plan to conduct our 
business has a different regulatory regime and such differences have continued  
beyond January 1998. The requirements for us to obtain                          

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necessary approvals vary considerably from country to country and are likely to 
change as competition is permitted in new service sectors. Most EU member       
states require companies to obtain a license in order to provide voice          
telephony services or construct and operate telecommunications networks.        
However, the EU generally does not permit its member states to require          
individual licenses for other types of services. In addition, we have obtained  
and will continue to seek to obtain interconnection agreements with other       
carriers within the EU. While EU directives require that dominant carriers      
offer cost-based and nondiscriminatory interconnection to competitors,          
individual EU member states have implemented and may implement this requirement 
differently. As a result, we may be delayed in obtaining or may not be able to  
obtain interconnection in certain countries that would allow us to compete      
effectively. Moreover, there can be no guarantee that long distance providers   
like us will be able to afford customers "equal access" to their networks, and  
the absence of such equal access could put such long distance companies at a    
disadvantage with respect to existing post, telephone and telegraph operators.  

United Kingdom                                                                

Our services are subject to the provisions of the United Kingdom          
Telecommunications Act. The Secretary of State for Trade and Industry, acting   
on the advice of the United Kingdom Department of Trade and Industry, is        
responsible for granting UK telecommunications licenses, while the Director     
General of Telecommunications and Oftel are responsible for enforcing the terms 
of such licenses. Oftel attempts to promote effective competition both in       
networks and in services to redress anti-competitive behavior.                  

In 1991, the British government established a "multi-operator" policy to  
replace the duopoly that had existed between British Telecom and Cable and      
Wireless Communications. Under the multi-operator policy, the Department of     
Trade and Industry recommends the grant of a license to operate a               
telecommunications network to any applicant that it believes has a reasonable   
business plan and where there are no other overriding considerations not to     
grant such license. All public telecommunications operators and international   
simple voice resellers operate under individual licenses granted by the         
Secretary of State for Trade and Industry pursuant to the United Kingdom        
Telecommunications Act. Any telecommunications system with compatible equipment 
that is authorized to be run under an individual license is permitted to        
interconnect to British Telecom's network. As of June 30, 1999, only those      
systems providing bearer services will be entitled to interconnection,          
providing the operator has been registered in Annex II. Under the terms of      
British Telecom's license, it is required to allow any such licensed operator   
to interconnect its system to British Telecom's system, unless it is not        
reasonably practicable to do so (e.g., due to incompatible equipment).          

Our subsidiary, Primus Telecommunications Limited, holds a license that   
authorizes it to provide switched voice services over leased private lines to   
all international points. In addition, Primus Telecommunications Limited has    
received a license from the United Kingdom's Secretary for Trade and Industry   
to provide international facilities-based voice services to all international   
points from the United Kingdom. This license also allows the holder to acquire  
ownership interests in or construct the United Kingdom half circuit of any IRU  
as well as backhaul facilities. The international facilities-based license      
together with the international simple resale license authorize the provision   
of every voice and data service, except the provision of broadcasting and       
mobile services. While the international facilities-based license authorizes us 
to acquire ownership interests in the United Kingdom half-circuit of satellite  
space segment in order to provide satellite-based services, it is also          
necessary to apply for a Wireless Telegraphy Act 1949 License which authorizes  
the use of the spectrum.                                                        

Telegroup Network Services Ltd. holds an ISVR license granted on December 
31, 1997 and Telegroup UK Ltd. holds an international facilities-based license  
granted on December 30, 1997.                                                   

Tariffs. Telecommunications tariffs on operators in the United Kingdom    
(excluding British Telecom) are generally not subject to prior review or        
approval by regulatory authorities, although Oftel has historically imposed     
price caps on British Telecom. British Telecom has advocated and will likely    
continue to advocate for                                                        

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greater pricing flexibility, including flexibility for pricing toll free and    
other services. Greater pricing flexibility could allow British Telecom to      
charge us higher prices for certain services or to charge end user customers    
prices that are lower than we are able to charge.                               

Interconnection and Indirect Access. We must interconnect our U.K. network
to networks of other service providers in the United Kingdom and allow our end  
user customers to obtain access to our services in order to compete effectively 
in the United Kingdom. In the United Kingdom, licensed long distance carriers   
like us can obtain interconnection to British Telecom at cost-based rates.      
However, while customers of British Telecom's long distance service can access  
that service automatically (i.e., without dialing additional digits), customers 
of other long distance carriers generally must dial additional digits to access 
their chosen carrier's services.                                                

 Fair Trading Practices. Oftel is the principal regulator of the competitive
aspects of the United Kingdom telecommunications industry. There are no foreign 
ownership restrictions that apply to telecommunications company licensing in    
the United Kingdom although the Department of Trade and Industry does have a    
discretion as to whether to award licenses on a case by case basis. We also are 
subject to general European law, which, among other things, prohibits certain   
anti-competitive agreements and abuses of dominant market positions through     
Articles 81 and 82 of the Treaty of Rome.                                       

Germany                                                                       

  The German Telecommunications Act of 1996 liberalized all telecommunications
activities as of January 1, 1998. The German Telecom Act has been complemented  
by several ordinances.                                                          

 Under the German regulatory scheme, licenses are required for the operation
of infrastructure and the provision of voice telephony services. Licenses       
required for the operation of infrastructure are divided into 3 license         
classes: mobile telecommunications (license class 1); satellite (license class  
2); and other telecommunications services for the general public (license class 
3). In addition to the infrastructure licenses, a separate license is required  
for provision of voice telephony services to the general public on the basis of 
self-operated telecommunications networks (license class 4). A class 4 license  
does not include the right to operate transmission infrastructure. All other    
telecommunications services (e.g. valued-added, data, etc.) are only subject to 
a notification requirement. We operate under a line license class 4 which has   
been extended to a Germany-wide area license.                                   

  Under the German Telecom Act, companies that desire to connect with Deutsche
Telekom's network must enter into an interconnection agreement with the         
regulated interconnection tariffs. We entered into an interconnection agreement 
with Deutsche Telekom on February 27, 1998 at the regulated standard            
interconnection rates presently under court review. Our interconnection         
agreement with Deutsche Telekom permits the parties to renegotiate              
interconnection rates or other provisions of the agreement in the event of a    
change in the German regulatory environment or other circumstances which have a 
bearing on the economic basis of the interconnection agreement or a party's     
license situation or which are considered by both parties to materially affect  
the interconnection agreement in any other way. The interconnection agreement   
may also be terminated by commencing a six month notice period at the end of    
the calendar year. After the public announcement on December 15, 1998, Deutsche 
Telekom, by letter of December 23, 1998, informed us that, as a matter of       
precaution, it terminated the interconnection agreement as of December 31, 1999 
and it asked that renegotiations be opened.                                     

 Several complaints, the outcome of which may affect our business, currently
are pending before the Regulierungsbehorde fur Telekommunikation und Post       
(RegTP) or German courts concerning interconnection with Deutsche Telekom.      
Since Deutsche Telekom and some of its major competitors in Germany have been   
unable to reach agreement on interconnection rates, the RegTP established       
provisional interconnection tariffs in September 1997 which Deutsche Telekom    
has since challenged in court. These rates are now part of the standard offer   
of Deutsche Telekom and are valid for all interconnected and licensed carriers  
for as long as the                                                              

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matter is pending before the German courts. Court review of these rates may     
result in higher rates being imposed on network operators retroactively as the  
standard interconnection agreement provides for retroactive effect of the       
court's final decision. Other pending complaints concern the costs of billing   
services provided by Deutsche Telekom to other carriers and rates for direct    
access to the end-user lines of Deutsche Telekom. It is expected that a final   
resolution to these matters will take several years.                            

Due, in part, to Deutsche Telekom's refusal, since March 1998, to conclude
interconnection agreements with long-distance operators, the RegTP initiated a  
public hearing concerning the prerequisites for interconnection under the       
German Telecom Act. The preliminary results were presented to the general       
public in a hearing on December 15, 1998 and have been confirmed and published. 
Accordingly, the RegTP regards an operator that requests three points of        
interconnection directed by one switch and three leased lines connecting these  
three points of interconnection as a carrier operating a public                 
telecommunications network as defined in the German Telecom Act and as such     
they are entitled to interconnection based on the regulated tariffs. Deutsche   
Telekom has filed an application requesting such surcharges to be imposed on    
all operators who have not signed the new interconnection agreement requiring   
operators to install additional points of interconnection and meet minimum      
traffic requirements to avoid atypical traffic. Deutsche Telekom uses the term  
"atypical traffic" to denote what it perceives an inefficient traffic caused by 
long-distance operators with only a few interconnection points with Deutsche    
Telekom. According to Deutsche Telekom, traffic originating outside the long    
distance network's geographic reach is transported through Deutsche Telekom's   
network to the long distance network's closest switch and back again to be      
terminated in Deutsche Telekom's network. In extreme cases this may multiply    
the distance a single call travels as compared to the case where the same call  
would have been routed more or less directly to its destination through         
Deutsche Telekom's or any other large network. Deutsche Telekom has claimed     
that this type of traffic jams its network and requires otherwise unnecessary   
investments into surplus capacity.                                              

In May 1999, the RegTP turned down Deutsche Telekom's applications for    
regulatory approval of surcharges for atypical traffic and its application for  
interconnection orders, including a 24-month minimum lease of interconnection   
lines and minimum traffic requirements, with regard to its 1999 interconnection 
agreements. However, the RegTP affirmed our obligation to install additional    
points of presence to the extent we exceed certain traffic volumes. New         
(possibly higher) interconnection fees, surcharges for small network operators, 
minimum traffic requirements and longer minimum lease requirements may be       
reintroduced in connection with the upcoming new interconnection regime 2000.   

  Deutsche Telekom has presented a new draft interconnection agreement subject
to the upcoming negotiations. The new interconnection offer is based generally  
on less favorable terms than the current one. These less favorable conditions   
may run counter to the outcome of the regulatory proceedings in May 1999 as     
described above. In addition, the RegTP may redesign the interconnection rules  
applicable in 2000. We cannot predict the results of this upcoming new          
interconnection regulation, but the results may severely affect our business in 
Germany.                                                                        

 Further, the general price depression in the end-customer market along with
the fact that the RegTP has authorized Deutsche Telekom's price cuts in the     
end-customer market (announced to be effective as of January 1 and April 1,     
1999) may adversely affect us. Other large operators also have reduced their    
prices which may adversely affect our business.                                 

We are or may become subject to certain other requirements as a licensed  
telecommunications provider in Germany. For example, licensed providers are     
under an obligation to present their standard terms and conditions to the       
RegTP. The RegTP may, based upon certain criteria, decide not to accept these   
terms and conditions. We also may become subject to universal service financing 
obligations. Currently, it is unlikely that the universal service financing     
system will be implemented in Germany in the foreseeable future. However, in    
the event that the system is implemented, we could be subject to such universal 
service requirements and financing schemes if we at that time should have a     
market share in Germany of at least 4%.                                         

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France                                                                        

 The French Telecommunications Act of 26 July 1996 further developed the new
legal framework for the development of a competitive telecommunications market  
in France.                                                                      

As a result, the French Regulator (Autorite de Regulation des             
Telecommunications) was created on January 1, 1997 with the task of overseeing  
the development of a competitive telecommunications sector which would provide  
benefits to the user. In addition, the monopoly on the provision of voice       
telephony services to the public was abolished as of January 1, 1998.           

Under the French regulatory regime, an L33.1 licence is required for the  
establishment and running by the operator of a telecommunications network open  
to the public (an "infrastructure licence") and the provision of public voice   
telephony services requires an L34.1 licence. An infrastructure licence is      
required by those operators who wish to install or purchase dark fiber for the  
running of a network. As with the L34.1 voice licence, L33.1 infrastructure     
licences are granted on a regional or nation-wide basis and it is possible to   
be granted a licence just for the region of Paris and its suburbs. We (via our  
French subsidiary) were awarded the first L34.1 only license on May 29, 1998.   
Call back operators and least cost routing operators not using their own leased 
lines as defined by the French Regulator, do not need to apply and obtain an    
L34.1 licence. Certain competitors obtained a joint L34.1 & L33.1 licence and   
we are considering applying for an L33.1 licence in addition to our L34.1       
license so that we can benefit from the lower interconnection tariffs afforded  
to L33.1 infrastructure license holders.                                        

 Because we hold a nation-wide class L34.1 licence, we have the authority to
originate and terminate calls throughout France.                                

Companies that desire to interconnect with France Telecom's network must  
enter into an interconnection agreement which applies certain fixed             
interconnection tariffs set out in an interconnection catalog. In order to      
obtain the lowest available interconnection tariffs throughout France, we would 
need to obtain a nation-wide infrastructure licence and install dark fiber and  
points of interconnection in all the different French regions (a minimum of 18  
regions) where we are to be originating and terminating traffic.                

  We have entered into an interconnection agreement with France Telecom at the
regulated standard interconnection rates applicable to L34.1 voice licence      
holders set out in the interconnection catalog. In order to interconnect with   
France Telecom, we are required to install, in addition to our principal switch 
in the city of Paris, a second point of presence to be interconnected with      
France Telecom in the outer zone of the Parisian region as defined for          
telecommunications purposes. We have located a site for our principal Ericsson  
AXE-10 switch and have ordered the leased lines from France Telecom to          
interconnect our switch with the most convenient France Telecom points of       
interconnection. France Telecom estimates and sets out in the interconnection   
agreement that leased lines so requested will be provided within a period of 6  
to 18 months.                                                                   

It is possible that the licence fees currently paid could be further      
increased. In addition, the interconnection fees payable to France Telecom      
include an element relating to the funding of France Telecom's universal        
service financing obligations, and it is possible that the levels of such       
contributions will be raised in the foreseeable future.                         

We have been granted the 1656 four digit indirect access code; however,   
there have been seven one digit indirect access numbers granted to other        
telecommunications providers in France. Those operators with a one digit access 
number will have a competitive advantage. It is highly unlikely that we will be 
able to obtain a one digit access number.                                       

The Telegroup French subsidiary holds a mixed voice and infrastructure    
license and has been allocated the 1633 carrier selection code. We understand   
that this Telegroup subsidiary employs over 10 employees and has entered into a 
number of contracts with other telecom operators in France. It has also         
contracted with France Telecom for the use of two "3PBQ" numbers which are the  
equivalent of four digit freephone access numbers                               

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for use in regions where the carrier selection code is not operational due to   
the lack of a point of interconnection. Primus is in the process of determining 
whether to maintain its separate license and carrier selection code, in light   
of those held by Telegroup.                                                     

Latin America                                                                 

Various countries in Latin America have taken initial steps towards       
deregulating their telecommunications markets. Each Latin American country has  
a different national regulatory regime and each country is in a different stage 
of liberalization. Historically, Latin American countries have reserved the     
provision of voice services to the state-owned post, telegraph and telephone    
operators. In the last few years, several Latin American countries have         
privatized completely or partially their national carriers, including           
Argentina, Chile, Mexico, Peru and Venezuela. In addition, certain countries    
have opened partially or completely their local and/or long distance markets,   
most notably Chile, which has competitive operators in all sectors. Argentina   
has liberalized certain telecommunications services, such as value-added,       
paging, data transmission, and personal communications services. Brazil         
currently is in the process of opening its telecommunications market to         
competition. Brazil intends to privatize Telecomunicas Brasileras S.A.          
(Telebras), which, through its 28 regional subsidiaries, holds a monopoly over  
the provision of local telephone services, as well as Empresa Brasiliera de     
Telecomunicacoes S.A., the monopoly provider of long distance and international 
telephone services. Moreover, Colombia recently has opened national and         
international long distance services to competition, and has awarded two new    
concessions for the provision of these services to two major local exchange     
carriers in Colombia--Empresa Brasiliera de Telecomunicaciones S.A. de Bogota   
and Orbitel, S.A. In Colombia the provision of value-added services and voice   
services to closed-user groups is open to competition. Mexico initiated         
competition in the domestic and international long distance services market on  
January 1, 1996, which are subject to a concession requirement. In addition,    
the Mexican government has opened recently basic telephony, and currently is    
auctioning radio-electric spectrum frequencies for the provision of personal    
communications services and Local Multipoint Distribution System Services.      
Value-added services are also fully open to competition in Mexico. Finally, in  
the Central American region, Guatemala and El Salvador recently have opened     
their telecommunications market to competition, abolishing all restrictions on  
foreign investment in this sector. Other countries in Central America, such as  
Nicaragua and Honduras, are in the process of privatizing their state-owned     
carriers, and have not opened fully their markets to competition.               

Employees                                                                       

The following table summarizes the number of our full-time employees as of
June 30, 1999, by region and classification:                                    

                                                                [Download Table]

                                                  North   Asia-              
                                                 America Pacific Europe Total
                                                 ------- ------- ------ -----
                                                                             
Management and Administrative...................    291     44     31     366
Sales and Marketing.............................    293    150     52     495
Customer Service and Support....................    342     64     60     466
Technical.......................................    365     81     34     480
                                                  -----    ---    ---   -----
  Total.........................................  1,291    339    177   1,807
                                                  =====    ===    ===   =====

We have never experienced a work stoppage, and none of our employees are  
represented by a labor union or covered by a collective bargaining agreement.   
We consider our employee relations to be excellent.                             

Properties                                                                      

We currently lease our corporate headquarters which is located in McLean, 
Virginia. Additionally, we also lease administrative, technical and sales       
office space, as well as space for our switches, in various locations in        

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the countries in which we operate, including the United States, Canada,         
Australia, the United Kingdom, Canada, Japan, Mexico, Germany and France. Total 
leased space approximates 350,000 square feet and the total annual lease costs  
are approximately $7.0 million. The operating leases expire at various times    
through 2008. Certain communications equipment which includes network switches  
and transmission lines are leased through operating and capital leases. We      
believe that our present administrative and sales office facilities are         
adequate for our anticipated operations and that similar space can readily be   
obtained as needed. We further believe that the current leased facilities are   
adequate to house existing communications equipment. However, as our network    
grows, we expect to lease additional locations to house the new equipment.      

Legal Proceedings                                                               

  We are from time to time involved in litigation incidental to the conduct of
its business. We believe the outcome of pending legal proceedings to which we   
are a party will not have a material adverse effect on our business, financial  
condition, results of operation, or cash flows.                                 

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MANAGEMENT

Executive Officers and Directors                                                

The following table and biographies set forth information concerning the  
individuals who serve as directors and executive officers of Primus:            

                                                        [Enlarge/Download Table]

                                                                        Year of Expiration 
         Name           Age                   Position                  of Term as Director
         ----           ---                   --------                  -------------------
                                                                                           
K. Paul Singh(1)....... 48   Chairman of the Board of Directors,               2002        
                             President, and Chief Executive Officer                        
Neil L. Hazard......... 47   Executive Vice President and Chief                 N/A        
                             Financial Officer                                             
John F. DePodesta...... 54   Executive Vice President and Director             2002        
Ravi Bhatia............ 50   Chief Operating Officer, Primus Australia          N/A        
Yousef Javadi.......... 43   Chief Operating Officer, Primus North              N/A        
                             America                                                       
John Melick............ 40   Vice President of International Business           N/A        
                             Development                                                   
Jay Rosenblatt......... 33   Vice President, Global Carrier Services            N/A        
Herman Fialkov(2)(3)... 77   Director                                          2000        
David E. Hershberg(2).. 62   Director                                          2000        
Douglas M. Karp........ 44   Director                                          2001        
John G. Puente(1)(3)... 69   Director                                          2001        

--------                                                                        
(1) Member of Nominating Committee.                                             
(2) Member of Compensation Committee.                                           
(3) Member of Audit Committee.                                                  

  K. Paul Singh co-founded Primus in 1994 with Mr. DePodesta and serves as its
Chairman, President and Chief Executive Officer. From 1991 until he co-founded  
Primus, he served as the Vice President of Global Product Marketing for MCI.    
Prior to joining MCI, Mr. Singh was the Chairman and Chief Executive Officer of 
Overseas Telecommunications, Inc. (OTI), a provider of private digital          
communications in over 26 countries which he founded in 1984 and was purchased  
by MCI in 1991.                                                                 

Neil L. Hazard joined Primus in 1996 as its Executive Vice President and  
Chief Financial Officer. Prior to joining Primus, Mr. Hazard was employed by    
MCI in several executive positions, most recently as its Director of Corporate  
Accounting and Financial Reporting, responsible for consolidation of MCI's      
financial results, external reporting to stockholders and securities compliance 
reporting. Mr. Hazard served as acting Controller of MCI for six months and as  
Director of Global Product Marketing. Prior to joining MCI in 1991, Mr. Hazard  
served as the Chief Financial Officer of OTI.                                   

John F. DePodesta co-founded Primus in 1994 with Mr. Singh and serves as a
director and its Executive Vice President. In addition to his position with     
Primus, Mr. DePodesta currently serves as the Chairman of the Board of Iron     
Road Railways Incorporated, which he co-founded in 1994, and served as Senior   
Vice President, Law and Public Policy of Genesis Health Ventures, Inc. from     
January 1996 through March 1998. Additionally, since 1994 he has been "of       
counsel" to the law firm of Pepper Hamilton LLP, where he was previously a      
partner since 1979. Before joining Pepper Hamilton LLP, Mr. DePodesta served as 
the General Counsel of Consolidated Rail Corporation.                           

  Ravi Bhatia joined Primus in October 1995 as the Managing Director of Primus
Telecommunications Pty., Ltd. (Australia). In March 1996 Mr. Bhatia became the  
Chief Operating Officer of Primus Australia and as such is responsible for      
implementing Primus's business strategy in Australia. Mr. Bhatia has over 26    
years of international experience in the telecommunications industry, which     
includes nine years of employment with                                          

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MCI in various sales and marketing positions. Most recently, he served as the   
Director of Sales and Marketing for MCI in the South Pacific Region, based in   
Sydney.                                                                         

Yousef Javadi joined Primus in March 1997 as Chief Operating Officer of   
Primus North America. Prior to joining Primus, Mr. Javadi was Vice President of 
Business Development at GE Americom (a GE Capital company) from 1995-1997. From 
1991-1995 Mr. Javadi was at MCI, as Director of Global Services. From 1985-1991 
he was at OTI as Vice President of Sales and Marketing. Prior to OTI, Mr.       
Javadi worked at Hughes Network Systems.                                        

John Melick joined Primus in 1994 as its Vice President of Sales and      
Marketing and, since 1996, has served as Vice President of International        
Business Development of the Company. Prior to joining Primus, Mr. Melick was a  
Senior Manager with MCI responsible for the day-to-day management of its global 
product portfolio in Latin America and the Caribbean region. He joined MCI in   
1991 at the time of the acquisition of OTI where he managed the development of  
OTI's service expansion into Mexico and Latin America.                          

Jay Rosenblatt has served as Primus' Vice President of Global Carrier     
Services since January 1996 and previously was Director of Marketing and Sales  
responsible for Primus' commercial programs from September 1994 to January      
1996. Prior to joining Primus in 1994, Mr. Rosenblatt was with MCI as the       
marketing manager responsible for private network services in the Americas and  
Caribbean.                                                                      

Herman Fialkov became a director of Primus in 1995. Mr. Fialkov is a      
consultant to Newlight Management LLC and a General Partner of PolyVentures     
Associates, L.P., a venture capital firm and has been associated with various   
venture capital firms since 1968. Previously, he was an officer and director of 
General Instrument Corporation which he joined in 1960 as a result of its       
acquisition of General Transistor Corporation, a company Mr. Fialkov founded.   
Mr. Fialkov is also a director of GlobeComm Systems, Inc.                       

  David E. Hershberg became a director of Primus in 1995. Mr. Hershberg is the
founder, Chairman, President and CEO of GlobeComm Systems, Inc., a system       
integrator of satellite earth stations. From 1976 to 1994, Mr. Hershberg was    
the President and Chief Executive Officer of Satellite Transmission Systems,    
Inc., a global provider of satellite telecommunications equipment, and became a 
Group President of California Microwave, Inc., a company that acquired          
Satellite Transmission Systems, Inc.                                            

Douglas M. Karp became a director Primus in June 1998. Mr. Karp has been a
Managing Director of E.M. Warburg, Pincus & Co., LLC (or its predecessor, E.M.  
Warburg, Pincus & Co., Inc.) since May 1991. Prior to joining E.M. Warburg,     
Pincus & Co., LLC, Mr. Karp held several positions with Salomon Inc. including  
Managing Director from January 1990 to May 1991, Director from January 1989 to  
December 1989 and Vice President from October 1986 to December 1988. Mr. Karp   
is a director of Qwest, TV Filme, Inc., Journal Register Company, PageNet do    
Brasil, S.A., StarMedia Network Inc. and several privately held companies.      

John G. Puente became a director of Primus in 1995. From 1987 to 1995, he 
was Chairman of the Board and CEO of Orion Network Systems, a satellite         
telecommunications company. Mr. Puente is currently Chairman of the Board of    
Telogy Networks, Inc., a privately-held company, and a director of MICROS       
Systems, Inc. Prior to joining Orion, Mr. Puente was Vice Chairman of M/A-Com   
Inc., now known as Hughes Network Systems, Inc., a diversified                  
telecommunications and manufacturing company, which he joined in 1978 when M/A- 
Com acquired Digital Communications Corporation, a satellite terminal and       
packet switching manufacturer of which Mr. Puente was a founder and Chief       
Executive Officer.                                                              

  Under the terms of a shareholders' agreement entered into in connection with
the TresCom merger among Primus, Warburg, Pincus and Mr. Singh, we have agreed  
to nominate one individual selected by Warburg, Pincus and reasonably           
acceptable to our non-employee directors, to serve as a member of the Primus    
board of directors. The foregoing nomination right remains effective so long as 
Warburg, Pincus is the beneficial owner of 10% or more of our outstanding       
common stock. In June 1998, Mr. Karp joined the Primus board of directors       
pursuant to the foregoing arrangement.                                          

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Classified Board of Directors                                                   

Pursuant to our By-Laws, the board of directors is divided into three     
classes of directors each containing, as nearly as possible, an equal number of 
directors. Directors within each class are elected to serve three-year terms    
and approximately one-third of the directors sit for election at each annual    
meeting of the our stockholders. A classified board of directors may have the   
effect of deterring or delaying any attempt by any group to obtain control of   
Primus by a proxy contest since such third party would be required to have its  
nominees elected at two separate annual meetings of the board of directors in   
order to elect a majority of the members of the board of directors. Directors   
who are elected to fill a vacancy (including vacancies created by an increase   
in the number of directors) must be confirmed by the stockholders at the next   
annual meeting of stockholders whether or not such director's term expires at   
such annual meeting.                                                            

Compensation of Directors                                                       

Directors are paid an annual fee of $10,000 and receive reimbursement of  
their expenses for attending meetings. In addition, we grant each person who    
becomes an Eligible Director (as defined in the Director Option Plan) options   
to purchase 15,000 shares of our common stock pursuant to the Director Option   
Plan. These options vest one-third upon the grant date, and one-third on each   
of the first and second anniversary of the grant dates. We did not grant any    
such options in 1997 or 1998.                                                   

Committees of the Board                                                         

Our board of directors has appointed an Audit Committee, Nominating       
Committee and a Compensation Committee.                                         

  Audit Committee. The Audit Committee, which currently consists of Mr. Puente
and Mr. Fialkov, has the authority and responsibility: to hire one or more      
independent public accountants to audit our books, records and financial        
statements and to review our systems of accounting (including our systems of    
internal control); to discuss with such independent public accountants the      
results of such audit and review; to conduct periodic independent reviews of    
the systems of accounting (including systems of internal control); and to make  
reports periodically to the board of directors with respect to its findings.    

 Nominating Committee. The Nominating Committee, which currently consists of
Messrs. Puente (Chairman) and Singh, is responsible for selecting those persons 
to be nominated to our board of directors.                                      

  Compensation Committee. The Compensation Committee, which currently consists
of Messrs. Fialkov (Chairman) and Hershberg, is responsible for fixing the      
compensation of the Chief Executive Officer and the other executive officers,   
deciding other compensation matters such as those relating to the operation of  
our Employee Stock Option Plan and Director Stock Option Plan, including the    
award of options under the Employee Stock Option Plan, and approving certain    
aspects of our management bonus plan.                                           

Compensation Committee Interlocks and Insider Participation                     

The Compensation Committee of the Board consists of Messrs. Fialkov and   
Hershberg, who were not at any time officers or employees of Primus. No         
executive officer of Primus serves as a member of the board of directors or     
compensation committee of another entity which has one or more executive        
officers that will serve as a member of the Primus Board or the Primus          
Compensation Committee.                                                         

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Executive Compensation                                                          

 The following table sets forth, for the years ended December 31, 1998, 1997
and 1996, certain compensation information with respect to our Chief Executive  
Officer and our other officers named therein.                                   

SUMMARY COMPENSATION TABLE

                                                        [Enlarge/Download Table]

                                    Annual Compensation      Long-Term Compensation            
                                  ----------------------- -----------------------------        
                                                                 Awards         Payouts        
                                                          --------------------- -------        
                                                   Other             Securities           All  
                                                  Annual  Restricted Underlying          Other 
                                                  Compen-   Stock     Options/   LTIP   Compen-
                                  Salary   Bonus  sation   Award(s)     SARs    Payouts sation 
Name and Principal Position  Year   ($)     ($)     ($)      ($)        (#)       ($)     ($)  
---------------------------  ---- ------- ------- ------- ---------- ---------- ------- -------
                                                                                               
K. Paul Singh--Chairman      1998 258,013 180,000    --       --          --       --      --  
 of the Board of             1997 247,692 160,000    --       --      100,000      --      --  
 Directors, President        1996 185,000 100,000    --       --      338,100      --      --  
 and Chief Executive                                                                           
 Officer                                                                                       
Neil L. Hazard--             1998 184,006 105,000    --       --          --       --      --  
 Executive Vice              1997 159,231 100,000    --       --       40,000      --      --  
 President and Chief         1996 118,461  60,000    --       --      304,290      --      --  
 Financial Officer                                                                             
Yousef B. Javadi--Chief      1998 154,808  80,000    --       --          --       --      --  
 Operating Officer,          1997 121,154  60,000    --       --      170,000      --      --  
 Primus North America        1996     --      --     --       --          --       --      --  
John F. DePodesta--          1998 178,718 135,000    --       --          --       --      --  
 Executive Vice              1997 100,000     --     --       --      180,000      --      --  
 President                   1996     --   10,000    --       --          --       --      --  
John Melick--Vice            1998 128,391  55,000    --       --          --       --      --  
 President of                1997 105,000  50,000    --       --       25,000      --      --  
 International Business      1996 101,538  10,000    --       --          --       --      --  
 Development                                                                                   

Stock Options Granted to Certain Executive Officers During Last Fiscal Year     

Under the Employee Stock Option Plan, options to purchase our common stock
are available for grant to selected employees. Options are also available for   
grant to eligible directors under our Director Stock Option Plan. No options    
for the purchase of our common stock were awarded to the executive officers     
named on the above summary compensation table during 1998.                      

Stock Plans                                                                     

Employee Stock Option Plan. We established the Employee Stock Option Plan 
for our employees and consultants on January 2, 1995. Recently, our board       
adopted and the stockholders approved an amendment to the Employee Stock Option 
Plan that, among other things, increased the number of options available for    
grant and expanded the category of plan participants. The Employee Stock Option 
Plan provides for the grant to selected full and part-time employees and        
consultants of Primus and its subsidiaries who contribute to the development    
and success of Primus and its subsidiaries of both "incentive stock options"    
within the meaning of Section 422 of the Code (ISOs) and options that are non-  
qualified for federal income tax purposes (NQSOs); provided, however, that      
consultants are eligible for the grant of NQSOs only. The total number of       
shares of our common stock for which options may be granted pursuant to the     
Employee Stock Option Plan is 5,500,000, of which 1,427,368 are available for   
future grants, subject to certain adjustments reflecting changes in our         
capitalization. No individual may receive, over the term of the Employee Stock  
Option Plan, options for more than an aggregate of 25% of the shares authorized 
for grant under the Employee Stock Option Plan. The Employee Stock Option Plan  
is currently administered by the Compensation Committee of our board of         
directors which is comprised of directors who are not also our employees. The   
Compensation Committee determines, among other things:                          

.  which employees and consultants will receive options under the Employee  
Stock Option Plan,                                                    

.  the time when options will be granted,                                   

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.  the type of option (ISO or NQSO, or both) to be granted,                 

.  the number of shares subject to each option,                             

.  the time or times when the options will become exercisable and expire,   
and                                                                   

.  subject to certain conditions discussed below, the option price and      
duration of the option.                                               

Members of our board of directors administering the Employee Stock Option Plan  
may vote on any matters affecting the administration of the Employee Stock      
Option Plan, except that no member may act upon the granting of an option to    
himself or herself.                                                             

The exercise price of the options granted under the Employee Stock Option 
Plan is determined by our board of directors, but may not be less than the fair 
market value per share of our common stock on the date the option is granted.   
If, however, an ISO is granted to any person who, at the time of the grant,     
owns capital stock possessing more than 10% of the total combined voting power  
of all classes of our capital stock, then the exercise price for such ISO may   
not be less than 110% of the fair market value per share of our common stock on 
the date the option is granted. Our board of directors also determines the      
method of payment for the exercise of options under the Employee Stock Option   
Plan. Payment may consist entirely of cash, check, promissory notes or our      
common stock having a fair market value on the date of surrender equal to the   
aggregate exercise price. Our board of directors, in its sole discretion, may   
cooperate with an optionee to complete a cashless exercise transaction.         

Options are not assignable or transferrable other than by will or the laws
of descent and distribution. In general, if an employee's employment or a       
consultant's engagement is terminated for any reason, such employee's or        
consultant's options exercisable on the date of termination are exercisable for 
three months following the date of termination. If our board of directors makes 
a determination that a terminated employee or consultant engaged in disloyalty  
to us, disclosed proprietary information, is convicted of a felony, or breached 
the terms of a written confidentiality agreement or non-competition agreement,  
all unexercised options held by such employee or consultant terminate upon the  
earlier of the date of such determination or the date of termination. If the    
employment or service of an employee or consultant terminates because of        
disability or death, such employee's or consultant's options that are           
exercisable on the date of disability or death will remain exercisable for 12   
months following the date of disability or death; provided, however, that if a  
disabled employee or consultant commences employment or service with one of our 
competitors during that 12-month period, all options held by the employee or    
consultant terminate immediately.                                               

  Options issued pursuant to the Employee Stock Option Plan outstanding on the
date of a "change in control" of Primus become immediately exercisable on such  
date. A change in control for purposes of the Employee Stock Option Plan        
includes the acquisition by any person or entity of the beneficial ownership of 
50% or more of the voting power of our common stock, the approval by the our    
stockholders of a merger, reorganization or consolidation in which our          
stockholders do not own 50% or more of the voting power of the stock of the     
entity surviving such transaction, the approval of our stockholders of an       
agreement of sale of all or substantially all of our assets, and the acceptance 
by our stockholders of a share exchange in which our stockholders do not own    
50% or more of the voting power of the stock of the entity surviving such       
exchange.                                                                       

There are no federal income tax consequences to Primus on the grant or    
exercise of an ISO. If an employee disposes of stock acquired through the       
exercise of an ISO within one year after the date such stock is acquired or     
within two years after the grant of the ISO (a Disqualifying Disposition), we   
will be entitled to a deduction in an amount equal to the difference between    
the fair market value of such stock on the date it is acquired and the exercise 
price of the ISO. There are no tax consequences to Primus if an ISO lapses      
before exercise or is forfeited. The grant of a NQSO has no immediate tax       
consequences to Primus. Upon the exercise of a NQSO by an employee or           
consultant, we are entitled to a deduction in an amount equal to the difference 
between the fair market value of the share acquired through exercise of the     
NQSO and the exercise price of the NQSO. There are no tax consequences to       
Primus if a NQSO lapses before exercise or is forfeited.                        

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 An employee who receives an ISO is not subject to federal income tax on the
grant or exercise of the ISO; however, the difference between the option price  
and the fair market value of our common stock received on the exercise of the   
ISO is an adjustment for purposes of the alternative minimum tax. Upon the      
exercise of an ISO, an employee will have a basis in the common stock received  
equal to the amount paid. An employee will be subject to capital gain or loss   
upon the sale of such common stock, unless such sale constitutes a              
Disqualifying Disposition, equal to the difference between the amount received  
for the stock and the employee's basis in such. The gain or loss will be long-  
or short-term, depending on the length of time the common stock received from   
the exercise of the ISO was held prior to disposition. There are no tax         
consequences to an employee if an ISO lapses before exercise or is forfeited.   

  In the event of a Disqualifying Disposition, an employee will be required to
recognize:                                                                      

  (1) taxable ordinary income in an amount equal to the difference between
the fair market value of the ISO Stock on the date of exercise of the ISO   
and the exercise price; and                                                 

  (2) capital gain or loss (long- or short-term, as the case may be) in an
amount equal to the difference between                                      

(a) the amount realized by the employee upon the Disqualifying    
Disposition and                                                         

  (b) the exercise price paid by the employee for the stock, increased
by the amount of ordinary income recognized by the employee, if any.    

If the disposition generates an allowable loss (e.g., a sale to an unrelated    
party not within 30 days of purchase of our common stock), then the amount      
required to be recognized by the employee as ordinary income will be limited to 
the excess, if any, of the amount realized on the sale over the basis of the    
stock.                                                                          

The Employee Stock Option Plan allows an employee or consultant to pay an 
exercise price in cash or shares of our common stock. If the employee pays with 
shares of our common stock that are already owned, the basis of the newly       
acquired common stock will depend on the tax character and number of shares of  
the previously owned stock used as payment. If an employee pays with shares     
acquired upon other than the exercise of an ISO, the transaction will be tax-   
free to the extent that the number of shares received does not exceed the       
number of shares paid. The basis of the number of shares of newly acquired      
common stock which does not exceed the number of shares of common stock paid    
will be equal to the basis of the shares paid. The employee's holding period    
with respect to such shares will include the holding period of the shares of    
common stock paid. To the extent that the employee receives more new shares     
than shares surrendered, the "excess" shares of common stock will take a zero   
basis. If an employee exercises an ISO by using stock that is previously        
acquired from the exercise of an ISO, however, certain special rules apply. If  
the employee has not held the previously acquired common stock for at least two 
years from the date of grant of the related ISO and one year from the date the  
employee acquired the previously acquired common stock, the use of such common  
stock to pay the exercise price will constitute a Disqualifying Disposition and 
subject the employee to income tax with respect to the common stock as          
described above. In such circumstances, the basis of the newly acquired common  
stock will be equal to the fair market value of the previously acquired common  
stock used as payment.                                                          

The grant of a NQSO has no immediate tax consequences to an employee or   
consultant. The exercise of a NQSO requires an employee or consultant to        
include in gross income the amount by which the fair market value of the        
acquired shares exceeds the exercise price on the exercise date. We are         
required to withhold income and employment taxes from an employee's wages on    
account of this income. The employee's or consultant's basis in the acquired    
shares will be their fair market value on the date of exercise. Upon a          
subsequent sale of such shares, the employee or consultant will recognize       
capital gain or loss equal to the difference between the sales price and the    
basis in the stock. The capital gain or loss will be long- or short-term,       
depending on whether the employee or consultant has held the shares for more    
than one year. There are no tax consequences to an employee or consultant if a  
NQSO lapses before exercise or is forfeited. If an employee or consultant uses  
previously owned common stock as payment for the exercise price of a NQSO, to   

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the extent the employee or consultant surrenders the same number of shares      
received, the exchange is tax-free and the new shares will have a basis equal   
to that of the shares surrendered. The holding period for the new shares will   
include the period the employee or consultant held the surrendered shares. To   
the extent the employee or consultant receives more new shares than shares      
surrendered, the excess shares are treated as having been acquired for no       
consideration and the fair market value of such excess shares is includible in  
the employee's or consultant's income as compensation. The basis of the excess  
shares is their fair market value at the time of receipt. If the previously     
owned shares consist of common stock from the exercise of an ISO for which the  
holding requirements were not met such that their use as payment of the         
exercise price constituted a Disqualifying Disposition, the employee will have  
the income tax consequences described above.                                    

Our board of directors has authority to suspend, terminate or discontinue 
the Employee Stock Option Plan or revise or amend it in any manner with respect 
to options granted after the date of revision. No such revision, however, can   
change the aggregate number of shares subject to the Employee Stock Option      
Plan, change the designation of employees eligible thereunder, or decrease the  
price at which options may be granted. Our board of directors may not grant any 
options under the Employee Stock Option Plan after January 2, 2005.             

TresCom International Stock Option Plan. In connection with the TresCom   
merger, we assumed a stock option plan previously sponsored by TresCom.         
Pursuant to the terms of the agreement governing the TresCom merger, each       
outstanding option to acquire one share of TresCom common stock was converted   
into an option to acquire 0.6147 shares of our common stock. Options to acquire 
136,816 shares of our common stock are outstanding under this Primus-TresCom    
Option Plan. The Primus-TresCom Option Plan provides for an equitable           
adjustment in the number and price of shares of our common stock with respect   
to outstanding options in the event the outstanding shares of our common stock  
are increased or decreased through stock dividends, recapitalizations,          
reorganizations or similar things.                                              

 The Primus-TresCom Option Plan is intended as an incentive and to encourage
stock ownership by the officers, key employees, consultants and directors of    
TresCom prior to the TresCom merger in order to increase their proprietary      
interest in our success and to encourage them to continue to provide services   
to us. No additional stock options will be granted under the Primus-TresCom     
Option Plan. All options issued under the Primus-TresCom Option Plan are        
entirely vested and exercisable in full.                                        

 The Primus-TresCom Option Plan is administered by our board of directors or
by a committee appointed by our board of directors and consisting of not less   
than two members of our board of directors who are not also employees of Primus 
or any of its subsidiaries. The Primus-TresCom Option Plan does not limit the   
length of time a director may serve as part of this committee. Subject to the   
terms of the Primus-TresCom Option Plan, the board of directors or this         
committee will have the exclusive authority to interpret, administer and make   
determinations under the Primus-TresCom Option Plan. All options granted under  
the Primus-TresCom Option Plan are in the form of ISOs. Payment for the shares  
of our common stock purchased under an option must be made in full upon         
exercise of the option, by certified or bank cashier's check or by any other    
means acceptable to us, including, without limitation, tender of shares of our  
common stock then owned by the optionee. Each grant of an option under the      
Primus-TresCom Option has been evidenced by an option agreement which sets      
forth the number of shares of our common stock subject to the option and        
includes other terms and conditions applicable to the option. These options are 
not assignable or transferable except by will or by the laws of descent and     
distribution, and, during the lifetime of the optionee, the option may be       
exercised only by the optionee.                                                 

The tax consequences to Primus and the recipient of these options upon the
grant and exercise of either a NQSO or ISO, and the sale of our common stock    
acquired upon exercise thereof, are identical to those described for NQSOs and  
ISOs under "--Employee Stock Option Plan" above.                                

  Director Stock Option Plan. We also established a Director Stock Option Plan
on July 27, 1995, as amended. The purpose of the Director Stock Option Plan is  
to encourage ownership in Primus by outside directors (present or future        
incumbent directors who are not affiliated with or employees Primus or any      

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subsidiary and who have not been nominated to serve as directors pursuant to an 
agreement with Primus) whose services are considered essential to our continued 
progress. Options granted under the Director Stock Option Plan are NQSOs. The   
Director Stock Option Plan is administered by a committee of the board of       
directors consisting of those directors who are not eligible to receive grants  
thereunder. The total number of shares of our common stock for which options    
may be granted pursuant to the Director Stock Option Plan is 338,100. On the    
effective date of the Director Stock Option Plan or the first date thereafter   
that any director becomes eligible to receive an award under the Director Stock 
Option Plan, each eligible director will automatically receive an option to     
purchase 15,000 shares of our common stock, exercisable for 5,000 shares        
immediately, and 5,000 on each of the next two anniversary dates of the grant   
date. All options become immediately exercisable, however, upon the retirement  
of a director in accordance with any mandatory retirement policy of our board   
of directors, upon the death or permanent disability of a director, or if we    
merge with another company and we are not the surviving corporation, we enter   
into an agreement to sell or otherwise dispose of all or substantially all of   
our assets, or any person or group acquires more than 20% of our outstanding    
voting stock.                                                                   

 The option price is the fair market value at the date on which an option is
granted. Payment for the exercise of options may consist of cash or our common  
stock. Options issued under the Director Stock Option Plan are not transferable 
other than by will or the laws of descent and distribution. Options expire upon 
the earlier of five years from the date they were granted or three years        
following either the retirement or resignation of the director, the failure of  
the director to be re-elected, or the permanent disability or death of the      
director. No options may be granted under the Director Stock Option Plan after  
December 31, 2005.                                                              

The grant of a NQSO has no immediate tax consequences to Primus. Upon the 
exercise of a NQSO by a director, we are entitled to a deduction in an amount   
equal to the difference between the fair market value of the share acquired     
through exercise of the NQSO and the exercise price of the NQSO. There are no   
tax consequences to Primus if a NQSO lapses before exercise or is forfeited.    

The tax consequences to a director upon the grant and exercise of a NQSO, 
and the sale of our common stock acquired upon exercise thereof, are identical  
to those described for NQSOs under "--Employee Stock Option Plan" above, except 
that we have no withholding obligations upon the exercise of a NQSO by a        
director.                                                                       

Employee Stock Purchase Plan. During 1997, our board of directors adopted 
and the stockholders approved an Employee Stock Purchase Plan. The Employee     
Stock Purchase Plan provides employees with the right to purchase shares of our 
common stock through payroll deduction. A total of 2,000,000 shares of our      
common stock are available for purchase under the Employee Stock Purchase Plan, 
subject to adjustment in the number and price of shares of our common stock     
available for purchase in the event the outstanding shares of our common stock  
are increased or decreased through stock dividends, recapitalizations,          
reorganizations or similar changes. This ESP Plan is to be administered by our  
board of directors, which may delegate responsibility for such administration   
to a committee of our board of directors. Subject to the terms of this ESP      
Plan, our board of directors or the committee shall have authority to interpret 
the ESP Plan, to prescribe, amend and rescind rules and regulations relating to 
it, and to make all other determinations deemed necessary or advisable in       
administering the ESP Plan.                                                     

  An employee of a participating company is eligible to participate in the ESP
Plan if the employee, as of the last day of the month immediately preceding the 
effective date of an election to purchase shares of our common stock pursuant   
to the ESP Plan (1) has been employed on a full-time basis for at least six     
consecutive months; or (2) has been employed on a part-time basis for at least  
24 consecutive months.                                                          

 Presently, only our employees residing in the United States are eligible to
participate in the ESP Plan. An employee is considered to be a part-time        
employee if the employee is scheduled to work at least 20 hours per week.       
Notwithstanding the foregoing, any employee who, after purchasing our common    
stock under the ESP Plan, would own five percent or more of the total combined  
voting power or value of all classes of our stock or                            

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any parent corporation or subsidiary corporation thereof is not eligible to     
participate. Ownership of stock is determined in accordance with the provisions 
of Section 424(d) of the Internal Revenue Code. Further, an employee is not     
eligible to participate if such participation would permit such employee's      
rights to purchase stock under all employee stock purchase plans of the         
participating companies which meet the requirements of section 423(b) of the    
Code to accrue at a rate which exceeds $25,000 in fair market value (as         
determined pursuant to section 423(b)(8) of the Code) for each calendar year in 
which such option is outstanding.                                               

Eligible employees may elect to participate in the Employee Stock Purchase
Plan during an offering which starts on the first day of each month beginning   
on or after adoption of the Employee Stock Purchase Plan by our board of        
directors and ends on the last day of each month. Shares will be deemed to have 
been purchased on the last day of such month. The purchase price per share      
offered under the Employee Stock Purchase Plan will be 85 percent of the lesser 
of: (1) the fair market value per share on the first day of the month, or if    
such date is not a trading day, then on the next trading day thereafter; or (2) 
the fair market value per share on the last day of the month, or if such date   
is not a trading day, then on the next trading day thereafter.                  

An eligible employee who wishes to participate in the Employee Stock      
Purchase Plan shall file an election form with our board of directors or the    
committee governing the ESP Plan at least 15 days before the first of the month 
for the first offering for which such election form is effective. On this form  
an employee may elect to have payroll deductions made from his compensation on  
each regular payday during the time he is a participant in the ESP Plan. All    
payroll deductions shall be credited to the participant's account under the ESP 
Plan. A participant who is on an approved leave of absence may authorize        
continuing payroll deductions.                                                  

 If the total number of shares of our common stock for which purchase rights
are exercised on the last day of a month exceeds the maximum number of shares   
of our common stock available, our board of directors or the relevant committee 
shall make a pro rata allocation of shares available for delivery and           
distribution in as nearly a uniform manner as practicable, and as it shall      
determine to be fair and equitable, and the unapplied account balances shall be 
returned to participants as soon as practicable following the last day of the   
month.                                                                          

  A participant may discontinue his participation in the ESP Plan at any time,
but no other change can be made during an offering, including, but not limited  
to, changes in the amount of payroll deductions for such offering. A            
participant may change the amount of payroll deductions for subsequent          
offerings by giving written notice of such change to our board of directors or  
the relevant committee on or before the 15th day of the month immediately       
preceding the first of the month for which such change is effective.            

A participant may elect to withdraw the balance credited to the           
participant's account by providing a termination form to our board of directors 
or the committee at any time before the last day of the month applicable to any 
offering. A participant may withdraw all, but not less than all, of the amounts 
credited to the participant's account. All amounts credited to such             
participant's account shall be paid as soon as practicable following the        
committee's receipt of the participant's termination form, and no further       
payroll deductions will be made with respect to the participant. A participant  
who elects to withdraw from an offering shall be deemed to have elected not to  
participate in each of the four succeeding offerings following the date on      
which the participant gives a termination form to the committee.                

Upon termination of a participant's employment for any reason other than  
death, including termination due to disability or continuation of a leave of    
absence beyond 90 days, all amounts credited to such participant's account      
shall be returned to the participant. In the event of a participant's (1)       
termination of employment due to death or (2) death after termination of        
employment but before the participant's account has been returned, all amounts  
credited to such participant's account shall be returned to the participant's   
successor-in-interest. A participant who is on an approved leave of absence     
shall remain eligible to participate in the ESP Plan until the end of the first 
offering ending after commencement of such approved leave of absence. A         
participant who has been on an approved leave of absence for more than 90 days  
shall not be eligible to participate in any offering that begins on or after    
the commencement of such approved leave of absence so long as such leave of     
absence continues.                                                              

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All funds held or received by us under the ESP Plan may be used for any   
corporate purpose until applied to the purchase of shares of our common stock   
or refunded to employees and shall not be segregated from our general assets.   
Shares of our common stock purchased under the ESP Plan will be issued from our 
treasury stock or from our authorized but unissued shares. The participating    
companies shall pay all fees and expenses incurred (excluding individual        
Federal, state, local or other taxes) in connection with the ESP Plan.          

  An Employee's rights under the ESP Plan belong to the employee alone and may
not be transferred or assigned to any other person during the employee's        
lifetime. After the shares of our common stock have been issued under the ESP   
Plan, such shares may be assigned or transferred the same as any other shares.  

The ESP Plan is not qualified under Section 401(a) of the Internal Revenue
Code. We generally will not be entitled to a deduction with respect to stock    
purchased under the ESP Plan, unless the stock is disposed of less than one     
year after our common stock is purchased by the employee, or less than two      
years after each commencement of an offering.                                   

Generally, no tax consequences arise at the time the participant purchases
shares of our common stock. If a participant does not dispose of shares of our  
common stock purchased under the ESP Plan for at least one year after the date  
of purchase and at least two years after the grant of the purchase right, he    
will be deemed to have received compensation taxable as ordinary income for the 
taxable year in which the disposition occurs in an amount equal to the lesser   
of (a) the 15% discount originally allowed, or (b) the excess over the purchase 
price of (i) the amount actually received for the shares if sold or exchanged   
or (ii) the fair market value of the shares on the date of any other            
termination of his ownership (such as by gift). The amount of such ordinary     
income is then added to the participant's basis in his shares for purposes of   
determining capital gain or loss.                                               

 If a participant disposes of shares of our common stock purchased under the
ESP Plan less than one year after the date of purchase, or more than one year   
after the date of purchase but within two years after the grant of the purchase 
right, he will be deemed to have received compensation taxable as ordinary      
income in the amount of the difference between the amount paid for the shares   
and the value of the shares at the time of purchase. If the shares are sold or  
exchanged, the amount of such ordinary income is added to the participant's     
basis in his shares for purposes of determining capital gain or loss. If a      
participant dies before disposing of the shares purchased under the ESP Plan,   
he will be deemed to have realized compensation income taxable as ordinary      
income in the taxable year closing with his death in an amount equal to the     
lesser of clauses (a) and (b)(ii) as set forth in the immediately preceding     
paragraph. He is deemed not to have realized any capital gain or loss because   
of death.                                                                       

Our board of directors or the relevant committee shall have the right to  
amend, modify or terminate the ESP Plan at any time without notice, provided    
that no employee's then existing rights are adversely affected without his or   
her consent, and provided further, that upon any amendment of the ESP Plan,     
stockholder approval will be obtained if required by law.                       

Restricted Stock Plan. We established the 1998 Restricted Stock Plan on   
December 15, 1998 to facilitate the grant of "restricted stock" to selected     
individuals who contribute to our development and success and that of our       
subsidiaries. The total number of shares of our common stock which may be       
granted under the 1998 Restricted Stock Plan is 750,000. For any calendar year, 
the maximum number of shares of our common stock which may be granted to any    
individual is 200,000.                                                          

The 1998 Restricted Stock Plan is administered by our board of directors, 
provided that our board of directors may delegate its authority under the 1998  
Restricted Stock Plan to a member of our board of directors, a committee of our 
board of directors or an executive officer of Primus. Except as otherwise       
provided by our board of directors, only our board of directors or the relevant 
committee may make grants under the 1998 Restricted Stock Plan to an executive  
officer or establish the number of shares of our common stock that can be       
subject to grants for any of our fiscal periods.                                

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Persons who may receive grants under the 1998 Restricted Stock Plan are   
limited to our and our subsidiaries' employees, consultants, agents, advisers,  
managers or any other individual whose participation in the 1998 Restricted     
Stock Plan is determined by our board of directors to be in our best interests. 
However, notwithstanding the foregoing, individuals who are required to file    
reports under Section 16(a) of the Exchange Act are not eligible to receive     
grants under the 1998 Restricted Stock Plan.                                    

Unless delegated to the relevant committee, our board of directors has the
full and final authority to:                                                    

(i) designate recipients of grants,                                   

(ii) determine the types of grants to be made                         

(iii) determine the number of shares of our common stock to be subject
to a grant,                                                                 

(iv) establish the terms and conditions of each grant, including, but 
not limited to, the nature and duration of any restriction or condition,    

 (v) prescribe the form of each award agreement pursuant to which grants
are made,                                                                   

(vi) make grants alone, in addition to, in tandem with or in          
substitution or exchange for any other grant or any other award granted     
under another plan maintained by Primus or a subsidiary, and                

 (vii) amend, modify or supplement the terms of any outstanding grant of
shares of our common stock under the 1998 Restricted Stock Plan.            

  The Board or its delegate will establish a restricted period with respect to
each grant of restricted stock under the 1998 Restricted Stock Plan. Except as  
otherwise determined by our board of directors, the minimum restricted period   
is one year. Each grant may be subject to a different restricted period, and    
may be subject to restrictions other than or in addition to the expiration of   
time, such as the satisfaction of individual or corporate objectives.           
Performance objectives other than the lapse of time must be established on or   
before the 90th day of the period of service to which the objectives relate and 
while the outcome is substantially uncertain, and may include:                  

.  earnings per share,                                                      

.  total stockholder return,                                                

.  operating earnings,                                                      

.  growth in assets,                                                        

.  return on equity,                                                        

.  return on capital,                                                       

.  market share,                                                            

.  stock price,                                                             

.  net income,                                                              

.  cash flow,                                                               

.  sales growth in general,                                                 

.  sales growth by type of product,                                         

.  sales growth by type of customer,                                        

.  retained earnings,                                                       

.  completion of acquisitions,                                              

.  completion of divestitures and asset sales,                              

.  cost or expense reductions,                                              

.  introduction or conversion of products or services, and                  

.  achievement of specified management information systems objectives.      

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In addition, performance objectives may include positive results,         
maintaining the status quo or limiting economic losses.                         

 Our common stock subject to grants under the 1998 Restricted Stock Plan may
not be sold, transferred, assigned, pledged or otherwise encumbered or disposed 
of during the restricted period. These restrictions lapse upon the expiration   
of the restricted period, whether by lapse of time or the fulfillment of        
applicable performance objectives. Unless our board of directors provides       
otherwise in any particular award agreement, recipients may vote the shares     
subject to that award agreement and will be entitled to receive dividends paid  
with respect to such shares. However, our board of directors may require that   
such dividends be reinvested in shares of our common stock, which shares may or 
may not be subject to the same restrictions as the shares subject to the award  
agreement.                                                                      

Unless otherwise provided by our board of directors, if a recipient       
terminates employment or engagement for any reason other than death or          
disability, any shares of our common stock held by such recipient that remain   
subject to restrictions under the 1998 Restricted Stock Plan will be forfeited. 
Unless otherwise provided by our board of directors, if a recipient terminates  
employment or engagement by reason of death or disability, all restrictions     
under the 1998 Restricted Stock Plan applicable to shares held by such          
recipient will lapse. For purposes of the 1998 Restricted Stock Plan,           
"disability" means "total and permanent disability," as described in Section    
22(e)(3) of the Code.                                                           

 The numbers of and type of shares subject to the 1998 Restricted Stock Plan
and to grants made thereunder will be adjusted to the extent necessary to       
prevent the enlargement or diminution of rights in the event of any merger,     
reorganization, consolidation, recapitalization, stock dividend, spin-off or    
other change in corporate structure affecting our common stock.                 

All restrictions on shares of our common stock granted under the 1998     
Restricted Stock Plan will lapse and the 1998 Restricted Stock Plan will        
terminate in the event of certain major corporate events. Those events include: 
(i) dissolution or liquidation of the Company, (ii) merger, consolidation or    
reorganization of the Company in which the Company is not the surviving entity, 
or (iii) any transaction approved by our board of directors that results in any 
person(s) or entity(ies) owning 80% or more of the combined voting power of all 
classes of securities of Primus. Notwithstanding the foregoing, the lapse of    
restrictions and the termination of the 1998 Restricted Stock Plan described in 
this paragraph will not occur despite the consummation of such a major          
corporate transaction if: (x) provision is made for continuation of the 1998    
Restricted Stock Plan following such transaction, or for the substitution for   
such shares of new restricted stock of a successor entity (with appropriate     
adjustments as to the number and kind of shares), or (y) a majority of our      
board of directors determines that such transaction should not trigger the      
lapse of the restrictions and the termination of the 1998 Restricted Stock      
Plan.                                                                           

Under the Internal Revenue Code, if property is transferred in connection 
with the performance of services, the excess, if any, of the fair market value  
of the property received over the price paid for such property is included in   
the income of the person performing such services as ordinary income. The       
income is included at the time such property either ceases to be subject to a   
substantial risk of forfeiture or is transferable free of such risk of          
forfeiture. The fair market value of such property is generally measured at the 
time when the substantial risk of forfeiture lapses, or when the property       
becomes transferable free of such risk of forfeiture, unless an election is     
made, as described below, to include the amount of any income at an earlier     
date.                                                                           

 Shares of our common stock granted to a recipient under the 1998 Restricted
Stock Plan will be treated as acquired in connection with the performance of    
services and will be considered to be subject to a substantial risk of          
forfeiture during the restricted period, as described above. A recipient who    
receives a grant of restricted stock will recognize ordinary compensation       
income, in each year in which the restricted period lapses, equal to the fair   
market value of the shares of our common stock as to which the restricted       
period lapses. The fair market value of such shares at the time of vesting      
generally will be equal to the then current market price of                     

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such shares. A recipient's basis for determining gain or loss on a subsequent   
disposition of such shares of our common stock will be the amount which he must 
include in income when the shares vest. Any gain or loss recognized on a        
disposition of such shares generally will be long-term capital gain or loss if  
the recipient holds the shares for more than one year from the date the         
restricted period lapses.                                                       

The general rules described above do not apply if a recipient elects,     
pursuant to Section 83(b) of the Internal Revenue Code, to include in his       
income the fair market value of the shares of our common stock subject to an    
award at the time the shares are awarded, without taking into account the       
effect of the restrictions on the shares. If a recipient makes such a Section   
83(b) election, he will not be required to recognize any income in any later    
year in which the shares vest. The recipient's basis for determining gain or    
loss on a disposition of the shares will be the amount included in income in    
the year of the initial award. Any gain or loss recognized by the recipient on  
a disposition of shares which were the subject of a Section 83(b) election will 
be capital gain or loss, and will be long-term capital gain or loss if the      
recipient holds the shares for more than one year from the date the shares are  
transferred to him. If, however, the recipient forfeits any shares upon a       
termination of employment, he will not be entitled to deduct any loss upon such 
forfeiture even though he may have been required to include an amount in income 
by virtue of a Section 83(b) election.                                          

In general, for federal income tax purposes, we will be entitled to a     
deduction in the same amount and at the same time as a recipient recognizes     
income. In certain circumstances, our deductions may be limited because of the  
application of the $1,000,000 compensation cap under Section 162(m) of the      
Internal Revenue Code.                                                          

Employment Agreements                                                           

 K. Paul Singh. We have entered into an employment agreement with Mr. Singh.
The Singh Agreement is a five-year contract, with a term beginning on June 1,   
1994 and continuing until May 30, 1999, and from year to year thereafter unless 
terminated. On May 30, 1999, this agreement renewed by its own terms for an     
additional year. Under the terms of the Singh Agreement, Mr. Singh is required  
to devote his full time efforts to Primus as Chairman of our board of           
directors, President and Chief Executive Officer. We are required to compensate 
Mr. Singh at an annual rate of $250,000 effective January 1, 1997 (which amount 
is reviewed annually by our board of directors and is subject to increase at    
their discretion). Mr. Singh, however, agreed to defer payment of his base      
salary from June 1, 1994 through May 31, 1995, which was subsequently paid to   
him on July 31, 1996. We are also obligated to:                                 

(i) allow Mr. Singh to participate in any bonus or incentive          
compensation plan approved for senior management,                           

(ii) provide life insurance in an amount equal to three times Mr.     
Singh's base salary and disability insurance which provides monthly         
payments in an amount equal to one-twelfth of his then applicable base      
salary,                                                                     

(iii) provide medical insurance, and                                  

(iv) pay up to $2,500 annually for Mr. Singh's personal tax and       
financial planning services.                                                

  We may terminate the Singh Agreement at any time in the event of Mr. Singh's
disability or for cause, each as defined in the Singh Agreement. Mr. Singh may  
resign at any time without penalty (other than the non-competition obligations  
discussed below). If we terminate the Singh Agreement for disability or cause,  
we will have no further obligations to Mr. Singh. If, however, we terminate the 
Singh Agreement other than for disability or cause, we must pay Mr. Singh one-  
twelfth of his then applicable base salary as severance pay. If Mr. Singh       
resigns, he may not directly or indirectly compete with our business until six  
months after his resignation. If we terminate Mr. Singh's employment for any    
reason, Mr. Singh may not directly or indirectly compete with our business      
until six months after the final payment of any amounts owed to him under the   
Singh Agreement become due.                                                     

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Wesley T. O'Brien. TresCom entered into an employment agreement with Mr.  
Wesley T. O'Brien which was amended and restated on February 15, 1997 and was   
further amended on February 3, 1998. The O'Brien Agreement provided for Mr.     
O'Brien to serve as TresCom's President and Chief Executive Officer for which   
he would receive an annual base salary of $231,000 and was to terminate in June 
1999; however, it was terminated as of June 22, 1998. Pursuant to the terms of  
the O'Brien Agreement, Mr. O'Brien was to receive any unpaid salary and bonus,  
as well as an additional amount equal to the salary remaining until June 1999.  
In addition, Mr. O'Brien agreed to a customary confidentiality clause and to a  
non-competition clause which prohibits Mr. O'Brien from competing with TresCom  
for one year from the date of the termination of the O'Brien Agreement. The     
consummation of the TresCom merger constituted a Change in Control as defined   
in the O'Brien Agreement, making Mr. O'Brien eligible for a one-time special    
bonus of $1.5 million. The first installment of this special bonus was paid     
contemporaneously with the closing of the TresCom merger and the remainder was  
paid upon Mr. O'Brien's termination.                                            

  Other Agreements. TresCom also entered into agreements with Mr. Dan O'Connor
and Ms. Denise Boerger. The O'Connor/Boerger Agreements each provide for a one- 
time special bonus of $500,000 in the event of a change in control, which was   
triggered by the TresCom merger. The first installment of these bonuses was     
paid contemporaneously with the closing of the TresCom merger. The second and   
third installments are due on the first and second anniversary, respectively,   
of the change in control so long as Mr. O'Connor or Ms. Boerger, as the case    
may be, remains employed by Primus.                                             

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TRANSACTIONS WITH AFFILIATES AND OTHERS 

Private Equity Sale                                                             

In July 1996, we completed the sale of 965,999 shares of our common stock 
for an aggregate purchase price of approximately $8.0 million to:               

 (i) Quantum Industrial Partners LDC, the principal operating subsidiary
of Quantum Industrial Holdings Ltd., an investment fund advised by Soros    
Fund Management, a private investment firm owned by Mr. George Soros,       

(ii) Winston Partners II LDC, the principal operating subsidiary of   
Winston Partners II Offshore Ltd., an investment fund advised by Chatterjee 
Management Company, a private entity owned by Dr. Purnendu Chatterjee,      

 (iii) Winston Partners II LLC, an investment fund advised by Chatterjee
Management Company, and                                                     

(iv) S-C Phoenix Holdings, L.L.C., an investment vehicle owned by     
affiliates of Mr. Soros and Dr. Chatterjee                                  

The Soros/Chatterjee Group named above also purchased, for an additional  
$8.0 million, warrants representing the right to receive, upon exercise, an     
indeterminate number of shares of our common stock with a fair market value of  
$10.0 million as of the date of exercise, plus up to 627,899 additional shares  
of our common stock. The warrants have been exercised in full.                  

The Soros/Chatterjee Group was granted registration rights pursuant to a  
registration rights agreement with us. Under the registration rights            
agreement, the Soros/Chatterjee Group is entitled to demand registration of     
its shares after July 31, 1998, a maximum of three times, the third demand      
being available only if the Soros/Chatterjee Group has not registered 80% of    
its shares of our common stock after the first demand registration. We are not  
required to effect any demand registration within 180 days after the effective  
date of a previous demand registration and may postpone, on one occasion in     
any 365-day period, the filing or effectiveness of a registration statement     
for a demand registration for up to 120 days under certain circumstances,       
including pending material transactions or the filing of a registration         
statement relating to the sale of shares for our own account. The               
Soros/Chatterjee Group is also entitled to unlimited piggyback registrations.   
All such registrations would be at our expense, exclusive of underwriting       
discounts and commissions, and legal fees (up to $25,000 for each such          
offering) incurred by the holders of the registrable securities. We and the     
Soros/Chatterjee Group have entered into customary indemnification and          
contribution provisions.                                                        

Additionally, members of the Soros/Chatterjee Group are entitled to tag-  
along rights to participate with Mr. Singh and members of his family in sales   
of capital stock on the same terms and conditions as Mr. Singh and members of   
his family. The Soros/Chatterjee Group shares are also subject to drag-along    
rights in the event holders of a majority of our common stock decide to sell    
80% or more of the outstanding capital stock of Primus. A securityholders       
agreement provides that members of the Soros/Chatterjee Group will not          
transfer shares of our common stock to a company, or any affiliate, that        
competes with us to a material extent in the provision of telecommunications    
services in the United States, Australia, the United Kingdom, France, Germany,  
Mexico, Canada, Italy or Hong Kong.                                             

Teleglobe                                                                       

We entered into an agreement on January 12, 1996 with Teleglobe, pursuant 
to which Teleglobe purchased 410,808 shares of our common stock for a total of  
$1,458,060. The equity investment was consummated in February 1996 as was a     
loan by Teleglobe of $2.0 million to us. The loan was repaid in full with the   
proceeds from the offering of the 1997 senior notes. Related to the Teleglobe   
investments, we and a number of our subsidiaries have entered into trading      
agreements with Teleglobe with respect to our respective                        

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service offerings. The parties have also agreed to cooperate in an effort to    
maximize efficiencies with respect to network facilities.                       

NSI Private Placements                                                          

In 1995 and 1996, we engaged Northeast Securities, Inc. to serve as the   
placement agent for two private placements of our common stock. Mr. Andrew B.   
Krieger, a former director of Primus, served as a broker-dealer in the private  
placements through an affiliation with Northeast Securities. In connection with 
these offerings, we paid Mr. Krieger cash commissions aggregating approximately 
$1,007,000. We also retained Krieger Associates, of which Mr. Krieger is the    
President and Chief Executive Officer, to perform certain financial and other   
consulting services and paid a total of approximately $105,828 for the          
performance of such services during 1995 and 1996. In addition, in connection   
with these private placements, we issued a total of 193,718 shares of our       
common stock to Krieger Associates and Mr. Krieger, and at the direction of Mr. 
Krieger issued a total of 74,003 shares of our common stock to other            
individuals associated with the transaction. We also issued, in connection with 
these private placements, a total of 245,555 shares of our common stock to      
Northeast Securities and certain of its employees associated with the           
transactions.                                                                   

Hotkey Investment                                                               

 In March 1998, we invested in Hotkey, a Melbourne, Australia-based Internet
service provider, acquiring a 60% interest in the Company. Mr. Singh was the    
holder of approximately 14% of the outstanding equity securities of Hotkey. We  
purchased our 60% ownership of Hotkey for approximately $1.3 million in cash.   
In February 1999, we purchased the remaining 40% of Hotkey from its             
stockholders for approximately $1.1 million comprised of $0.3 million in cash   
and 57,025 shares of our common stock. In connection with the February 1999     
transaction, K. Paul Singh received 6,148 shares of our common stock and        
$34,252 in cash.                                                                

Executive Officer Loan                                                          

As of September 3, 1998, we loaned Ravi and Madhu Bhatia the principal    
amount of $164,000. As of March 31, 1999, the Bhatias paid down the principal   
amount of the loan to $112,681 and we extended the maturity of the loan. The    
loan is now due on the earlier of the termination of Mr. Bhatia's employment or 
August 31, 1999. Interest is calculated daily at a rate of 10% per annum.       
Repayment of the loan is secured by options to purchase our common stock held   
by Mr. Bhatia and a pledge of 50,000 shares of our common stock. The common     
stock which is pledged is subject to a prior pledge in favor of Schroder & Co.  
to secure payment of certain loans.                                             

TresCom Merger                                                                  

 In June 1998, pursuant to an Agreement and Plan of Merger dated February 3,
1998, as amended, Taurus Acquisition Corporation, a Florida corporation and our 
wholly-owned subsidiary, merged with and into TresCom International, Inc., a    
Florida corporation. Under the terms of the merger agreement, TresCom           
shareholders received 0.6147 shares of our common stock in exchange for each    
share of TresCom's common stock outstanding at the effective time of the        
merger, other than shares beneficially owned by us or our affiliates. The       
exchange ratio was determined pursuant to the merger agreement by dividing      
$12.00 by $19.5223, which was the weighted average sales price of our common    
stock during the 20-trading day period ending on June 4, 1998. As a result of   
the consummation of the merger, TresCom became our wholly-owed subsidiary.      

As a result of the merger, Warburg, Pincus Investors, L.P., which         
beneficially owned approximately 52% of TresCom's common stock, received        
approximately 3,875,689 shares of our common stock valued at approximately      
$71,458,016. Warburg, Pincus currently beneficially owns approximately 13.5% of 
our common stock. Pursuant to a Stockholder Agreement dated February 3, 1998,   
by and among Mr. Singh, Warburg, Pincus, and us, Warburg, Pincus was granted    
certain demand and piggyback registration rights related to shares              

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of our common stock, which if exercised, would permit Warburg, Pincus to        
transfer such shares free of Rule 144 volume limitations (the same as non-      
affiliates of TresCom), and the right, so long as Warburg, Pincus beneficially  
owns 10% or more of our common stock, to nominate an individual, reasonably     
acceptable to our non-employee directors, to serve as a director on our Board   
of Directors.                                                                   

Satellite Earth Station                                                         

 In June 1998, our U.K. subsidiary entered into a $2.1 million agreement for
the design, manufacture, installation and the provision of training with        
respect to a satellite earth station in London. David Hershberg, one of our     
directors, is the chairman, president and a stockholder of the company          
providing such services. During 1998, $1.2 million was paid by us for the above 
services.                                                                       

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PRINCIPAL STOCKHOLDERS

The following table sets forth information, as of July 29, 1999, with     
respect to the beneficial ownership of shares of our common stock by each       
person or group who is known to us to be the beneficial owner of more than five 
percent of our outstanding common stock, by each director or nominee for        
director, by each of the executive officers on the Summary Compensation Table,  
and by all directors and executive officers as a group. Unless otherwise        
indicated, each person has sole voting power and sole investment power.         

                                                                [Download Table]

                                                        Amount and             
                                                        Nature of              
                                                        Beneficial    Percent  
Name and Address of Beneficial Owner                   Ownership(1) of Class(2)
------------------------------------                   ------------ -----------
                                                                               
K. Paul Singh(3)......................................  4,761,839      16.4%   
 1700 Old Meadow Road                                                          
 McLean, VA 22102                                                              

Warburg, Pincus Investors, L.P.(4)....................  3,875,689      13.5%   
 466 Lexington Avenue                                                          
 New York, New York 10017                                                      

Franklin Resources, Inc.(5)...........................  2,035,270       7.1%   
 777 Mariners Island Boulevard                                                 
 San Mateo, CA 94404                                                           

John F. DePodesta(6)..................................    382,924       1.3%   

Herman Fialkov........................................     30,000         *    

David E. Hershberg(7).................................     51,667         *    

Douglas M. Karp(8)....................................  3,875,689      13.5%   

John G. Puente........................................    100,715         *    

Neil L. Hazard(9).....................................    325,165       1.1%   

Yousef B. Javadi(10)..................................    112,356         *    

John Melick(11).......................................    127,294         *    

Ravi Bhatia(12).......................................    113,930         *    

All executive officers and directors as a group(13)...  9,942,992      33.2%   

--------                                                                        
*  Less than 1% of our outstanding common stock.                              

(1) Beneficial ownership is determined in accordance with the rules of the    
Securities and Exchange Commission, and includes voting or investment 
   power with respect to the shares beneficially owned. Shares of our common
    stock subject to options or warrants currently exercisable or which become
exercisable on or prior to 60 days from July 15, 1999 are deemed      
  outstanding for computing the percentage ownership of the person holding
    such options or warrants, but are not deemed outstanding for computing the
percentage ownership of any other person.                             

(2) Based upon 28,707,691 shares of our common stock outstanding as of July   
29, 1999.                                                             

(3) Includes 377,786 shares of our common stock owned by Mr. Singh's wife and 
   children, 488,500 shares of our common stock held by a private foundation
   of which Mr. Singh is the president and a director, 396,828 shares of our
  common stock held of record by a series of revocable trusts of which Mr.
    Singh is the trustee and pursuant to which Mr. Singh has sole voting power
 and shared dispositive power, and 1,148 shares held in a 401(k) plan of
which Mr. Singh is a beneficiary. Also includes 371,433 shares of our 
  common stock issuable upon the exercise of options granted to Mr. Singh.

(4) E.M. Warburg, Pincus & Co., LLC, a New York limited liability company     
 ("E.M. Warburg"), manages Warburg, Pincus. Warburg, Pincus & Co., a New
York general partnership ("WP"), the sole general partner of Warburg, 
Pincus, has a 20% interest in the profits of Warburg, Pincus as the   
general partner.                                                      

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 Lionel I. Pincus is the managing partner of WP and the managing member of
E.M. Warburg and may be deemed to control both WP and E.M. Warburg.     
(5) Based on a Schedule 13G dated February 1, 1999, Franklin Resources, Inc.  
("Franklin") has reported that it may be deemed to be the beneficial  
  owner of 2,035,270 shares of our common stock. According to the Schedule
  13G, such shares are also beneficially owned by Franklin Advisers, Inc.,
  an investment advisory subsidiary (the "Adviser") of Franklin, which has
all investment and/or voting power over the shares pursuant to an     
   advisory contract. In addition, Charles B. Johnson and Rupert H. Johnson,
   Jr. each own in excess of 10% of the outstanding common stock of Franklin
 and are the principal shareholders of FRI and may, therefore, be deemed
to be the beneficial owner of the shares of our common stock held by  
 Franklin. Franklin, the Adviser, and Messrs. Charles and Rupert Johnson
disclaim any economic interest or beneficial ownership in such shares.
(6) Includes 161,430 shares of our common stock issuable upon the exercise of 
options granted to Mr. DePodesta.                                     
(7) Includes 50,715 shares of our common stock issuable upon the exercise of  
   options granted to Mr. Hershberg and 952 shares of our common stock owned
by a partnership of which Mr. Hershberg is a general partner.         
(8) All shares shown as being beneficially owned by Mr. Karp are owned        
directly by Warburg, Pincus and are included because of Mr. Karp's    
affiliation with Warburg, Pincus. Mr. Karp disclaims "beneficial      
ownership" of these shares within the meaning of Rule 13d-3 of the    
Exchange Act. See Note 4 above.                                       
(9) Includes 317,623 shares of our common stock issuable upon the exercise of 
options granted to Mr. Hazard.                                        
(10) Includes 106,666 shares of our common stock issuable upon the exercise of  
options granted to Mr. Javadi.                                        
(11) Includes 123,287 shares of our common stock issuable upon the exercise of  
options granted to Mr. Melick.                                        
(12) Includes 43,810 shares of our common stock issuable upon the exercise of   
   options granted to Mr. Bhatia. Certain of Mr. Bhatia's options and shares
are pledged to secure payment of certain loans. See "Transactions with
Affiliates and Others--Executive Officer Loan."                       

(13) Consists of 11 persons and includes 1,225,536 shares of our common stock   
  issuable upon the exercise of options granted to directors and executive
officers. Includes 3,875,689 shares deemed to be beneficially owned by
Mr. Karp which are owned directly by Warburg, Pincus and are included 
because of Mr. Karp's affiliation with Warburg, Pincus. Mr. Karp      
disclaims "beneficial ownership" of these shares within the meaning of
Rule 13d-3 of the Securities Exchange Act. See Notes 4 and 12 above.  

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Stockholders' Rights Plan                                                       

We have adopted a stockholders' rights plan in which we granted preferred 
stock purchase rights as a dividend to our stockholders of record at the close  
of business on December 31, 1998. In implementing this plan, our Board has      
declared a distribution of one right for each outstanding share of our common   
stock. Each right entitles the holder to purchase from us 1/1000 of a share of  
Series B Junior participating Preferred Stock at a purchase price of $90 per    
1/1000 of a share of Series B Preferred Stock, subject to adjustment. Each      
1/1000 of a share of Series B Preferred Stock is intended to be approximately   
the economic equivalent of one share of common stock. The rights will expire on 
December 23, 2008, unless we redeem them.                                       

The rights are not exercisable and not traded separately from the common  
stock. The rights will become exercisable if a person or group in the future    
becomes the beneficial owner of 20% or more of our then outstanding common      
stock or announces an offer to acquire 20% or more of our then outstanding      
common stock.                                                                   

If                                                                        

(i)  we are the surviving corporation in a merger with an acquiring person
and shares of our common stock remain outstanding,                

(ii)  a person becomes the beneficial owner of 20% or more of our then      
outstanding common stock,                                       

(iii) an acquiring person engages in one or more "self- dealing"            
transactions as set forth in the rights plan, or                

(iv) when there is an acquiring person, the acquiring person's ownership    
interest is increased by more than 1% (for example by means of a  
reverse stock split or recapitalization),                         

each holder of a right (other than those held by an acquiring person) will      
thereafter have the right to receive, upon exercise, Series B Preferred Stock   
(or, in certain circumstances, common stock, cash, property or other Primus     
securities) having a current market value equal to two times the exercise price 
of the right.                                                                   

If                                                                        

(i) we are acquired in a merger or other business combination transaction   
   and we are not the surviving corporation (other than a merger described
in the preceding paragraph),                                        

(ii) any person consolidates or merges with us and all or part of our       
common stock is converted or exchanged for securities, cash or    
property of any other person, or                                  

(iii) 50% or more of our assets or earning power is sold or transferred,    

each holder of a right (other than those held by an acquiring person) shall     
therefore have the right to receive, upon exercise, common stock of the         
acquiring person having a value equal to two times the exercise price of the    
right.                                                                          

  Our board of directors may redeem the rights in whole, but not in part, at a
price of $0.001 per right (subject to adjustment in certain events), payable,   
at the election of the board of directors, in cash or shares of common stock.   
When the board of directors orders the redemption of the rights, the rights     
will terminate and the only right of the holders of rights will be to receive   
the redemption price.                                                           

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DESCRIPTION OF OTHER INDEBTEDNESS 

1997 Senior Notes                                                               

General. Our 1997 senior notes are senior obligations, limited to $225    
million in principal amount, which mature on August 1, 2004. The 1997 senior    
notes, which were issued pursuant to the 1997 indenture, accrue interest at a   
rate of 11 3/4% per annum. Interest is payable each February 1 and August 1,    
commencing on February 1, 1998.                                                 

Ranking. The 1997 senior notes will rank senior in right of payment to any
of our future subordinated indebtedness (as defined in the 1997 indenture), and 
pari passu in right of payment with all of our senior indebtedness. Because we  
operate via a holding company that conducts its business through its            
subsidiaries, all existing and future indebtedness and other liabilities and    
commitments of our subsidiaries, including trade payables, will be structurally 
senior to the 1997 senior notes.                                                

Security. The indenture required us to purchase and pledge to First Union 
National Bank, as security for the benefit of the holders of the 1997 senior    
notes, securities consisting of U.S. government securities in an amount         
sufficient to provide for the payment in full of the first six scheduled        
interest payments due on the 1997 senior notes. We used approximately $71.8     
million of the net proceeds of the 1997 senior notes to acquire these pledged   
securities. Assuming the first six scheduled interest payments on the 1997      
senior notes are made in a timely manner, all remaining pledged securities will 
be released.                                                                    

Optional Redemption. The 1997 senior notes are not redeemable prior to    
August 1, 2001. Thereafter, the 1997 senior notes will be redeemable, in whole  
or in part, at our option, at the redemption prices set forth in the indenture, 
plus accrued and unpaid interest to the applicable redemption date.             
Specifically, if redeemed during the 12-month period commencing on August 1 of  
the years set forth below, the redemption price will be that amount, expressed  
as a percentage of the principal amount of the 1997 senior notes, set forth     
below:                                                                          

                                                                [Download Table]

                                                                   Redemption
Year                                                                 Price   
----                                                               ----------
                                                                             
2001..............................................................  105.875% 
2002..............................................................  102.938% 
2003 (and thereafter).............................................  100.000% 

In addition, prior to August 1, 2000, we may redeem up to 35% of the      
originally issued principal amount of the 1997 senior notes at 111.750% of the  
principal amount thereof, plus accrued and unpaid interest through the          
redemption date, with the net cash proceeds of one or more Public Equity        
Offerings (as defined in the 1997 indenture); provided, however, that at least  
65% of the originally issued principal amount of the 1997 senior notes remains  
outstanding after the occurrence of such redemption.                            

  Change of Control. Upon the occurrence of a Change of Control (as defined in
the 1997 indenture), each holder of 1997 senior notes will have the right to    
require us to repurchase all or any part of such holder's 1997 senior notes at  
a purchase price in cash equal to 101% of the principal amount thereof, plus    
accrued and unpaid interest to the date of purchase.                            

Covenants. The 1997 indenture contains certain covenants that, among other
things, limit our ability and that of our Restricted Subsidiaries (as defined   
in the 1997 indenture) to:                                                      

.  incur additional indebtedness and issue preferred stock;                 

.  pay dividends or make other distributions;                               

.  repurchase Capital Stock (as defined in the 1997 indenture) or           
 subordinated indebtedness or make certain other Restricted Payments (as
defined in the 1997 indenture);                                       

.  create certain liens;                                                    

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.  enter into certain transactions with affiliates;                         

.  sell assets;                                                             

.  issue or sell Capital Stock of our Restricted Subsidiaries; or           

.  enter into certain mergers and consolidations.                           

Pursuant to a consent solicitation, we amended the 1997 indenture to      
generally conform portions of covenants relating to debt incurrence, restricted 
payments, permitted investments and permitted liens to the corresponding        
provisions in the 1998 indenture and to the corresponding provisions which will 
be contained in the indenture.                                                  

 Events of Default. The 1997 indenture contains customary events of default,
including:                                                                      

(i) defaults in the payment of principal, premium or interest,        

(ii) defaults in the compliance with covenants contained in the 1997  
indenture,                                                                  

(iii) cross defaults on more than $5 million of other indebtedness,   

  (iv) failure to pay more than $5 million of judgments that have not been
stayed by appeal or otherwise and                                           

(v) the bankruptcy of Primus or certain of its subsidiaries.          

1998 Senior Notes                                                               

General. Our 1998 senior notes are senior obligations, limited to $150    
million in principal amount, which mature on May 15, 2008. The 1998 senior      
notes, which were issued pursuant to an indenture dated May 19, 1998, accrue    
interest at a rate of 9 7/8% per annum. Interest is payable each May 15 and     
November 15, commencing on November 15, 1998.                                   

  Ranking. The 1998 senior notes rank senior in right of payment to any future
subordinated Indebtedness (as defined in the 1998 indenture governing the 1998  
senior notes), and pari passu in right of payment with all senior indebtedness. 
Because we are a holding company that conducts business through subsidiaries,   
all existing and future indebtedness and other liabilities and commitments of   
our subsidiaries, including trade payables, will be structurally senior to the  
1998 senior notes.                                                              

Optional Redemption. The 1998 senior notes are not redeemable prior to May
15, 2003. Thereafter, the 1998 senior notes will be redeemable, in whole or in  
part, at our option, at the redemption prices set forth in the indenture, plus  
accrued and unpaid interest to the applicable redemption date. Specifically, if 
redeemed during the 12-month period commencing on May 15 of the years set forth 
below, the redemption price will be that amount, expressed as a percentage of   
the principal amount of the 1998 senior notes, set forth below:                 

                                                                [Download Table]

                                                                 Redemption
Year                                                               Price   
----                                                             ----------
                                                                           
2003............................................................  104.938% 
2004............................................................  103.208% 
2005............................................................  101.604% 
2006 (and thereafter)...........................................  100.000% 

In addition, prior to May 15, 2001, we may redeem up to 25% of the        
originally issued principal amount of the 1998 senior notes at 109.875% of the  
principal amount thereof, plus accrued and unpaid interest through the          
redemption date, with the net cash proceeds of one or more Public Equity        
Offerings (as defined in the 1998 indenture); provided, however, that at least  
75% of the originally issued principal amount of the 1998 senior notes remains  
outstanding after the occurrence of such redemption.                            

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  Change of Control. Upon the occurrence of a Change of Control (as defined in
the 1998 indenture), each holder of 1998 senior notes will have the right to    
require us to repurchase all or any part of such holder's 1998 senior notes at  
a purchase price in cash equal to 101% of the principal amount thereof, plus    
accrued and unpaid interest to the date of purchase.                            

Covenants. The 1998 indenture contains certain covenants that, among other
things, limit the ability of Primus and its Restricted Subsidiaries (as defined 
in the 1998 indenture) to:                                                      

.  incur additional indebtedness and issue preferred stock,                 

.  pay dividends or make other distributions,                               

.  repurchase Capital Stock (as defined in the 1998 indenture) or           
 subordinated indebtedness or make certain other Restricted Payments (as
defined in the 1998 indenture),                                       

.  create certain liens,                                                    

.  enter into certain transactions with affiliates,                         

.  sell assets,                                                             

.  issue or sell Capital Stock of our Restricted Subsidiaries, or           

.  enter into certain mergers and consolidations.                           

These covenants are substantially the same as those contained in the      
indenture. See "Description of Exchange Notes--Covenants."                      

 Events of Default. The 1998 indenture contains customary events of default,
including:                                                                      

(i) defaults in the payment of principal, premium or interest,        

(ii) defaults in the compliance with covenants contained in the 1998  
indenture,                                                                  

(iii) cross defaults on more than $10 million of other indebtedness,  

(iv) failure to pay more than $10 million of judgments that have not  
been stayed by appeal or otherwise and                                      

(v) the bankruptcy of Primus or certain of its subsidiaries.          

Telegroup Notes                                                                 

In June 1999, we issued $45.5 million aggregate principal amount of our 11
1/4% senior notes due 2009 to Telegroup, Inc. in a private placement. These     
notes were issued pursuant to the same indenture as, and contain the same terms 
as, our 11 1/4% senior notes due 2009 issued in January 1999. In connection     
with our issuance of these notes to Telegroup, we agreed to register them for   
resale by October 28, 1999. If we do not cause these notes to be registered by  
October 28, 1999, additional cash interest will accrue on the Telegroup notes   
as liquidated damages in an amount equal to .50% per annum of the principal     
amount of the notes. The amount of liquidated damages will increase by an       
additional .50% per annum of the principal amount of the notes with respect to  
each subsequent 90 day period (or portion thereof) until the resale of the      
Telegroup notes has been registered, up to a maximum rate of 1.5% per annum.    
Immediately upon the registration of the Telegroup notes, there shall be no     
further accrual of liquidated damages with respect to the Telegroup notes. For  
a further description of the notes issued to Telegroup, see "Description of     
Exchange Notes."                                                                

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DESCRIPTION OF EXCHANGE NOTES 

  Set forth below is a summary of certain provisions of the new notes. The new
notes will be issued pursuant to an indenture, dated as of January 29, 1999,    
between us, as issuer, and First Union National Bank, as trustee. The following 
summary of certain provisions of the Indenture does not purport to be complete  
and is subject to, and is qualified in its entirety by reference to, all the    
provisions of the indenture, including the definitions of certain terms therein 
and those terms made a part thereof by the Trust Indenture Act. Whenever        
particular Sections or defined terms of the indenture not otherwise defined     
herein are referred to, such Sections or defined terms are incorporated herein  
by reference. Copies of the form of the indenture are available upon request    
from us or the trustee. The term "Note" or "Notes" includes the initial notes   
and the new notes.                                                              

The form and terms of the new notes will be identical in all material     
respects to the form and terms of the initial notes, except that:               

(i) the new notes have been registered under the Securities Act and,  
therefore, will not bear legends restricting the transfer thereof,          

  (ii) holders of the new notes, except in limited circumstances, will not
be entitled to liquidated damages, and                                      

  (iii) holders of the new notes will not be, and upon consummation of the
exchange offer, holders of the initial notes will no longer be, entitled to 
certain rights under the Registration Rights Agreement intended for the     
holders of unregistered securities.                                         

The exchange offer shall be deemed consummated upon the occurrence of the 
delivery by us to the Registrar under the exchange note indenture in the same   
aggregate principal amount as the aggregate principal amount of Initial Notes   
that are validly tendered by holders thereof pursuant to the exchange offer.    

General                                                                         

  The Notes issued on the Closing Date will be our senior obligations, limited
to $200 million aggregate principal amount, except that the indenture will      
provide for the issuance of an additional $75 million of Notes which may be of  
the same series as, and which may vote as a single class for purpose of the     
Indenture with, the $200 million of Notes issued on the Closing Date (the       
"Additional Notes"). In addition, the Notes have the following characteristics: 

                                                                [Download Table]
                                                                             
Maturity......................................... January 15, 2009           
Interest......................................... 11 1/4% per annum          
Interest Payable................................. semiannually on January 15 
                                                  and July 15 of each year,  
                                                  commencing January 15, 2000

Interest on the Notes will be payable to the Person in whose name the Note (or  
any predecessor Note) is registered at the close of business on the preceding   
January 1 or July 1 as the case may be. Interest will be computed on the basis  
of a 360-day year of twelve 30-day months.                                      

 Principal of, premium, if any, and interest on the Notes will be payable by
wire transfer of immediately available funds to the holder of the global note   
and with respect to the holder of certificated notes at the office or agency of 
Primus (which initially will be the corporate trust operations office of the    
Trustee at NC 1153, 1125 West W.T. Harris Boulevard, Charlotte, North Carolina  
28262); provided that, at our option, payment of interest may be made by check  
mailed to the address of the holders as such address appears in the Note        
Register.                                                                       

 The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 of principal amount at maturity and any integral        
multiple thereof. No service charge will be made for any                        

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registration of transfer or exchange of Notes, but we may require payment of a  
sum sufficient to cover any transfer tax or other similar governmental charge   
payable in connection therewith.                                                

Optional Redemption                                                             

The Notes will be redeemable, at our option, in whole or in part, at any  
time or from time to time, on or after January 15, 2004 and prior to maturity,  
upon not less than 30 nor more than 60 days' prior notice mailed by first class 
mail to each holders' last address as it appears in the note register, at the   
following redemption prices (expressed in percentages of principal amount       
thereof), plus accrued and unpaid interest and liquidated damages, if any,      
thereon to the redemption date (subject to the right of holders of record on    
the relevant Regular Record Date to receive interest due on an interest payment 
date that is on or prior to the Redemption Date), if redeemed during the 12-    
month period commencing on January 15, of the years set forth below:            

                                                                [Download Table]

                                                                   Redemption
Year                                                                 Price   
----                                                               ----------
                                                                             
2004..............................................................  105.625% 
2005..............................................................  103.750% 
2006..............................................................  101.875% 
2007 (and thereafter).............................................  100.000% 

Notwithstanding the foregoing, prior to January 15, 2002 we may on any one
or more occasions redeem up to 35% of the originally issued principal amount of 
Notes at a redemption price of 111.25% of the principal amount thereof, plus    
accrued and unpaid interest and liquidated damages, if any, thereon to the      
redemption date, with the Net Cash Proceeds of one or more Public Equity        
Offerings; provided (i) that at least 65% of the originally issued principal    
amount of Notes remains outstanding immediately after the occurrence of such    
redemption and (ii) that notice of such redemption is mailed within 60 days of  
the closing of each such Public Equity Offering. (Section 1101)                 

  In the case of any partial redemption, selection of the Notes for redemption
will be made by the trustee in compliance with the requirements of the          
principal national securities exchange, if any, on which the Notes are listed   
or, if the Notes are not listed on a national securities exchange, on a pro     
rata basis, by lot or by such other method as the trustee in its sole           
discretion shall deem to be fair and appropriate; provided that no Note of      
$1,000 in principal amount at maturity or less shall be redeemed in part. If    
any Note is to be redeemed in part only, the notice of redemption relating to   
such Note shall state the portion of the principal amount thereof to be         
redeemed. A new Note in principal amount equal to the unredeemed portion        
thereof will be issued in the name of the holder thereof upon cancellation of   
the original Note.                                                              

Ranking                                                                         

  The indebtedness evidenced by the Notes will rank senior in right of payment
to any of our existing and future obligations that are expressly subordinated   
in right of payment to the Notes and will rank pari passu in right of payment   
with all other of our existing and future senior unsecured obligations,         
including trade payables. As of March 31, 1999, after giving pro forma effect   
to the offering of the new notes, and our issuance of $45.5 million of senior   
notes due 2009 in connection with the Telegroup acquisition, we would have had  
outstanding approximately $651.8 million of indebtedness on a consolidated      
basis. Because we are a holding company that conducts our business through our  
subsidiaries, all existing and future indebtedness and other liabilities and    
commitments of our subsidiaries, including trade payables, will be structurally 
senior to the notes. As of March 31, 1999, our consolidated subsidiaries had    
outstanding aggregate liabilities of approximately $174.7 million, which        
included $28.6 million of indebtedness.                                         

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Covenants                                                                       

Limitation on Indebtedness                                                    

 (a) We will not, and will not permit any of our Restricted Subsidiaries to,
Incur any Indebtedness (other than the Notes issued on the Closing Date);       
provided, however, that we may Incur Indebtedness if immediately thereafter the 
ratio of:                                                                       

(i) the aggregate principal amount (or accreted value, as the case may
be) of Indebtedness of Primus and its Restricted Subsidiaries on a          
consolidated basis outstanding as of the Transaction Date to                

(ii) the Pro Forma Consolidated Cash Flow for the preceding two full  
fiscal quarters multiplied by two, determined on a pro forma basis as if    
any such Indebtedness that had been Incurred and the proceeds thereof had   
been applied at the beginning of such two fiscal quarters, would be greater 
than zero and less than 6.0 to 1.                                           

  (b) Notwithstanding the foregoing, Primus and (except for Indebtedness under
subsections (v), (vii) and (xi) below) any Restricted Subsidiary may Incur each 
and all of the following:                                                       

(i) Indebtedness of Primus or any Restricted Subsidiary under one or  
more Credit Facilities in an aggregate principal amount at any one time     
outstanding not to exceed the greater of                                    

(a) $50 million or                                                

(b) 65% of Eligible Accounts Receivable, subject to any permanent 
reductions required by any other terms of the Indenture;                

(ii) Indebtedness (including Guarantees) Incurred by Primus or a      
Restricted Subsidiary after the Closing Date to finance the cost (including 
the cost of design, development, construction, acquisition, installation or 
integration) of equipment used in the telecommunications business or        
ownership rights with respect to indefeasible rights of use or minimum      
investment units (or similar ownership interests) in domestic or            
transnational fiber optic cable or other transmission facilities, in each   
case purchased or leased by Primus or a Restricted Subsidiary after the     
Closing Date (including acquisitions by way of Capitalized Leases and       
acquisitions of the Capital Stock of a Person that becomes a Restricted     
Subsidiary to the extent of the Fair Market Value (as determined in good    
faith by our board of directors, whose determination shall be conclusive    
and evidenced by a Board Resolution) of such equipment, ownership rights or 
minimum investment units so acquired);                                      

(iii) Indebtedness of any Restricted Subsidiary to Primus or          
Indebtedness of Primus or any Restricted Subsidiary to any other Restricted 
Subsidiary; provided that any subsequent issuance or transfer of any        
Capital Stock which results in any such Restricted Subsidiary ceasing to be 
a Restricted Subsidiary or any subsequent transfer of such Indebtedness not 
permitted by this clause (iii) (other than to us or another Restricted      
Subsidiary) shall be deemed, in each case, to constitute the incurrence of  
such Indebtedness, and provided further that Indebtedness to a Restricted   
Subsidiary must be subordinated in right of payment to the Notes;           

(iv) Indebtedness of Primus or a Restricted Subsidiary issued in      
exchange for, or the net proceeds of which are used to refinance or refund, 
then outstanding Indebtedness of Primus or a Restricted Subsidiary, other   
than Indebtedness Incurred under clauses (i), (iii), (vi), (viii), (ix) and 
(xii) of this paragraph, and any refinancings thereof in an amount not to   
exceed the amount so refinanced or refunded (plus premiums, accrued         
interest, and reasonable fees and expenses); provided that such new         
Indebtedness shall only be permitted under this clause (iv) if              

 (A) in case the Notes are refinanced in part or the Indebtedness to
be refinanced is pari passu with the Notes, such new Indebtedness, by   
its terms or by the terms of any agreement or instrument pursuant to    
which such new Indebtedness is issued or remains outstanding, is        
expressly made pari passu with, or subordinate in right of payment to,  
the remaining Notes,                                                    

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(B) in case the Indebtedness to be refinanced is subordinated in  
right of payment to the Notes, such new Indebtedness, by its terms or by
the terms of any agreement or instrument pursuant to which such new     
Indebtedness is issued or remains outstanding, is expressly made        
subordinate in right of payment to the Notes at least to the extent that
the Indebtedness to be refinanced is subordinated to the Notes and      

   (C) such new Indebtedness, determined as of the date of Incurrence of
such new Indebtedness, does not mature prior to the Stated Maturity of  
the Indebtedness to be refinanced or refunded, and the Average Life of  
such new Indebtedness is at least equal to the remaining Average Life of
the Indebtedness to be refinanced or refunded; and provided further that
in no event may our Indebtedness be refinanced by means of any          
Indebtedness of any Restricted Subsidiary pursuant to this clause (iv); 

 (v) Indebtedness not to exceed, at any one time outstanding, 2.00 times

  (A) the Net Cash Proceeds received by us after May 18, 1998 from the
issuance and sale of our Capital Stock (other than Redeemable Stock) to 
a Person that is not a Subsidiary, to the extent such Net Cash Proceeds 
have not been used pursuant to clause (C)(2) of the first paragraph or  
clauses (iii), (iv) or (vii) of the second paragraph of the "Limitation 
on Restricted Payments" covenant described below to make a Restricted   
Payment and                                                             

 (B) the Fair Market Value (as determined in good faith by our board
of directors, whose determination shall be conclusive and evidenced by a
Board Resolution) of property (other than cash and cash equivalents)    
used in a Permitted Business or common equity interests in a Person (the
property and assets of such Person consisting primarily of              
telecommunications assets) that becomes a Restricted Subsidiary (such   
Fair Market Value being that of the common equity interests received    
pursuant to the transaction resulting in such Person becoming a         
Restricted Subsidiary), and, in each case, received by us after May 18, 
1998 from the issuance or sale of our Capital Stock (other than         
Redeemable Stock) to a Person that is not a Subsidiary to the extent    
such sale of Capital Stock has not been used pursuant to clauses (iii), 
(iv) and (vii) of the second paragraph of the "Limitation on Restricted 
Payments" covenant described below to make a Restricted Payment;        
provided that such Indebtedness does not mature prior to the Stated     
Maturity of the Notes and the Average Life of such Indebtedness is      
longer than that of the Notes;                                          

(vi) Indebtedness of Primus or any Restricted Subsidiary              

 (A) in respect of performance, surety or appeal bonds or letters of
credit supporting trade payables, in each case provided in the ordinary 
course of business;                                                     

  (B) under Currency Agreements and Interest Rate Agreements; provided
that such agreements                                                    

(a) are designed solely to protect us or any Restricted       
Subsidiary against fluctuation in foreign currency exchange rates or
interest rates and                                                  

 (b) do not increase the Indebtedness of the obligor outstanding
at any time other than as a result of fluctuations in foreign       
currency exchange rates or interest rates or by reason of fees,     
indemnities and compensation payable thereunder; and                

   (C) arising from agreements providing for indemnification, adjustment
of purchase price or similar obligations, or from Guarantees or letters 
of credit, surety bonds or performance bonds securing any of our        
obligations or any of our Restricted Subsidiaries pursuant to such      
agreements, in any case Incurred in connection with the disposition of  
any business, assets or Restricted Subsidiary (other than Guarantees of 
Indebtedness Incurred by any Person acquiring all or any portion of such
business, assets or Restricted Subsidiary for the purpose of financing  
such acquisition), in a principal amount not to exceed the gross        
proceeds actually received by us or any Restricted Subsidiary in        
connection with such disposition;                                       

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(vii) Indebtedness of Primus, to the extent that the net proceeds     
thereof are promptly                                                        

(A) used to repurchase Notes tendered in a Change of Control Offer
or                                                                      

(B) deposited to defease all of the Notes as described below under
"Defeasance or Covenant Defeasance of Indenture";                       

(viii) Indebtedness of a Restricted Subsidiary represented by a       
Guarantee of the Notes and any other Indebtedness permitted by and made in  
accordance with the "Limitation on Issuances of Guarantees of Indebtedness  
by Restricted Subsidiaries" covenant;                                       

(ix) Indebtedness of Primus or any Restricted Subsidiary not otherwise
permitted hereunder in an aggregate principal amount which, when aggregated 
with the principal amount of all other Indebtedness then outstanding and    
incurred pursuant to this clause (ix), does not exceed $200 million at any  
one time outstanding;                                                       

(x) Acquired Indebtedness;                                            

(xi) Strategic Subordinated Indebtedness; and                         

(xii) Indebtedness of Primus or any Restricted Subsidiary arising from
the honoring by a bank or other financial institution of a check or similar 
instrument inadvertently (except in the case of daylight overdrafts) drawn  
against insufficient funds in the ordinary course of business, provided     
that such Indebtedness is extinguished within three business days of        
Incurrence.                                                                 

  (c) Notwithstanding any other provision of this "Limitation on Indebtedness"
covenant, the maximum amount of Indebtedness that Primus or a Restricted        
Subsidiary may Incur pursuant to this "Limitation on Indebtedness" covenant     
shall not be deemed to be exceeded with respect to any outstanding Indebtedness 
due solely to the result of fluctuations in the exchange rates of currencies.   

 (d) For purposes of determining any particular amount of Indebtedness under
this "Limitation on Indebtedness" covenant, Guarantees, Liens or obligations    
with respect to letters of credit supporting Indebtedness otherwise included in 
the determination of such particular amount shall not be included. For purposes 
of determining compliance with this "Limitation on Indebtedness" covenant, in   
the event that an item of Indebtedness meets the criteria of more than one of   
the types of Indebtedness described in the above clauses, we, in our sole       
discretion, shall classify and from time to time may reclassify such item of    
Indebtedness and only be required to include the amount and type of such        
Indebtedness in one of such clauses. (Section 1011)                             

Limitation on Restricted Payments                                             

We will not, and will not permit any Restricted Subsidiary to, directly or
indirectly,                                                                     

 (i) (A) declare or pay any dividend or make any distribution in respect
of our Capital Stock to the holders thereof (other than dividends or        
distributions payable solely in shares of Capital Stock (other than         
Redeemable Stock) or in options, warrants or other rights to acquire such   
shares of Capital Stock) or                                                 

(B) declare or pay any dividend or make any distribution in respect of
the Capital Stock of any Restricted Subsidiary to any Person other than     
dividends and distributions payable to Primus or any Restricted Subsidiary  
or to all holders of Capital Stock of such Restricted Subsidiary on a pro   
rata basis,                                                                 

 (ii) purchase, redeem, retire or otherwise acquire for value any shares
of Capital Stock (including options, warrants or other rights to acquire    
such shares of Capital Stock) held by any Person other than a Restricted    
Subsidiary,                                                                 

 (iii) make any voluntary or optional principal payment, or voluntary or
optional redemption, repurchase, defeasance, or other acquisition or        
retirement for value of Subordinated Indebtedness or                        

(iv) make any Investment, other than a Permitted Investment, in any   
Person (such payments or any other actions described in clauses (i) through 
(iv) being collectively "Restricted Payments") if, at the time of, and      
after giving effect to, the proposed Restricted Payment:                    

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(A) a Default or Event of Default shall have occurred and be      
continuing;                                                             

  (B) the Company could not Incur at least $1.00 of Indebtedness under
the first paragraph of the "Limitation on Indebtedness" covenant; or    

(C) the aggregate amount expended for all Restricted Payments (the
amount so expended, if other than in cash, to be determined in good     
faith by our board of directors, whose determination shall be           
conclusive and evidenced by a Board Resolution) after the date of the   
Indenture shall exceed the sum of                                       

(1) the remainder of                                          

           (a) 100% of the aggregate amount of the Consolidated Cash
            Flow (determined by excluding income resulting from transfers of
        assets received by Primus or a Restricted Subsidiary from an
         Unrestricted Subsidiary) accrued on a cumulative basis during
        the period (taken as one accounting period) beginning on the
          first day of the last fiscal quarter immediately preceding the
      Closing Date and ending on the last day of the last fiscal
quarter preceding the Transaction Date minus        

               (1) the product of 1.75 times cumulative Consolidated Fixed
            Charges accrued on a cumulative basis during the period (taken
         as one accounting period) beginning on the first day of the
            last fiscal quarter immediately preceding the Closing Date and
             ending on the last day of the last fiscal quarter preceding the
Transaction Date plus                             

                (2) the aggregate Net Cash Proceeds received by us after the
          Closing Date from the issuance and sale of our Capital Stock
    (other than Redeemable Stock) to a Person who is not a
         Subsidiary (except to the extent such Net Cash Proceeds are
           used to incur new Indebtedness outstanding pursuant to clause
          (v) of the paragraph (b) of the "Limitation on Indebtedness"
covenant) plus                                    

          (3) the aggregate Net Cash Proceeds received after the
             Closing Date by us from the issuance or sale of debt securities
          that have been converted into or exchanged for Capital Stock
            (other than Redeemable Stock) together with the aggregate cash
            received by us at the time of such conversion or exchange plus

         (4) without duplication of any amount included in the
             calculation of Consolidated Cash Flow, in the case of repayment
    of, or return of capital in respect of, any Investment
           constituting a Restricted Payment made after the Closing Date
      and reducing the amount of Restricted Payments otherwise
            permitted under this clause (C), an amount equal to the lesser
          of the return of capital with respect to such Investment and
          the cost of such Investment, in either case less the cost of
the disposition of such Investment.               

The foregoing provision shall not be violated by reason of:               

(i) the payment of any dividend within 60 days after the date of      
declaration thereof if, at said date of declaration, such payment would     
comply with the foregoing paragraph;                                        

(ii) the redemption, repurchase, defeasance or other acquisition or   
retirement for value of Indebtedness that is subordinated in right of       
payment to the Notes including premium, if any, and accrued and unpaid      
interest, with the proceeds of, or in exchange for, Indebtedness Incurred   
under clause (iv) of paragraph (b) of the "Limitation on Indebtedness"      
covenant;                                                                   

(iii) the repurchase, redemption or other acquisition of Capital Stock
in exchange for, or out of the proceeds of a substantially concurrent       
offering of, shares of Capital Stock (other than Redeemable Stock) (except  
to the extent such proceeds are used to incur new Indebtedness pursuant to  
clause (v) of paragraph (b) of the "Limitation on Indebtedness" covenant);  

(iv) the acquisition of Indebtedness which is subordinated in right of
payment to the Notes in exchange for, or out of the proceeds of, a          
substantially concurrent offering of, shares of Capital Stock               

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(other than Redeemable Stock) (except to the extent such proceeds are used  
to incur new Indebtedness pursuant to clause (v) of paragraph (b) of the    
"Limitation on Indebtedness" covenant);                                     

(v) payments or distributions to dissenting stockholders pursuant to  
applicable law, pursuant to or in connection with a consolidation, merger   
or transfer of assets that complies with the provisions of the Indenture    
applicable to mergers, consolidations and transfers of all or substantially 
all of our property and assets;                                             

(vi) cash payments in lieu of the issuance of fractional shares issued
in connection with the exercise of any Common Stock warrants;               

(vii) Investments in Permitted Businesses acquired in exchange for    
Capital Stock (other than Redeemable Stock) or the Net Cash Proceeds from   
the issuance and sale of such Capital Stock (except to the extent such      
proceeds are used to incur new Indebtedness pursuant to clause (v) of       
paragraph (b) of the "Limitation on Indebtedness" covenant); provided that  
such proceeds are so used within 270 days of the receipt thereof;           

  (viii) the purchase of any Subordinated Indebtedness at a purchase price
not greater than 101% of the principal amount thereof, together with        
accrued interest, if any, thereof in the event of a Change of Control in    
accordance with provisions similar to the "Repurchase of Notes upon a       
Change of Control" covenant; provided that prior to such purchase we have   
made the Change of Control offer as provided in such covenant with respect  
to the Notes and have purchased all Notes validly tendered for payment in   
connection with such Change of Control Offer; and                           

(ix) other Restricted Payments not to exceed $5.0 million; provided   
that, except in the case of clause (i), no Default or Event of Default      
shall have occurred and be continuing or occur as a consequence of the      
actions or payments set forth therein. (Section 1012)                       

Each Restricted Payment permitted pursuant to the immediately preceding   
paragraph (other than (1) a Restricted Payment referred to in clause (ii)       
thereof, (2) an exchange of Capital Stock for Capital Stock or an exchange of   
Indebtedness for Capital Stock referred to in clauses (iii) or (iv) thereof or  
(3) an Investment referred to in clause (vii) thereof) and the Net Cash         
Proceeds from any issuance of Capital Stock referred to in clauses (iii), (iv)  
and (vii) shall be included in calculating whether the conditions of clause (C) 
of the first paragraph of this "Limitation on Restricted Payments" covenant     
have been met with respect to any subsequent Restricted Payments.               

Any Restricted Payments made other than in cash shall be valued at Fair   
Market Value. The amount of any Investment "outstanding" at any time shall be   
deemed to be equal to the amount of such Investment on the date made, less the  
return of capital, repayment of loans, and release of Guarantees, in each case  
of or to us and our Restricted Subsidiaries with respect to such Investment (up 
to the amount of such Investment on the date made).                             

Limitation on Dividend and Other Payment Restrictions Affecting Restricted    
Subsidiaries                                                                  

So long as any of the Notes are outstanding, we will not, and will not    
permit any Restricted Subsidiary to, create or otherwise cause or suffer to     
exist or become effective any consensual encumbrance or restriction of any kind 
on the ability of any Restricted Subsidiary to:                                 

(i) pay dividends or make any other distributions permitted by        
applicable law on any Capital Stock of such Restricted Subsidiary owned by  
us or any other Restricted Subsidiary,                                      

  (ii) pay any indebtedness owed to us or any other Restricted Subsidiary,

(iii) make loans or advances to us or any other Restricted Subsidiary,
or                                                                          

(iv) transfer any of its property or assets to us or any other        
Restricted Subsidiary.                                                      

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The foregoing provisions shall not restrict any encumbrances or           
restrictions:                                                                   

(i) existing on the Closing Date in the Indenture or any other        
agreements in effect on the Closing Date, and any extensions, refinancings, 
renewals or replacements of such agreements; provided that the encumbrances 
and restrictions in any such extensions, refinancings, renewals or          
replacements are no less favorable in any material respect to the holders   
of the Notes than those encumbrances or restrictions that are then in       
effect and that are being extended, refinanced, renewed or replaced;        

(ii) contained in the terms of any Indebtedness or any agreement      
pursuant to which such Indebtedness was issued if the encumbrance or        
restriction applies only in the event of a payment default or default with  
respect to a financial covenant contained in such Indebtedness or agreement 
and such encumbrance or restriction is not materially more disadvantageous  
to the holders of the Notes than is customary in comparable financings (as  
determined by us) and we determine that any such encumbrance or restriction 
will not materially affect our ability to make principal or interest        
payments on the Notes;                                                      

(iii) existing under or by reason of applicable law;                  

(iv) existing with respect to any Person or the property or assets of 
such Person acquired by us or any Restricted Subsidiary, existing at the    
time of such acquisition and not incurred in contemplation thereof, which   
encumbrances or restrictions are not applicable to any Person or the        
property or assets of any Person other than such Person or the property or  
assets of such Person so acquired;                                          

(v) in the case of clause (iv) of the first paragraph of this         
"Limitation on Dividend and Other Payment Restrictions Affecting Restricted 
Subsidiaries" covenant,                                                     

(A) that restrict in a customary manner the subletting, assignment
or transfer of any property or asset that is, or is subject to, a       
lease, purchase mortgage obligation, license, conveyance or contract or 
similar property or asset,                                              

(B) existing by virtue of any transfer of, agreement to transfer, 
option or right with respect to, or Lien on, any of our property or     
assets or those of any Restricted Subsidiary not otherwise prohibited   
by the Indenture or                                                     

(C) arising or agreed to in the ordinary course of business, not  
relating to any Indebtedness, and that do not, individually or in the   
aggregate, detract from the value of our property or assets or those of 
any Restricted Subsidiary in any manner material to Primus or any       
Restricted Subsidiary; or                                               

 (vi) with respect to a Restricted Subsidiary and imposed pursuant to an
agreement that has been entered into for the sale or disposition of all or  
substantially all of the Capital Stock of, or property and assets of, such  
Restricted Subsidiary.                                                      

Nothing contained in this "Limitation on Dividend and Other Payment             
Restrictions Affecting Restricted Subsidiaries" covenant shall prevent us or    
any Restricted Subsidiary from (1) creating, incurring, assuming or suffering   
to exist any Liens otherwise permitted in the "Limitation on Liens" covenant or 
(2) restricting the sale or other disposition of property or assets of Primus   
or any of its Restricted Subsidiaries that secure Indebtedness of Primus or any 
of its Restricted Subsidiaries. (Section 1013)                                  

Limitation on the Issuance and Sale of Capital Stock of Restricted            
Subsidiaries                                                                  

We will not sell, transfer, convey or otherwise dispose of and will not   
permit any Restricted Subsidiary, directly or indirectly, to issue, transfer,   
convey, sell, lease or otherwise dispose of any shares of Capital Stock         
(including options, warrants or other rights to purchase shares of such Capital 
Stock) of such or any other Restricted Subsidiary to any Person except:         

(i) to Primus or a Restricted Subsidiary,                             

(ii) issuances of director's qualifying shares or sales to foreign    
nationals of shares of Capital Stock of non-U.S. Restricted Subsidiaries to 
the extent required by law and                                              

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  (iii) issuances and sales of Capital Stock of Restricted Subsidiaries if

 (A) the Net Cash Proceeds from such issuance, transfer, conveyance,
sale, lease or other disposition are applied in accordance with the     
provisions of the "Limitation on Asset Sales" covenant,                 

(B) immediately after giving effect to such issuance, transfer,   
conveyance, sale, lease or other disposition, such Restricted Subsidiary
would no longer constitute a Restricted Subsidiary, and                 

(C) any Investment in such Person remaining after giving effect to
such issuance, transfer, conveyance, sale, lease or other disposition   
would have been permitted to be made under the "Limitation on Restricted
Payments" covenant if made on the date of such issuance, transfer,      
conveyance, sale, lease or other disposition (valued as provided in the 
definition of "Investment"). (Section 1014)                             

Limitation on Transactions with Shareholders and Affiliates                   

We will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, enter into, renew or extend any transaction (including, without     
limitation, the purchase, sale, lease or exchange of property or assets, or     
the rendering of any service) with any holder (or any Affiliate of such         
holder) of 5% or more of any class of Capital Stock or with any Affiliate or    
any Restricted Subsidiary, unless                                               

(i) such transaction or series of transactions is on terms no less    
favorable to us or such Restricted Subsidiary than those that could be      
obtained in a comparable arm's-length transaction with a Person that is not 
such a holder or an Affiliate,                                              

(ii) if such transaction or series of transactions involves aggregate 
consideration in excess of $5.0 million, then such transaction or series of 
transactions is approved by a majority of our board of directors, including 
the approval of a majority of the independent, disinterested directors, and 
is evidenced by a resolution of our board of directors, and                 

(iii) if such transaction or series of transactions involves aggregate
consideration in excess of $25.0 million, then we or such Restricted        
Subsidiary will deliver to the Trustee a written opinion as to the fairness 
to us or such Restricted Subsidiary of such transaction from a financial    
point of view from a nationally recognized investment banking firm (or, if  
an investment banking firm is generally not qualified to give such an       
opinion, by a nationally recognized appraisal firm or accounting firm). Any 
such transaction or series of transactions shall be conclusively deemed to  
be on terms no less favorable to us or such Restricted Subsidiary than      
those that could be obtained in an arm's-length transaction if such         
transaction or transactions are approved by a majority of our board of      
directors, including a majority of the independent, disinterested           
directors, and are evidenced by a resolution of our board of directors.     

The foregoing limitation does not limit, and will not apply to            

  (i) any transaction between us and any of our Restricted Subsidiaries or
between Restricted Subsidiaries;                                            

(ii) the payment of reasonable and customary regular fees to our      
directors who are not our employees;                                        

(iii) any Restricted Payments not prohibited by the "Limitation on    
Restricted Payments" covenant;                                              

 (iv) transactions provided for in the Employment Agreement as in effect
on the Closing Date; and                                                    

(v) loans and advances to employees of Primus or any Restricted       
Subsidiary not exceeding at any one time outstanding $2.0 million in the    
aggregate, in the ordinary course of business and in accordance with past   
practice. (Section 1015)                                                    

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Limitation on Liens                                                           

Under the terms of the Indenture, we will not, and will not permit any    
Restricted Subsidiary to, create, incur, assume or suffer to exist any Lien     
(other than Permitted Liens) on any of our assets or properties of any          
character (including, without limitation, licenses and trademarks), or any      
shares of Capital Stock or Indebtedness of any Restricted Subsidiary, without   
making effective provision for all of the Notes and all other amounts due       
under the Indenture to be directly secured equally and ratably with (or prior   
to) the obligation or liability secured by such Lien. (Section 1016)            

Limitation on Asset Sales                                                     

We will not, and will not permit any Restricted Subsidiary to, make any   
Asset Sale unless (i) Primus or the Restricted Subsidiary, as the case may be,  
receives consideration at the time of such sale or other disposition at least   
equal to the Fair Market Value of the assets sold or disposed of as determined  
by the good-faith judgment of our board of directors, which determination, in   
each case where such Fair Market Value is greater than $5.0 million, will be    
evidenced by a Board Resolution and (ii) at least 75% of the consideration      
received for such sale or other disposition consists of cash or cash            
equivalents or the assumption of unsubordinated Indebtedness.                   

We shall, or shall cause the relevant Restricted Subsidiary to, within 360
days after the date of receipt of the Net Cash Proceeds from an Asset Sale,     
(i) (A) apply an amount equal to such Net Cash Proceeds to permanently repay    
our unsubordinated Indebtedness or Indebtedness of any Restricted Subsidiary,   
in each case owing to a Person other than Primus or any of its Restricted       
Subsidiaries or (B) invest an equal amount, or the amount not so applied        
pursuant to clause (A) in long-term property or assets of a nature or type or   
that are used in a business (or in a company having property and assets of a    
nature or type, or engaged in a business) similar or related to the nature or   
type of the property and assets of, or the business of, Primus and its          
Restricted Subsidiaries existing on the date of such investment (as determined  
in good faith by our board of directors, whose determination shall be           
conclusive and evidenced by a Board Resolution) and (ii) apply (no later than   
the end of the 360-day period referred to above) such excess Net Cash Proceeds  
(to the extent not applied pursuant to clause (i)) as provided in the           
following paragraphs of this "Limitation on Asset Sales" covenant. The amount   
of such Net Cash Proceeds required to be applied (or to be committed to be      
applied) during such 360-day period referred to above in the preceding          
sentence and not applied as so required by the end of such period shall         
constitute "Excess Proceeds."                                                   

If, as of the first day of any calendar month, the aggregate amount of    
Excess Proceeds not theretofore subject to an Excess Proceeds Offer (as         
defined below) totals at least $10.0 million, we must, not later than the 30th  
Business Day thereafter, make an offer (an "Excess Proceeds Offer") to          
purchase from the holders on a pro rata basis an aggregate principal amount of  
Notes equal to the Proportionate Share of the Excess Proceeds on such date, at  
a purchase price equal to 100% of the principal amount of the Notes, plus, in   
each case, accrued and unpaid interest to the date of purchase (the "Excess     
Proceeds Payment").                                                             

We shall commence an Excess Proceeds Offer by mailing a notice to the     
Trustee and each holder stating:                                                

(i) that the Excess Proceeds Offer is being made pursuant to this     
"Limitation on Asset Sales" covenant and that all Notes validly tendered    
will be accepted for payment on a pro rata basis;                           

(ii) the purchase price and the date of purchase (which shall be a    
Business Day no earlier than 30 days nor later than 60 days from the date   
such notice is mailed) (the "Excess Proceeds Payment Date");                

(iii) that any Note not tendered will continue to accrue interest     
pursuant to its terms;                                                      

(iv) that, unless we default in the payment of the Excess Proceeds    
Payment, any Note accepted for payment pursuant to the Excess Proceeds      
Offer shall cease to accrue interest on and after the Excess Proceeds       
Payment Date;                                                               

(v) that holders electing to have a Note purchased pursuant to the    
Excess Proceeds Offer will be required to surrender the Note, together with 
the form entitled "Option of the Holder to Elect Purchase"                  

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on the reverse side of the Note completed, to the Paying Agent at the       
address specified in the notice prior to the close of business on the       
Business Day immediately preceding the Excess Proceeds Payment Date;        

(vi) that holders will be entitled to withdraw their election if the  
Paying Agent receives, not later than the close of business on the third    
Business Day immediately preceding the Excess Proceeds Payment Date, a      
telegram, facsimile transmission or letter setting forth the name of such   
holder, the principal amount of Notes delivered for purchase and a          
statement that such holder is withdrawing his election to have such Notes   
purchased; and                                                              

 (vii) that holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of    
the Notes surrendered; provided that each Note purchased and each new Note  
issued shall be in a principal amount of $1,000 or integral multiples       
thereof.                                                                    

On the Excess Proceeds Payment Date, the Company shall                    

(i) accept for payment on a pro rata basis Notes or portions thereof  
tendered pursuant to the Excess Proceeds Offer up to the Proportionate      
Share of such Excess Proceeds;                                              

 (ii) deposit with the Paying Agent money sufficient to pay the purchase
price of all Notes or portions thereof so accepted; and                     

(iii) deliver, or cause to be delivered, to the Trustee all Notes or  
portions thereof so accepted together with an Officer's Certificate         
specifying the Notes or portions thereof accepted for payment by the        
Company.                                                                    

The Paying Agent shall promptly mail to the holders of Notes so accepted        
payment in an amount equal to the purchase price, and the Trustee shall         
promptly authenticate and mail to such holders a new Note equal in principal    
amount to any unpurchased portion of the Note surrendered; provided that each   
Note purchased and each new Note issued shall be in a principal amount of       
$1,000 or integral multiples thereof. We will publicly announce the results of  
the Excess Proceeds Offer as soon as practicable after the Excess Proceeds      
Payment Date. For purposes of this "Limitation on Asset Sales" covenant, the    
Trustee shall act as the Paying Agent.                                          

  We will comply with Rule 14e-1 under the Securities Exchange Act of 1934 and
any other securities laws and regulations thereunder to the extent such laws    
and regulations are applicable, in the event that such Excess Proceeds are      
received by the Company under this "Limitation on Asset Sales" covenant and the 
Company is required to repurchase Notes as described above. (Section 1017)      

Limitation on Issuances of Guarantees of Indebtedness by Restricted           
Subsidiaries                                                                  

We will not permit any Restricted Subsidiary, directly or indirectly, to  
guarantee, assume or in any other manner become liable with respect to any of   
our Indebtedness, other than Indebtedness under Credit Facilities incurred      
under clauses (i) and (ii) of the "Limitation on Indebtedness" covenant, unless 
(i) such Restricted Subsidiary simultaneously executes and delivers a           
supplemental indenture to the Indenture providing for a Guarantee of the Notes  
on terms substantially similar to the guarantee of such Indebtedness, except    
that if such Indebtedness is by its express terms subordinated in right of      
payment to the Notes, any such assumption, Guarantee or other liability of such 
Restricted Subsidiary with respect to such Indebtedness shall be subordinated   
in right of payment to such Restricted Subsidiary's assumption, Guarantee of    
other liability with respect to the Notes substantially to the same extent as   
such Indebtedness is subordinated to the Notes and (ii) such Restricted         
Subsidiary waives, and will not in any manner whatsoever claim or take the      
benefit or advantage of, any rights of reimbursement, indemnity or subrogation  
or any other rights against Primus or any other Restricted Subsidiary as a      
result of any payment by such Restricted Subsidiary under its Guarantee.        

 Notwithstanding the foregoing, any Guarantee by a Restricted Subsidiary may
provide by its terms that it will be automatically and unconditionally released 
and discharged upon (i) any sale, exchange or transfer, to any Person not an    
Affiliate of us, of all of our and each Restricted Subsidiary's Capital Stock   
in, or all or substantially all of the assets of, such Restricted Subsidiary    
(which sale, exchange or transfer is not prohibited                             

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by the Indenture) or (ii) the release or discharge of the guarantee which       
resulted in the creation of such Guarantee, except a discharge or release by or 
as a result of payment under such guarantee. (Section 1018)                     

Business of the Company                                                       

We will not, and will not permit any Restricted Subsidiary to, be         
principally engaged in any business or activity other than a Permitted          
Business.                                                                       

Limitation on Investments in Unrestricted Subsidiaries                        

 We will not make, and will not permit any of our Restricted Subsidiaries to
make, any Investments in Unrestricted Subsidiaries if, at the time thereof, the 
aggregate amount of such Investments would exceed the amount of Restricted      
Payments then permitted to be made pursuant to the "Limitation on Restricted    
Payments" covenant. Any Investments in Unrestricted Subsidiaries permitted to   
be made pursuant to this covenant (i) will be treated as the making of a        
Restricted Payment in calculating the amount of Restricted Payments made by the 
Company or a Subsidiary and (ii) may be made in cash or property (if made in    
property, the Fair Market Value thereof as determined by our board of directors 
(whose determination shall be conclusive and evidenced by a Board Resolution)   
shall be deemed to be the amount of such Investment for the purpose of clause   
(i)). (Section 1020)                                                            

Provision of Financial Statements and Reports                                 

 We will file on a timely basis with the Securities and Exchange Commission,
to the extent such filings are accepted by the Commission and whether or not we 
have a class of securities registered under the Securities Exchange Act of      
1934, the annual reports, quarterly reports and other documents that we would   
be required to file if we were subject to Section 13 or 15 of the Exchange Act. 
All such annual reports shall include the geographic segment financial          
information contemplated by Item 101(d) of Regulation S-K under the Securities  
Act of 1933 and all such quarterly reports shall provide the same type of       
interim financial information that, as of the date of the Indenture, currently  
is our practice to provide. We will also be required (a) to file with the       
Trustee, and provide to each holder, without cost to such holder, copies of     
such reports and documents within 15 days after the date on which we file such  
reports and documents with the Commission or the date on which we would be      
required to file such reports and documents if we were so required, and (b) if  
filing such reports and documents with the Commission is not accepted by the    
Commission or is prohibited under the Exchange Act, to supply at our cost       
copies of such reports and documents to any prospective holder promptly upon    
request. (Section 1009)                                                         

Other                                                                         

We will not, and will not permit any of our Restricted Subsidiaries to,   
Incur any Indebtedness (other than fees and expenses which accrue by the terms  
of the TresCom credit facility) under the TresCom credit facility and we will   
cause the TresCom credit facility to be terminated as soon as practicable.      

Repurchase of Notes upon a Change of Control                                    

  Upon the occurrence of a Change of Control, each holder shall have the right
to require us to repurchase all or any part of its Notes at a purchase price in 
cash pursuant to the offer described below (the "Change of Control Offer")      
equal to 101% of the principal amount thereof, plus accrued and unpaid interest 
to the date of purchase (subject to the right of holders of record to receive   
interest on the relevant interest payment date) (the "Change of Control         
Payment").                                                                      

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  Within 30 days following any Change of Control, we will mail a notice to the
Trustee and each holder stating:                                                

(i) that a Change of Control has occurred, that the Change of Control 
Offer is being made pursuant to this "Repurchase of Notes upon a Change of  
Control" covenant and that all Notes validly tendered will be accepted for  
payment;                                                                    

(ii) the purchase price and the date of purchase (which shall be a    
Business Day no earlier than 30 days nor later than 60 days from the date   
such notice is mailed) (the "Change of Control Payment Date");              

(iii) that any Note not tendered will continue to accrue interest     
pursuant to its terms;                                                      

(iv) that, unless we default in the payment of the Change of Control  
Payment, any Note accepted for payment pursuant to the Change of Control    
Offer shall cease to accrue interest on and after the Change of Control     
Payment Date;                                                               

 (v) that holders electing to have any Note or portion thereof purchased
pursuant to the Change of Control Offer will be required to surrender such  
Note, together with the form entitled "Option of the Holder to Elect        
Purchase" on the reverse side of such Note completed, to the Paying Agent   
at the address specified in the notice prior to the close of business on    
the third Business Day immediately preceding the Change of Control Payment  
Date;                                                                       

(vi) that holders will be entitled to withdraw their election if the  
Paying Agent receives, not later than the close of business on the third    
Business Day immediately preceding the Change of Control Payment Date, a    
telegram, telex, facsimile transmission or letter setting forth the name of 
such holder, the principal amount of Notes delivered for purchase and a     
statement that such holder is withdrawing his election to have such Notes   
purchased; and                                                              

 (vii) that holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of    
the Notes surrendered; provided that each Note purchased and each new Note  
issued shall be in a principal amount of $1,000 or integral multiples       
thereof.                                                                    

On the Change of Control Payment Date, we shall:                          

(i) accept for payment Notes or portions thereof tendered pursuant to 
the Change of Control Offer;                                                

 (ii) deposit with the Paying Agent money sufficient to pay the purchase
price of all Notes or portions thereof so accepted; and                     

(iii) deliver, or cause to be delivered, to the Trustee, all Notes or 
portions thereof so accepted together with an Officer's Certificate         
specifying the Notes or portions thereof accepted for payment by the        
Company.                                                                    

The Paying Agent shall promptly mail, to the holders of Notes so accepted,      
payment in an amount equal to the purchase price, and the Trustee shall         
promptly authenticate and mail to such holders a new Note equal in principal    
amount of any unpurchased portion of the Notes surrendered; provided that each  
Note purchased and each new Note issued shall be in a principal amount of       
$1,000 or integral multiples thereof. We will publicly announce the results of  
the Change of Control Offer on or as soon as practicable after the Change of    
Control Payment Date. For purposes of this "Repurchase of Notes upon a Change   
of Control" covenant, the Trustee shall act as Paying Agent.                    

  We will comply with Rule 14e-1 under the Securities Exchange Act of 1934 and
any other securities laws and regulations thereunder to the extent such laws    
and regulations are applicable in the event that a Change of Control occurs and 
we are required to repurchase the Notes under this "Repurchase of Notes upon a  
Change of Control" covenant. (Section 1010)                                     

If we are unable to repay all of our indebtedness that would prohibit     
repurchase of the Notes or are unable to obtain the consents of the holders of  
our indebtedness, if any, outstanding at the time of a Change of Control whose  
consent would be so required to permit the repurchase of Notes, then we will    
have breached such                                                              

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covenant. Our failure to repurchase Notes at the conclusion of the Change of    
Control Offer will constitute an Event of Default without any waiting period or 
notice requirements.                                                            

There can be no assurances that we will have sufficient funds available at
the time of any Change of Control to make any debt payment (including           
repurchases of Notes) required by the foregoing covenant (as well as may be     
contained in other of our securities which might be outstanding at the time).   
The above covenant requiring us to repurchase the Notes will, unless the        
consents referred to above are obtained, require us to repay all indebtedness   
then outstanding which by its terms would prohibit such Note repurchase, either 
prior to or concurrently with such note repurchase.                             

Consolidation, Merger and Sale of Assets                                        

  We will not consolidate with, merge with or into, or sell, convey, transfer,
lease or otherwise dispose of all or substantially all of our property and      
assets (as an entirety or substantially an entirety in one transaction or a     
series of related transactions) to, any Person or permit any Person to merge    
with or into us and we will not permit any of our Restricted Subsidiaries to    
enter into any such transaction or series of transactions if such transaction   
or series of transactions, in the aggregate, would result in the sale,          
assignment, conveyance, transfer, lease or other disposition of all or          
substantially all of our properties and assets or of us and our Restricted      
Subsidiaries, taken as a whole, to any other Person or Persons, unless:         

(i) we will be the continuing Person, or the Person (if other than us)
formed by such consolidation or into which we are merged or that acquired   
or leased such property and assets of us will be a corporation, partnership 
or trust organized and validly existing under the laws of the United States 
of America or any jurisdiction thereof and shall expressly assume, by a     
supplemental indenture, executed and delivered to the Trustee, all of our   
obligations with respect to the Notes and under the Indenture;              

 (ii) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing;                     

  (iii) immediately after giving effect to such transaction on a pro forma
basis we, or any Person becoming the successor obligor of the Notes, as the 
case may be, could Incur at least $1.00 of Indebtedness under paragraph (a) 
of the "Limitation on Indebtedness" covenant; and                           

(iv) we deliver to the Trustee an Officer's Certificate (attaching the
arithmetic computations to demonstrate compliance with clause (iii)) and    
Opinion of Counsel stating that such consolidation, merger or transfer and, 
if required in connection with such transaction, the related supplemental   
indenture complies with this provision and that all conditions precedent    
provided for herein relating to such transaction have been complied with;   
provided, however, that clause (iii) above does not apply if, in the good   
faith determination of our board of directors, whose determination shall be 
evidenced by a Board Resolution, the principal purpose of such transaction  
is to change our state of incorporation; and provided further that any such 
transaction shall not have as one of its purposes the evasion of the        
foregoing limitations. (Section 801)                                        

Events of Default                                                               

The following events will be defined as "Events of Default" in the        
Indenture:                                                                      

  (a) default in the payment of interest or Liquidated Damages, if any, on
the Notes when due and payable and continuance of such default for a period 
of 30 days;                                                                 

 (b) default in the payment of principal of (or premium, if any, on) any
Note at its Stated Maturity, upon acceleration, redemption or otherwise;    

(c) default in the payment of principal or interest or Liquidated     
Damages, if any, on Notes required to be purchased pursuant to an Excess    
Proceeds Offer as described under "Limitation on Asset Sales" or pursuant   
to a Change of Control Offer as described under "Repurchase of Notes upon a 
Change of Control";                                                         

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(d) failure to perform or comply with the provisions described under  
"Consolidation, Merger and Sale of Assets";                                 

(e) default in the performance of or breach of any other of our       
covenants or agreements in the Indenture or under the Notes (other than a   
default specified in clause (a), (b), (c) or (d) above) and such default or 
breach continues for a period of 30 consecutive days after written notice   
by the Trustee or the holders of 25% or more in aggregate principal amount  
of the Notes;                                                               

 (f) there occurs with respect to any issue or issues of Indebtedness of
Primus or any Restricted Subsidiary having an outstanding principal amount  
of $10.0 million or more in the aggregate for all such issues of all such   
Persons, whether such Indebtedness now exists or shall hereafter be         
created,                                                                    

(I) an event of default that has caused the holder thereof to     
declare such Indebtedness to be due and payable prior to its Stated     
Maturity and such Indebtedness has not been discharged in full or such  
acceleration has not been rescinded or annulled by the earlier of       

(x) the expiration of any applicable grace period or          

(y) the thirtieth day after such default and/or               

(II) the failure to make a principal payment at the final (but not
any interim) fixed maturity and such defaulted payment shall not have   
been made, waived or extended by the earlier of                         

(x) the expiration of any applicable grace period or          

(y) the thirtieth day after such default;                     

(g) any final judgment or order (not covered by insurance) for the    
payment of money in excess of $10.0 million in the aggregate for all such   
final judgments or orders against all such Persons (treating any            
deductibles, self-insurance or retention as not so covered) shall be        
rendered against us or any Restricted Subsidiary and shall not be paid or   
discharged, and there shall be any period of 30 consecutive days following  
entry of the final judgment or order that causes the aggregate amount for   
all such final judgments or orders outstanding and not paid or discharged   
against all such Persons to exceed $10.0 million during which a stay of     
enforcement of such final judgment or order, by reason of a pending appeal  
or otherwise, shall not be in effect;                                       

  (h) a court having jurisdiction in the premises enters a decree or order
for                                                                         

(A) relief in respect of us or any of our Significant Subsidiaries
in an involuntary case under any applicable bankruptcy, insolvency or   
other similar law now or hereafter in effect,                           

(B) appointment of a receiver, liquidator, assignee, custodian,   
trustee, sequestrator or similar official of us or any of our           
Significant Subsidiaries or for all or substantially all of our         
property and assets or those of our Significant Subsidiaries or         

  (C) the winding up or liquidation of the affairs of Primus or any of
its Significant Subsidiaries and, in each case, such decree or order    
shall remain unstayed and in effect for a period of 30 consecutive      
days; or                                                                

(i) we or any of its Significant Subsidiaries                 

(A) commences a voluntary case under any applicable bankruptcy,   
insolvency or other similar law now or hereafter in effect, or consents 
to the entry of an order for relief in an involuntary case under any    
such law,                                                               

(B) consents to the appointment of or taking possession by a      
receiver, liquidator, assignee, custodian, trustee, sequestrator or     
similar official of us or any of our Significant Subsidiaries or for    
all or substantially all of the property and assets of Primus or any of 
its Significant Subsidiaries or                                         

(C) effects any general assignment for the benefit of creditors.  
(Section 501)                                                           

If an Event of Default (other than an Event of Default specified in clause
(h) or (i) above) occurs and is continuing under the Indenture, the Trustee or  
the holders of at least 25% in aggregate principal amount of the                

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Notes, then outstanding, by written notice to us (and to the Trustee if such    
notice is given by the holders), may, and the Trustee at the request of such    
holders shall, declare the principal of, premium, if any, and accrued but       
unpaid interest and liquidated damages, if any, on the Notes to be immediately  
due and payable. Upon a declaration of acceleration, such principal of,         
premium, if any, and accrued interest and liquidation damages, if any, shall be 
immediately due and payable. In the event of a declaration of acceleration      
because an Event of Default set forth in clause (f) above has occurred and is   
continuing, such declaration of acceleration shall be automatically rescinded   
and annulled if the Indebtedness that is the subject of such Event of Default   
has been discharged or the holders thereof have rescinded their declaration of  
acceleration in respect of such Indebtedness, and written notice of such        
discharge or rescission, as the case may be, shall have been given to the       
trustee by us and countersigned by the holders of such Indebtedness or a        
trustee, fiduciary or agent for such holders, within 60 days after such         
declaration of acceleration in respect of the Notes, and no other Event of      
Default has occurred during such 60-day period which has not been cured or      
waived during such period. If an Event of Default specified in clause (h) or    
(i) above occurs, the principal of, premium, if any, and accrued interest and   
liquidated damages, if any, on the Notes then outstanding shall ipso facto      
become and be immediately due and payable without any declaration or other act  
on the part of the trustee or any holder. The holders of at least a majority in 
principal amount of the outstanding Notes by written notice to us and to the    
Trustee, may waive all past defaults and rescind and annul a declaration of     
acceleration and its consequences if, among other things, (i) all existing      
Events of Default, other than the nonpayment of the principal of, premium, if   
any, and accrued and unpaid interest and Liquidated Damages, if any, on the     
Notes that have become due solely by such declaration of acceleration, have     
been cured or waived and (ii) the rescission, in the Opinion of Counsel, would  
not conflict with any judgment or decree of a court of competent jurisdiction.  
(Section 502)                                                                   

The holders of at least a majority in aggregate principal amount of the   
outstanding Notes may direct the time, method and place of conducting any       
proceeding for any remedy available to the trustee or exercising any trust or   
power conferred on the trustee. However, the trustee may refuse to follow any   
direction that conflicts with law or the Indenture, that may involve the        
Trustee in personal liability, or that the trustee determines in good faith may 
be unduly prejudicial to the rights of holders of Notes not joining in the      
giving of such direction and may take any other action it deems proper that is  
not inconsistent with any such direction received from holders of Notes. No     
holder may pursue any remedy with respect to the Indenture or the Notes unless: 

  (i) the holder gives the trustee written notice of a continuing Event of
Default;                                                                    

(ii) the holders of at least 25% in aggregate principal amount of     
outstanding Notes make a written request to the Trustee to pursue the       
remedy;                                                                     

  (iii) such holder or holders offer the trustee indemnity satisfactory to
the trustee against any costs, liability or expense;                        

(iv) the trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and                      

(v) during such 60-day period, the holders of a majority in aggregate 
principal amount of the outstanding Notes do not give the trustee a         
direction that is inconsistent with the request.                            

However, such limitations do not apply to the right of any holder of a Note to  
receive payment of the principal of, premium, if any, or interest or Liquidated 
Damages, if any, on, such Note or to bring suit for the enforcement of any such 
payment, on or after the due date expressed in the Notes, which right shall not 
be impaired or affected without the consent of the holder. (Sections 507, 508   
and 512)                                                                        

 The indenture will require certain of our officers to certify, on or before
a date not more than 90 days after the end of each fiscal year, that a review   
has been conducted of our activities and our performance under the indenture    
and that we have fulfilled all obligations thereunder or, if there has been a   
default in the fulfillment of any such obligation, specifying each such default 
and the nature and status thereof. We will also be obligated to notify the      
trustee of any default or defaults in the performance of any covenants or       
agreements under the indenture. (Section 1008)                                  

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Defeasance or Covenant Defeasance of Indenture                                  

We may, at our option and at any time, elect to have our obligations upon 
the Notes discharged with respect to the outstanding Notes ("defeasance"). Such 
defeasance means that we will be deemed to have paid and discharged the entire  
Indebtedness represented by the outstanding Notes and to have satisfied all our 
other obligations under such Notes and the indenture insofar as such Notes are  
concerned except for                                                            

(i) the rights of holders of outstanding Notes to receive payments    
(solely from monies deposited in trust) in respect of the principal of,     
premium, if any, and interest and Liquidated Damages, if any, on such Notes 
when such payments are due,                                                 

 (ii) our obligations to issue temporary Notes, register the transfer or
exchange of any Notes, replace mutilated, destroyed, lost or stolen Notes,  
maintain an office or agency for payments in respect of the Notes and       
segregate and hold such payments in trust,                                  

(iii) the rights, powers, trusts, duties and immunities of the Trustee
and                                                                         

(iv) the defeasance provisions of the Indenture.                      

In addition, we may, at our option and at any time, elect to have our           
obligations released with respect to certain covenants set forth in the         
Indenture, and any omission to comply with such obligations will not constitute 
a Default or an Event of Default with respect to the Notes ("covenant           
defeasance"). (Sections 1301, 1302, and 1303)                                   

In order to exercise either defeasance or covenant defeasance,            

(i) we must irrevocably deposit or cause to be deposited with the     
trustee, as trust funds in trust, specifically pledged as security for, and 
dedicated solely to, the benefit of the holders of the Notes, cash in       
United States dollars, U.S. Government Obligations (as defined in the       
Indenture), or a combination thereof, in such amounts as will be            
sufficient, in the opinion of a nationally recognized firm of independent   
public accountants, to pay and discharge the principal of, premium if any,  
and interest and Liquidated Damages, if any, on the outstanding Notes on    
the Stated Maturity (or upon redemption, if applicable) of such principal,  
premium, if any, or installment of interest;                                

 (ii) no Default or Event of Default with respect to the Notes will have
occurred and be continuing on the date of such deposit or, insofar as an    
event of bankruptcy under clauses (h) or (i) of "Events of Default" above   
is concerned, at any time during the period ending on the 123rd day after   
the date of such deposit;                                                   

  (iii) such defeasance or covenant defeasance will not result in a breach
or violation of, or constitute a default under any material agreement or    
instrument (other than the Indenture) to which we are a party or by which   
we are bound;                                                               

(iv) in the case of defeasance, we shall have delivered to the trustee
an opinion of counsel stating that we have received from, or there has been 
published by, the Internal Revenue Service a ruling, or since January 29,   
1999, there has been a change in applicable federal income tax law, in      
either case to the effect that, and based thereon such opinion shall        
confirm that, the holders of the outstanding Notes will not recognize       
income, gain or loss for federal income tax purposes as a result of such    
defeasance and will be subject to federal income tax on the same amounts,   
in the same manner and at the same times as would have been the case if     
such defeasance had not occurred;                                           

(v) in the case of covenant defeasance, we shall have delivered to the
trustee an opinion of counsel to the effect that the holders of the Notes   
outstanding will not recognize income, gain or loss for federal income tax  
purposes as a result of such covenant defeasance and will be subject to     
federal income tax on the same amounts, in the same manner and at the same  
times as would have been the case if such covenant defeasance had not       
occurred; and                                                               

  (vi) we shall have delivered to the trustee an officer's certificate and
an opinion of counsel, each stating that all conditions precedent provided  
for relating to either the defeasance or the covenant defeasance, as the    
case may be, have been complied with. (Section 1304)                        

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Modification and Waiver                                                         

Modifications and amendments of the indenture may be made by us and the   
trustee with the consent of the holders of not less than a majority in          
aggregate principal amount of the outstanding Notes; provided, however, that no 
such modification or amendment may, without the consent of each holder affected 
thereby,                                                                        

(i) change the Stated Maturity of the principal of, or any installment
of interest on, any Note,                                                   

(ii) reduce the principal amount of, or premium or Liquidated Damages,
if any, or interest on any Note or extend the time for payment of interest  
on, or alter the redemption provisions of, any Note,                        

  (iii) change the currency of payment of principal of, or premium if any,
or interest on any Note,                                                    

 (iv) impair the right of any holder of the Notes to receive payment of,
principal of and interest on such holder's Notes on or after the due dates  
therefor or to institute suit for the enforcement of any payment on or      
after the Stated Maturity (or, in the case of a redemption, on or after the 
Redemption Date) of any Note,                                               

 (v) reduce the above-stated percentage of outstanding Notes the consent
of whose holders is necessary to modify or amend the Indenture,             

(vi) modify any provision of any Guarantee of the Notes in a manner   
adverse to the holders of the Notes,                                        

(vii) waive a default in the payment of principal of, premium, if any,
or accrued and unpaid interest or liquidated damages, if any, on the Notes  
or                                                                          

(viii) reduce the percentage or aggregate principal amount of         
outstanding Notes the consent of whose holders is necessary for waiver of   
compliance with certain provisions of the indenture or for waiver of        
certain defaults.                                                           

Governing Law and Submission to Jurisdiction                                    

  The Notes and the indenture will be governed by the laws of the State of New
York. We and the trustee will submit to the jurisdiction of the U.S. federal    
and New York state courts located in the Borough of Manhattan, City and State   
of New York for purposes of all legal actions and proceedings instituted in     
connection with the Notes and the indenture.                                    

Currency Indemnity                                                              

U.S. dollars are the sole currency of account and payment for all sums    
payable by us under or in connection with the Notes, including damages. Any     
amount received or recovered in a currency other than dollars (whether as a     
result of, or of the enforcement of, a judgment or order of a court of any      
jurisdiction, in our winding-up or dissolution or otherwise) by any holder of a 
Note in respect of any sum expressed to be due to it from us shall only         
constitute a discharge to us to the extent of the dollar amount which the       
recipient is able to purchase with the amount so received or recovered in that  
other currency on the date of that receipt or recovery (or, if it is not        
practicable to make that purchase on that date, on the first date on which it   
is practicable to do so). If that dollar amount is less than the dollar amount  
expressed to be due to the recipient under any Note, we shall indemnify the     
recipient against any loss sustained by it as a result. In any event, we shall  
indemnify the recipient against the cost of making any such purchase. For the   
purposes of this paragraph, it will be sufficient for the holder of a Note to   
certify in a satisfactory manner (indicating the sources of information used)   
that it would have suffered a loss had an actual purchase of dollars been made  
with the amount so received in that other currency on the date of receipt or    
recovery (or, if a purchase of dollars on such date had not been practicable,   
on the first date on which it would have been practicable, it being required    
that the need for a change of date be certified in the manner mentioned above). 
These indemnities constitute a separate and independent obligation from our     
other obligations, shall give rise to a separate and independent cause of       
action, shall apply irrespective of any indulgence granted by any holder of a   
Note and shall continue in full force and effect despite any other judgment,    
order, claim or proof for a liquidated amount in respect of any sum due under   
any Note.                                                                       

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Concerning the Trustee                                                          

The indenture contains certain limitations on the rights of the trustee,  
should it become a creditor of us, to obtain payment of claims in certain cases 
or to realize on certain property received in respect of any such claim as      
security or otherwise. The trustee will be permitted to engage in other         
transactions; however, if the trustee acquires any conflicting interest, it     
must eliminate such conflict within 90 days, apply to the Securities and        
Exchange Commission for permission to continue or resign.                       

 The holders of a majority in principal amount of the outstanding Notes will
have the right to direct the time, method and place of conducting any           
proceeding for exercising any remedy available to the trustee, subject to       
certain exceptions. The indenture provides that in case an Event of Default     
shall occur (which shall not be cured), the trustee will be required, in the    
exercise of its power, to use the degree of care of a prudent man in the        
conduct of his own affairs. Subject to such provisions, the trustee will be     
under no obligation to exercise any of its rights or powers under the indenture 
at the request of any holder of Notes, unless such holder shall have offered to 
the trustee security and indemnity satisfactory to it against any loss,         
liability or expense.                                                           

Certain Definitions                                                             

Set forth below is a summary of certain of the defined terms used in the  
covenants and other provisions of the indenture. Reference is made to the       
indenture for the full definition of all terms as well as any other capitalized 
term used herein for which no definition is provided.                           

  "Acquired Indebtedness" is defined to mean Indebtedness of a Person existing
at the time such Person becomes a Restricted Subsidiary or assumed in           
connection with an Asset Acquisition by Primus or a Restricted Subsidiary and   
not incurred in connection with, or in anticipation of, such Person becoming a  
Restricted Subsidiary or such Asset Acquisition; provided that Indebtedness of  
such Person which is redeemed, defeased, retired or otherwise repaid at the     
time of or immediately upon the consummation of the transactions by which such  
Person becomes a Restricted Subsidiary or such Asset Acquisition shall not be   
Indebtedness.                                                                   

"Affiliate" is defined to mean, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect  
common control with, such Person. For purposes of this definition, "control"    
(including, with correlative meanings, the terms "controlling," "controlled by" 
and "under common control with"), as applied to any Person, is defined to mean  
the possession, directly or indirectly, of the power to direct or cause the     
direction of the management and policies of such Person, whether through the    
ownership of voting securities, by contract or otherwise. For purposes of the   
indenture "Affiliate" shall be deemed to include Mr. K. Paul Singh.             

"Asset Acquisition" is defined to mean (i) an investment by the Company or
any of its Restricted Subsidiaries in any other Person pursuant to which such   
Person shall become a Restricted Subsidiary of the Company or shall be merged   
into or consolidated with the Company or any of its Restricted Subsidiaries or  
(ii) an acquisition by the Company or any of its Restricted Subsidiaries of the 
property and assets of any Person other than the Company or any of its          
Restricted Subsidiaries that constitute substantially all of a division or line 
of business of such Person.                                                     

 "Asset Disposition" is defined to mean the sale or other disposition by the
Company or any of its Restricted Subsidiaries (other than to the Company or     
another Restricted Subsidiary of the Company) of (i) all or substantially all   
of the Capital Stock of any Restricted Subsidiary of the Company or (ii) all or 
substantially all of the assets that constitute a division or line of business  
of the Company or any of its Restricted Subsidiaries.                           

"Asset Sale" is defined to mean any sale, transfer or other disposition   
(including by way of merger, consolidation or sale-leaseback transactions) in   
one transaction or a series of related transactions by the Company or any of    
its Restricted Subsidiaries to any Person other than the Company or any of its  
Restricted                                                                      

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Subsidiaries of (i) all or any of the Capital Stock of any Subsidiary, (ii) all 
or substantially all of the property and assets of an operating unit or         
business of the Company or any of its Restricted Subsidiaries or (iii) any      
other property and assets of the Company or any of its Restricted Subsidiaries  
outside the ordinary course of business of the Company or such Restricted       
Subsidiary and, in each case, that is not governed by the provisions of the     
Indenture applicable to mergers, consolidations and sales of assets of the      
Company and which, in the case of any of clause (i), (ii) or (iii) above,       
whether in one transaction or a series of related transactions, (a) have a Fair 
Market Value in excess of $1.0 million or (b) are for net proceeds in excess of 
$1.0 million; provided that (x) sales or other dispositions of inventory,       
receivables and other current assets in the ordinary course of business and (y) 
sales or other dispositions of assets for consideration at least equal to the   
Fair Market Value (as determined in good faith by the Board of Directors, whose 
determination shall be conclusive and evidenced by a Board Resolution) of the   
assets sold or disposed of, to the extent that the consideration received would 
constitute property or assets of the kind described in clause (i)(B) of the     
second paragraph of the "Limitation on Asset Sales" covenant, shall not be      
included within the meaning of "Asset Sale."                                    

  "Average Life" is defined to mean, at any date of determination with respect
to any debt security, the quotient obtained by dividing (i) the sum of the      
products of (a) the number of years from such date of determination to the      
dates of each successive scheduled principal payment of such debt security and  
(b) the amount of such principal payment by (ii) the sum of all such principal  
payments.                                                                       

"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday 
which is not a day on which banking institutions in The City of New York or     
Richmond, Virginia are authorized or obligated by law or executive order to     
close.                                                                          

 "Capital Stock" is defined to mean, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,     
whether voting or non-voting) in equity of such Person, whether now outstanding 
or issued after the date of the Indenture, including, without limitation, all   
Common Stock and Preferred Stock.                                               

 "Capitalized Lease" is defined to mean, as applied to any Person, any lease
of any property (whether real, personal or mixed) of which the discounted       
present value of the rental obligations of such Person as lessee, in conformity 
with GAAP, is required to be capitalized on the balance sheet of such Person;   
and "Capitalized Lease Obligation" is defined to mean the discounted present    
value of the rental obligations under such lease.                               

"Change of Control" is defined to mean such time as (i) a "person" or     
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) 
becomes the ultimate "beneficial owner" (as defined in Rule 13d-3 under the     
Exchange Act) of more than 50% of the total voting power of the then            
outstanding Voting Stock of the Company on a fully diluted basis; (ii)          
individuals who at the beginning of any period of two consecutive calendar      
years constituted the Board of Directors (together with any directors who are   
members of the Board of Directors on the date hereof and any new directors      
whose election by the Board of Directors or whose nomination for election by    
the Company's stockholders was approved by a vote of at least two-thirds of the 
members of the Board of Directors then still in office who either were members  
of the Board of Directors at the beginning of such period or whose election or  
nomination for election was previously so approved) cease for any reason to     
constitute a majority of the members of such board of directors then in office; 
(iii) the sale, lease, transfer, conveyance or other disposition (other than by 
way of merger or consolidation), in one or a series of related transactions, of 
all or substantially all of the assets of the Company and its Subsidiaries      
taken as a whole to any such "person" or "group" (other than to Primus or a     
Restricted Subsidiary); (iv) the merger or consolidation of the Company with or 
into another corporation or the merger of another corporation with or into the  
Company with the effect that immediately after such transaction any such        
"person" or "group" of persons or entities shall have become the beneficial     
owner of securities of the surviving corporation of such merger or              
consolidation representing a majority of the total voting power of the then     
outstanding Voting Stock of the surviving corporation; or (v) the adoption of a 
plan relating to the liquidation or dissolution of the Company.                 

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"Closing Date" is defined to mean January 29, 1999.                       

"Common Stock" is defined to mean, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,     
whether voting or non-voting) of such Person's common stock, whether now        
outstanding or issued after the date of the Indenture, including, without       
limitation, all series and classes of such common stock.                        

 "Consolidated Cash Flow" is defined to mean, for any period, the sum of the
amounts for such period of (i) Consolidated Net Income, (ii) Consolidated       
Interest Expense, (iii) income taxes, to the extent such amount was deducted in 
calculating Consolidated Net Income (other than income taxes (either positive   
or negative) attributable to extraordinary and non-recurring gains or losses or 
sales of assets), (iv) depreciation expense, to the extent such amount was      
deducted in calculating Consolidated Net Income, (v) amortization expense, to   
the extent such amount was deducted in calculating Consolidated Net Income, and 
(vi) all other non-cash items reducing Consolidated Net Income (excluding any   
non-cash charge to the extent that it represents an accrual of or reserve for   
cash charges in any future period), less all non-cash items increasing          
Consolidated Net Income, all as determined on a consolidated basis for the      
Company and its Restricted Subsidiaries in conformity with GAAP.                

"Consolidated Fixed Charges" is defined to mean, for any period,          
Consolidated Interest Expense plus dividends declared and payable on Preferred  
Stock.                                                                          

"Consolidated Interest Expense" is defined to mean, for any period, the   
aggregate amount of interest in respect of Indebtedness (including capitalized  
interest, amortization of original issue discount on any Indebtedness and the   
interest portion of any deferred payment obligation, calculated in accordance   
with the effective interest method of accounting; all commissions, discounts    
and other fees and charges owed with respect to letters of credit and bankers'  
acceptance financing; the net costs associated with Interest Rate Agreements;   
and interest on Indebtedness that is Guaranteed or secured by the Company or    
any of its Restricted Subsidiaries) and all but the principal component of      
rentals in respect of Capitalized Lease Obligations paid, accrued or scheduled  
to be paid or to be accrued by the Company and its Restricted Subsidiaries      
during such period.                                                             

 "Consolidated Net Income" is defined to mean, for any period, the aggregate
consolidated net income (or loss) of the Company and its Restricted             
Subsidiaries for such period determined in conformity with GAAP; provided that  
the following items shall be excluded in computing Consolidated Net Income      
(without duplication): (i) solely for the purposes of calculating the amount of 
Restricted Payments that may be made pursuant to clause (C) of the first        
paragraph of the "Limitation on Restricted Payments" covenant described above,  
the net income (or loss) of any Person accrued prior to the date it becomes a   
Restricted Subsidiary or is merged into or consolidated with the Company or any 
of its Restricted Subsidiaries or all or substantially all of the property and  
assets of such Person are acquired by the Company or any of its Restricted      
Subsidiaries; (ii) any gains or losses (on an after-tax basis) attributable to  
Asset Sales; (iii) except for purposes of calculating the amount of Restricted  
Payments that may be made pursuant to clause (C) of the first paragraph of the  
"Limitation on Restricted Payments" covenant described above, any amount paid   
or accrued as dividends on Preferred Stock of the Company or Preferred Stock of 
any Restricted Subsidiary owned by Persons other than the Company and any of    
its Restricted Subsidiaries; (iv) all extraordinary gains and extraordinary     
losses; and (v) the net income (or loss) of any Person (other than net income   
(or loss) attributable to a Restricted Subsidiary) in which any Person (other   
than the Company or any of its Restricted Subsidiaries) has a joint interest,   
except to the extent of the amount of dividends or other distributions actually 
paid to the Company or any of its Restricted Subsidiaries by such other Person  
during such period.                                                             

 "Credit Facilities" is defined to mean, with respect to the Company, one or
more debt facilities or commercial paper facilities with banks or other         
institutional lenders providing for revolving credit loans, term loans,         
receivables financing (including through the sale of receivables to such        
lenders or to special purpose                                                   

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entities formed to borrow from such lenders against such receivables) or        
letters of credit, in each case, as amended, restated, modified, renewed,       
refunded, replaced or refinanced in whole or in part form time to time.         

"Currency Agreement" is defined to mean any foreign exchange contract,    
currency swap agreement and any other arrangement and agreement designed to     
provide protection against fluctuations in currency values.                     

"Default" is defined to mean any event that is, or after notice or passage
of time or both would be, an Event of Default.                                  

"Eligible Accounts Receivable" is defined to mean the accounts receivables
(net of any reserves and allowances for doubtful accounts in accordance with    
GAAP) of any Person that are not more than 60 days past their due date and that 
were entered into in the ordinary course of business on normal payment terms as 
shown on the most recent consolidated balance sheet of such Person filed with   
the Commission, all in accordance with GAAP.                                    

"Eligible Institution" is defined to mean a commercial banking institution
that has combined capital and surplus of not less than $500 million or its      
equivalent in foreign currency, whose debt is rated "A-3" or higher or "A-" or  
higher according to Moody's Investors Service, Inc. or Standard & Poor's        
Ratings Group (or such similar equivalent rating by at least one "nationally    
recognized statistical rating organization" (as defined in Rule 436 under the   
Securities Act)) respectively, at the time as of which any investment or        
rollover therein is made.                                                       

"Employment Agreement" is defined to mean the employment agreement between
the Company and Mr. K. Paul Singh, dated June 1994.                             

"Existing Indebtedness" is defined to mean Indebtedness outstanding on the
date of the Indenture.                                                          

"Fair Market Value" is defined to mean, with respect to any asset or      
property, the sale value that would be obtained in an arm's length transaction  
between an informed and willing seller under no compulsion to sell and an       
informed and willing buyer.                                                     

"GAAP" is defined to mean generally accepted accounting principles in the 
United States of America as in effect from time to time, including, without     
limitation, those set forth in the opinions and pronouncements of the           
Accounting Principles Board of the American Institute of Certified Public       
Accountants and statements and pronouncements of the Financial Accounting       
Standards Board or in such other statements by such other entity as approved by 
a significant segment of the accounting profession.                             

"Government Securities" is defined to mean direct obligations of, or      
obligations guaranteed by, the United States of America for the payment of      
which obligations or guarantee the full faith and credit of the United States   
is pledged.                                                                     

"Guarantee" is defined to mean any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness or other        
obligation of any other Person and, without limiting the generality of the      
foregoing, any obligation, direct or indirect, contingent or otherwise, of such 
Person (i) to purchase or pay (or advance or supply funds for the purchase or   
payment of) such Indebtedness or other obligation of such other Person (whether 
arising by virtue of partnership arrangements, or by agreements to keep-well,   
to purchase assets, goods, securities or services, to take-or-pay, or to        
maintain financial statement conditions or otherwise) or (ii) entered into for  
purposes of assuring in any other manner the obligee of such Indebtedness or    
other obligation of the payment thereof or to protect such obligee against loss 
in respect thereof (in whole or in part); provided that the term "Guarantee"    
shall not include endorsements for collection or deposit in the ordinary course 
of business. The term "Guarantee" used as a verb has a corresponding meaning.   

"Incur" is defined to mean, with respect to any Indebtedness, to incur,   
create, issue, assume, Guarantee or otherwise become liable for or with respect 
to, or become responsible for, the payment of, contingently or                  

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otherwise, such Indebtedness, including an Incurrence of Indebtedness by reason 
of the acquisition of more than 50% of the Capital Stock of any Person;         
provided that neither the accrual of interest nor the accretion of original     
issue discount shall be considered an Incurrence of Indebtedness.               

  "Indebtedness" is defined to mean, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person for    
borrowed money, (ii) all obligations of such Person evidenced by bonds,         
debentures, notes or other similar instruments, (iii) all obligations of such   
Person in respect of letters of credit or other similar instruments (including  
reimbursement obligations with respect thereto), (iv) all obligations of such   
Person to pay the deferred and unpaid purchase price of property or services,   
which purchase price is due more than six months after the date of placing such 
property in service or taking delivery and title thereto or the completion of   
such services, except Trade Payables, (v) all obligations of such Person as     
lessee under Capitalized Leases, (vi) all Indebtedness of other Persons secured 
by a Lien on any asset of such Person, whether or not such Indebtedness is      
assumed by such Person; provided that the amount of such Indebtedness shall be  
the lesser of (A) the Fair Market Value of such asset at such date of           
determination and (B) the amount of such Indebtedness, (vii) all Indebtedness   
of other Persons Guaranteed by such Person to the extent such Indebtedness is   
Guaranteed by such Person, (viii) the maximum fixed redemption or repurchase    
price of Redeemable Stock of such Person at the time of determination and (ix)  
to the extent not otherwise included in this definition, obligations under      
Currency Agreements and Interest Rate Agreements. The amount of Indebtedness of 
any Person at any date shall be the outstanding balance at such date of all     
unconditional obligations as described above and, with respect to contingent    
obligations, the maximum liability upon the occurrence of the contingency       
giving rise to the obligation, provided (i) that the amount outstanding at any  
time of any Indebtedness issued with original issue discount is the face amount 
of such Indebtedness less the remaining unamortized portion of the original     
issue discount of such Indebtedness at such time as determined in conformity    
with GAAP and (ii) that Indebtedness shall not include any liability for        
federal, state, local or other taxes.                                           

 "Interest Rate Agreement" is defined to mean interest rate swap agreements,
interest rate cap agreements, interest rate insurance, and other arrangements   
and agreements designed to provide protection against fluctuations in interest  
rates.                                                                          

"Investment" in any Person is defined to mean any direct or indirect      
advance, loan or other extension of credit (including, without limitation, by   
way of Guarantee or similar arrangement; but excluding advances to customers in 
the ordinary course of business that are, in conformity with GAAP, recorded as  
accounts receivable on the balance sheet of the Company or its Restricted       
Subsidiaries) or capital contribution to (by means of any transfer of cash or   
other property to others or any payment for property or services for the        
account or use of others), or any purchase or acquisition of Capital Stock,     
bonds, notes, debentures or other similar instruments issued by, such Person.   
For purposes of the definition of "Unrestricted Subsidiary," the "Limitation on 
Restricted Payments" covenant and the "Limitation on Issuance and Sale of       
Capital Stock of Restricted Subsidiaries" covenant described above, (i)         
"Investment" shall include (a) the Fair Market Value of the assets (net of      
liabilities) of any Restricted Subsidiary of the Company at the time that such  
Restricted Subsidiary of the Company is designated an Unrestricted Subsidiary   
and shall exclude the Fair Market Value of the assets (net of liabilities) of   
any Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is    
designated a Restricted Subsidiary of the Company and (b) the Fair Market       
Value, in the case of a sale of Capital Stock in accordance with the            
"Limitation on the Issuance and Sale of Capital Stock of Restricted             
Subsidiaries" covenant such that a Person no longer constitutes a Restricted    
Subsidiary, of the remaining assets (net of liabilities) of such Person after   
such sale, and shall exclude the Fair Market Value of the assets (net of        
liabilities) of any Unrestricted Subsidiary at the time that such Unrestricted  
Subsidiary is designated a Restricted Subsidiary of the Company and (ii) any    
property transferred to or from an Unrestricted Subsidiary shall be valued at   
its Fair Market Value at the time of such transfer, in each case as determined  
by the Board of Directors in good faith.                                        

"Lien" is defined to mean any mortgage, pledge, security interest,        
encumbrance, lien or charge of any kind (including, without limitation, any     
conditional sale or other title retention agreement or lease in the nature      

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thereof, any sale with recourse against the seller or any Affiliate of the      
seller, or any agreement to give any security interest).                        

 "Marketable Securities" is defined to mean: (i) Government Securities which
have a remaining weighted average life to maturity of not more than one year    
from the date of Investment therein; (ii) any time deposit account, money       
market deposit and certificate of deposit maturing not more than 180 days after 
the date of acquisition issued by, or time deposit of, an Eligible Institution; 
(iii) commercial paper maturing not more than 90 days after the date of         
acquisition issued by a corporation (other than an Affiliate of the Company)    
with a rating, at the time as of which any investment therein is made, of "P-1" 
or higher according to Moody's Investors Service, Inc., or "A-1" or higher      
according to Standard & Poor's Rating Group (or such similar equivalent rating  
by at least one "nationally recognized statistical rating organization" (as     
defined in Rule 436 under the Securities Act)); (iv) any banker's acceptance or 
money market deposit accounts issued or offered by an Eligible Institution; (v) 
repurchase obligations with a term of not more than 7 days for Government       
Securities entered into with an Eligible Institution; and (vi) any fund 95% of  
the assets of which consist of investments of the types described in clauses    
(i) through (v) above.                                                          

 "Net Cash Proceeds" is defined to mean, (a) with respect to any Asset Sale,
the proceeds of such Asset Sale in the form of cash or cash equivalents,        
including payments in respect of deferred payment obligations (to the extent    
corresponding to the principal, but not interest, component thereof) when       
received in the form of cash or cash equivalents (except to the extent such     
obligations are financed or sold with recourse to the Company or any Restricted 
Subsidiary of the Company) and proceeds from the conversion of other property   
received when converted to cash or cash equivalents, net of (i) brokerage       
commissions and other fees and expenses (including fees and expenses of counsel 
and investment bankers) related to such Asset Sale, (ii) provisions for all     
taxes (whether or not such taxes will actually be paid or are payable) as a     
result of such Asset Sale without regard to the consolidated results of         
operations of the Company and its Restricted Subsidiaries, taken as a whole,    
(iii) payments made to repay Indebtedness or any other obligation outstanding   
at the time of such Asset Sale that either (A) is secured by a Lien on the      
property or assets sold or (B) is required to be paid as a result of such sale  
and (iv) appropriate amounts to be provided by the Company or any Restricted    
Subsidiary of the Company as a reserve against any liabilities associated with  
such Asset Sale, including, without limitation, pension and other post-         
employment benefit liabilities, liabilities related to environmental matters    
and liabilities under any indemnification obligations associated with such      
Asset Sale, all as determined in conformity with GAAP and (b) with respect to   
any issuance or sale of Capital Stock, the proceeds of such issuance or sale in 
the form of cash or cash equivalents, including payments in respect of deferred 
payment obligations (to the extent corresponding to the principal, but not      
interest, component thereof) when received in the form of cash or cash          
equivalents (except to the extent such obligations are financed or sold with    
recourse to the Company or any Restricted Subsidiary of the Company) and        
proceeds from the conversion of other property received when converted to cash  
or cash equivalents, net of attorney's fees, accountants' fees, underwriters'   
or placement agents' fees, discounts or commissions and brokerage, consultant   
and other fees incurred in connection with such issuance or sale and net of     
taxes paid or payable as a result thereof.                                      

  "Permitted Business" is defined to mean the business of (i) transmitting, or
providing services relating to the transmission of, voice, video or data        
through owned or leased transmission facilities, (ii) constructing, creating,   
developing or marketing communications related network equipment, software and  
other devices for use in a telecommunications business or (iii) evaluating,     
participating or pursuing any other activity or opportunity that is primarily   
related to those identified in clause (i) or (ii) above; provided that the      
determination of what constitutes a Permitted Business shall be made in good    
faith by the Board of Directors of the Company, whose determination shall be    
conclusive and evidenced by a Board Resolution.                                 

 "Permitted Investment" is defined to mean (i) an Investment in a Restricted
Subsidiary or a Person which will, upon the making of such Investment, become a 
Restricted Subsidiary or be merged or consolidated with or into or transfer or  
convey all or substantially all its assets to, Primus or a Restricted           
Subsidiary; (ii) any Investment in Marketable Securities; (iii) payroll, travel 
and similar advances to cover matters that are expected at the time of such     
advances ultimately to be treated as expenses in accordance with GAAP; (iv)     
loans or                                                                        

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advances to employees made in the ordinary course of business in accordance     
with past practice of the Company or its Restricted Subsidiaries and that do    
not in the aggregate exceed $1.0 million at any time outstanding; (v) stock,    
obligations or securities received in satisfaction of judgments; (vi)           
Investments in any Person received as consideration for Asset Sales to the      
extent permitted under the "Limitation on Asset Sales" covenant; and (vii)      
Investments in any Person at any one time outstanding (measured on the date     
each such Investment was made without giving effect to subsequent changes in    
value) in an aggregate amount not to exceed 10.0% of the Company's total        
consolidated assets.                                                            

"Permitted Liens" is defined to mean (i) Liens for taxes, assessments,    
governmental charges or claims that are being contested in good faith by        
appropriate legal proceedings promptly instituted and diligently conducted and  
for which a reserve or other appropriate provision, if any, as shall be         
required in conformity with GAAP shall have been made; (ii) statutory Liens of  
landlords and carriers, warehousemen, mechanics, suppliers, materialmen,        
repairmen or other similar Liens arising in the ordinary course of business and 
with respect to amounts not yet delinquent or being contested in good faith by  
appropriate legal proceedings promptly instituted and diligently conducted and  
for which a reserve or other appropriate provision, if any, as shall be         
required in conformity with GAAP shall have been made; (iii) Liens incurred or  
deposits made in the ordinary course of business in connection with workers'    
compensation, unemployment insurance and other types of social security; (iv)   
Liens incurred or deposits made to secure the performance of tenders, bids,     
leases, statutory or regulatory obligations, bankers' acceptances, surety and   
appeal bonds, government contracts, performance and return-of-money bonds and   
other obligations of a similar nature incurred in the ordinary course of        
business (exclusive of obligations for the payment of borrowed money); (v)      
easements, rights-of-way, municipal and zoning ordinances and similar charges,  
encumbrances, title defects or other irregularities that do not materially      
interfere with the ordinary course of business of the Company or any of its     
Restricted Subsidiaries; (vi) Liens (including extensions and renewals thereof) 
upon real or personal property purchased or leased after the Closing Date;      
provided that (a) such Lien is created solely for the purpose of securing       
indebtedness Incurred in compliance with the "Limitation on Indebtedness"       
covenant (1) to finance the cost (including the cost of design, development,    
construction, acquisition, installation or integration) of the item of property 
or assets subject thereto and such Lien is created prior to, at the time of or  
within six months after the later of the acquisition, the completion of         
construction or the commencement of full operation of such property or (2) to   
refinance any Indebtedness previously so secured, (b) the principal amount of   
the Indebtedness secured by such Lien does not exceed 100% of such cost and (c) 
any such Lien shall not extend to or cover any property or assets other than    
such item of property or assets and any improvements on such item; (vii) leases 
or subleases granted to others that do not materially interfere with the        
ordinary course of business of the Company and its Restricted Subsidiaries,     
taken as a whole; (viii) Liens encumbering property or assets under             
construction arising from progress or partial payments by a customer of the     
Company or its Restricted Subsidiaries relating to such property or assets;     
(ix) any interest or title of a lessor in the property subject to any           
Capitalized Lease or operating lease; (x) Liens arising from filing Uniform     
Commercial Code financing statements regarding leases; (xi) Liens on property   
of, or on shares of stock or Indebtedness of, any corporation existing at the   
time such corporation becomes, or becomes a part of, any Restricted Subsidiary; 
provided that such Liens do not extend to or cover any property or assets of    
the Company or any Restricted Subsidiary other than the property or assets      
acquired and were not created in contemplation of such transaction; (xii) Liens 
in favor of the Company or any Restricted Subsidiary; (xiii) Liens arising from 
the rendering of a final judgment or order against the Company or any           
Restricted Subsidiary of the Company that does not give rise to an Event of     
Default; (xiv) Liens securing reimbursement obligations with respect to letters 
of credit that encumber documents and other property relating to such letters   
of credit and the products and proceeds thereof; (xv) Liens in favor of customs 
and revenue authorities arising as a matter of law to secure payment of customs 
duties in connection with the importation of goods; (xvi) Liens encumbering     
customary initial deposits and margin deposits and other Liens that are either  
within the general parameters customary in the industry or incurred in the      
ordinary course of business, in each case, securing Indebtedness under Interest 
Rate Agreements and Currency Agreements; (xvii) Liens arising out of            
conditional sale, title retention, consignment or similar arrangements for the  
sale of goods entered into by the Company or any of its Restricted Subsidiaries 
in the ordinary course of business in accordance with the past practices of the 
Company and its Restricted                                                      

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Subsidiaries prior to the Closing Date; (xviii) Liens existing on the Closing   
Date or securing the Notes or any Guarantee of the Notes; (xix) Liens granted   
after the Closing Date on any assets or Capital Stock of the Company or its     
Restricted Subsidiaries created in favor of the holders; (xx) Liens securing    
Indebtedness which is incurred to refinance secured Indebtedness which is       
permitted to be Incurred under clause (iv) of paragraph (b) of the "Limitation  
on Indebtedness" covenant; provided that such Liens do not extend to or cover   
any property or assets of the Company or any Restricted Subsidiary other than   
the property or assets securing the Indebtedness being refinanced; (xxi) Liens  
on the property or assets of a Restricted Subsidiary securing Indebtedness of   
such Subsidiary which Indebtedness is permitted under the Indenture; and (xxii) 
Liens securing Indebtedness under Credit Facilities incurred in compliance with 
clauses (i) and (ii) of paragraph (b) of the "Limitation on Indebtedness"       
covenant.                                                                       

"Person" means any individual, corporation, partnership, joint venture,   
association, joint-stock company, trust, unincorporated organization or         
government or any agency or political subdivision thereof.                      

"Preferred Stock" is defined to mean, with respect to any Person, any and 
all shares, interests, participations or other equivalents (however designated, 
whether voting or non-voting) of such Person's preferred or preference stock,   
whether now outstanding or issued after the date of the Indenture, including,   
without limitation, all series and classes of such preferred or preference      
stock.                                                                          

"Pro Forma Consolidated Cash Flow" is defined to mean, for any period, the
Consolidated Cash Flow of the Company for such period calculated on a pro forma 
basis to give effect to any Asset Disposition or Asset Acquisition not in the   
ordinary course of business (including acquisitions of other Persons by merger, 
consolidation or purchase of Capital Stock) during such period as if such Asset 
Disposition or Asset Acquisition had taken place on the first day of such       
period.                                                                         

 "Proportionate Share" is defined to mean, as of any date of calculation, an
amount equal to (i) the outstanding principal amount of Notes as of such date,  
divided by (ii) the sum of the outstanding principal amount of Notes as of such 
date plus the outstanding principal amount as of such date of all other         
Indebtedness (other than Subordinated Indebtedness) of the Issuer the terms of  
which obligate the Issuer to make a purchase offer in connection with the       
relevant Excess Proceeds or the Asset Sale giving rise thereto; provided that   
if the terms of such other Indebtedness do not provide for proration of the     
amount of such Indebtedness to be purchased with Excess Proceeds, the           
"Proportionate Share" in respect of the Notes may be zero.                      

"Public Equity Offering" is defined to mean an underwritten primary public
offering of Common Stock of the Company pursuant to an effective registration   
statement under the Securities Act.                                             

"Purchase Money Obligations" is defined to mean, with respect to each     
Person, obligations, other than those under Capitalized Leases, Incurred or     
assumed in the ordinary course of business in connection with the purchase of   
property to be used in the business of such Person.                             

"Redeemable Stock" is defined to mean any class or series of Capital Stock
of any Person that by its terms or otherwise is (i) required to be redeemed     
prior to the Stated Maturity of the Notes, (ii) redeemable at the option of the 
holder of such class or series of Capital Stock at any time prior to the Stated 
Maturity of the Notes or (iii) convertible into or exchangeable for Capital     
Stock referred to in clause (i) or (ii) above or Indebtedness having a          
scheduled maturity prior to the Stated Maturity of the Notes; provided that any 
Capital Stock that would not constitute Redeemable Stock but for provisions     
thereof giving holders thereof the right to require such Person to repurchase   
or redeem such Capital Stock upon the occurrence of an "asset sale" or "change  
of control" occurring prior to the Stated Maturity of the Notes shall not       
constitute Redeemable Stock if the "asset sale" or "change of control"          
provisions applicable to such Capital Stock are no more favorable to the        
holders of such Capital Stock than the provisions contained in "Limitation on   
Asset Sales" and "Repurchase of Notes upon a Change of Control" covenants       
described above and such Capital Stock specifically provides that such Person   
will not repurchase or redeem any such stock pursuant to such provision prior   
to the Company's offer to repurchase such Notes as are required to be           
repurchased pursuant to the                                                     

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"Limitation on Asset Sales" and "Repurchase of Notes upon a Change of Control"  
covenants described above.                                                      

"Restricted Subsidiary" is defined to mean any Subsidiary of the Company  
other than an Unrestricted Subsidiary.                                          

"Significant Subsidiary" is defined to mean, at any date of determination,
any Subsidiary of the Company that, together with its Subsidiaries, (i) for the 
most recent fiscal year of the Company, accounted for more than 10% of the      
consolidated revenues of the Company or (ii) as of the end of such fiscal year, 
was the owner of more than 10% of the consolidated assets of the Company, all   
as set forth on the most recently available consolidated financial statements   
of the Company for such fiscal year.                                            

  "Stated Maturity" is defined to mean, (i) with respect to any debt security,
the date specified in such debt security as the fixed date on which the final   
installment of principal of such debt security is due and payable and (ii) with 
respect to any scheduled installment of principal of or interest on any debt    
security, the date specified in such debt security as the fixed date on which   
such installment is due and payable.                                            

  "Strategic Subordinated Indebtedness" is defined to mean Indebtedness of the
Company Incurred to finance the acquisition of a Person engaged in a business   
that is related, ancillary or complementary to the business conducted by the    
Company or any of its Restricted Subsidiaries, which Indebtedness by its terms, 
or by the terms of any agreement or instrument pursuant to which such           
Indebtedness is Incurred, (i) is expressly made subordinate in right of payment 
to the Notes and (ii) provides that no payment of principal, premium or         
interest on, or any other payment with respect to, such Indebtedness may be     
made prior to the payment in full of all of the Company's obligations under the 
Notes; provided that such Indebtedness may provide for and be repaid at any     
time from the proceeds of a capital contribution, the sale of Common Stock      
(other than Redeemable Stock) of the Company, or other Strategic Subordinated   
Indebtedness Incurred, after the Incurrence of such Indebtedness.               

"Subordinated Indebtedness" is defined to mean Indebtedness of the Company
subordinated in right of payment to the Notes.                                  

"Subsidiary" is defined to mean, with respect to any Person, any          
corporation, association or other business entity of which more than 50% of the 
outstanding Voting Stock is owned, directly or indirectly, by such Person and   
one or more other Subsidiaries of such Person.                                  

"Trade Payables" is defined to mean any accounts payable or any other     
indebtedness or monetary obligation to trade creditors created, assumed or      
Guaranteed by the Company or any of its Restricted Subsidiaries arising in the  
ordinary course of business in connection with the acquisition of goods and     
services.                                                                       

  "Transaction Date" is defined to mean, with respect to the Incurrence of any
Indebtedness by the Company or any of its Restricted Subsidiaries, the date     
such Indebtedness is to be Incurred and, with respect to any Restricted         
Payment, the date such Restricted Payment is to be made.                        

"Unrestricted Subsidiary" is defined to mean (i) any Subsidiary of the    
Company that at the time of determination shall be designated an Unrestricted   
Subsidiary by the Board of Directors in the manner provided below and (ii) any  
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate  
any Restricted Subsidiary of the Company (including any newly acquired or newly 
formed Subsidiary of the Company) to be an Unrestricted Subsidiary unless such  
Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property 
of, the Company or any Restricted Subsidiary; provided that (A) either (I) the  
Subsidiary to be so designated has total assets of $1,000 or less or (II) if    
such Subsidiary has assets greater than $1,000, that such designation would be  
permitted under the "Limitation on Restricted Payments" covenant described      
above, and (B) such Subsidiary is not liable, directly or indirectly, with      
respect to any Indebtedness other than Unrestricted Subsidiary Indebtedness.    
The Board of Directors may designate any Unrestricted                           

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Subsidiary to be a Restricted Subsidiary of the Company; provided that          
immediately after giving effect to such designation (x) the Company could Incur 
$1.00 of additional Indebtedness under the first paragraph of the "Limitation   
on Indebtedness" covenant described above and (y) no Default or Event of        
Default shall have occurred and be continuing. Any such designation by the      
Board of Directors shall be evidenced to the Trustee by promptly filing with    
the Trustee a copy of the Board Resolution giving effect to such designation    
and an Officer's Certificate certifying that such designation complied with the 
foregoing provisions.                                                           

"Unrestricted Subsidiary Indebtedness" is defined to mean Indebtedness of 
any Unrestricted Subsidiary (i) as to which neither the Company nor any         
Restricted Subsidiary is directly or indirectly liable (by virtue of the        
Company or any such Restricted Subsidiary being the primary obligor on,         
guarantor of, or otherwise liable in any respect to, such Indebtedness), and    
(ii) which, upon the occurrence of a default with respect thereto, does not     
result in, or permit any holder of any Indebtedness of the Company or any       
Restricted Subsidiary to declare, a default on such Indebtedness of the Company 
or any Restricted Subsidiary or cause the payment thereof to be accelerated or  
payable prior to its Stated Maturity.                                           

"U.S. Subsidiary" is defined to mean any corporation or other entity      
incorporated or organized under the laws of the United States or any state      
thereof.                                                                        

 "Voting Stock" is defined to mean with respect to any Person, Capital Stock
of any class or kind ordinarily having the power to vote for the election of    
directors, managers or other voting members of the governing body of such       
Person.                                                                         

"Wholly Owned," with respect to any Subsidiary, is defined to mean a      
Subsidiary of the Company if all of the outstanding Capital Stock in such       
Subsidiary (other than any director's qualifying shares or Investments by       
foreign nationals mandated by applicable law) is owned by the Company or one or 
more Wholly Owned Subsidiaries of the Company.                                  

Book Entry, Delivery and Form                                                   

The initial notes were offered and sold to qualified institutional buyers 
("Qualified Institutional Buyers") in reliance on Rule 144A and, to certain     
non-U.S. holders, Regulation S under the Securities Act of 1933. The Initial    
Notes were issued in registered, global form in minimum denominations of $1,000 
in excess thereof.                                                              

The initial notes are represented by one or more permanent global notes in
registered, global form without interest coupons (collectively, the "Rule 144A  
Global Note"), and, except as set forth below, the new notes will be            
represented by one or more Notes in registered, global form without interest    
coupons (the "Unrestricted Global Note," and together with the Rule 144A Global 
Note, the "Global Note"). The Rule 144A Global Note was, and the Unrestricted   
Global Note will be deposited upon issuance with the trustee as custodian for   
the Depositary Trust Company (the "Depositary") in New York, New York, and      
registered in the name of the Depositary or its nominee, in each case for       
credit to an account of a direct or indirect participant as described below.    

  Except as set forth below, the Global Notes may be transferred, in whole and
not in part, only to the Depositary, a nominee of the Depositary or to a        
successor of the Depositary or its nominee. Beneficial interests in the Global  
Notes may not be exchanged for Notes in certificated form except in the limited 
circumstances described below. See "--Depositary Procedures--Exchange of Book-  
Entry Notes for Certificated Notes."                                            

The Trustee will act as registrar.                                        

Depositary Procedures                                                           

  The depositary has advised us that the depositary is a limited-purpose trust
company created to hold securities for its participating organizations          
(collectively, the "Participants") and to facilitate the clearance and          
settlement of transactions in those securities between Participants through     
electronic book-entry changes in                                                

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accounts of Participants. The Participants include securities brokers and       
dealers (including the initial purchasers), banks, trust companies, clearing    
corporations and certain other organizations. Access to the depositary's system 
is also available to other entities such as banks, brokers, dealers and trust   
companies that clear through or maintain a custodial relationship with a        
Participant, either directly or indirectly (collectively, "Indirect             
Participants"). Persons who are not Participants may beneficially own           
securities held by or on behalf of the Depositary only through Participants or  
Indirect Participants. The ownership interest and transfer of ownership         
interest of each actual purchaser of each security held by or on behalf of the  
depositary are recorded on the records of the Participants and Indirect         
Participants.                                                                   

The depositary has also advised us that pursuant to procedures established
by it, (i) upon deposit of the Global Notes, the depositary will credit the     
accounts of Participants designated by the initial purchasers with portions of  
the principal amount of Global Notes and (ii) ownership of such interests in    
the Global Notes will be shown on, and the transfer of ownership thereof will   
be effected only through, records maintained by the Depositary (with respect to 
Participants) or by Participants and the Indirect Participants (with respect to 
other owners of beneficial interest in the Global Notes).                       

Investors in the Global Note may hold their interests therein directly    
through the depositary, if they are participants in such system, or indirectly  
through organizations that are Participants in such system. All interests in a  
Global Note may be subject to the procedures and requirements of the            
Depositary.                                                                     

 The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to    
transfer beneficial interest in a Global Note to such persons may be limited to 
that extent. Because the depositary can act only on behalf of Participants,     
which in turn act on behalf of Indirect Participants and certain banks, the     
ability of a person having a beneficial interest in a Global Note to pledge     
such interest to persons or entities that do not participate in the Depositary  
system, or otherwise take actions in respect of such interests may be affected  
by the lack of physical certificate evidencing such interests.                  

 Except as described below, owners of interests in the Global Notes will not
have Notes registered in their names, will not receive physical delivery of     
Notes in certificated form and will not be considered the registered owners or  
holders thereof under the Indenture for any purpose.                            

 Payments in respect of the principal and premium and liquidated damages, if
any, and interest on a Global Note registered in the name of the Depositary or  
its nominee will be payable by the paying agent to the depositary or its        
nominee in is capacity as the registered holder of a Global Note under the      
indenture. Under the terms of the indenture, we and the trustee will treat the  
persons in whose names the Notes, including the Global Notes, are registered as 
the owners thereof for the purpose of receiving such payments and for any and   
all other purposes whatsoever. Consequently, neither we, the trustee nor any    
agent of us or the trustee have or will have any responsibility or liability    
for (i) any aspect of the depositary's records or any participant's or Indirect 
Participant's records relating to or payments made on account of beneficial     
ownership interests in the Global Notes, or for maintaining, supervising or     
reviewing any of the Depositary's records or any participant's or Indirect      
Participant's records relating to the beneficial ownership interests in the     
Global Notes or (ii) any other matter relating to the actions and practices of  
the Depositary or any of its Participants or Indirect Participants.             

The depositary has advised us that its current practices, upon receipt of 
any payment in respect of securities such as the Notes (including principal and 
interest), is to credit the accounts of the relevant Participants with the      
payment on the payment date, in amounts proportionate to their respective       
holdings in principal amount of beneficial interests in the relevant security   
such as the Global Notes as shown on the records of the depositary. Payments by 
Participants and the Indirect Participants to the beneficial owners of Notes    
will be governed by standing instructions and customary practices and will not  
be the responsibility of the depositary, the trustee or us. Neither we nor the  
trustee will be liable for any delay by the depositary or its Participants in   
identifying the beneficial owners of the Notes, and we and the trustee may      
conclusively rely on                                                            

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and will be protected in relying on instructions from the depositary or its     
nominee as the registered owner of the Notes for all purposes.                  

 Interests in the Global Notes will trade in the depositary's Same-Day Funds
Settlement System and secondary market trading activity in such interests       
will, therefore, settle in immediately available funds, subject in all cases    
to the rules and procedures of the depositary and its Participants. Transfers   
between Participants in the depositary will be effective in accordance with     
the depositary's procedures, and will be settled in same-day funds.             

The depositary has advised us that it will take any action permitted to be
taken by a holder of Notes only at the direction of one or more Participants    
to whose account the depositary interests in the Global Notes are credited and  
only in respect of such portion of the aggregate principal amount of the Notes  
as to which such Participant or Participants has or have given direction.       
However, if there is an Event of Default under the Notes, the depositary        
reserves the right to exchange Global Notes for legended Notes in certificated  
form, and to distribute such Notes to its Participants.                         

The information in this section concerning the depositary and its book-   
entry systems has been obtained from sources that we believe to be reliable,    
but we take no responsibility for the accuracy thereof. Neither we nor the      
trustee will have any responsibility for the performance by the depositary or   
its respective Participants or Indirect Participants of its respective          
obligations under the rules and procedures governing its operations.            

Exchange of Book-Entry Notes for Certificated Notes.                          

A Global Note is exchangeable for definitive Notes in registered          
certificated form if:                                                           

(i) the Depositary                                                    

(A) notifies us that it is unwilling or unable to continue as     
depository for the Global Note and we thereupon fail to appoint a       
successor depository or                                                 

(B) has ceased to be a clearing agency registered under the       
Securities Exchange Act of 1934,                                        

(ii) upon the continuance of an Event of Default or                   

 (iii) we, at our option, notify the Trustee in writing that we elect to
cause issuance of the Notes in certificated form.                           

In addition, beneficial interests in a Global Note may be exchanged for         
certificated Notes upon request but only upon at least 20 days' prior written   
notice given to the Trustee by or on behalf of the Depositary in accordance     
with customary procedures. In all cases, certificated Notes delivered in        
exchange for any Global Note or beneficial interest therein will be registered  
in names, and issued in any approved denominations, requested by or on behalf   
of the Depositary (in accordance with its customary procedures) and will bear,  
the restrictive legend referred to in "Notice to Investors," unless we          
determine otherwise in compliance with applicable law.                          

Year 2000 Issues.                                                             

Management of the Depositary is aware that some computer applications,    
systems, and the like for processing data ("Systems") that are dependent upon   
calendar dates, including dates before, on, and after January 1, 2000, may      
encounter "Year 2000 problems." The depositary has informed its Participants    
and other members of the financial community (the "Industry") that it has       
developed and is implementing a program so that its Systems, as the same        
relate to the timely payment of distributions (including principal and income   
payments) to securityholders, book-entry deliveries, and settlement of trades   
within the depositary ("DTC Services"), continue to function appropriately.     
This program includes a technical assessment and a remediation plan, each of    
which is complete. Additionally, the depositary's plan includes a testing       
phase, which is expected to be completed within appropriate time frames.        

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However, the depositary's ability to perform properly its services is also
dependent upon other parties, including but not limited to issuers and their    
agents, as well as third party vendors from whom DTC licenses software and      
hardware, and third party vendors on whom the Depositary relies for information 
or the provision of services, including telecommunication and electrical        
utility service providers, among others. The depositary has informed the        
Industry that it is contacting (and will continue to contact) third party       
vendors from whom the Depositary acquires services to: (i) impress upon them    
the importance of such services being Year 2000 compliant; and (ii) determine   
the extent of their efforts for Year 2000 remediation (and, as appropriate,     
testing) of their services. In addition, the depositary is in the process of    
developing such contingency plans as it deems appropriate.                      

According to the Depositary, the foregoing information with respect to the
Depositary has been provided to the Industry for informational purposes only    
and is not intended to serve as a representation, warranty, or contract         
modification of any kind.                                                       

Same Day Settlement and Payment.                                              

  The indenture will require that payments in respect of the Notes represented
by the Global Note (including principal, premium, if any, interest and          
Liquidated Damages, if any) be made by wire transfer of immediately available   
funds to the accounts specified by the Global Note Holder. With respect to      
certificated Notes, we will make all payments of principal, premium, if any,    
interest and Liquidated Damages, if any, by wire transfer of immediately        
available funds to the accounts specified by the holders thereof or, if no such 
account is specified, by mailing a check to each such holder's registered       
address. We expect that secondary trading in the certificated Notes will also   
be settled in immediately available funds.                                      

Exchange Offer and Registration Rights                                          

Primus and certain subsidiaries entered into the Registration Rights      
Agreement with the initial purchasers, pursuant to which we agreed to file with 
the Securities Exchange Commission, subject to the provisions described below,  
the Exchange Offer Registration Statement on an appropriate form permitting     
registration of the new notes to be offered in exchange for the Transfer        
Restricted Securities and to permit resales of new notes held by broker-dealers 
as contemplated by the Registration Rights Agreement. The Registration Rights   
Agreement provides that unless the exchange offer would not be permitted by     
applicable law or Securities Exchange Commission policy, we will (i) file the   
Exchange Offer Registration Statement with the Commission and use our           
reasonable best efforts to cause the Exchange Offer Registration Statement to   
be declared effective by the Commission within 150 days after the Closing Date, 
(ii) (A) file all pre-effective amendments to such Registration Statement as    
may be necessary in order to cause such Registration Statement to become        
effective, (B) file if applicable, a post-effective amendment to such           
Registration Statement pursuant to Rule 430A under the Securities Act of 1933   
and (C) cause all necessary filing in connection with the registration and      
qualifications of the new notes to be made under the blue sky laws of such      
jurisdictions as are necessary to permit consummation of the exchange offer and 
(iii) use our reasonable best efforts to cause the exchange offer to be         
consummated on or prior to 180 days after the Closing Date.                     

For purposes of the foregoing, "Transfer Restricted Securities" means each
Note until the earliest to occur of                                             

(i) the date on which such Note has been exchanged by a person other  
than a broker-dealer for new notes in the exchange offer,                   

 (ii) following the exchange by a broker-dealer in the exchange offer of
such Note for one or more new notes, the date on which such new notes are   
sold to a purchaser who receives from such broker-dealer on or prior to the 
date of such sale a copy of the prospectus contained in the Exchange Offer  
Registration Statement,                                                     

 (iii) the date on which such Note has been effectively registered under
the Securities Act of 1934 and disposed of in accordance with the Shelf     
Registration Statement or                                                   

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(iv) the date on which such Note is eligible for distribution to the  
public pursuant to Rule 144 under the Securities Act.                       

 Under existing Commission interpretations, the new notes would, in general,
be freely transferable after the exchange offer without further registration    
under the Securities Act; provided, however, that, in the case of broker-       
dealers participating in the exchange offer, a prospectus meeting the           
requirements of the Securities Act must be delivered by such broker-dealers in  
connection with resales of the new notes. We have agreed, for a period of 180   
days after consummation of the exchange offer, to make available a prospectus   
meeting the requirements of the Securities Act to any such broker-dealer for    
use in connection with any resale of any new notes acquired in the exchange     
offer. A broker-dealer that delivers such a prospectus to purchasers in         
connection with such resales will be subject to certain of the civil liability  
provisions under the Securities Act and will be bound by the provisions of the  
Registration Rights Agreement (including certain indemnification rights and     
obligations).                                                                   

Holders of Notes that desire to exchange such Notes for new notes in the  
exchange offer will be required to make certain representations, including      
representations that:                                                           

 (i) any new notes to be received by it will be acquired in the ordinary
course of its business,                                                     

(ii) it has no arrangement with any person to participate in the      
distribution (within the meaning of the Securities Act) of the new notes    
and                                                                         

(iii) it is not our "affiliate," as defined in Rule 405 of the        
Securities Act, or if it is an affiliate, it will comply with the           
registration and prospectus delivery requirements of the Securities Act to  
the extent applicable.                                                      

 If the holder is not a broker-dealer, it will be required to represent that
it is not engaged in, and does not intend to engage in, the distribution of     
the new notes. If the holder is a broker-dealer that will receive new notes     
for its own account in exchange for Notes that were acquired as a result of     
market-making activities or other trading activities, it will be required to    
acknowledge that it will deliver a prospectus in connection with any resale of  
such new notes.                                                                 

We have agreed to pay all expenses incident to the exchange offer and will
indemnify the initial purchasers against certain liabilities, including         
liabilities under the Securities Act.                                           

If:                                                                       

(i) we are not permitted to file the exchange offer Registration      
Statement or to consummate the exchange offer because the exchange offer is 
not permitted by applicable law or Commission policy,                       

(ii) any holder of Transfer Restricted Securities that is a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act)     
notifies the Company at least 20 business days prior to the consummation of 
the exchange offer that                                                     

(a) applicable law or Commission policy prohibits us from         
participating in the Exchange Offer,                                    

(b) such Holder may not resell the new notes acquired by it in the
exchange offer to the public without delivering a prospectus and the    
prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such holder or             

  (c) such holder is a broker-dealer and holds Notes acquired directly
from us or an affiliate of ours,                                        

  (iii) the exchange offer is not for any other reason consummated by July
28, 1999 or                                                                 

  (iv) the exchange offer has been completed and in the written opinion of
counsel for the initial purchasers a Registration Statement must be filed   
and a prospectus must be delivered by the initial purchasers in connection  
with any offering or sale of Transfer Restricted Securities, we will use    
our reasonable best efforts to:                                             

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(A) file a Shelf Registration Statement within 60 days of the     
earliest to occur of (i) through (iv) above and                         

 (B) cause the Shelf Registration Statement to be declared effective
by the Commission on or prior to the 120th day after such obligation    
arises.                                                                 

We shall use our reasonable best efforts to keep such Shelf Registration        
Statement continuously effective, supplemented and amended to ensure that it is 
available for resales of Notes by the holders of Transfer Restricted Securities 
entitled to this benefit and to ensure that such Shelf Registration Statement   
conforms and continues to conform with the requirements of the Registration     
Rights Agreement, the Securities Act and the policies, rules and regulations of 
the Commission, as announced from time to time, until the second anniversary of 
the Closing Date; provided, however, that during such two-year period the       
holders may be prevented or restricted by us from effecting sales pursuant to   
the Shelf Registration Statement as more fully described in the Registration    
Rights Agreement. A holder of Notes that sells its Notes pursuant to the Shelf  
Registration Statement generally will be required to be named as a selling      
security holder in the related prospectus and to deliver a prospectus to        
purchasers, will be subject to certain of the civil liability provisions under  
the Securities Act in connection with such sales and will be bound by the       
provisions of the Registration Rights Agreement that are applicable to such     
holder (including certain indemnification and contribution obligations).        

If:                                                                       

  (i) we fail to file with the Commission the Shelf Registration Statement
on or before the date specified therein for such filing,                    

(ii) any of such Registration Statements is not declared effective by 
the Commission on or prior to the date specified for such effectiveness in  
the Registration Rights Agreement (the Effectiveness Target Date),          

 (iii) the exchange offer has not been consummated within 180 days after
the Closing Date with respect to the Exchange Offer Registration Statement, 
or                                                                          

(iv) any Registration Statement required by the Registration Rights   
Agreement is filed and declared effective but thereafter ceases to be       
effective or fails to be usable for its intended purpose without being      
succeeded within five business days by a post-effective amendment to such   
Registration Statement that cures such failure and that is itself           
immediately declared effective (each such event referred to in clauses (i)  
through (iv) above, a Registration Default),                                

then additional cash interest (Liquidated Damages) shall accrue to each holder  
of the Notes commencing upon the occurrence of such Registration Default in an  
amount equal to .50% per annum of the principal amount of Notes held by such    
Holder. The amount of liquidated damages will increase by an additional .50%    
per annum of the principal amount of Notes with respect to each subsequent 90-  
day period (or portion thereof) until all Registration Defaults have been       
cured, up to a maximum rate of liquidated damages of 1.50% per annum of the     
principal amount of Notes. All accrued liquidated damages will be paid to       
holders by us in the same manner as interest is paid pursuant to the indenture. 
Following the cure of all Registration Defaults relating to any particular      
Transfer Restricted Securities, the accrual of Liquidated Damages with respect  
to such Transfer Restricted Securities will cease.                              

As a result of the exchange offer not having been consummated by July 28, 
1999, a Registration Default commenced on July 29, 1999 and Liquidated Damages  
began to accrue to each holder of the Notes in the amount set forth in the      
preceding paragraph.                                                            

The summary herein of certain provisions of the Registration Rights       
Agreement does not purport to be complete and is subject to, and is qualified   
in its entirety by reference to, all the provisions of the Registration Rights  
Agreement, a copy of which will be made available to prospective purchasers of  
the Notes upon request to us.                                                   

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FEDERAL INCOME TAX CONSIDERATIONS 

The following is a general discussion of certain material United States   
federal income tax consequences of the exchange of the initial notes for the    
new notes, and the ownership and disposition of the new notes for holders who   
acquired the new notes in exchange for existing notes. This discussion is       
limited to holders who hold both the existing notes and the new notes as        
capital assets, within the meaning of Section 1221 of the Internal Revenue Code 
of 1986, as amended.                                                            

  This discussion does not address all aspects of United States federal income
taxation that may be applicable to investors in light of their particular       
circumstances, or to investors subject to special treatment under United States 
federal income tax law (including, without limitation, certain financial        
institutions, insurance companies, tax-exempt entities, dealers in securities,  
persons who have acquired notes as part of a straddle, hedge, conversion        
transaction or other integrated investment or constructive sale or persons      
whose functional currency is not the United States dollar).                     

This discussion is based on provisions of the Code, Treasury regulations  
promulgated thereunder, and administrative and judicial interpretations         
thereof, all as in effect on the date hereof and all of which are subject to    
change, possibly with retroactive effect.                                       

EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS TAX ADVISOR AS TO THE        
PARTICULAR TAX CONSEQUENCES TO SUCH INVESTOR OF THE PURCHASE, OWNERSHIP AND     
DISPOSITION OF THE NOTES INCLUDING THE APPLICABILITY OF ANY FEDERAL ESTATE OR   
GIFT TAX LAWS, ANY STATE, LOCAL OR FOREIGN TAX LAWS, ANY CHANGES IN APPLICABLE  
TAX LAWS AND ANY PENDING OR PROPOSED LEGISLATION OR REGULATIONS.                

 As used in this section, the term "U.S. holder" means a beneficial owner of
a Note that is, for United States federal income tax purposes,                  

.  a citizen or resident of the United States,                              

.  a corporation or partnership created or organized under the laws of the  
United States or of any political subdivision thereof,                

.  an estate the income of which is subject to United States federal income 
taxation regardless of its source, or                                 

.  a trust, if a United States court is able to exercise primary            
  supervision over the administration of such trust and one or more United
States persons have the authority to control all substantial decisions
of such trust or the trust has a valid election in effect under       
applicable U.S. Treasury regulations to be treated as a U.S. person.  

The term "non-U.S. holder" means a beneficial owner of a Note other than a
U.S. Holder.                                                                    

U.S. Taxation of U.S. Holders                                                   

Payments of Interest. Stated interest payable on the new notes generally  
will be included in the gross income of a U.S. holder as ordinary interest      
income at the time accrued or received, in accordance with such U.S. holder's   
method of accounting for United States federal income tax purposes.             

We may be required to pay liquidation damages to U.S. holders of the new  
notes. Although the matter is not free from doubt, we intend to take the        
position that a U.S. holder of a new note should be required to report the      
liquidated damages as ordinary income for United States federal income tax      
purposes when the liquidated damages accrue or are received in accordance with  
the holder's method of accounting. It is possible, however, that the Internal   
Revenue Service may take a different position, in which case the timing and     
amount of income may be different.                                              

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Disposition of the Notes. The exchange of the existing notes for the new  
notes will not be a taxable event for U.S. federal income tax purposes. The     
holding period of the new note will include the U.S. holder's holding period of 
the initial note, and the basis of the new note will be the same as the basis   
in the initial note immediately before the exchange.                            

On the sale, exchange, redemption, retirement at maturity or other        
disposition of a new note, a U.S. holder generally will recognize capital gain  
or loss (except ans noted in the next paragraph) equal to the difference        
between the amount realized and the U.S. holder's adjusted tax basis in the new 
note. The capital gain or loss will be long-term capital gain or loss if the    
holding period for the new note (that includes the holding period for the       
initial note) exceeds one year at the time of the disposition. Generally, the   
maximum tax rate for individuals on long term capital gain is 20%.              

  To the extent a portion of the amount realized on the disposition of the new
note is attributable to interest, it will be taxed as ordinary income and not   
capital gain. A portion of the amount realized will be attributable to interest 
if there is accrued but unpaid interest at the time of the disposition, or if   
the U.S. holder purchased the initial notes (other than at original issuance)   
at a market discount, as defined in the Internal Revenue Code of 1986, as       
amended. If a U.S. holder bought an existing note for an amount less than the   
stated redemption price at maturity, he or she should consult with his or her   
tax advisor to determine if there is market discount in the new note, and the   
impact of the market discount on the taxation of the holding and disposition of 
the new note.                                                                   

Bond Premium                                                                  

If a U.S. holder purchased an initial note for an amount in excess of the 
amount payable at the maturity date, the U.S. holder may deduct the excess as   
amortizable bond premium over the aggregate terms of the existing notes and the 
new notes under a yield to maturity formula. The deduction is available only if 
an election is made by the U.S. holder, and the election will apply to all      
obligations owned or acquired by the U.S. holder. The U.S. holder's adjusted    
basis in the initial notes and the new notes will be reduced to the extent of   
the amortizable bond premium.                                                   

U.S. Taxation of Non-U.S. Holders                                               

Payments of Interest. In general, under current U.S. tax law, payments of 
interest received by a non-U.S. holder will not be subject to United States     
withholding tax, provided that the non-U.S. holder                              

.  does not actually or constructively own 10% or more of the total         
combined voting power of all of our classes of stock entitled to vote,

.  is not a bank whose receipt of interest is described in Section          
881(c)(3)(A) of the Internal Revenue Code,                            

.  is not a controlled foreign corporation that is related to us actually   
or constructively through stock ownership, and                        

.  either                                                                   

.  the beneficial owner of the new note provides us or our paying agent 
with a properly executed certification on IRS form W-8BEN (or     
suitable substitute form), signed under penalties of perjury, that
 the beneficial owner is not a "U.S. person" for U.S. federal income
tax purposes and that provides the beneficial owner's name and    
address, or                                                       

.  a securities clearing organization, bank or other financial          
 institution that holds customers' securities in the ordinary course
 of its business holds the new note and certifies to us or our agent
under penalties of perjury that the IRS form W-8BEN (or a suitable
 substitute form) has been received from the beneficial owner of the
  new note or a qualifying intermediary and furnishes the payor a copy
thereof.                                                          

Payments of interest not exempt from U.S. federal withholding tax as      
described above, or not exempt because of a change of law effective after the   
date of the original issuance of the existing note, will be subject to such     
withholding tax at the rate of 30%, unless reduced or eliminated under an       
applicable income tax treaty,                                                   

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and unless the beneficial owner of the new note provides us or our paying       
agent, as the case may be, with a properly executed                             

.  IRS Form W-8BEN (or successor form) claiming an exemption from or        
reduction of withholding under the benefit of a tax treaty or         

.  IRS Form W-8ECI (or successor form) stating that interest paid on the    
new note is not subject to withholding tax because it is effectively  
 connected with the beneficial owner's conduct of a trade or business in
the United States.                                                    

  It is unclear whether the payment of liquidated damages to a non-U.S. holder
will be subject to withholding of U.S. federal income tax, and we may withhold  
30% from any such payments made to non-U.S. holders.                            

 Treasury regulations that are to be effective with respect to payments made
after December 31, 2001 provide alternative methods for satisfying the          
certification requirements described in the preceding paragraph. Those          
regulations also will require, in the case of new notes held by a foreign       
partnership, that the certification described above be provided by each         
partner.                                                                        

Disposition of the New Notes.                                                 

The exchange of an initial note for a new note will not be a taxable event
for a non-U.S. holder.                                                          

A non-U.S. holder generally will not be subject to U.S. federal income tax
(and no tax will be withheld) with respect to gain realized on the sale,        
exchange or other disposition of a new note, unless                             

.  the gain is effectively connected with a U.S. trade or business          
conducted by the non-U.S. holder or                                   

.  the non-U.S. holder is an individual who is present in the United States 
for 183 or more days during the taxable year of the Disposition and   
certain other conditions are met.                                     

Effectively Connected Income. If interest and other payments received by a
non-U.S. holder with respect to the new notes, including proceeds from the sale 
or exchange of the new notes, are effectively connected with the conduct by the 
non-U.S. holder of a trade or business within the United States (or the non-    
U.S. holder is otherwise subject to U.S. federal income taxation on a net basis 
with respect to such holder's ownership of the notes), the non-U.S. holder will 
generally be subject to the rules described above under "U.S. Taxation of U.S.  
Holders" (subject to any modification provided under an applicable income tax   
treaty). The non-U.S. holder may also be subject to the U.S. "branch profits    
tax" if the holder is a corporation.                                            

Backup Withholding and Information Reporting                                    

In general, information reporting requirements will apply to certain      
payments of principal, interest and liquidated damages paid on new notes and to 
the proceeds of sale of a new note made to U.S. holders other than certain      
exempt recipients (such as corporations). U.S. holders also may be subject to   
backup withholding at a rate of 31% on payments of principal, liquidated        
damages and interest on, and the proceeds of the sale or exchange of, the new   
notes. In general, backup withholding will apply to the payments if the U.S.    
holder                                                                          

.  fails to furnish a taxpayer identification number (TIN) which, for an    
individual, would be his or her Social Security number,               

.  furnishes an incorrect TIN, or                                           

.  fails to report in full payments of interest or dividends.               

Information reporting and backup withholding generally will not apply to  
payments made to a non-U.S. holder who provides the certification described     
under "U.S. Taxation of non-U.S. holders--Payments of Interest" or otherwise    
establishes an exemption from backup withholding, provided that neither we or   
the paying agent have actual knowledge that the holder is a U.S. person.        

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PLAN OF DISTRIBUTION

Each broker-dealer that holds initial notes that were acquired for its own
account as a result of market making or other trading activities (other than    
initial notes acquired directly from us), may exchange initial notes for new    
notes in the exchange offer. However, any such broker-dealer may be deemed to   
be an "underwriter" within the meaning of such term under the Securities Act    
and must, therefore, acknowledge that it will deliver a prospectus in           
connection with any resale of new notes received in the exchange offer. This    
prospectus delivery requirement may be satisfied by the delivery by such        
broker-dealer of this prospectus, as it may be amended or supplemented from     
time to time. We have agreed that, for a period of 180 days after the effective 
date of this Prospectus, we will make this Prospectus, as amended or            
supplemented, available to any broker-dealer who receives new notes in the      
exchange offer for use in connection with any such sale. We will not receive    
any proceeds from any sales of new notes by broker-dealers. new notes received  
by broker-dealers for their own accounts pursuant to the exchange offer may be  
sold from time to time in one or more transactions in the over-the-counter      
market, in negotiated transactions, through the writing of options on the new   
notes or a combination of such methods of resale, at market prices at the time  
of resale, at prices related to such prevailing market prices or negotiated     
prices. Any such resale of new notes by broker-dealers may be made directly to  
a purchaser or to or through brokers or dealers who may receive compensation in 
the form of commissions or concessions from any such broker-dealer and/or the   
purchasers of any such new notes. Any broker-dealer that resells new notes that 
were received by it for its own account pursuant to the exchange offer and any  
broker or dealer that participates in a distribution of such new notes may be   
deemed to be an "underwriter" within the meaning of the Securities Act and any  
profit on any such resale of new notes and any commissions or concessions       
received by any such persons may be deemed to be underwriting compensation      
under the Securities Act. We have agreed to pay all expenses incident to the    
exchange offer other than commissions or concessions of any brokers or dealers  
and will indemnify holders (including any broker-dealer) against certain        
liabilities, including liabilities under the Securities Act. By acceptance of   
the exchange offer, each broker-dealer that receives new notes pursuant to the  
exchange offer hereby agrees to notify us prior to using the Prospectus in      
connection with the sale or transfer of new notes, and acknowledges and agrees  
that, upon receipt of notice from us of the happening of any event which makes  
any statement in the Prospectus untrue in any material respect or which         
requires the making of any changes in the prospectus in order to make the       
statements herein not misleading (which notice we agree to deliver promptly to  
such broker-dealer), such broker- dealer will suspend use of the prospectus     
until we have amended or supplemented the prospectus to correct such            
misstatement or omission and has furnished copies of the amended or             
supplemented prospectus to such broker-dealer.                                  

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AVAILABLE INFORMATION 

 We are subject to the informational requirements of the Securities Exchange
Act of 1934 and in accordance therewith file reports and other information with 
the Securities Exchange Commission, which reports include our financial         
information set forth in full. Such reports and other information filed by us   
can be inspected and copied at public reference facilities maintained by the    
Commission at Room 1024, 450 Fifth Street, NW, Judiciary Plaza, Washington,     
D.C. 20549; Seven World Trade Center, 13th Floor, New York, New York 10048; and 
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. For further       
information concerning the Commission's public reference rooms, the Commission  
can be reached at 1-800-SEC-0330. The Commission also maintains a Web site that 
contains reports, proxy and information statements, and other information       
regarding registrants that file electronically with the Commission. The site    
may be accessed at http://www.sec.gov. Anyone who receives this prospectus may  
obtain a copy of the Indenture and Registration Rights Agreement without charge 
by writing to Primus Telecommunications Group, Incorporated, 1700 Old Meadow    
Road, McLean, VA 22102, Attention: David Slotkin, Deputy General Counsel.       

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 

All documents filed with the Commission by us pursuant to sections 13(a), 
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 subsequent to the     
date of this prospectus and prior to termination of the offering made hereby    
are incorporated herein by reference. Any statement contained in a document     
incorporated or deemed to be incorporated by reference herein shall be deemed   
to be modified or superseded for purposes of this prospectus to the extent that 
a statement contained in any other subsequently filed document which also is or 
is deemed to be incorporated by reference herein modifies or supersedes such    
statement.                                                                      

LEGAL MATTERS 

 The validity of the Exchange Notes offered hereby and certain United States
federal income tax matters are being passed upon for us by Pepper Hamilton LLP. 
Mr. John DePodesta, "of counsel" to Pepper Hamilton LLP, is a director and an   
Executive Vice President of the Company, and the beneficial owner of 382,924    
shares of our common stock.                                                     

EXPERTS 

 The consolidated financial statements of Primus as of December 31, 1998 and
1997 and for each of the three years in the period ended December 31, 1998      
included in this prospectus have been audited by Deloitte & Touche LLP,         
independent auditors, as stated in their report appearing herein, and are       
included in reliance upon the report of such firm given upon their authority as 
experts in accounting and auditing.                                             

The consolidated financial statements of TresCom International, Inc. at   
December 31, 1997 and 1996, and for each of the three years in the period ended 
December 31, 1997, appearing in this prospectus and registration statement have 
been audited by Ernst & Young LLP, independent auditors, as set forth in their  
report thereon appearing elsewhere herein, and are included in reliance upon    
such report given upon the authority of such firm as experts in accounting and  
auditing.                                                                       

The combined financial statements of Telegroup, Inc. and certain          
subsidiaries as of December 31, 1997 and 1998, and for each of the years in the 
three-year period ended December 31, 1998, have been included herein and in the 
registration statement in reliance upon the report of KPMG LLP, independent     
certified public accountants, appearing elsewhere herein, and upon the          
authority of said firm as experts in accounting and auditing.                   

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The report of KPMG LLP covering the December 31, 1998 combined financial  
statements, contains an explanatory paragraph that states that the Company has  
filed for protection under Chapter 11 of the United States Bankruptcy Code due  
to significant financial and liquidity problems. These circumstances raise      
substantial doubt about its ability to continue as a going concern. The         
combined financial statements do not include any adjustments that might result  
from the outcome of this uncertainty.                                           

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INDEX TO FINANCIAL STATEMENTS 

                                                                [Download Table]

                                                                           Page
                                                                           ----
                                                                               
Primus Telecommunications Group, Incorporated:                                 
Independent Auditors' Report..............................................  F-2
Consolidated Financial Statements:                                             
  Consolidated Statement of Operations for the years ended December 31,        
   1998, 1997 and 1996....................................................  F-3
  Consolidated Balance Sheet as of December 31, 1998 and 1997.............  F-4
  Consolidated Statement of Stockholders' Equity for the years ended           
   December 31, 1998, 1997 and 1996.......................................  F-5
  Consolidated Statement of Cash Flows for the years ended December 31,        
   1998, 1997 and 1996....................................................  F-6
  Consolidated Statement of Comprehensive Loss for the years ended             
   December 31, 1998, 1997 and 1996.......................................  F-7
  Notes to Consolidated Financial Statements..............................  F-8
  Consolidated Statement of Operations for the three months ended March        
   31, 1999 and 1998...................................................... F-20
  Consolidated Balance Sheet as of March 31, 1999......................... F-21
  Consolidated Statement of Cash Flows for the three months ended March        
   31, 1999 and 1998...................................................... F-22
  Consolidated Statement of Comprehensive Loss for the three months ended      
   March 31, 1999 and 1998................................................ F-23
TresCom International, Inc.:                                                   
Report of Independent Auditors............................................ F-24
Consolidated Financial Statements:                                             
  Consolidated Balance Sheets as of December 31, 1997 and 1996............ F-25
  Consolidated Statements of Operations for the years ended December 31,       
   1997, 1996 and 1995.................................................... F-26
  Consolidated Statements of Shareholders' Equity for the years ended          
   December 31, 1997, 1996 and 1995....................................... F-27
  Consolidated Statements of Cash Flows for the years ended December 31,       
   1997, 1996 and 1995.................................................... F-28
  Notes to Consolidated Financial Statements.............................. F-29
Telegroup, Inc. and Certain Subsidiaries:                                      
Independent Auditors' Report.............................................. F-39
Combined Financial Statements:                                                 
  Combined Balance Sheets as of December 31, 1997 and 1998................ F-40
  Combined Statements of Operations for the years ended December 31, 1996,     
   1997 and 1998.......................................................... F-41
  Combined Statements of Comprehensive Losses for the years ended December     
   31, 1996, 1997 and 1998................................................ F-42
  Combined Statements of Shareholders' Equity (Deficit) for the years          
   ended December 31, 1996, 1997 and 1998................................. F-43
  Combined Statements of Cash Flows for the years ended December 31, 1996,     
   1997 and 1998.......................................................... F-44
  Notes to Combined Financial Statements.................................. F-45
  Combined Balance Sheets as of March 31, 1998 and 1999................... F-67
  Combined Statements of Operations and Comprehensive Losses for the three     
   months ended March 31, 1998 and 1999................................... F-68
  Combined Statements of Cash Flows for the three months ended March 31,       
   1998 and 1999.......................................................... F-69
TresCom Financial Statement Schedule:                                          
  Report of Independent Auditors..........................................  S-1
  Schedule II--Valuation and Qualifying Accounts..........................  S-2

F-1 

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INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of                                   
Primus Telecommunications Group, Incorporated                                   

We have audited the accompanying consolidated balance sheets of Primus    
Telecommunications Group, Incorporated and subsidiaries (the "Company") as of   
December 31, 1998 and 1997, and the related consolidated statements of          
operations, stockholders' equity, comprehensive loss and cash flows for each of 
the three years in the period ended December 31, 1998. These financial          
statements are the responsibility of the Company's management. Our              
responsibility is to express an opinion on these financial statements based on  
our audits.                                                                     

We conducted our audits in accordance with generally accepted auditing    
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the financial statements are free of         
material misstatement. An audit includes examining, on a test basis, evidence   
supporting the amounts and disclosures in the financial statements. An audit    
also includes assessing the accounting principles used and significant          
estimates made by management, as well as evaluating the overall financial       
statement presentation. We believe that our audits provide a reasonable basis   
for our opinion.                                                                

In our opinion, such consolidated financial statements present fairly, in 
all material respects, the financial position of Primus Telecommunications      
Group, Incorporated and subsidiaries as of December 31, 1998 and 1997, and the  
results of their operations and their cash flows for each of the three years in 
the period ended December 31, 1998, in conformity with generally accepted       
accounting principles.                                                          

Deloitte & Touche LLP                                                           
Washington, D.C.                                                                

February 10, 1999, except                                                       
for paragraph one of Note 16                                                    
as to which the date is                                                         
March 31, 1999                                                                  

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PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED 

CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)

                                                                [Download Table]

                                           For the Year Ended December 31,    
                                           ---------------------------------- 
                                              1998        1997        1996    
                                           ----------  ----------  ---------- 
                                                                              
Net revenue............................... $  421,628  $  280,197  $  172,972 
Cost of revenue...........................    353,016     252,731     158,845 
                                           ----------  ----------  ---------- 
Gross margin..............................     68,612      27,466      14,127 
                                           ----------  ----------  ---------- 
Operating expenses                                                            
  Selling, general and administrative.....     79,532      50,622      20,114 
  Depreciation and amortization...........     24,185       6,733       2,164 
                                           ----------  ----------  ---------- 
    Total operating expenses..............    103,717      57,355      22,278 
                                           ----------  ----------  ---------- 
Loss from operations......................    (35,105)    (29,889)     (8,151)
Interest expense..........................    (40,047)    (12,914)       (857)
Interest income...........................     11,504       6,238         785 
Other income (expense)....................        --          407        (345)
                                           ----------  ----------  ---------- 
Loss before income taxes..................    (63,648)    (36,158)     (8,568)
Income taxes..............................        --          (81)       (196)
                                           ----------  ----------  ---------- 
Net loss.................................. $  (63,648) $  (36,239) $   (8,764)
                                           ==========  ==========  ========== 
Basic and diluted net loss per common                                         
 share.................................... $    (2.61) $    (1.99) $    (0.75)
                                           ==========  ==========  ========== 
Weighted average number of common shares                                      
 outstanding..............................     24,432      18,250      11,660 
                                           ==========  ==========  ========== 

See notes to consolidated financial statements. 

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PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED 

CONSOLIDATED BALANCE SHEET
(in thousands, except share amounts)

                                                                [Download Table]

                                                      December 31, December 31,
                                                          1998         1997    
                                                      ------------ ------------
                                                                               
ASSETS                                                                         
Current assets:                                                                
  Cash and cash equivalents..........................  $ 136,196     $115,232  
  Restricted investments.............................     25,729       22,774  
  Accounts receivable (net of allowance for doubtful                           
   accounts of                                                                 
   $14,976 and $5,044)...............................     92,531       58,172  
  Prepaid expenses and other current assets..........     13,505        5,152  
                                                       ---------     --------  
    Total current assets.............................    267,961      201,330  
Restricted investments...............................     24,894       50,776  
Property and equipment, net..........................    158,873       59,241  
Intangibles--Net.....................................    205,039       33,164  
Other assets.........................................     17,196       10,882  
                                                       ---------     --------  
    Total assets.....................................  $ 673,963     $355,393  
                                                       =========     ========  
LIABILITIES AND STOCKHOLDERS' EQUITY                                           
Current Liabilities                                                            
  Accounts payable...................................  $  82,520     $ 56,358  
  Accrued expenses and other current liabilities.....     42,597       12,468  
  Accrued interest...................................     12,867       11,016  
  Deferred income taxes..............................        361        1,814  
  Current portion of long-term obligations...........     22,423        1,059  
                                                       ---------     --------  
    Total current liabilities........................    160,768       82,715  
Long term obligations................................    397,751      230,152  
Other liabilities....................................        527          --   
                                                       ---------     --------  
    Total liabilities................................    559,046      312,867  
                                                       ---------     --------  
Commitments and Contingencies                                                  
Stockholders' Equity:                                                          
  Preferred stock, $.01 par value--authorized                                  
   2,455,000 shares;                                                           
   none issued and outstanding.......................        --           --   
  Common stock, $.01 par value--authorized,                                    
   80,000,000 and                                                              
   40,000,000 shares; issued and outstanding,                                  
   28,059,063 and                                                              
   19,662,233 shares.................................        281          197  
  Additional paid-in capital.........................    234,549       92,181  
  Accumulated deficit................................   (111,653)     (48,005) 
  Accumulated other comprehensive loss...............     (8,260)      (1,847) 
                                                       ---------     --------  
    Total stockholders' equity.......................    114,917       42,526  
                                                       ---------     --------  
    Total liabilities and stockholders' equity.......  $ 673,963     $355,393  
                                                       =========     ========  

See notes to consolidated financial statements. 

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PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED 

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands)

                                                        [Enlarge/Download Table]

                                                                                  Accumulated               
                         Preferred Stock     Common Stock                            Other                  
                         -----------------   ------------- Paid-In   Accumulated Comprehensive Stockholders'
                         Shares    Amount    Shares Amount Capital     Deficit       Loss         Equity    
                         -------   -------   ------ ------ --------  ----------- ------------- -------------
                                                                                                            
Balance, December 31,                                                                                       
 1995...................      --    $    --   7,064  $ 71  $  5,496   $  (3,002)    $    (3)     $  2,562   
 Common shares sold                                                                                         
  through private                                                                                           
  placement, net of                                                                                         
  transaction costs.....      --        --    3,148    31    21,837         --          --         21,868   
 Common shares issued                                                                                       
  for services                                                                                              
  performed.............      --        --      279     3       987         --          --            990   
 Preferred shares issued                                                                                    
  for acquisition.......      455         5     --    --      5,455         --          --          5,460   
 Common shares sold, net                                                                                    
  of transaction costs..      --        --    5,750    58    54,341         --          --         54,399   
 Conversion of preferred                                                                                    
  shares to common                                                                                          
  shares................     (455)       (5)  1,538    15       (10)        --          --            --    
 Foreign currency                                                                                           
  translation                                                                                               
  adjustment............      --        --      --    --        --          --          (75)          (75)  
 Net loss...............      --        --      --    --        --       (8,764)        --         (8,764)  
                          -------   -------  ------  ----  --------   ---------     -------      --------   
Balance, December 31,                                                                                       
 1996...................      --        --   17,779   178    88,106     (11,766)        (78)       76,440   
 Common shares issued                                                                                       
  upon exercise of                                                                                          
  warrants..............      --        --    1,843    19     1,453         --          --          1,472   
 Common shares issued                                                                                       
  for employer 401(k)                                                                                       
  match.................      --        --        5   --         45         --          --             45   
 Common shares issued                                                                                       
  upon exercise of                                                                                          
  employee stock                                                                                            
  options...............      --        --       35   --         42         --          --             42   
 Senior note offering--                                                                                     
  warrants..............      --        --      --    --      2,535         --          --          2,535   
 Foreign currency                                                                                           
  translation                                                                                               
  adjustment............      --        --      --    --        --          --       (1,769)       (1,769)  
 Net loss...............      --        --      --    --        --      (36,239)        --        (36,239)  
                          -------   -------  ------  ----  --------   ---------     -------      --------   
Balance, December 31,                                                                                       
 1997...................      --        --   19,662   197    92,181     (48,005)     (1,847)       42,526   
 Common shares issued                                                                                       
  for business                                                                                              
  acquisitions..........      --        --    7,864    79   137,547         --          --        137,626   
 Common shares issued                                                                                       
  for employer 401(k)                                                                                       
  match.................      --        --        9   --        119         --          --            119   
 Common shares issued                                                                                       
  upon exercise of                                                                                          
  employee stock                                                                                            
  options...............      --        --      489     5     4,334         --          --          4,339   
 Common shares issued                                                                                       
  for employee stock                                                                                        
  purchase plan.........      --        --       24   --        263         --          --            263   
 Common shares issued                                                                                       
  upon exercise of                                                                                          
  warrants..............      --        --       11   --        105         --          --            105   
 Foreign currency                                                                                           
  translation                                                                                               
  adjustment............      --        --      --    --        --          --       (6,413)       (6,413)  
 Net loss...............      --        --      --    --        --      (63,648)        --        (63,648)  
                          -------   -------  ------  ----  --------   ---------     -------      --------   
Balance, December 31,                                                                                       
 1998...................      --    $    --  28,059  $281  $234,549   $(111,653)    $(8,260)     $114,917   
                          =======   =======  ======  ====  ========   =========     =======      ========   

See notes to consolidated financial statements. 

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PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED 

CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)

                                                                [Download Table]

                                             For the Year Ended December 31,    
                                            ----------------------------------- 
                                               1998        1997         1996    
                                            ----------  -----------  ---------- 
                                                                                
Cash flows from operating activities:                                           
 Net loss.................................. $  (63,648) $   (36,239) $   (8,764)
 Adjustments to reconcile net loss to net                                       
  cash used in operating activities:                                            
   Depreciation, amortization and                                               
    accretion..............................     24,547        6,733       2,164 
   Sales allowance.........................      9,431        6,185       1,960 
   Foreign currency transaction (gain)                                          
    loss...................................        --          (407)        345 
   Stock issuance--401(k) plan employer                                         
    match..................................        119           45         --  
   Changes in assets and liabilities:                                           
    (Increase) decrease in accounts                                             
     receivable............................    (20,765)     (34,240)    (19,405)
    (Increase) decrease in prepaid expenses                                     
     and other current assets..............     (7,027)      (4,080)       (227)
    (Increase) decrease in other assets....        735        1,147      (1,621)
    Increase (decrease) in accounts                                             
     payable...............................     (8,196)      30,247      11,729 
    Increase (decrease) in accrued                                              
     expenses, other current liabilities                                        
     and other liabilities.................     (8,073)       5,000       6,032 
    Increase (decrease) in accrued interest                                     
     payable...............................      1,581       10,852         847 
                                            ----------  -----------  ---------- 
      Net cash provided by (used in)                                            
       operating activities................    (71,296)     (14,757)     (6,940)
                                            ----------  -----------  ---------- 
Cash flows from investing activities:                                           
 Purchase of property and equipment........    (75,983)     (39,465)    (12,745)
 (Purchase) sale of short-term                                                  
  investments..............................        --        25,125     (25,125)
 (Purchase) sale of restricted                                                  
  investments..............................     22,927      (73,550)        --  
 Cash used for business acquisitions, net                                       
  of cash acquired.........................     (1,165)     (16,349)     (1,701)
                                            ----------  -----------  ---------- 
      Net cash provided by (used in)                                            
       investing activities................    (54,221)    (104,239)    (39,571)
                                            ----------  -----------  ---------- 
Cash flows from financing activities:                                           
 Principal payments on capital leases and                                       
  long-term obligations....................     (2,373)     (16,881)       (508)
 Proceeds from sale of common stock and                                         
  exercise of employee stock options.......      4,707        1,514      77,576 
 Proceeds from issuance of long-term                                            
  obligations..............................    150,000      225,000       2,407 
 Deferred financing costs..................     (5,500)      (9,500)        --  
                                            ----------  -----------  ---------- 
      Net cash provided by (used in)                                            
       financing activities................    146,834      200,133      79,475 
                                            ----------  -----------  ---------- 
Effects of exchange rate changes on cash                                        
 and cash equivalents......................       (353)      (1,379)        214 
                                            ----------  -----------  ---------- 
Net change in cash and cash equivalents....     20,964       79,758      33,178 
Cash and cash equivalents, beginning of                                         
 year......................................    115,232       35,474       2,296 
                                            ----------  -----------  ---------- 
Cash and cash equivalents, end of year..... $  136,196  $   115,232  $   35,474 
                                            ==========  ===========  ========== 
Supplemental cash flow information                                              
 Cash paid for interest.................... $   38,466  $     2,745  $      149 
 Non-cash investing and financing                                               
  activities:                                                                   
    Common stock issued for services....... $      --   $       --   $      990 
    Capital leases for acquisition of                                           
     equipment............................. $   16,958  $     8,228  $      388 
    Notes payable for acquisition of                                            
     equipment............................. $      --   $       --   $    2,826 

See notes to consolidated financial statements. 

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PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED 

CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS
(in thousands)

                                                                [Download Table]

                                               For the Year Ended December 31,   
                                               ----------------------------------
                                                  1998        1997       1996    
                                               ----------  ----------  ----------
                                                                                 
Net Loss...................................... $  (63,648) $  (36,239) $  (8,764)
Other Comprehensive Loss--                                                       
  Foreign currency translation adjustment.....     (6,413)     (1,769)       (75)
                                               ----------  ----------  --------- 
Comprehensive Loss............................ $  (70,061) $  (38,008) $  (8,839)
                                               ==========  ==========  ========= 

See notes to consolidated financial statements. 

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PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Business                                                    

Primus Telecommunications Group, Incorporated (Primus or the Company) is a
facilities-based global telecommunications company that offers international    
and domestic long distance, Internet and data, and other telecommunications     
services to business, residential and other telecommunications carrier          
customers primarily in North America, the Asia-Pacific and Europe. The Company, 
incorporated in the state of Delaware, operates as a holding company and has    
wholly-owned operating subsidiaries in the United States, Canada, Mexico,       
Australia, Japan, the United Kingdom and Germany.                               

2. Summary of Significant Accounting Policies                                   

Principles of Consolidation--The consolidated financial statements include
the accounts of the Company and its wholly-owned and majority-owned             
subsidiaries. All intercompany accounts and transactions have been eliminated.  

  Revenue Recognition--Revenues from long distance telecommunications services
are recognized when the services are provided and are presented net of          
estimated uncollectible amounts.                                                

Cost of Revenue--Cost of revenue includes network costs that consist of   
access, transport, and termination costs. Such costs are recognized when        
incurred in connection with the provision of telecommunications services.       

Foreign Currency Translation--The assets and liabilities of the Company's 
foreign subsidiaries are translated at the exchange rates in effect on the      
reporting date, and income and expenses are translated at the average exchange  
rate during the period. The net effect of such translation gains and losses are 
reflected within accumulated other comprehensive loss in the stockholders'      
equity section of the balance sheet.                                            

Cash and Cash Equivalents--The Company considers cash on hand, deposits in
banks, certificates of deposit, and overnight repurchase agreements with        
original maturities of three months or less to be cash and cash equivalents.    

Restricted Investments--Restricted investments consist of United States   
Federal Government-backed obligations which are recorded at amortized cost.     
These securities are classified as held-to-maturity and are restricted to       
satisfy certain interest obligations on the Company's 1997 Senior Notes.        

Property and Equipment--Property and equipment, which consists of fiber   
optic cable and telecommunications equipment, furniture and computer equipment, 
leasehold improvements and software is stated at cost less accumulated          
depreciation and amortization. Depreciation and amortization expense are        
computed using the straight-line method over the estimated useful lives of the  
assets which range from three to twenty-five years, or for leasehold            
improvements and leased equipment, over the terms of the leases or estimated    
lives, whichever is shorter. Expenditures for maintenance and repairs that do   
not materially extend the useful lives of the assets are charged to expense.    

Intangible Assets--At December 31, 1998 and 1997 intangible assets, net of
accumulated amortization, consist of goodwill of $179.9 million and $27.8       
million respectively, and customer lists of $25.1 million and $5.3 million      
respectively. Goodwill is being amortized over 30 years on a straight-line      
basis and customer lists over the estimated run-off of the customer bases not   
to exceed five years. Accumulated amortization at December 31, 1998 and 1997,   
was $4.7 million and $1.2 million related to goodwill and $5.9 million and $1.9 
million related to customer lists, respectively. The Company periodically       
evaluates the realizability of intangible and other long-lived assets. In       
making such evaluations, the Company compares certain financial                 

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PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

indicators such as expected undiscounted future revenues and cash flows to the  
carrying amount of the assets. The Company believes that no impairments exist   
as of December 31, 1998.                                                        

Deferred Financing Costs--Deferred financing costs incurred in connection 
with the 1998 Senior Notes and the 1997 Senior Notes are reflected within other 
assets and are being amortized over the life of the respective Senior Notes     
using the straight-line method which does not differ materially from the        
effective interest method.                                                      

Stock-Based Compensation--The Company adopted Statement of Financial      
Accounting Standards No. 123 (SFAS 123), Accounting for Stock-Based             
Compensation. Under the provisions of SFAS 123, the Company continues to        
measure compensation expense for its stock-based employee compensation plans    
using the intrinsic value method prescribed by Accounting Principles Board      
Opinion No. 25, Accounting for Stock Issued to Employees, and has provided in   
Note 10 pro forma disclosures of the effect on net loss and loss per share as   
if the fair value-based method prescribed by SFAS 123 had been applied in       
measuring compensation expense.                                                 

  Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates  
and assumptions that affect the reported amounts of assets and liabilities and  
disclosures of contingent assets and liabilities at the date of the financial   
statements and the reported amounts of net revenue and expenses during the      
reporting period. Actual results could differ from those estimates.             

  Concentration of Credit Risk--Financial instruments that potentially subject
the Company to concentration of credit risk principally consist of trade        
accounts receivable. The Company performs ongoing credit evaluations of its     
customers but generally does not require collateral to support customer         
receivables.                                                                    

Income Taxes--The Company recognizes income tax expense for financial     
reporting purposes following the asset and liability approach for computing     
deferred income taxes. Under this method, the deferred tax assets and           
liabilities are determined based on the difference between financial reporting  
and tax bases of assets and liabilities based on enacted tax rates. Deferred    
tax assets are reduced by a valuation allowance when, in the opinion of         
management, it is more likely than not that some portion or all of the deferred 
tax assets will not be realized.                                                

 Net Loss Per Share--The Company has computed basic and diluted net loss per
share based on the weighted average number of shares of common stock and        
potential common stock outstanding during the period. Potential common stock,   
for purposes of determining diluted net loss per share, would include, where    
applicable, the effects of dilutive stock options, warrants, and convertible    
securities, and the effect of such potential common stock would be computed     
using the treasury stock method or the if-converted method. None of the         
Company's outstanding options and warrants are considered to be dilutive.       

 Comprehensive Income (Loss)--In 1998, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 130 (SFAS 130), Reporting       
Comprehensive Income. As such, a consolidated statement of comprehensive loss   
reflecting the aggregation of net loss and foreign currency translation         
adjustments, the Company's principal components of other comprehensive income   
or loss, has been presented for each of the three years in the period ended     
December 31, 1998.                                                              

  Operating Segments--In 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 131 (SFAS 131), Disclosures about         
Segments of an Enterprise and Related Information (Note 14). SFAS 131           
superceded SFAS 14 and its adoption resulted in revised and additional          
disclosures but had no effect on the financial position, results of operations  
or liquidity of the Company.                                                    

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PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

New Accounting Pronouncements--In June 1998, Statement of Financial       
Accounting Standards No. 133 (SFAS 133), Accounting for Derivative Instruments  
and Hedging Activities was issued. SFAS 133 established standards for the       
accounting and reporting of derivative instruments and hedging activities and   
requires that all derivative financial instruments be measured at fair value    
and recognized as assets or liabilities in the financial statements. The        
Statement will be adopted by the Company during fiscal 2000, and the Company is 
currently evaluating the impact of such adoption.                               

In April 1998, the American Institute of Certified Public Accountants     
(AICPA) issued Statement of Position (SoP) 98-5, Reporting on the Costs of      
Start-Up Activities. SoP 98-5 provides guidance on the financial reporting of   
start-up and organizational costs. The effect of adopting SoP 98-5 is not       
expected to have a material effect on the financial position, results of        
operation or liquidity of the Company.                                          

Reclassifications--Certain previous year amounts have been reclassified to
conform with current year presentation.                                         

3. Acquisitions                                                                 

 On June 9, 1998 the Company acquired TresCom International, Inc. (TresCom),
a long distance telecommunications carrier focused on international long        
distance traffic originating in the United States and terminating in the        
Caribbean and Central and South America regions. As a result of the             
acquisition, all of the approximately 12.7 million TresCom common shares        
outstanding were exchanged for approximately 7.8 million shares of the          
Company's common stock valued at approximately $138 million. An additional      
$11.7 million cash purchase obligation associated with a subsidiary of TresCom  
is expected to paid during 1999 and has been included in accrued expenses and   
other current liabilities.                                                      

In March 1998 the Company purchased a 60% controlling interest in Hotkey  
Internet Services Pty., Ltd. (Hotkey), an Australian ISP, for approximately     
$1.3 million.                                                                   

  Effective March 1, 1998 the Company acquired all of the outstanding stock of
Eclipse Telecommunications Pty., Ltd. (Eclipse), a data communications provider 
in Australia. The Company paid approximately $1.8 million in cash and 27,500    
shares of the Company's Common Stock for Eclipse.                               

  On October 20, 1997, the Company acquired the equity and ownership interests
in Telepassport L.L.C. (Telepassport) for a purchase price of $6.0 million.     
Additionally, on October 20, 1997, the Company purchased substantially all of   
the assets of USFI, Inc. (USFI) for $5.5 million. Telepassport and USFI were    
under common control and engaged in the business of providing international and 
domestic telecommunication services, including long distance and reorigination  
services in Europe, Asia, and South Africa.                                     

 On April 8, 1997, the Company acquired the assets of Cam-Net Communications
Network, Inc. and its subsidiaries, a Canadian based provider of domestic and   
international long distance service. The purchase price was approximately $5.0  
million in cash.                                                                

On March 1, 1996, the Company acquired the outstanding capital stock of   
Axicorp Pty., Ltd. (subsequently renamed Primus Australia), the fourth largest  
telecommunications carrier in Australia. The purchase price consisted of cash,  
Company stock, and seller financing. The Company paid $5.7 million cash,        
including transaction costs, and issued 455,000 shares of its Series A          
Convertible Preferred Stock, which were subsequently converted to 1,538,355     
common shares. The Company also issued two notes aggregating $8.1 million to    
the sellers, both of which were repaid in full during 1997.                     

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PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

The Company has accounted for all of these acquisitions using the purchase
method. Accordingly, the results of operations of the acquired companies are    
included in the consolidated results of operations of the Company, as of the    
date of their respective acquisition.                                           

 Unaudited pro forma operating results for the years ended December 31, 1998
and 1997, as if the acquisitions of TresCom, Telepassport and USFI had occurred 
as of January 1, 1997, are as follows (in thousands, except per share amounts): 

                                                                [Download Table]

                                                         1998      1997   
                                                       --------  -------- 
                                                                          
Net revenue........................................... $485,196  $448,929 
Net loss.............................................. $(75,956) $(63,426)
Basic and diluted net loss per share.................. $  (2.73) $  (2.43)

 The pro forma financial information is presented for informational purposes
only and is not necessarily indicative of the operating results that would have 
occurred had the acquisitions been consummated as of the above dates, nor are   
they necessarily indicative of future operations.                               

4. Property and Equipment                                                       

Property and equipment consist of the following (in thousands):           

                                                                [Download Table]

                                                           December 31,    
                                                         ----------------- 
                                                           1998     1997   
                                                         --------  ------- 
                                                                           
Network equipment....................................... $148,413  $48,246 
Furniture and equipment.................................   11,987    9,334 
Leasehold improvements..................................    2,907    1,845 
Construction in progress................................   16,157    5,147 
                                                         --------  ------- 
                                                          179,464   64,572 
Less: Accumulated depreciation and amortization.........  (20,591)  (5,331)
                                                         --------  ------- 
                                                         $158,873  $59,241 
                                                         ========  ======= 

Equipment under capital leases totaled $34.5 million and $9.2 million with
accumulated depreciation of $4.3 million and $0.8 million at December 31, 1998  
and 1997, respectively.                                                         

5. Long-Term Obligations                                                        

Long-term obligations consist of the following (in thousands):            

                                                                [Download Table]

                                                          December 31,     
                                                        ------------------ 
                                                          1998      1997   
                                                        --------  -------- 
                                                                           
Obligations under capital leases....................... $ 28,268  $  8,487 
Revolving Credit Agreement.............................   17,819       --  
Senior Notes...........................................  372,978   222,616 
Other long-term obligations............................    1,109       108 
                                                        --------  -------- 
Subtotal...............................................  420,174   231,211 
Less: Current portion of long-term obligations.........  (22,423)   (1,059)
                                                        --------  -------- 
                                                        $397,751  $230,152 
                                                        ========  ======== 

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PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

As a result of the acquisition of TresCom, the Company has a $25 million  
revolving credit and security agreement (the Revolving Credit Agreement) with a 
commercial bank secured by certain of the Company's accounts receivable. In     
January 1999, the Company voluntarily repaid in full and terminated the         
Revolving Credit Agreement.                                                     

  On May 19, 1998 the Company completed the sale of $150 million 9 7/8% Senior
Notes (1998 Senior Notes). The 1998 Senior Notes are due May 15, 2008 with      
early redemption at the option of the Company at any time after May 15, 2003.   
In addition, prior to May 15, 2001, the Company may redeem up to 25% of the     
originally issued principal amount of the 1998 Senior Notes at 109.875% of the  
principal amount thereof, plus accrued and unpaid interest through the          
redemption date. Interest is payable each May 15th and November 15th.           

On August 4, 1997 the Company completed the sale of $225 million 11 3/4%  
Senior Notes (1997 Senior Notes) and Warrants (the Offering) to purchase        
392,654 shares of the Company's common stock. The 1997 Senior Notes are due     
August 1, 2004 with early redemption at the option of the Company at any time   
after August 1, 2001, at a premium to par value. Dividends are currently        
prohibited by the senior notes indenture. Interest payments are due semi-       
annually on February 1st and August 1st. A portion of the proceeds from the     
offering of the 1997 Senior Notes have been pledged to secure the first six     
semi-annual interest payments on the 1997 Senior Notes and are reflected on the 
balance sheet as restricted investments. A portion of the proceeds of the       
Offering, $2.535 million, was allocated to the warrants, and the resulting debt 
discount is being amortized over the life of the debt on the straight-line      
method which does not differ materially from the effective interest method.     

6. Income Taxes                                                                 

The differences between the tax provision calculated at the statutory     
federal income tax rate and the actual tax provision for each period is shown   
in the table below (in thousands):                                              

                                                                [Download Table]

                                       For the Year Ended December 31,   
                                       ----------------------------------
                                          1998        1997       1996    
                                       ----------  ----------  ----------
                                                                         
Tax benefit at federal statutory                                         
 rate................................. $  (22,277) $  (12,294) $  (2,913)
State income tax, net of federal                                         
 benefit..............................     (1,387)     (2,100)      (491)
Foreign taxes.........................        --           81        196 
Unrecognized benefit of net operating                                    
 losses...............................     21,506      14,394      3,387 
Other.................................      2,158         --          17 
                                       ----------  ----------  --------- 
Income taxes.......................... $      --   $       81  $     196 
                                       ----------  ----------  --------- 

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PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

The significant components of the Company's deferred tax assets and       
liabilities are as follows (in thousands):                                      

                                                                [Download Table]

                                                        December 31,   
                                                    ------------------ 
                                                      1998      1997   
                                                    --------  -------- 
                                                                       
Deferred tax assets (non-current):                                     
  Cash to accrual basis adjustments (U.S.)......... $    269  $    590 
  Accrued expenses.................................    5,393       936 
  Net operating loss carryforwards.................   32,606    17,856 
  Valuation allowance..............................  (38,268)  (16,762)
                                                    --------  -------- 
                                                    $    --   $    --  
                                                    ========  ======== 
Deferred tax liabilities (current):                                    
  Accrued income................................... $    --   $    903 
  Other............................................      --        385 
  Depreciation.....................................      361       526 
                                                    --------  -------- 
                                                    $    361  $  1,814 
                                                    ========  ======== 

During the year ended December 31, 1998, the valuation allowance increased
by approximately $21.5 million primarily due to the acquisition of TresCom and  
its related net operating losses.                                               

  At December 31, 1998, the Company had operating loss carryforwards available
to reduce future federal taxable income which expire as follows (in millions):  

                                                                [Download Table]

Year                                                         Primus TresCom
----                                                         ------ -------
                                                                           
2009........................................................ $ 6.1   $ 5.8 
2010........................................................   7.1     5.4 
2011........................................................   6.9     1.9 
2012........................................................  33.2    10.6 
2018........................................................  35.6     --  
                                                             -----   ----- 
                                                             $88.9   $23.7 
                                                             =====   ===== 

Approximately $23.7 million of operating loss carryforwards relate to the 
acquisition of TresCom. Utilization of these operating losses is limited to the 
offset of future TresCom operating income. The Company's net operating loss     
carryforwards for state purposes are not significant and, therefore, have not   
been recorded as deferred tax assets.                                           

At December 31, 1998, the Company had Australian and United Kingdom net   
operating loss carryforwards of $18.6 million and $2.1 million (in United       
States dollars), respectively, that have no expiration periods.                 

No provision was made in 1998 for U.S. income taxes on the undistributed  
earnings of the foreign subsidiaries as it is the Company's intention to        
utilize those earnings in the foreign operations for an indefinite period of    
time or to repatriate such earnings only when tax effective to do so. It is not 
practicable to determine the amount of income or withholding tax that would be  
payable upon the remittance of those earnings.                                  

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PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

7. Fair Value of Financial Instruments                                          

  The carrying amounts reported in the consolidated balance sheet for cash and
cash equivalents, restricted investments, accounts receivable and accounts      
payable approximate fair value. The estimated fair value of the Company's 1998  
and 1997 Senior Notes (carrying value of $373 million), based on quoted market  
prices, at December 31, 1998 was $375 million. The estimated fair value of the  
Company's 1997 Senior Notes (carrying value of $223 million), based on quoted   
market prices, at December 31, 1997 was $242 million.                           

8. Commitments and Contingencies                                                

Future minimum lease payments under capital lease obligations and non-    
cancelable operating leases as of December 31, 1998 are as follows (in          
thousands):                                                                     

                                                                [Download Table]

                                                         Capital  Operating
Year Ending December 31,                                 Leases    Leases  
------------------------                                 -------  ---------
                                                                           
  1999.................................................. $ 7,219   $ 5,295 
  2000..................................................   7,604     3,502 
  2001..................................................   8,088     3,187 
  2002..................................................   8,045     2,740 
  2003..................................................   4,934     1,754 
  Thereafter............................................     198     3,058 
                                                         -------   ------- 
  Total minimum lease payments..........................  36,088   $19,536 
                                                                   ======= 
Less: Amount representing interest......................  (7,820)          
                                                         -------           
                                                         $28,268           
                                                         =======           

 Rent expense under operating leases was $4.8 million, $2.6 million and $1.1
million for the years ended December 31, 1998, 1997 and 1996, respectively.     

9. Stockholders' Equity                                                         

In December 1998, the Company adopted a Stockholders' Rights Plan (the    
Rights Plan) under which preferred stock purchase rights have been granted to   
the Company's common stockholders of record at the close of business on         
December 31, 1998. The rights will become exercisable if a person or group      
becomes the beneficial owner of more than 20% of the outstanding common stock   
of the Company or announces an offer to become the beneficial owner of more     
than 20% of the outstanding common stock of the Company.                        

In June 1998, the Company issued 7,836,324 shares of its common stock,    
valued at $137.6 million, in exchange for all of the outstanding common shares  
of TresCom. Additionally, the Board amended the Company's Amended and Restated  
Certificate of Incorporation (the Certificate) to increase the authorized       
Common Stock to 80,000,000 shares.                                              

In October 1997, the Company issued 1,842,941 shares of its common stock  
pursuant to the exercise of certain warrants, which had been issued in          
connection with the Company's $16 million July 1996 private equity sale. In     
connection with such exercise, the Company received approximately $1.5 million. 

In August 1997 the Company completed a Senior Notes and Warrants Offering.
Warrants valued at $2,535,000 to purchase 392,654 shares of the Company's       
common stock at a price of $9.075 per share were issued.                        

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PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

In November 1996, the Company completed an initial public offering of     
5,750,000 shares of its Common Stock. The net proceeds to the Company (after    
deducting underwriter discounts and offering expenses) were $54.4 million.      

  In connection with the Company's initial public offering, the Board approved
a split of all shares of Common Stock at a ratio of 3.381 to one as of November 
7, 1996 and amended the Company's Certificate to increase the authorized Common 
Stock to 40,000,000 shares. All share amounts presented have been restated to   
give effect to the November 7, 1996 stock split.                                

In February 1996, the Company's Certificate was amended to authorize      
2,455,000 shares of Preferred Stock (nonvoting) with a par value of $0.01 per   
share. On March 1, 1996, 455,000 shares of Series A Convertible Preferred Stock 
were issued in connection with the purchase of Primus Australia. The            
outstanding Preferred Stock was converted to Common Stock prior to the date of  
the Company's initial public offering.                                          

10. Stock-Based Compensation                                                    

In December 1998, the Company established the 1998 Restricted Stock Plan  
(the Restricted Plan) to facilitate the grant of restricted stock to selected   
individuals who contribute to the development and success of the Company. The   
total number of shares of common stock that may be granted under the Restricted 
Plan is 750,000. As of December 31, 1998, there had not been any grants under   
the Restricted Plan.                                                            

 The Company sponsors an Employee Stock Option Plan (the Employee Plan). The
total number of shares of common stock authorized for issuance under the        
Employee Plan is 3,690,500. Under the Employee Plan, awards may be granted to   
key employees of the Company and its subsidiaries in the form of Incentive      
Stock Options or Nonqualified Stock Options. The Employee Plan allows the       
granting of options at an exercise price of not less than 100% of the stock's   
fair value at the date of grant. The options vest over a period of up to three  
years, and no option will be exercisable more than ten years from the date it   
is granted.                                                                     

 The Company sponsors a Director Stock Option Plan (the "Director Plan") for
non-employee directors. Under the Director Plan, an option is granted to each   
qualifying non-employee director to purchase 15,000 shares of common stock,     
which vests over a two-year period. The option price per share is the fair      
market value of a share of common stock on the date the option is granted. No   
option will be exercisable more than ten years from the date of grant. An       
aggregate of 338,100 shares of common stock were reserved for issuance under    
the Director Plan.                                                              

  A summary of stock option activity during the three years ended December 31,
1998 is as follows:                                                             

                                                                [Download Table]

                                1998                1997                1996        
                         ------------------- ------------------- -------------------
                                    Weighted            Weighted            Weighted
                                    Average             Average             Average 
                                    Exercise            Exercise            Exercise
                          Shares     Price    Shares     Price    Shares     Price  
                         ---------  -------- ---------  -------- ---------  --------
                                                                                    
Options outstanding--                                                               
 Beginning of year...... 2,555,360   $ 6.95  1,587,894   $ 3.02    722,015   $2.64  
  Granted............... 1,298,937    16.07  1,063,750    12.59    913,552    3.35  
  Exercised.............  (488,835)    7.42    (35,724)    1.19        --      --   
  Forfeitures...........  (236,896)   17.52    (60,560)    6.27    (47,673)   3.55  
                         ---------   ------  ---------   ------  ---------   -----  
Outstanding--                                                                       
 End of year............ 3,128,566   $ 9.87  2,555,360   $ 6.95  1,587,894   $3.02  
                         =========   ======  =========   ======  =========   =====  
Eligible for exercise--                                                             
 End of year............ 1,427,041   $ 6.93    899,170   $ 3.00    511,149   $2.81  
                         =========   ======  =========   ======  =========   =====  

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PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

The following table summarizes information about stock options outstanding
at December 31, 1998:                                                           

                                                                [Download Table]

                         Options Outstanding             Options Exercisable   
                   -----------------------------------  -----------------------
                                 Weighted                                      
                                  Average    Weighted                 Weighted 
                                 Remaining   Average                  Average  
    Range of          Total        Life      Exercise      Total      Exercise 
 Option Prices     Outstanding   in Years     Price     Exercisable    Price   
 -------------     -----------   ---------   --------   -----------   -------- 
                                                                               
$ 0.01 to $ 3.55    1,176,527      2.06       $ 3.07       913,195     $ 2.99  
$ 3.56 to $14.00    1,474,017      4.73       $12.24       409,307     $12.59  
$14.01 to $23.87      478,022      5.39       $19.28       104,539     $19.13  
                    ---------                            ---------             
                    3,128,566                            1,427,041             
                    =========                            =========             

 The weighted average fair value at date of grant for options granted during
1998, 1997 and 1996 was $7.38, $5.45 and $1.38 per option, respectively. The    
fair value of each option grant is estimated on the date of grant using the     
Black-Scholes option pricing model with the following assumptions:              

                                                                [Download Table]

                                                     1998    1997    1996  
                                                    ------- ------- -------
                                                                           
Expected dividend yield............................      0%      0%      0%
Expected stock price volatility....................     97%     80%     49%
Risk-free interest rate............................    4.6%    5.7%    6.0%
Expected option term............................... 4 years 4 years 4 years

If compensation cost for the Company's grants for stock-based compensation
had been recorded consistent with the fair value-based method of accounting per 
SFAS 123, the Company's pro forma net loss, and pro forma basic and diluted net 
loss per share for the years ending December 31, would be as follows:           

                                                                [Download Table]

                                                1998      1997     1996   
                                              --------  --------  ------- 
                                                                          
Net loss (amounts in thousands)                                           
  As reported................................ $(63,648) $(36,239) $(8,764)
  Pro forma.................................. $(67,621) $(37,111) $(9,242)
Basic and diluted net loss per share                                      
  As reported................................ $  (2.61) $  (1.99) $ (0.75)
  Pro forma.................................. $  (2.77) $  (2.03) $ (0.79)

11. Employee Benefit Plans                                                      

The Company sponsors a 401(k) employee benefit plan (the 401(k) Plan) that
covers substantially all United States based employees. Employees may           
contribute amounts to the 401(k) Plan not to exceed statutory limitations. The  
401(k) plan provides an employer matching contribution of 50% of the first 6%   
of employee annual salary contributions. The employer match is made in common   
stock of the Company and is subject to 3-year cliff vesting. The Company        
contributed Primus common stock valued at approximately $119,000 and $45,000    
during 1998 and 1997.                                                           

Effective January 1, 1998, the Company adopted an Employee Stock Purchase 
Plan (ESPP). The ESPP allows employees to contribute up to 15% of their         
compensation to be used toward purchasing the Company's common stock at 85% of  
the fair market value. An aggregate of 2,000,000 shares of common stock were    
reserved for issuance under the ESPP.                                           

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PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

12. Related Parties                                                             

 In June 1998, a subsidiary of the Company entered into a $2.1 agreement for
the design, manufacture, installation and the provision of training with        
respect to a satellite earth station in London. A Director of the Company is    
the Chairman and a stockholder of the company providing such services. During   
1998, $1.2 million was paid for the above services.                             

13. Valuation and Qualifying Accounts                                           

Activity in the Company's allowance accounts for the years ended December 
31, 1998, 1997 and 1996 was as follows (in thousands):                          

                                                                [Download Table]

                           Doubtful Accounts                             
-------------------------------------------------------------------------
                            Charged to                                   
            Balance at      Costs and                        Balance at  
Period  Beginning of Period  Expenses  Deductions Other (1) End of Period
------  ------------------- ---------- ---------- --------- -------------
                                                                         
 1996         $   132        $ 1,960    $   (377)  $   870     $ 2,585   
 1997         $ 2,585        $ 6,185    $ (4,309)  $   583     $ 5,044   
 1998         $ 5,044        $ 9,431    $(12,772)  $13,273     $14,976   

                      Deferred Tax Asset Valuation                       
-------------------------------------------------------------------------
                            Charged to                                   
            Balance at      Costs and                        Balance at  
Period  Beginning of Period  Expenses  Deductions Other (1) End of Period
------  ------------------- ---------- ---------- --------- -------------
                                                                         
 1996         $ 1,087        $ 1,641    $    --    $   --      $ 2,728   
 1997         $ 2,728        $14,034    $    --    $   --      $16,762   
 1998         $16,762        $21,506    $    --    $   --      $38,268   

--------                                                                        
(1) Other additions represent the allowances for doubtful accounts, which were  
recorded in connection with business acquisitions.                      

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PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

14. Operating Segment and Related Information                                   

The Company has three reportable operating segments based on management's       
organization of the enterprise into geographic areas--North America, Asia-      
Pacific and Europe. The Company evaluates the performance of its segments and   
allocates resources to them based upon net revenue and EBITDA. The Company      
defines EBITDA as net income (loss) before interest expense and interest        
income, income taxes, depreciation and amortization and other income (expense). 

Operations and assets of the North American segment include shared corporate    
functions and assets which the Company does not allocate to its other           
geographic segments for management reporting purposes. Summary information with 
respect to the Company's segments is as follows (in thousands):                 

                                                                [Download Table]

                                                 Year Ended December 31,     
                                                ---------------------------- 
                                                  1998      1997      1996   
                                                --------  --------  -------- 
                                                                             
Net Revenue                                                                  
  North America................................ $188,008  $ 74,359  $ 16,573 
  Asia-Pacific.................................  172,757   183,126   151,253 
  Europe.......................................   60,863    22,712     5,146 
                                                --------  --------  -------- 
    Total...................................... $421,628  $280,197  $172,972 
                                                ========  ========  ======== 
EBITDA                                                                       
  North America................................ $(14,420) $(14,709) $ (5,965)
  Asia-Pacific.................................    1,482    (5,856)    2,207 
  Europe.......................................    2,018    (2,591)   (2,229)
                                                --------  --------  -------- 
    Total...................................... $(10,920) $(23,156) $ (5,987)
                                                ========  ========  ======== 
Capital Expenditures                                                         
  North America................................ $ 33,431  $ 12,441  $  7,453 
  Asia-Pacific.................................   24,589    16,506     4,263 
  Europe.......................................   17,763    10,518     1,029 
                                                --------  --------  -------- 
    Total...................................... $ 75,983  $ 39,465  $ 12,745 
                                                ========  ========  ======== 

                                                       December 31,          
                                                ---------------------------- 
                                                  1998      1997      1996   
                                                --------  --------  -------- 
                                                                             
Assets                                                                       
  North America................................ $507,356  $249,109  $ 67,575 
  Asia-Pacific.................................  109,290    83,476    62,823 
  Europe.......................................   57,317    22,808     5,211 
                                                --------  --------  -------- 
    Total...................................... $673,963  $355,393  $135,609 
                                                ========  ========  ======== 

The above capital expenditures exclude assets acquired in business        
combinations and under terms of capital leases.                                 

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PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

15. Quarterly Results of Operations (unaudited)                                 

The following is a tabulation of the unaudited quarterly results of       
operations for the two years ended December 31, 1998 and 1997:                  

                                                                [Download Table]

                                           For the quarter ended              
                               -----------------------------------------------
                               March 31,  June 30,  September 30, December 31,
                                 1998       1998        1998          1998    
                               ---------  --------  ------------- ------------
                                              (in thousands)                  
                                                                              
Net Revenue................... $ 80,051   $ 99,475    $116,047      $126,055  
Gross Margin.................. $ 11,329   $ 15,349    $ 19,490      $ 22,444  
Net Loss...................... $(12,317)  $(14,793)   $(19,035)     $(17,503) 

                                           For the quarter ended              
                               -----------------------------------------------
                               March 31,  June 30,  September 30, December 31,
                                 1997       1997        1997          1997    
                               ---------  --------  ------------- ------------
                                              (in thousands)                  
                                                                              
Net Revenue................... $ 59,036   $ 70,045    $ 73,018      $ 78,098  
Gross Margin.................. $  4,002   $  5,867    $  7,752      $  9,845  
Net Loss...................... $ (4,907)  $ (8,875)   $(10,591)     $(11,866) 

16. Subsequent Events                                                           

 On March 31, 1999, the Company purchased the common stock of London Telecom
Network, Inc. and certain related entities that provide long distance           
telecommunications services in Canada (the LTN Companies), for approximately    
$36 million in cash (including payments made in exchange for certain non-       
competition agreements). In addition, on March 31, 1999, the Company entered    
into an agreement to purchase for $14 million in cash substantially all of the  
operating assets of Wintel CNC Communications Inc. and Wintel CNT               
Communications Inc. (the Wintel Companies), which are Canada-based long         
distance telecommunications providers affiliated with the LTN Companies. The    
purchase of the assets of the Wintel Companies is expected to close in early    
May 1999. If the LTN companies and the Wintel Companies collectively achieve    
certain financial goals during the first half of 1999, the Company has agreed   
to pay up to an additional $4.6 million in cash.                                

In February 1999 the Company purchased the remaining 40% of Hotkey, a     
Melbourne, Australia-based ISP. The remaining 40% was purchased for             
approximately $1.1 million comprised of $0.3 million in cash and 57,025 shares  
of the Company's common stock.                                                  

On February 5, 1999 the Company acquired all of the outstanding shares in 
the capital of GlobalServe Communications, Inc., a privately held ISP based in  
Toronto, Canada. The purchase price of approximately $4.2 million was comprised 
of $2.1 million in cash and 142,806 shares of the Company's common stock.       

On January 29, 1999 the Company completed the sale of $200 million 11 1/4%
Senior Notes (1999 Senior Notes) due 2009 with semi-annual interest payments.   
The $192.5 million in net proceeds of the 1999 Senior Notes will be used to     
fund capital expenditures to expand and develop the Company's global Network    
and other corporate purposes.                                                   

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PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED     

CONSOLIDATED STATEMENT OF OPERATIONS      

(in thousands, except per share amounts)      

(unaudited)     

                                                                [Download Table]

                                                              Three Months     
                                                             Ended March 31,   
                                                            ------------------ 
                                                              1999      1998   
                                                            --------  -------- 
                                                                               
Net revenue................................................ $131,228  $ 80,051 
Cost of revenue............................................  104,596    68,722 
                                                            --------  -------- 
Gross margin...............................................   26,632    11,329 
                                                            --------  -------- 
Operating expenses                                                             
  Selling, general and administrative......................   29,296    15,377 
  Depreciation and amortization............................    8,976     3,478 
                                                            --------  -------- 
    Total operating expenses...............................   38,272    18,855 
                                                            --------  -------- 
Loss from operations.......................................  (11,640)   (7,526)
Interest expense...........................................  (16,770)   (7,175)
Interest income............................................    3,255     2,384 
                                                            --------  -------- 
Loss before income taxes...................................  (25,155)  (12,317)
Income taxes...............................................      --        --  
                                                            --------  -------- 
Net loss................................................... $(25,155) $(12,317)
                                                            ========  ======== 
Basic and diluted net loss per common share................ $  (0.89) $  (0.62)
                                                            ========  ======== 
Weighted average number of common shares outstanding.......   28,317    19,717 
                                                            ========  ======== 

See notes to consolidated financial statements.     

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PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED     

CONSOLIDATED BALANCE SHEET      

(in thousands, except share amounts)      

(unaudited)     

                                                                [Download Table]

                                                                     March 31, 
                                                                       1999    
                                                                     --------- 
                                                                               
ASSETS                                                                         
Current assets:                                                                
  Cash and cash equivalents......................................... $ 268,530 
  Restricted investments............................................    27,464 
  Accounts receivable (net of allowance for doubtful accounts of               
   $13,564 and $14,976).............................................   102,510 
  Prepaid expenses and other current assets.........................    20,876 
                                                                     --------- 
    Total current assets............................................   419,380 
Restricted investments..............................................    10,546 
Property and equipment--Net.........................................   171,013 
Intangibles--Net....................................................   214,347 
Other assets........................................................    27,508 
                                                                     --------- 
    Total assets.................................................... $ 842,794 
                                                                     ========= 
LIABILITIES AND STOCKHOLDERS' EQUITY                                           
Current Liabilities:                                                           
  Accounts payable.................................................. $  89,045 
  Accrued expenses and other current liabilities....................    42,658 
  Accrued interest..................................................    14,288 
  Current portion of long-term obligations..........................     5,204 
                                                                     --------- 
    Total current liabilities.......................................   151,195 
Long term obligations...............................................   596,505 
Other liabilities...................................................        25 
                                                                     --------- 
    Total liabilities...............................................   747,725 
                                                                     --------- 
Commitments and Contingencies                                                  
Stockholders' Equity:                                                          
  Preferred stock, $.01 par value--authorized 2,455,000 shares;                
   none issued and outstanding......................................       --  
  Common stock, $.01 par value--authorized 80,000,000 shares; issued           
   and outstanding, 28,404,934 and 28,059,063 shares................       284 
  Additional paid-in capital........................................   238,569 
  Accumulated deficit...............................................  (136,808)
  Accumulated other comprehensive loss..............................    (6,976)
                                                                     --------- 
    Total stockholders' equity......................................    95,069 
                                                                     --------- 
    Total liabilities and stockholders' equity...................... $ 842,794 
                                                                     ========= 

See notes to consolidated financial statements.     

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PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED     

CONSOLIDATED STATEMENT OF CASH FLOWS      

(in thousands)      

(unaudited)     

                                                                [Download Table]

                                                           Three Months Ended   
                                                                March 31,       
                                                           -------------------- 
                                                             1999       1998    
                                                           ---------  --------- 
                                                                                
Cash flows from operating activities:                                           
 Net loss................................................. $ (25,155) $ (12,317)
 Adjustments to reconcile net loss to net cash used in                          
  operating activities:                                                         
   Depreciation, amortization and accretion...............     9,067      3,567 
   Sales allowance........................................     2,833      1,724 
   Stock issuance--401(k) plan employer match.............        62         20 
   Changes in assets and liabilities:                                           
    (Increase) decrease in accounts receivable............   (12,342)   (11,020)
    (Increase) decrease in prepaid expenses and other                           
     current assets.......................................    (7,118)    (1,576)
    (Increase) decrease in other assets...................    (2,272)      (325)
    Increase (decrease) in accounts payable...............     5,512      9,876 
    Increase (decrease) in accrued expenses, other current                      
     liabilities and other liabilities....................    (2,179)      (413)
    Increase (decrease) in accrued interest payable.......     1,419     (6,609)
                                                           ---------  --------- 
      Net cash provided by (used in) operating                                  
       activities.........................................   (30,173)   (17,073)
                                                           ---------  --------- 
Cash flows from investing activities:                                           
 Purchase of property and equipment.......................   (16,391)   (11,369)
 (Purchase) sale of restricted investments................    12,612     12,072 
 Cash used for business acquisitions, net of cash                               
  acquired................................................    (7,825)    (1,627)
                                                           ---------  --------- 
      Net cash provided by (used in) investing                                  
       activities.........................................   (11,604)      (924)
                                                           ---------  --------- 
Cash flows from financing activities:                                           
 Principal payments on capital leases and long-term                             
  obligations.............................................   (18,961)      (316)
 Proceeds from sale of common stock and exercise of                             
  employee stock options..................................       203        496 
 Proceeds from issuance of long-term obligations..........   200,000       (114)
 Deferred financing costs.................................    (7,500)       --  
                                                           ---------  --------- 
      Net cash provided by (used in) financing                                  
       activities.........................................   173,742         66 
                                                           ---------  --------- 
Effects of exchange rate changes on cash and cash                               
 equivalents..............................................       369         80 
                                                           ---------  --------- 
Net change in cash and cash equivalents...................   132,334    (17,851)
Cash and cash equivalents, beginning of period............   136,196    115,232 
                                                           ---------  --------- 
Cash and cash equivalents, end of period.................. $ 268,530  $  97,381 
                                                           =========  ========= 

See notes to consolidated financial statements.     

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PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED     

CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS      

(in thousands)      

(unaudited)     

                                                                [Download Table]

                                                            Three Months     
                                                           Ended March 31,   
                                                          ------------------ 
                                                            1999      1998   
                                                          --------  -------- 
                                                                             
Net Loss................................................. $(25,155) $(12,317)
Other Comprehensive Gain (Loss)--                                            
  Foreign currency translation adjustment................    1,284     1,013 
                                                          --------  -------- 
Comprehensive Loss....................................... $(23,871) $(11,214)
                                                          ========  ======== 

See notes to consolidated financial statements.     

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REPORT OF INDEPENDENT AUDITORS

The Board of Directors                                                          
TresCom International, Inc.                                                     

We have audited the accompanying consolidated balance sheets of TresCom   
International, Inc. and its subsidiaries ("TresCom") as of December 31, 1997    
and 1996 and the related consolidated statements of operations, shareholders'   
equity and cash flows for each of the three years in the period ended December  
31, 1997. These financial statements are the responsibility of TresCom's        
management. Our responsibility is to express an opinion on these financial      
statements based on our audits.                                                 

We conducted our audits in accordance with generally accepted auditing    
standards. Those standards require that we plan and perform the audits to       
obtain reasonable assurance about whether the financial statements are free of  
material misstatement. An audit includes examining, on a test basis, evidence   
supporting the amounts and disclosures in the financial statements. An audit    
also includes assessing the accounting principles used and significant          
estimates made by management, as well as evaluating the overall financial       
statement presentation. We believe that our audits provide a reasonable basis   
for our opinion.                                                                

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of TresCom        
International, Inc. and subsidiaries at December 31, 1997 and 1996 and the      
results of their operations and their cash flows for each of the three years in 
the period ended December 31, 1997, in conformity with generally accepted       
accounting principles.                                                          

                     Ernst & Young LLP

Atlanta, Georgia                                                                
February 27, 1998                                                               

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TRESCOM INTERNATIONAL, INC. 

CONSOLIDATED BALANCE SHEETS 

                                                                [Download Table]

                                                              December 31,     
                                                            ------------------ 
                                                              1997      1996   
                                                            --------  -------- 
                                                             (in thousands,    
                                                            except share snd   
                                                             per share data)   
                                                                               
ASSETS                                                                         
Current assets:                                                                
  Cash and cash equivalents................................ $  1,481  $  6,020 
  Accounts receivable, net of allowance for doubtful                           
   accounts of $8,149 and $7,588, respectively.............   31,743    29,063 
  Other current assets.....................................    2,406     3,441 
                                                            --------  -------- 
    Total current assets...................................   35,630    38,524 
Property and equipment, at cost:                                               
  Transmission and communications equipment................   29,720    24,691 
  Furniture, fixtures and other............................    9,620     5,600 
                                                            --------  -------- 
                                                              39,340    30,291 
Less accumulated depreciation and amortization.............   (9,668)   (5,755)
                                                            --------  -------- 
                                                              29,672    24,536 
Other assets:                                                                  
  Customer bases, net of accumulated amortization of $2,385                    
   and $1,358, respectively................................    3,274     3,806 
  Excess of cost over net assets of businesses acquired,                       
   net of accumulated amortization of $3,508 and $2,368,                       
   respectively............................................   38,826    34,260 
  Other....................................................    1,027       484 
                                                            --------  -------- 
    Total assets........................................... $108,429  $101,610 
                                                            ========  ======== 
LIABILITIES AND SHAREHOLDERS' EQUITY                                           
Current liabilities:                                                           
  Accounts payable......................................... $  1,237  $  2,758 
  Accrued network costs....................................   19,497    19,546 
  Other accrued expenses...................................    6,365     5,395 
  Long-term obligations due within one year................    1,098       817 
  Deferred revenue and other current liabilities...........    1,689     1,807 
                                                            --------  -------- 
    Total current liabilities..............................   29,886    30,323 
Long-term obligations (Notes 3 and 4)......................   19,593     3,965 
Shareholders' equity:                                                          
  Preferred stock, $.01 par value per share; 1,000,000                         
   shares authorized, no shares issued and outstanding.....      --        --  
  Common stock, $.0419 par value per share; 50,000,000                         
   shares authorized; 12,104,960 and 11,804,675 shares                         
   issued and outstanding, respectively....................      505       493 
  Deferred compensation....................................     (551)     (808)
  Additional paid-in capital...............................  108,354   106,140 
  Accumulated deficit......................................  (49,358)  (38,503)
                                                            --------  -------- 
    Total shareholders' equity.............................   58,950    67,322 
                                                            --------  -------- 
      Total liabilities and shareholders' equity........... $108,429  $101,610 
                                                            ========  ======== 

See accompanying notes. 

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TRESCOM INTERNATIONAL, INC. 

CONSOLIDATED STATEMENTS OF OPERATIONS 

                                                                [Download Table]

                                                 Twelve Months Ended          
                                                    December 31,              
                                          ----------------------------------- 
                                             1997         1996        1995    
                                          -----------  ----------  ---------- 
                                             (In thousands, except share      
                                                 and per share data)          
                                                                              
Revenues................................. $   157,641  $  139,621  $  102,641 
Cost of services.........................     124,365     106,928      74,679 
                                          -----------  ----------  ---------- 
Gross profit.............................      33,276      32,693      27,962 
Selling, general and administrative                                           
 (Notes 2, 9 and 12).....................      36,386      30,808      32,437 
Depreciation and amortization............       6,599       4,928       3,961 
                                          -----------  ----------  ---------- 
Operating loss...........................      (9,709)     (3,043)     (8,436)
Interest and other expenses, net.........       1,146         578       3,191 
                                          -----------  ----------  ---------- 
Loss before extraordinary item...........     (10,855)     (3,621)    (11,627)
Extraordinary loss on early                                                   
 extinguishment of debt..................         --        1,956         --  
                                          -----------  ----------  ---------- 
Net loss................................. $  (10,855)  $   (5,577) $  (11,627)
                                          ===========  ==========  ========== 
Net loss applicable to common stock...... $  (10,855)  $   (6,267) $  (16,504)
                                          ===========  ==========  ========== 
Basic and diluted per share data:                                             
 Loss before extraordinary item.......... $     (.91)  $     (.41) $    (5.29)
 Extraordinary item......................         --         (.18)        --  
                                          -----------  ----------  ---------- 
Net loss per share of common stock....... $     (.91)  $     (.59) $    (5.29)
                                          ===========  ==========  ========== 
Weighted average number of shares of                                          
 common stock outstanding................  11,890,047  10,671,096   3,119,590 
                                          ===========  ==========  ========== 

See accompanying notes. 

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TRESCOM INTERNATIONAL, INC. 

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY 

                                                        [Enlarge/Download Table]

                                Preferred Stock                            Trescom Common Stock                       
                              --------------------               -----------------------------------------            
                                         Accrued                                   Additional                         
                                        Undeclared     Stock                        Paid-in     Deferred   Accumulated
                    Shares     Amount   Dividends  Subscriptions   Shares   Amount  Capital   Compensation   Deficit  
                   ---------  --------  ---------- ------------- ---------- ------ ---------- ------------ -----------
                                                   (In thousands, except share data)                                  
                                                                                                                      
Balance at                                                                                                            
 December 31,                                                                                                         
 1994............    283,594  $ 28,359   $ 1,652       $ 511        202,864  $  9   $     76    $   --      $(15,732) 
Issuance of                                                                                                           
 Common Stock....        --        --        --          --       2,183,799    91        824        --           --   
Issuance of                                                                                                           
 Preferred Stock:                                                                                                     
 Series A........      1,467       147       --          --             --    --         --         --           --   
 Series C........    151,421    15,142       --         (511)           --    --         --         --           --   
Accrued dividends                                                                                                     
 on Preferred                                                                                                         
 Stock...........        --        --      4,877         --             --    --         --         --        (4,877) 
Grant of stock                                                                                                        
 options.........        --        --        --          --             --    --         796       (796)         --   
Non-cash                                                                                                              
 compensation....        --        --        --          --             --    --         --         139          --   
Issuance of                                                                                                           
 Common Stock                                                                                                         
 Warrants........        --        --        --          --             --    --       2,428        --           --   
Net loss.........        --        --        --          --             --    --         --         --       (11,627) 
                   ---------  --------   -------       -----     ----------  ----   --------    -------     --------  
Balance at                                                                                                            
 December 31,                                                                                                         
 1995............    436,482    43,648     6,529         --       2,386,663   100      4,124       (657)     (32,236) 
Conversion of                                                                                                         
 Preferred Stock                                                                                                      
 to Common Stock                                                                                                      
 and accrued                                                                                                          
 dividends.......   (436,482)  (43,648)   (7,219)        --       4,558,155   191     50,676        --           --   
Accrued dividends                                                                                                     
 on Preferred                                                                                                         
 Stock...........        --        --        690         --             --    --         --         --          (690) 
Initial public                                                                                                        
 offering of                                                                                                          
 Common Stock....        --        --        --          --       4,545,455   190     50,537        --           --   
Costs associated                                                                                                      
 with initial                                                                                                         
 public offering                                                                                                      
 of Common                                                                                                            
 Stock...........        --        --        --          --             --    --      (2,160)       --           --   
Grant of stock                                                                                                        
 options.........        --        --        --          --             --    --       1,701     (1,701)         --   
Non-cash                                                                                                              
 compensation                                                                                                         
 expense.........        --        --        --          --             --    --         --       1,264          --   
Exercise of stock                                                                                                     
 options.........        --        --        --          --         141,988     6         54        --           --   
Forfeiture of                                                                                                         
 stock options...        --        --        --          --             --    --        (286)       286          --   
Net loss.........        --        --        --          --             --    --         --         --        (5,577) 
Common Stock                                                                                                          
 issued in                                                                                                            
 connection with                                                                                                      
 acquisitions....        --        --        --          --         172,414     6      1,494        --           --   
                   ---------  --------   -------       -----     ----------  ----   --------    -------     --------  
Balance at                                                                                                            
 December 31,                                                                                                         
 1996............        --        --        --          --      11,804,675   493    106,140       (808)     (38,503) 
Non-cash                                                                                                              
 compensation                                                                                                         
 expense.........        --        --        --          --             --    --         --         257          --   
Exercise of stock                                                                                                     
 options.........        --        --        --          --          16,769     1          6        --           --   
Common stock                                                                                                          
 issued in                                                                                                            
 connection with                                                                                                      
 acquisitions....        --        --        --          --         283,516    11      2,208        --           --   
Net loss.........        --        --        --          --             --    --         --         --       (10,855) 
                   ---------  --------   -------       -----     ----------  ----   --------    -------     --------  
Balance at                                                                                                            
 December 31,                                                                                                         
 1997............        --   $    --    $   --        $ --      12,104,960  $505   $108,354    $  (551)    $(49,358) 
                   =========  ========   =======       =====     ==========  ====   ========    =======     ========  

                       Total                                                                                          
                   Shareholders'                                                                                      
                      Equity                                                                                          
                   -------------                                                                                      
                                                                                                                      
Balance at                                                                                                            
 December 31,                                                                                                         
 1994............    $ 14,875                                                                                         
Issuance of                                                                                                           
 Common Stock....         915                                                                                         
Issuance of                                                                                                           
 Preferred Stock:                                                                                                     
 Series A........         147                                                                                         
 Series C........      14,631                                                                                         
Accrued dividends                                                                                                     
 on Preferred                                                                                                         
 Stock...........         --                                                                                          
Grant of stock                                                                                                        
 options.........         --                                                                                          
Non-cash                                                                                                              
 compensation....         139                                                                                         
Issuance of                                                                                                           
 Common Stock                                                                                                         
 Warrants........       2,428                                                                                         
Net loss.........     (11,627)                                                                                        
                   -------------                                                                                      
Balance at                                                                                                            
 December 31,                                                                                                         
 1995............      21,508                                                                                         
Conversion of                                                                                                         
 Preferred Stock                                                                                                      
 to Common Stock                                                                                                      
 and accrued                                                                                                          
 dividends.......         --                                                                                          
Accrued dividends                                                                                                     
 on Preferred                                                                                                         
 Stock...........         --                                                                                          
Initial public                                                                                                        
 offering of                                                                                                          
 Common Stock....      50,727                                                                                         
Costs associated                                                                                                      
 with initial                                                                                                         
 public offering                                                                                                      
 of Common                                                                                                            
 Stock...........      (2,160)                                                                                        
Grant of stock                                                                                                        
 options.........         --                                                                                          
Non-cash                                                                                                              
 compensation                                                                                                         
 expense.........       1,264                                                                                         
Exercise of stock                                                                                                     
 options.........          60                                                                                         
Forfeiture of                                                                                                         
 stock options...         --                                                                                          
Net loss.........      (5,577)                                                                                        
Common Stock                                                                                                          
 issued in                                                                                                            
 connection with                                                                                                      
 acquisitions....       1,500                                                                                         
                   -------------                                                                                      
Balance at                                                                                                            
 December 31,                                                                                                         
 1996............      67,322                                                                                         
Non-cash                                                                                                              
 compensation                                                                                                         
 expense.........         257                                                                                         
Exercise of stock                                                                                                     
 options.........           7                                                                                         
Common stock                                                                                                          
 issued in                                                                                                            
 connection with                                                                                                      
 acquisitions....       2,219                                                                                         
Net loss.........     (10,855)                                                                                        
                   -------------                                                                                      
Balance at                                                                                                            
 December 31,                                                                                                         
 1997............    $ 58,950                                                                                         
                   =============                                                                                      

See accompanying notes. 

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TRESCOM INTERNATIONAL, INC. 

CONSOLIDATED STATEMENTS OF CASH FLOWS 

                                                                [Download Table]

                                                      Twelve Months Ended       
                                                          December 31,          
                                                   ---------------------------- 
                                                     1997      1996      1995   
                                                   --------  --------  -------- 
                                                         (in thousands)         
                                                                                
CASH FLOWS FROM OPERATING ACTIVITIES:                                           
Loss before extraordinary item...................  $(10,855) $ (3,621) $(11,627)
Extraordinary loss on early extinguishment of                                   
 debt............................................       --     (1,956)      --  
Adjustments to reconcile net loss to net cash                                   
 used in operating activities:                                                  
  Depreciation and amortization..................     6,599     4,928     3,961 
  Non-cash interest expense......................       --        431       607 
  Non-cash interest expense on note to                                          
   shareholder...................................       --        297       --  
  Non-cash compensation..........................       257     1,264       139 
  Changes in operating assets and liabilities,                                  
   net of effects of acquisitions:                                              
    Accounts receivable..........................    (2,118)  (11,770)   (5,511)
    Other current assets.........................     1,045    (2,139)     (943)
    Accounts payable.............................    (2,805)      564    (2,307)
    Accrued network costs........................       (49)    7,911     1,180 
    Other accrued expenses.......................      (772)      754    (1,942)
    Deferred revenue and other current                                          
     liabilities.................................    (1,427)    1,513       --  
                                                   --------  --------  -------- 
Net cash used in operating activities............   (10,125)   (1,824)  (16,443)
CASH FLOWS FROM INVESTING ACTIVITIES:                                           
Purchases of property and equipment..............    (6,914)   (8,086)   (5,637)
Expenditures for line installations..............      (577)     (144)     (418)
Cash paid for purchases of businesses, net.......    (1,201)     (522)      --  
                                                   --------  --------  -------- 
Net cash used in investing activities............    (8,692)   (8,752)   (6,055)
CASH FLOWS FROM FINANCING ACTIVITIES:                                           
Proceeds from the issuance of common stock.......       --     50,727       915 
Costs relating to initial public offering........       --     (2,160)      --  
Proceeds from the issuance of preferred stock....       --        --     14,778 
Proceeds from debt...............................       --        --      7,572 
Proceeds from issuance of warrants associated                                   
 with debt.......................................       --        --      2,428 
Proceeds from revolving credit agreement, net....    15,645       --        --  
Payment of loan acquisition costs................      (482)      (86)     (533)
Repayment of cash overdraft......................       --        --       (382)
Repayment of revolving credit facility...........       --    (24,173)      --  
Repayment of sellers' note.......................       --     (1,000)      --  
Repayment of notes payable to stockholder........       --     (8,476)      --  
Repayment of debt................................       (15)      (18)      (27)
Proceeds from stock option exercise..............         7        60       --  
Principal payments on capital lease obligations..      (877)     (330)     (201)
                                                   --------  --------  -------- 
Net cash provided by financing activities........    14,278    14,544    24,550 
                                                   --------  --------  -------- 
Net change in cash and cash equivalents..........    (4,539)    3,968     2,052 
Cash and cash equivalents at beginning of                                       
 period..........................................     6,020     2,052       --  
                                                   --------  --------  -------- 
Cash and cash equivalents at end of period.......  $  1,481  $  6,020  $  2,052 
                                                   ========  ========  ======== 
Interest paid....................................  $    806  $  1,352  $  2,257 
                                                   ========  ========  ======== 
Capital lease obligations incurred...............  $  1,156  $  4,310  $    --  
                                                   ========  ========  ======== 

See accompanying notes. 

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TRESCOM INTERNATIONAL, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 

1. BUSINESS                                                                     

Organization and Basis of Presentation                                        

TresCom International, Inc. (TresCom) was incorporated in Florida on      
December 8, 1993 as TeraCom Communications, Inc. Effective June 30, 1994,       
TresCom changed its name to TresCom International, Inc.                         

TresCom is a facilities-based long-distance telecommunications carrier    
focused on international long- distance traffic. TresCom offers                 
telecommunications services, including direct dial "1 plus" and toll-free long  
distance, calling and debit cards, international toll-free service, 24-hour     
bilingual operator services, intra-island local service in Puerto Rico, private 
lines, frame relay, international inbound service, international country to     
country calling services and international callthrough from selected markets.   

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                   

Principles of Consolidation                                                   

The accompanying consolidated financial statements include the accounts of
TresCom and its wholly-owned subsidiaries. All significant intercompany         
transactions and balances have been eliminated in consolidation.                

Cash and Cash Equivalents                                                     

 TresCom considers all highly liquid investments with original maturities of
three months or less to be cash equivalents. Cash equivalents are recorded at   
cost, which approximates fair market value.                                     

Property and Equipment                                                        

  Property and equipment is recorded at cost. Depreciation and amortization is
provided for financial reporting purposes using the straight-line method over   
the following estimated useful lives:                                           

                                                                [Download Table]
                                                                         
Transmission and communications equipment.................. 3 to 20 years
Furniture, fixtures and other..............................  3 to 7 years

The costs of software and software upgrades purchased for internal use are
capitalized. Significant capital projects are constantly being initiated as     
TresCom continues to expand its network. Beginning in 1996, a substantial       
amount of employee time was required to properly plan, install, test and        
certify the equipment associated with these projects. In connection with these  
projects, TresCom capitalized $1,229 and $1,450 in direct and indirect employee 
costs during 1997 and 1996, respectively.                                       

Change in Accounting Estimate                                                 

 During the first quarter of 1997, TresCom changed the estimated useful life
of fiber optic undersea cables from 10 to 20 years to conform to the            
predominant industry standard. The change in depreciation expense associated    
with the revised estimated useful life of fiber optic undersea cables was       
approximately $120 for 1997.                                                    

Advertising                                                                   

Pursuant to American Institute of Certified Public Accountants (AICPA)    
Statement of Position No. 93-7, "Reporting on Advertising Costs," TresCom       
expenses advertising costs as incurred except for direct-response               

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TRESCOM INTERNATIONAL, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

(In Thousands, Except Share and Per Share Data) 

advertising costs, which are capitalized and amortized over the expected period 
of future benefit. Direct-response advertising programs were implemented during 
1996 and consist of fees paid to various telemarketing entities and internal    
costs of performing telemarketing activities. The capitalized costs are         
amortized over a nine month period beginning in the month revenues associated   
with those costs are first generated.                                           

At December 31, 1997 and 1996, advertising costs totaling $770 and $1,390,
respectively, were recorded as other current assets. Advertising expense for    
the years ended December 31, 1997, 1996 and 1995 were $4,865, $2,047 and        
$1,359, respectively.                                                           

Other Assets                                                                  

The excess of cost over net assets of businesses acquired represents the  
excess of the consideration paid over the fair value of the net assets acquired 
and is amortized on a straight-line basis over 35 years. Customer bases are     
recorded based on the estimated value of the customer bases acquired in the     
acquisition of businesses and are amortized on a straight-line basis over       
periods ranging from three to seven years.                                      

 Other assets are periodically reviewed by TresCom for impairments where the
fair value is less than the carrying value.                                     

 Legal expenses and other direct costs incurred in connection with obtaining
financing agreements are deferred and amortized over the life of the financing  
agreements. Such capitalized costs amounted to $482 and $86 during the years    
ended December 31, 1997 and 1996, respectively. Accumulated amortization of     
deferred financing costs was $133 and $10 at December 31, 1997 and 1996,        
respectively.                                                                   

Use of Estimates                                                              

The preparation of financial statements in conformity with generally      
accepted accounting principles requires management to make estimates and        
assumptions that affect the amounts reported in the financial statements and    
accompanying notes. Actual results could differ from those estimates.           

Revenues                                                                      

Revenues are derived primarily from the provision of long-distance        
telecommunications services and are recognized when the services are provided.  
In 1997, TresCom recognized $543 of revenue from the sale of excess             
Indefeasible Rights of Use (IRU) on undersea digital fiber optic transmission   
cables.                                                                         

Cost of Services                                                              

Cost of services include payments to local exchange carriers (LECs),      
interexchange carriers, post, telegraph and telephone organizations (PTTs) and  
telecommunications administrations (TAs) primarily for access and transport     
charges.                                                                        

Concentrations of Credit Risk and Major Customers                             

TresCom derives a majority of its operating revenues from wholesale       
customers as well as commercial customers in Florida, New York, St. Thomas and  
Puerto Rico. Financial instruments which potentially subject TresCom to         
concentrations of credit risk consist principally of accounts receivable.       
TresCom's allowance for doubtful accounts is based upon management's estimates  
and historical experience. In situations where TresCom deems appropriate,       
prepayment and/or cash deposits or letters of credit are required for the       
provision of services.                                                          

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TRESCOM INTERNATIONAL, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

(In Thousands, Except Share and Per Share Data) 

Income Taxes                                                                  

TresCom accounts for income taxes under the liability method. Under the   
liability method, deferred income taxes are recorded to reflect the net tax     
effects of temporary differences between the carrying amounts of assets and     
liabilities for financial reporting and the amounts used for income tax         
purposes.                                                                       

New Accounting Pronouncements                                                 

In 1996, TresCom adopted Statement of Financial Accounting Standards No.  
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived     
Assets to be Disposed Of" (SFAS 121). The adoption of SFAS 121 did not have any 
effect on the financial statements. In 1996, TresCom also adopted the           
provisions of Statement of Financial Accounting Standards No. 123, "Accounting  
for Stock-Based Compensation" (SFAS 123) (See Note 5).                          

 In 1997, the Financial Accounting Standards Board issued Statement No. 128,
"Earnings Per Share" (see Note 13). Statement No. 128 replaced the calculation  
of primary and fully diluted earnings per share with basic and diluted earnings 
per share. Unlike primary earnings per share, basic earnings per share excludes 
any dilutive effects of options, warrants and convertible securities. Diluted   
earnings per share is very similar to the previously reported fully diluted     
earnings per share. All earnings per share amounts for all periods have been    
presented, and where appropriate, restated to conform to the Statement No. 128  
requirements.                                                                   

  Comparative net loss per share data have been restated for prior periods. In
connection therewith, common stock, options and warrants issued within one year 
prior to the original filing of TresCom's initial public offering (the IPO) at  
prices below the IPO price, which had previously been considered outstanding    
for all periods presented even though antidilutive, have been reflected in the  
computations of basic and diluted net loss per share in accordance with         
Statement of Financial Accounting Standards No. 128 and Securities and Exchange 
Commission Staff Accounting Bulletin No. 98, issued February 3, 1998. Such      
common stock has been treated as outstanding only since issuance, and options   
and warrants have been excluded from the computations as they are considered    
antidilutive.                                                                   

In June of 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130 (SFAS 130), "Reporting Comprehensive  
Income" and Statement of Financial Accounting Standards No. 131 (SFAS 131),     
"Disclosures about Segments of an Enterprise and Related Information" which are 
both effective for fiscal years beginning after December 15, 1997. Management   
believes that the adoption of SFAS 130 and SFAS 131 will not have a material    
adverse effect on TresCom's consolidated financial statements.                  

Reclassification                                                              

Certain prior year amounts have been reclassified to conform with current 
year presentation.                                                              

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TRESCOM INTERNATIONAL, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

(In Thousands, Except Share and Per Share Data) 

3. LONG-TERM OBLIGATIONS                                                        

A summary of long-term obligations is as follows:                         

                                                                [Download Table]

                                                               December 31, 
                                                              --------------
                                                               1997    1996 
                                                              ------- ------
                                                                            
Revolving Credit Agreement                                                  
Interest payable monthly at rates based upon the lender's                   
 commercial lending rate plus .50% (8.75% at December 31,                   
 1997), maturing in July 2002................................ $15,645 $  -- 
Loans payable to the Small Business Administration, bearing                 
 interest at 4%, due in monthly principal and interest                      
 payments of $3 through February 2015, collateralized by a                  
 security agreement covering certain assets..................     401    416
Capital leases bearing interest at rates ranging from 9% to                 
 11% and payable in monthly installments totaling $129.......   4,645  4,366
                                                              ------- ------
                                                               20,691  4,782
Less amounts due within one year.............................   1,098    817
                                                              ------- ------
                                                              $19,593 $3,965
                                                              ======= ======

 In November 1994, a wholly-owned subsidiary of TresCom obtained from a bank
a revolving credit facility (the Bank Facility) with an aggregate commitment of 
$27,000, which expired on June 30, 1996. On February 16, 1996, TresCom repaid   
all outstanding amounts borrowed under the Bank Facility. Extraordinary expense 
of $432 was recognized to write-off the remaining deferred financing costs      
associated with the Bank Facility.                                              

Under the terms of the Bank Facility, TresCom was required to maintain at 
least 50% of its debt on a fixed rate basis and, as a result, entered into an   
interest rate swap agreement and interest rate cap agreement (the Instruments)  
with the lending bank to convert variable interest rate payments to fixed       
payments. The estimated fair value (i.e., the net present value of the amount   
TresCom was required to pay the counterpart over the remaining term of the      
agreement) of the Instruments, based upon the quoted market price provided by   
the financial institution was $562 at December 31, 1995. On September 18, 1996, 
when the net settlement value was $302, the Instruments were paid off in full.  

In October and November 1995, TresCom borrowed $7,000 and $3,000,         
respectively, under one-year notes bearing interest at 12% compounded quarterly 
from a major shareholder of TresCom. In connection with these notes, TresCom    
issued a warrant to purchase 358,034 shares of common stock at an exercise      
price of $0.42 per share. The warrants are exercisable immediately and expire   
on October 2, 2007. Of the $10,000 in borrowings, approximately $2,400 has been 
allocated to the value of the warrants. On February 14, 1996, TresCom repaid    
the entire balance relating to the notes. Accordingly, extraordinary interest   
expense in the amount of $1,524 was recognized in the first quarter of 1996.    

 During the third quarter of 1996, TresCom established a relationship with a
commercial bank to provide asset financing. TresCom utilized approximately      
$4,310 in the fourth quarter of 1996 for capital projects. An additional $1,156 
was utilized in the second quarter of 1997.                                     

During the fourth quarter of 1996, TresCom established a $5,000 line of   
credit with a commercial bank (the Credit Facility) secured by certain accounts 
receivable. The Credit Facility, as amended on March 27, 1997, contained        
standard debt covenants relating to financial position and performance, as well 
as restrictions on the declaration and payment of dividends. Through July 31,   
1997, TresCom was either in compliance or received waivers with respect to all  
covenants under the Credit Facility.                                            

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TRESCOM INTERNATIONAL, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

(In Thousands, Except Share and Per Share Data) 

On July 31, 1997, TresCom entered into a Revolving Credit and Security    
Agreement (the Revolving Credit Agreement) secured by TresCom's accounts        
receivable and certain intangible assets. The maximum borrowing under this      
agreement is $25,000; however, the amount available to be borrowed is based     
upon TresCom's pledged accounts receivable and intangible assets.               

On July 31, 1997, all borrowings under the Credit Facility were repaid in 
full with borrowings under the Revolving Credit Agreement and the Credit        
Facility was terminated. As of December 31, 1997, availability under the        
Revolving Credit Agreement was approximately $19,702, of which $15,645          
(including approximately $600 of letters of credit) had been utilized. At       
December 31, 1997, TresCom was in compliance with all covenants under the       
Revolving Credit Agreement.                                                     

Principal payments on all debt obligations are:                           

                                                                [Download Table]
                                                                            
1998................................................................ $    17
1999................................................................      17
2000................................................................      18
2001................................................................      19
2002................................................................      20
Thereafter..........................................................     310
Revolving Credit Agreement..........................................  15,645
                                                                     -------
  Total............................................................. $16,046
                                                                     =======

4. LEASE OBLIGATIONS                                                            

  TresCom occupies office facilities and leases certain equipment and software
under noncancelable operating leases. Rental expense for the years ended        
December 31, 1997, 1996 and 1995 was $1,703, $1,421 and $1,341, respectively.   

During the years ended December 31, 1997 and 1996, TresCom acquired       
communication equipment of approximately $1,156 and $4,310, respectively, under 
capital lease obligations. Asset balances for property acquired under capital   
leases consist of:                                                              

                                                                [Download Table]

                                                              December 31,   
                                                              -------------- 
                                                               1997    1996  
                                                              ------  ------ 
                                                                             
Transmission and communication equipment..................... $5,871  $4,715 
Furniture, fixtures and other................................    213     270 
                                                              ------  ------ 
                                                               6,084   4,985 
Accumulated depreciation.....................................   (916)   (311)
                                                              ------  ------ 
                                                              $5,168  $4,674 
                                                              ======  ====== 

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TRESCOM INTERNATIONAL, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

(In Thousands, Except Share and Per Share Data) 

  Depreciation expense associated with assets acquired under capital leases is
included with depreciation and amortization expense on the Statements of        
Operations. The present value of minimum capital lease payments are included in 
the balance sheet as a part of long-term obligations. Future minimum lease      
payments for all noncancelable leases at December 31, 1997 are:                 

                                                                [Download Table]

                                                    Capital Operating       
                                                    Leases   Leases   Total 
                                                    ------- --------- ------
                                                                            
1998............................................... $1,637   $1,168   $2,805
1999...............................................  1,471      915    2,386
2000...............................................  1,419      731    2,150
2001...............................................  1,073      566    1,639
2002...............................................     90      507      597
Thereafter.........................................    --       138      138
                                                    ------   ------   ------
  Total future minimum lease payments..............  5,690   $4,025   $9,715
                                                    ======   ======   ======
Less amounts representing interest.................  1,045                  
                                                    ------                  
Present value of net minimum lease payments........ $4,645                  
                                                    ======                  

5. CAPITALIZATION                                                               

Preferred Stock                                                               

The Board of Directors of TresCom is authorized to issue up to one million
shares of preferred stock, par value $.01 per share, in one or more series and  
to fix the powers, voting rights, designations and preferences of each series.  

Common Stock                                                                  

On February 13, 1996, TresCom sold 4,545,455 shares of its common stock at
$12 per share in its IPO. The net proceeds of this sale were approximately      
$48,600. The net proceeds were used to retire debt and accrued interest of      
approximately $35,800.                                                          

Stock Option Plan                                                             

TresCom has a stock option plan under which 936,432 options to purchase   
shares of common stock may be granted to officers, key employees, consultants   
and directors. The plan allows the granting of incentive stock options, which   
may not have an exercise price below the greater of par value or the market     
value on the date of grant, and non-qualified stock options, which may not have 
an exercise price below par value. All options must be exercised no later than  
10 years from the date of grant. No option may be granted under the plan after  
February 22, 2004.                                                              

Options generally vest as to 20% on the first anniversary of the vesting  
commencement date or grant date and as to an additional 20% on each anniversary 
thereafter. All options expire on the tenth anniversary of the grant date,      
unless sooner terminated under the terms of the stock option plan. In the event 
of certain changes in control of TresCom, all options become fully vested.      

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TRESCOM INTERNATIONAL, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 
(In thousands, except share and per share date) 

The following table summarizes all options activity for the years ended   
December 31, 1995, 1996 and 1997:                                               

                                                                [Download Table]

                                                 Number              Weighted
                                                   of                Average 
                                                 Options Exercisable Exercise
                                                 Granted   Options    Price  
                                                 ------- ----------- --------
                                                                             
Outstanding as of December 31, 1994............. 110,840              $ 0.42 
Canceled........................................ 110,840                0.42 
Granted......................................... 484,955                0.42 
Forfeited.......................................  12,749                0.42 
                                                 -------   -------    ------ 
Outstanding as of December 31, 1995............. 472,206    19,826      0.42 
Canceled........................................ 220,622                0.42 
Granted......................................... 534,119               12.53 
Forfeited....................................... 147,452               10.82 
Exercised....................................... 141,988                0.42 
                                                 -------   -------    ------ 
Outstanding as of December 31, 1996............. 496,263    23,713     10.37 
Canceled........................................   2,000                7.50 
Granted......................................... 447,000                7.76 
Forfeited.......................................  61,790                9.48 
Exercised.......................................  16,769                0.42 
                                                 -------   -------    ------ 
Outstanding as of December 31, 1997............. 862,704   103,733    $ 9.28 
                                                 =======   =======    ====== 

The following table summarizes options at December 31, 1997:              

                                                                [Download Table]
                                                                             
                                                                 Options     
                                   Options Outstanding         Exercisable   
                             ------------------------------- ----------------
                                       Weighted   Weighted           Weighted
                                       Average    Average    Number  Average 
                             Number of Exercise Contractual    of    Exercise
Range of Exercise price       Options   Price   Life (years) Options  Price  
-----------------------      --------- -------- ------------ ------- --------
  $0.42.....................    75,585 $   0.42     7.66      24,309 $   0.42
   12.00--17.63.............   372,119    12.76     8.26      74,424    12.00
   7.50--12.00..............   415,000     7.76     9.13       5,000    12.00

Non-cash compensation expense was recorded over the vesting period of the 
options. Accordingly, $257, $1,264 and $139 of non-cash compensation expense    
was recorded in the years ended December 31, 1997, 1996 and 1995, respectively. 

 TresCom follows the requirements of Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" to account for its stock option  
plan and, accordingly, compensation cost is recognized in the consolidated      
statements of operations for the stock option plan to the extent the options    
are granted at prices below fair market value. TresCom adopted SFAS 123, which  
requires certain disclosures about stock-based employee compensation            
arrangements. SFAS 123 requires pro forma disclosure of the impact on net       
income and earnings per share if the fair value method defined in SFAS 123 had  
been used. The fair value for these options was estimated at the date of grant  
using a minimum value option valuation method for options granted prior to the  
IPO and a Black-Scholes option valuation model for options granted after the    
IPO with the following weighted-average assumptions: a risk-free interest rate  
of 6.1%; a dividend yield of 0%; a volatility factor of the expected market     
price of the TresCom common stock of 1.207 for options granted during 1997 and  
.729 for options granted during 1996 and 1995, and an expected life of five   
years.                                                                          

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TRESCOM INTERNATIONAL, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

(In Thousands, Except Share and Per Share Data) 

  The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are     
fully transferable. In addition, option valuation models require the input of   
highly subjective assumptions including the expected stock price volatility.    
Because TresCom's stock options have characteristics significantly different    
from those of traded options, and because change in the subjective input        
assumptions can materially affect the fair value estimate, in management's      
opinion, the existing models do not necessarily provide a reliable single       
measure of the fair value of its stock options.                                 

 The weighted average grant date fair value of options granted in 1997, 1996
and 1995 is $6.46, $7.88 and $10.50 per share, respectively. The options        
granted during 1995 had exercise prices below market value and the options      
granted during 1997 and 1996 had exercise prices at or above fair market value. 

For purposes of pro-forma disclosures, the estimated fair value of the    
options is amortized to expense over the vesting period of the options. The     
SFAS 123 pro-forma information is as follows:                                   

                                                                [Download Table]

                                                  1997     1996      1995   
                                                --------  -------  -------- 
                                                                            
Pro forma net loss............................. $(12,583) $(5,713) $(11,627)
Pro forma basic and diluted loss per share.....    (1.06)   (0.60)    (5.29)

6. INCOME TAXES                                                                 

 The significant components of TresCom's deferred tax assets and liabilities
are:                                                                            

                                                                [Download Table]

                                                        December 31,         
                                                  -------------------------- 
                                                    1997     1996     1995   
                                                  --------  -------  ------- 
                                                                             
Deferred tax assets                                                          
  Allowance for bad debts........................ $  3,251  $ 2,975  $ 1,139 
  Net operating loss carry-forward...............   12,256    6,229    6,311 
  Accruals.......................................      218      566      279 
  Depreciation and amortization..................      --       101      873 
  Other..........................................       15       11      270 
  Valuation allowance............................  (14,053)  (8,479)  (8,793)
                                                  --------  -------  ------- 
                                                     1,687    1,403       79 
Deferred tax liabilities                                                     
  Depreciation and amortization..................   (1,558)     --       --  
  Acquisition basis differences..................     (129)  (1,403)     (79)
                                                  --------  -------  ------- 
                                                  $    --   $   --   $   --  
                                                  ========  =======  ======= 

The net change in TresCom's valuation allowance was $5,574, $(314) and    
$3,056 for the years ended December 31, 1997, 1996 and 1995, respectively.      

On July 17, 1989, the Industrial Development Commission of the U.S. Virgin
Islands (U.S.V.I.) granted STSJ tax benefits to cover long-distance             
telecommunications services in the U.S. Virgin Islands. These benefits include  
a 90% exemption from income taxes for a ten-year period effective January 1,    
1989.                                                                           

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TRESCOM INTERNATIONAL, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

(In Thousands, Except Share and Per Share Data) 

 The reconciliation of income tax attributable to operations computed at the
U.S. federal statutory rates to income tax expense is:                          

                                                                [Download Table]

                                                      December 31,         
                                                    ---------------------  
                                                    1997    1996    1995   
                                                    -----   -----   -----  
                                                                           
Tax at U.S. statutory rate......................... (34.0)% (34.0)% (34.0)%
State taxes, net of federal benefit................  (3.6)   (2.0)   (2.0) 
Amortization of excess of cost over net assets of                          
 businesses acquired...............................   3.8     6.5     2.7  
Foreign tax rate differences.......................   2.0     7.1     3.7  
Unrecognized benefit of net operating loss.........  31.8    22.4    29.6  
                                                    -----   -----   -----  
                                                      --      --      --   
                                                    =====   =====   =====  

At December 31, 1997, TresCom has U.S. and foreign net operating loss     
carryforwards for tax purposes of $24,335 and $12,354, respectively. These net  
operating loss carryforwards expire in the years 1997 through 2012.             

7. RETIREMENT PLAN                                                              

TresCom maintains the TresCom 401(k) Savings and Retirement Plan for all  
U.S. and U.S.V.I. subsidiaries and the TresCom 165(e) Savings and Retirement    
Plan for the Puerto Rican subsidiary. Employees age 21 or older are eligible to 
participate six months after their date of hire and to elect to defer a         
percentage of his/her salary. TresCom has the discretion to make contributions  
to the TresCom 401(k) Savings and Retirement Plan and TresCom 165(e) Saving and 
Retirement Plan. In 1996, 25,000 shares of stock in TresCom were authorized as  
retirement plan contributions. In 1997 and 1996, 4,439 and 2,065 shares,        
respectively, were allocated to the TresCom 401(k) Savings and Retirement Plan  
and the TresCom 165(e) Savings and Retirement Plan for aggregate amounts of     
approximately $31 and $16, respectively.                                        

8. COMMITMENTS AND CONTINGENCIES                                                

TresCom is involved in various claims and is subject to possible actions  
arising out of the normal course of its business. Although the ultimate outcome 
of these claims cannot be ascertained at this time, it is the opinion of        
TresCom's management, based on knowledge of the facts and advice of counsel,    
that the resolution of such claims and actions will not have a material adverse 
effect on TresCom's financial condition or results of operations.               

TresCom has commitments under various types of agreements for the purchase
of property and equipment to continue expansion of its network. Portions of     
such agreements not completed at year end are not reflected in the consolidated 
financial statements. These commitments were approximately $1,000 at year end   
1997.                                                                           

9. SETTLEMENTS                                                                  

In the past, TresCom incurred some significant charges as a result of     
disputes with carriers. These charges amounted to $4,100 and $900 in the first  
and second quarter of 1995, respectively. In addition, significant losses       
resulting from settlements with customers totaled $4,069 during the first       
quarter of 1995.                                                                

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TRESCOM INTERNATIONAL, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

(In Thousands, Except Share and Per Share Data) 

10. FINANCIAL INSTRUMENTS                                                       

 The carrying amounts reflected in the consolidated balance sheets for cash,
accounts receivable, accounts payable and accrued expenses approximate the      
respective fair values due to the short-term nature of these items. The fair    
values for long-term obligations at December 31, are as follows:                

                                                                [Download Table]

                                                  1997           1996     
                                             -------------- --------------
                                             Carrying Fair  Carrying Fair 
                                              Value   Value  Value   Value
                                             -------- ----- -------- -----
                                                                          
Loans payable to the Small Business                                       
 Administration.............................   $401   $323    $416   $335 
                                               ====   ====    ====   ==== 

 The fair values of all other long-term obligations approximate the carrying
values and are therefore not disclosed.                                         

11. RELATED PARTY TRANSACTIONS                                                  

During 1996, an affiliate of a major shareholder of TresCom owned         
approximately 20% of LCI International, Inc. (LCI). TresCom buys network        
services from and provides network services to LCI. At December 31, 1996, the   
net amount due to LCI was $1,935. During 1996, $7,140 of services were provided 
and $5,453 were used. During 1997, the affiliate of TresCom's major shareholder 
reduced their ownership stake to an insignificant percentage.                   

In December 1996, TresCom acquired 100% of the common stock of Intex      
Telecommunications, Inc. from LCI. The purchase price consideration was 394,095 
shares of TresCom common stock.                                                 

12. NATURAL DISASTER                                                            

On September 16, 1995, Hurricane Marilyn damaged the island of St. Thomas 
where TresCom has significant operations. TresCom's Property and Business       
Interruption Insurance covered a significant portion of the damages to          
equipment and certain losses from operations. At September 30, 1995, TresCom    
estimated its exposure relating to the hurricane to be $2,500. Based on visits  
to the affected area, review of accounts receivable and actual settlements with 
customers, management revised its estimate of losses resulting from the         
hurricane to $1,717. Accordingly, the net loss for the quarter ended December   
31, 1996 included this change in estimate of $783.                              

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TRESCOM INTERNATIONAL, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

(In Thousands, Except Share and Per Share Data) 

13. EARNINGS PER SHARE                                                          

  The following table sets forth the computation of basic and diluted earnings
per share:                                                                      

                                                                [Download Table]

                                             1997         1996         1995    
                                          -----------  -----------  ---------- 
                                                                               
Numerator:                                                                     
 Loss before extraordinary item.......... $   (10,855) $    (3,621) $  (11,627)
 Extraordinary loss on early                                                   
  extinguishment of debt.................         --         1,956         --  
                                          -----------  -----------  ---------- 
 Net loss................................     (10,855)      (5,577)    (11,627)
 Preferred stock dividends...............         --           690       4,877 
                                          -----------  -----------  ---------- 
 Numerator for basic and diluted earnings                                      
  per share--net loss applicable to                                            
  common stock........................... $   (10,855) $    (6,267) $  (16,504)
                                          ===========  ===========  ========== 
Denominator:                                                                   
 Denominator for basic and diluted                                             
  earnings per share--weighted average                                         
  shares.................................  11,890,047   10,671,096   3,119,590 
                                          ===========  ===========  ========== 
Basic and diluted per share data:                                              
 Loss before extraordinary item.......... $     (0.91) $     (0.41) $    (5.29)
 Extraordinary item......................         --         (0.18)        --  
                                          -----------  -----------  ---------- 
 Net loss per share of common stock...... $     (0.91) $     (0.59) $    (5.29)
                                          ===========  ===========  ========== 

The earnings per share amounts in the above table have been calculated in 
compliance with Statement of Financial Accounting Standards No. 128, "Earnings  
Per Share." For further information regarding earnings per share and            
capitalization of TresCom, see Notes 2 and 5.                                   

14. SUBSEQUENT EVENTS                                                           

In February 1998, TresCom entered into a definitive Agreement and Plan of 
Merger with Primus Telecommunications Group, Inc. (Primus) and Taurus           
Acquisition Corporation, a wholly-owned subsidiary of Primus (Taurus). Pursuant 
to the terms of the Agreement and Plan of Merger, as amended, it is             
contemplated that Taurus will merge with and into TresCom, that TresCom will be 
the surviving corporation and that Primus will acquire 100% of the issued and   
outstanding shares of TresCom common stock. The transaction is expected to be   
completed during the second quarter of 1998 and is subject to, among other      
things, the approval of both Primus's and TresCom's shareholders and certain    
regulatory authorities.                                                         

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INDEPENDENT AUDITORS' REPORT      

The Board of Directors                                                          
Telegroup, Inc.:                                                                

 We have audited the accompanying combined balance sheets of Telegroup, Inc.
and certain subsidiaries (the Company) as of December 31, 1997 and 1998 and the 
related combined statements of operations, comprehensive losses, shareholders'  
equity (deficit), and cash flows for each of the years in the three-year period 
ended December 31, 1998. These combined financial statements are the            
responsibility of the Company's management. Our responsibility is to express an 
opinion on these combined financial statements based on our audits.             

We conducted our audits in accordance with generally accepted auditing    
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the financial statements are free of         
material misstatement. An audit includes examining, on a test basis, evidence   
supporting the amounts and disclosures in the financial statements. An audit    
also includes assessing the accounting principles used and significant          
estimates made by management, as well as evaluating the overall financial       
statement presentation. We believe that our audits provide a reasonable basis   
for our opinion.                                                                

 In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Telegroup, Inc. and 
certain subsidiaries as of December 31, 1997 and 1998 and the results of its    
operations and its cash flows for each of the years in the three-year period    
ended December 31, 1998, in conformity with generally accepted accounting       
principles.                                                                     

The accompanying combined financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in note 1 to    
the combined financial statements, the Company has filed for protection under   
Chapter 11 of the United States Bankruptcy Code due to significant financial    
and liquidity problems. These circumstances raise substantial doubt about its   
ability to continue as a going concern. Management's plans in regard to these   
matters are also described in note 1. The financial statements do not include   
any adjustments that might result from the outcome of this uncertainty.         

July 9, 1999                                                                    

Lincoln, Nebraska                                                               

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TELEGROUP, INC. AND CERTAIN SUBSIDIARIES      

COMBINED BALANCE SHEETS     

December 31, 1997 and 1998      

                                                                [Download Table]

                                                        1997          1998     
                                                    ------------  ------------ 
                                                                               
ASSETS                                                                         
Current assets:                                                                
  Cash and cash equivalents........................ $ 72,763,095    19,101,837 
  Securities available-for-sale....................   21,103,030           --  
  Accounts receivable and unbilled services, less                              
   allowance for credit losses of $6,074,795 in                                
   1997 and $4,423,308 in 1998.....................   52,863,679    52,492,330 
  Income tax recoverable...........................    2,693,679       212,938 
  Prepaid expenses and other assets................    1,274,952     2,981,706 
  Receivables from shareholders (note 5)...........       39,376        85,777 
  Receivables from employees.......................      152,259        54,901 
                                                    ------------  ------------ 
    Total current assets...........................  150,890,070    74,929,489 
                                                    ------------  ------------ 
Net property and equipment (note 6)................   27,372,572    54,676,104 
                                                    ------------  ------------ 
Other assets:                                                                  
  Deposits and other assets (note 6)...............    3,594,072     4,418,531 
  Goodwill, net of amortization of $142,203 in 1997                            
   and $223,458 in 1998 (note 4)...................    3,102,707     4,148,679 
  Capitalized software, net of amortization (note                              
   2)..............................................    1,724,758     3,334,549 
  Debt issuance costs, net of amortization (note                               
   3)..............................................    3,648,026     3,513,108 
                                                    ------------  ------------ 
                                                      12,069,563    15,414,867 
                                                    ------------  ------------ 
    Total assets................................... $190,332,205   145,020,460 
                                                    ============  ============ 
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)                                 
Current liabilities:                                                           
  Accounts payable (note 8)........................ $ 46,754,624    88,602,750 
  Commissions payable..............................    7,691,401     4,173,700 
  Accrued expenses (notes 8 and 10)................    4,466,320     6,551,162 
  Notes payable (note 3)...........................          --     24,832,437 
  Customer deposits................................      777,847       693,781 
  Unearned revenue.................................      186,779       153,430 
  Current portion of capital lease obligations                                 
   (note 7)........................................      158,706       123,656 
  Current portion of long-term debt (note 3).......       93,788   111,130,591 
                                                    ------------  ------------ 
    Total current liabilities......................   60,129,465   236,261,507 
                                                    ------------  ------------ 
Capital lease obligations, excluding current                                   
 portion (note 7)..................................      221,179        37,483 
Long-term debt, excluding current portion (note                                
 3)................................................  101,450,951       118,677 
Minority interest (note 4).........................          --            --  
Common stock, no par or stated value; 150,000,000                              
 shares authorized, 30,889,945 and 33,689,785                                  
 issued and outstanding in 1997 and 1998,                                      
 respectively......................................          --            --  
Additional paid-in capital.........................   51,649,660    63,313,048 
Retained deficit (note 1)..........................  (23,075,221) (155,267,829)
Accumulated other comprehensive income (deficit)...      (43,829)      557,574 
                                                    ------------  ------------ 
    Total shareholders' equity (deficit)...........   28,530,610   (91,397,207)
Commitments and contingencies (notes 6 and 11)                                 
                                                    ------------  ------------ 
    Total liabilities and shareholders' equity                                 
     (deficit)..................................... $190,332,205   145,020,460 
                                                    ============  ============ 

See accompanying notes to combined financial statements.      

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TELEGROUP, INC. AND CERTAIN SUBSIDIARIES      

COMBINED STATEMENTS OF OPERATIONS     

Years ended December 31, 1996, 1997 and 1998      

                                                                [Download Table]

                                             1996         1997         1998     
                                         ------------  -----------  ----------- 
                                                                                
Revenues:                                                                       
  Retail...............................  $179,146,795  220,691,970  234,662,249 
  Wholesale............................    34,060,714  112,408,905  125,269,438 
                                         ------------  -----------  ----------- 
    Total revenues.....................   213,207,509  333,100,875  359,931,687 
Cost of revenues (note 11).............   150,536,859  252,054,271  299,650,665 
                                         ------------  -----------  ----------- 
Gross profit...........................    62,670,650   81,046,604   60,281,022 
                                         ------------  -----------  ----------- 
Operating expenses:                                                             
  Selling, general and administrative                                           
   expenses (notes 6, 10                                                        
   and 13).............................    59,651,857   87,370,378  106,342,704 
  Depreciation and amortization........     1,881,619    4,959,785   10,939,925 
  Stock option-based compensation (note                                         
   8)..................................     1,032,646      342,380      285,317 
  Impairment of long-lived assets                                               
   (notes 4 and 6).....................           --           --    14,798,830 
                                         ------------  -----------  ----------- 
    Total operating expenses...........    62,566,122   92,672,543  132,366,776 
                                         ------------  -----------  ----------- 
    Operating income (loss)............       104,528  (11,625,939) (72,085,754)
Other income (expense):                                                         
  Interest expense.....................      (578,500)  (4,208,328) (11,069,365)
  Interest income......................       377,450    2,014,395    2,406,269 
  Foreign currency transaction loss....      (147,752)    (571,637)    (632,761)
  Other................................       118,504      290,622       84,756 
                                         ------------  -----------  ----------- 
    Loss before income taxes and                                                
     extraordinary item................      (125,770) (14,100,887) (81,296,855)
Income tax benefit (expense) (note 9)..         7,448      576,526      (29,908)
Minority interest in share of loss                                              
 (note 4)..............................           --           --           --  
                                         ------------  -----------  ----------- 
    Loss before extraordinary item.....      (118,322) (13,524,361) (81,326,763)
Extraordinary item, loss on                                                     
 extinguishment of debt, net of income                                          
 tax benefit of $1,469,486 (note 3)....           --    (9,970,815)         --  
                                         ------------  -----------  ----------- 
    Net loss...........................  $   (118,322) (23,495,176) (81,326,763)
                                         ============  ===========  =========== 

See accompanying notes to combined financial statements.      

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TELEGROUP, INC. AND CERTAIN SUBSIDIARIES      

COMBINED STATEMENTS OF COMPREHENSIVE LOSSES     

Years ended December 31, 1996, 1997 and 1998      

                                                                [Download Table]

                                            1996        1997         1998     
                                          ---------  -----------  ----------- 
                                                                              
Net loss................................. $(118,322) (23,495,176) (81,326,763)
Foreign currency translation adjustment,                                      
 net of tax..............................    (2,203)     (41,626)     601,403 
                                          ---------  -----------  ----------- 
  Comprehensive loss..................... $(120,525) (23,536,802) (80,725,360)
                                          =========  ===========  =========== 

See accompanying notes to combined financial statements.      

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TELEGROUP, INC. AND CERTAIN SUBSIDIARIES      

COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)     

Years ended December 31, 1996, 1997 and 1998      

                                                        [Enlarge/Download Table]

                                                                      Accumulated              
                                                                      other com-      Total    
                            Common Stock    Additional    Retained    prehensive  shareholders'
                          -----------------  paid-in      earnings      income       equity    
                            Shares   Amount  capital     (deficit)     (deficit)    (deficit)  
                          ---------- ------ ----------  ------------  ----------- -------------
                                                                                               
Balances at December 31,                                                                       
 1995...................  24,651,989  $--        4,595     3,142,852        --       3,147,447 
Dividends...............         --    --          --       (425,000)       --        (425,000)
Net loss................         --    --          --       (118,322)       --        (118,322)
Issuance of common                                                                             
 stock..................   1,297,473   --       52,366           --         --          52,366 
Notes receivable from                                                                          
 shareholders for common                                                                       
 stock..................         --    --      (52,366)          --         --         (52,366)
Shares issued in                                                                               
 connection with                                                                               
 business combinations                                                                         
 (note 4)...............     262,116   --      573,984           --         --         573,984 
Compensation expense in                                                                        
 connection with stock                                                                         
 option plan (notes 3                                                                          
 and 8).................         --    --    1,032,646           --         --       1,032,646 
Warrants issued in                                                                             
 connection with the                                                                           
 Private Offering (note                                                                        
 8).....................         --    --    9,153,951           --         --       9,153,951 
Change in foreign                                                                              
 currency translation...         --    --          --            --      (2,203)        (2,203)
                          ----------  ----  ----------  ------------    -------    ----------- 
Balances at December 31,                                                                       
 1996...................  26,211,578   --   10,765,176     2,599,530     (2,203)    13,362,503 
Net loss................         --    --          --    (23,495,176)       --     (23,495,176)
Carve-out of uncombined                                                                        
 subsidiaries (note 1)..         --    --          --     (2,179,575)       --      (2,179,575)
Issuance of shares, net                                                                        
 of offering expenses                                                                          
 (note 8)...............   4,450,000   --   39,825,343           --         --      39,825,343 
Shares issued in                                                                               
 connection with                                                                               
 business combination                                                                          
 (note 4)...............      40,000   --      470,000           --         --         470,000 
Compensation expense in                                                                        
 connection with stock                                                                         
 option plan (note 8)...         --    --      342,380           --         --         342,380 
Issuance of shares for                                                                         
 options exercised (note                                                                       
 8).....................     188,367   --      246,761           --         --         246,761 
Change in foreign                                                                              
 currency translation...         --    --          --            --     (41,626)       (41,626)
                          ----------  ----  ----------  ------------    -------    ----------- 
Balances at December 31,                                                                       
 1997...................  30,889,945   --   51,649,660   (23,075,221)   (43,829)    28,530,610 
Net loss................         --    --          --    (81,326,763)       --     (81,326,763)
Carve-out of uncombined                                                                        
 subsidiaries (note 1)..         --    --          --    (50,865,845)       --     (50,865,845)
Shares issued in                                                                               
 connection with                                                                               
 business combinations                                                                         
 (note 4)...............     538,232   --    7,066,524           --         --       7,066,524 
Compensation expense in                                                                        
 connection with stock                                                                         
 option plan (note 8)...         --    --      285,317           --         --         285,317 
Commission expense in                                                                          
 connection with                                                                               
 independent agent stock                                                                       
 option plan (note 8)...         --    --      474,241           --         --         474,241 
Shares issued in-lieu of                                                                       
 future commissions                                                                            
 (note 13)..............     181,737   --    1,592,234           --         --       1,592,234 
Payment received on note                                                                       
 receivable from                                                                               
 shareholders...........         --    --       52,366           --         --          52,366 
Issuance of shares for                                                                         
 warrants exercised                                                                            
 (note 8)...............   1,327,333   --          --            --         --             --  
Unissued warrants in                                                                           
 connection with                                                                               
 forbearance agreements                                                                        
 (note 8)...............         --    --          --            --         --             --  
Issuance of shares for                                                                         
 property purchase......     204,035   --    1,466,649           --         --       1,466,649 
Warrants issued for                                                                            
 property purchase (note                                                                       
 8).....................         --    --        9,758           --         --           9,758 
Issuance of shares for                                                                         
 options exercised (note                                                                       
 8).....................     537,503   --      702,128           --         --         702,128 
Issuance of shares for                                                                         
 litigation settlement..      11,000   --       14,171           --         --          14,171 
Change in foreign                                                                              
 currency translation...         --    --          --            --     601,403        601,403 
                          ----------  ----  ----------  ------------    -------    ----------- 
Balances at December 31,                                                                       
 1998...................  33,689,785  $--   63,313,048  (155,267,829)   557,574    (91,397,207)
                          ==========  ====  ==========  ============    =======    =========== 

See accompanying notes to combined financial statements.      

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TELEGROUP, INC. AND CERTAIN SUBSIDIARIES      

COMBINED STATEMENTS OF CASH FLOWS     

Years ended December 31, 1996, 1997 and 1998      

                                                                [Download Table]

                                             1996         1997         1998     
                                         ------------  -----------  ----------- 
                                                                                
Cash flows from operating activities:                                           
 Net loss..............................  $   (118,322) (23,495,176) (81,326,763)
 Adjustments to reconcile net loss to                                           
  net cash provided by (used in)                                                
  operating activities:                                                         
 Depreciation and amortization.........     1,881,619    4,959,785   10,939,925 
 Assets held for disposal..............           --           --     1,263,991 
 Deferred income taxes.................       229,933      635,167          --  
 Impairment of long-lived assets.......           --           --    14,798,830 
 Loss on sale of equipment.............           --       227,672      114,491 
 Loss on extinguishment of debt........           --    10,040,301          --  
 Issuance of shares for litigation                                              
  settlement...........................           --           --        14,171 
 Provision for credit losses on                                                 
  accounts receivable..................     5,124,008    8,407,168    9,369,240 
 Accretion of debt discounts...........        48,077    1,874,090    8,225,692 
 Stock option-based compensation                                                
  expense..............................     1,032,646      342,380      285,317 
 Stock option-based commission                                                  
  expense..............................           --           --       474,241 
 Changes in operating assets and                                                
  liabilities, excluding the effects of                                         
  business combinations:                                                        
 Accounts receivable and unbilled                                               
  services.............................   (14,199,095) (28,671,383)  (7,518,222)
 Prepaid expenses and other assets.....      (134,946)    (979,711)    (841,421)
 Deposits and other assets.............       (80,001)  (4,555,603)  (8,963,770)
 Accounts payable, commissions payable                                          
  and accrued expenses.................    16,292,448   19,091,546   36,462,512 
 Income taxes..........................    (5,323,692)  (1,064,375)   2,480,741 
 Unearned revenue......................        64,276      122,503      (33,349)
 Customer deposits.....................        87,506      174,907      (84,066)
                                         ------------  -----------  ----------- 
  Net cash provided by (used in)                                                
   operating activities................     4,904,457  (12,890,729) (14,338,440)
                                         ------------  -----------  ----------- 
Cash flows from investing activities:                                           
 Purchases of equipment................    (9,067,923) (20,192,680) (36,885,963)
 Sales (purchases) of securities                                                
  available-for-sale...................           --   (21,103,030)  21,103,030 
 Proceeds from sale of equipment.......           --       450,000      126,191 
 Capitalization of software............    (1,789,604)    (316,785)  (2,057,012)
 Cash paid in business combinations,                                            
  net of cash acquired.................      (468,187)    (656,334)  (2,576,145)
 Net change in receivables from                                                 
  shareholders and employees...........        63,334      (91,122)      50,957 
                                         ------------  -----------  ----------- 
  Net cash used in investing                                                    
   activities..........................   (11,262,380) (41,909,951) (20,238,942)
                                         ------------  -----------  ----------- 
Cash flows from financing activities:                                           
 Net proceeds (principal payments) from                                         
  (on) notes payable...................    (2,000,000)         --    24,832,437 
 Proceeds from issuance of senior                                               
  subordinated notes...................    20,000,000          --           --  
 Proceeds from issuance of convertible                                          
  subordinated notes...................           --    25,000,000          --  
 Proceeds from issuance of senior                                               
  discount notes.......................           --    74,932,500          --  
 Prepayment of senior subordinated                                              
  notes................................           --   (20,000,000)         --  
 Debt issuance costs...................    (1,450,281)  (3,753,558)    (471,532)
 Net proceeds from issuance of stock...           --    39,825,343          --  
 Net proceeds from options exercised...           --       246,761      702,128 
 Dividends paid........................      (950,000)         --           --  
 Net proceeds (principal payments) from                                         
  (on) other long-term borrowings......       530,803     (452,762)   1,478,837 
 Principal payments under capital lease                                         
  obligations..........................      (180,901)    (168,321)    (143,272)
 Proceeds received (borrowings) on note                                         
  due from shareholders................       (25,881)         --        52,366 
                                         ------------  -----------  ----------- 
  Net cash provided by financing                                                
   activities..........................    15,923,740  115,629,963   26,450,964 
                                         ------------  -----------  ----------- 
 Exchange rate changes.................        (2,203)     (41,626)     601,403 
 Carve-out of uncombined subsidiaries..           --    (2,179,575) (50,865,845)
 Shares issued in connection with                                               
  business combinations of uncombined                                           
  subsidiaries.........................           --           --     4,729,602 
                                         ------------  -----------  ----------- 
  Net increase (decrease) in cash and                                           
   cash equivalents....................     9,563,614   58,608,082  (53,661,258)
                                         ------------  -----------  ----------- 
Cash and cash equivalents at beginning                                          
 of year...............................     4,591,399   14,155,013   72,763,095 
                                         ------------  -----------  ----------- 
Cash and cash equivalents at end of                                             
 year..................................  $ 14,155,013   72,763,095   19,101,837 
                                         ============  ===========  =========== 
Supplemental disclosures of cash flow                                           
 information:                                                                   
 Interest paid.........................  $    356,270    3,930,558    2,545,501 
                                         ============  ===========  =========== 
 Income taxes paid.....................  $  5,164,634          795       82,283 
                                         ============  ===========  =========== 
Supplemental disclosures of noncash                                             
 investing and financing activities:                                            
 Dividends declared....................  $    425,000          --           --  
                                         ============  ===========  =========== 
 Common stock issued in connection with                                         
  business combinations................  $    573,984      470,000    7,066,524 
                                         ============  ===========  =========== 
 Common stock issued in consideration                                           
  for notes receivable.................  $     52,366          --           --  
                                         ============  ===========  =========== 
 Equipment acquired under capital                                               
  lease................................  $        --       108,504          --  
                                         ============  ===========  =========== 
 Common stock issued in-lieu of future                                          
  commissions..........................  $        --           --     1,592,234 
                                         ============  ===========  =========== 
 Common stock and warrants issued in                                            
  connection with property purchase....  $        --           --     1,476,407 
                                         ============  ===========  =========== 

See accompanying notes to combined financial statements.      

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TELEGROUP, INC. AND CERTAIN SUBSIDIARIES      

NOTES TO COMBINED FINANCIAL STATEMENTS      

December 31, 1996, 1997 and 1998      

(1) BASIS OF PRESENTATION                                                       

On February 10, 1999 (the Filing Date), amidst increasing financial and   
liquidity problems, Telegroup, Inc. filed for protection under Chapter 11 of    
the United States (U.S.) Bankruptcy Code, as amended (the Bankruptcy Code).     
Telegroup, Inc. filed a voluntary petition to operate as a Debtor in Possession 
(DIP) in the U.S. Bankruptcy Court District of New Jersey (the Bankruptcy       
Court). Telegroup, Inc.'s subsidiary companies have not filed for Chapter 11    
protection. Telegroup, Inc.'s equity interests in such subsidiaries represent   
assets of the bankruptcy estate.                                                

The commencement of a Chapter 11 bankruptcy proceeding results in the     
imposition of an automatic stay against the commencement or continuation of any 
judicial, administrative or other proceeding against Telegroup, Inc., against   
any act to obtain possession of property of or from Telegroup, Inc., and        
against any act to create, perfect or enforce any lien against property of      
Telegroup, Inc., subject to certain exceptions permitted under the Bankruptcy   
Code. Telegroup, Inc.'s creditors, therefore, are generally prohibited from     
attempting to collect prepetition debts without the consent of the Bankruptcy   
Court. Any creditor may seek relief from the automatic stay and, if applicable, 
enforce a lien against its collateral, if authorized by the Bankruptcy Court.   
There are various other provisions of the Bankruptcy Code which may impose      
limitations or constraints on Telegroup, Inc.'s operations.                     

Pursuant to provisions of the Bankruptcy Code, claims arising prior to the
filing of the petition under Chapter 11 of the Bankruptcy Code may not be paid  
outside of a plan of reorganization without prior approval of the Bankruptcy    
Court. Certain prepetition claims have subsequently been paid or satisfied with 
approval from the Bankruptcy Court. These claims include payments for           
commissions and wages, salaries and employee benefits.                          

Since the Filing Date, Telegroup, Inc. has continued in possession of its 
properties and as a DIP is authorized to operate and manage its business and to 
enter into all transactions that it could have entered into in the ordinary     
course of its business had there been no Chapter 11 filing. Subsequent to the   
Filing Date, Telegroup, Inc. restructured the terms of many of its              
relationships with critical telecommunications service carriers and reduced     
significant portions of its general and administrative costs, in an effort to   
effectively manage its liquidity problems. In March 1999, the Bankruptcy Court  
set a date of June 15, 1999 (the Bar Date) as the date for which all pre-Filing 
Date claims could be filed by creditors against Telegroup, Inc.                 

 During the first quarter of 1999, Telegroup, Inc. continued to operate as a
DIP and petitioned the Bankruptcy Court for approval to sell the majority of    
its assets under Sections 363 and 365 of the Bankruptcy Code. Following the     
approval of the Bankruptcy Court and a public notice, on May 26, 1999, Primus   
Telecommunications, Inc. (Primus) emerged as highest bidder at the auction and  
committed to purchase the majority of Telegroup, Inc.'s assets, including the   
common stock of Telegroup, Inc.'s subsidiary companies, excluding the           
subsidiaries located in Australia and New Zealand, which include Telegroup      
Network Services Australia Pty Limited, Telegroup Network Services New Zealand  
Pty Limited, and Switch Telecommunications Pty Limited (collectively the        
Australian and New Zealand Subsidiaries) (the Core Business Assets), for        
$71,825,000. The sale of the Core Business Assets to Primus, including an       
additional sale of accounts receivable and other assets less assumed            
liabilities for approximately $22,190,000, closed on June 30, 1999. The         
effective date of these transactions was June 1, 1999. The purchase price was   
paid by Primus in unregistered debt securities of $45,467,000 in the form of    
11.25% Senior Notes due 2009 (the Primus Notes), a $4,592,006 promissory note   
due 60% on July 30, 1999 and 40% on August 31, 1999, and cash.                  

In addition, the auction resulted in other telecommunications carriers    
purchasing certain other fixed assets of Telegroup, Inc. for approximately      
$5,600,000 in cash.                                                             

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TELEGROUP, INC. AND CERTAIN SUBSIDIARIES      

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)     

December 31, 1996, 1997 and 1998      

Telegroup, Inc. used the auction proceeds to pay in full its asset-based  
line of credit and term loan with Foothill Capital Corp. (Foothill) (see note   
3). The remaining assets of Telegroup, Inc., consisting primarily of cash and   
Primus Notes obtained from the sale of assets from the auction, are being held  
subject to the review and reconciliation of creditors' proofs of claims that    
have been filed with the Bankruptcy Court against Telegroup, Inc. as of the Bar 
Date. Management of Telegroup, Inc. have estimated and accrued known claims it  
believes are valid relating to products and/or services received prior to       
December 31, 1998 in the accompanying combined financial statements. However, a 
number of disputed claims exist which are individually significant in amount    
and which, together, are materially in excess of the amounts reflected in the   
accompanying combined financial statements. Disputed claims for products and/or 
services received prior to December 31, 1998 have been reflected at such        
amounts, if any, that are estimated will be allowed. Disputed claims could be   
greater than or less than the amounts reflected in the accompanying financial   
statements and these differences may be material. It is anticipated that claims 
will be reconciled in connection with the consummation of a Chapter 11 plan of  
liquidation. The ultimate amount and classification of claims which will be     
allowed can not be estimated at this time.                                      

  Pursuant to provisions of the Bankruptcy Code, Telegroup, Inc. has until the
confirmation of a plan of reorganization to assume or reject executory          
contracts and unexpired leases of personal property, subject to the discretion  
of the Bankruptcy Court, on request of a party to such contract or lease, to    
require Telegroup, Inc. to determine within a specified time period whether to  
assume a particular executory contract or unexpired lease of personal property. 
Generally, a Chapter 11 debtor must assume all leases of nonresidential real    
property within 60 days of its Chapter 11 filing, or such leases will be deemed 
rejected, unless the Bankruptcy Court, for cause, within such 60-day period     
establishes a longer period for assumption decisions. Subject to certain        
exceptions, by order of the Bankruptcy Court, Telegroup, Inc. obtained an       
extension of time within which to assume or reject its nonresidential real      
property leases.                                                                

 Assumption of an executory contract or unexpired lease under the Bankruptcy
Code requires Telegroup, Inc., among other things, to cure all defaults under   
such executory contract or unexpired lease. Rejection of an executory contract  
or unexpired lease constitutes a breach of such executory contract or unexpired 
lease immediately before the date of the filing of the Chapter 11 petition,     
giving the other party to the contract or unexpired lease the right to assert a 
general unsecured claim against the bankruptcy estate for damages arising out   
of the breach. Prior to the filing of Telegroup, Inc.'s plan of liquidation,    
Telegroup, Inc. anticipates that it will notify the Bankruptcy Court of those   
contracts and leases that it will assume or reject as of the effective date of  
the plan of liquidation. Included in Primus's purchase agreement, Primus will   
assume certain executory contracts and unexpired leases. Telegroup, Inc. will   
reject all remaining contracts and leases. Primus continues to review           
Telegroup, Inc.'s contracts and leases to determine which ones they will        
assume. The Disclosure Statement, which will be filed concurrently with the     
plan of liquidation, will set forth Telegroup, Inc.'s estimates of the          
aggregate cure amounts and rejection damage claims to be incurred in connection 
with assumptions and rejections for only those contracts and leases not already 
rejected or assumed prior to the filing of the plan of liquidation. Rejection   
of these executory contracts and unexpired leases could result in additional    
claims against the estate.                                                      

The accompanying combined financial statements have been prepared in order
for Primus to comply with certain reporting requirements of the Securities and  
Exchange Commission. The accompanying combined financial statements represent   
the accounts of Telegroup, Inc. and certain subsidiaries (the Company). As      
Primus is not purchasing the Australian and New Zealand Subsidiaries, these     
subsidiaries, in which Telegroup, Inc. has significant control, are excluded    
from the combined financial statements. In accordance with the accounting rules 
prescribed for "carve-out" financial statements, the excess of the purchase     
price of the Australian and New Zealand Subsidiaries over fair value of their   
net assets acquired recorded by Telegroup, Inc., the financial position,        
results of operations, comprehensive losses and cash flows for these            

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NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)     

December 31, 1996, 1997 and 1998      

subsidiaries are not included in the combined financial statements. The net     
effect of the "carve-out" adjustment is reflected in retained deficit in the    
combined financial statements.                                                  

  The accompanying combined financial statements have been prepared on a going
concern basis which assumes continuity of operations and realization of assets  
and liquidation of liabilities in the ordinary course of business. As discussed 
herein, there are significant uncertainties relating to the ability of the      
Company to continue as a going concern. The combined financial statements do    
not include any adjustments relating to the recoverability and classification   
of recorded asset amounts, or the amounts and classification of liabilities     
that might be necessary as a result of the outcome of the uncertainties         
discussed herein.                                                               

 All significant intercompany accounts and transactions have been eliminated
in consolidation.                                                               

(2) NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES                      

Nature of Business                                                            

The Company is an alternative provider of domestic and international      
telecommunications services. The Company's revenues are derived from the sale   
of telecommunications to retail customers, typically residential users and      
small- to medium-sized business and wholesale customers, typically              
telecommunications carriers. The Company's customers are principally located in 
the United States, Europe and the Pacific Rim. In both the retail and wholesale 
aspects of its business, the Company extends credit to customers on an          
unsecured basis with the risk of loss limited to outstanding amounts.           

 The Company markets its services through a worldwide network of independent
agents and supervisory "country coordinators". The Company extends credit to    
its sales representatives and country coordinators on an unsecured basis with   
the risk of loss limited to outstanding amounts, less commissions payable to    
the representatives and coordinators.                                           

A summary of the Company's significant accounting policies follows:       

Cash Equivalents and Securities Available-for-sale                            

  The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents. At December 31, 1997, cash      
equivalents consisted of money market instruments, U.S. Government securities,  
and commercial paper totaling $70,133,492. There were no cash equivalents at    
December 31, 1998. Securities available-for-sale represent U.S. Government      
securities with maturities greater than three months. Securities available-for- 
sale are recorded at the lower of amortized cost or market value. At December   
31, 1997, amortized cost approximated market value.                             

Property and Equipment                                                        

Property and equipment are stated at cost. Equipment held under capital   
leases are stated at the lower of the fair value of the asset or the net        
present value of the minimum lease payments at the inception of the lease.      
Depreciation on property and equipment is provided using the straight-line      
method over the estimated useful lives of the assets. Equipment held under      
capital leases and leasehold improvements are amortized straight-line over the  
shorter of the lease term or estimated useful life of the asset. Amortization   
of assets held under capital leases and leasehold improvements are included     
with depreciation expense.                                                      

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NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)     

December 31, 1996, 1997 and 1998      

Capitalized Software Development Costs                                        

The Company capitalizes software costs incurred in the development of its 
telecommunications switching software, billing systems and other support        
platforms. The Company capitalizes external direct costs of materials and       
services consumed, internal direct payroll and payroll related costs incurred   
and estimated costs of debt funds used in the development of internal use       
software. Capitalization begins upon the completion of the preliminary project  
stage and ends when the software is substantially complete and ready for its    
intended use. Amortization of capitalized software is provided using the        
straight-line method over the software's estimated useful life, which ranges    
from one to five years. For the years ended December 31, 1997 and 1998,         
amortization of software development costs totaled $498,682 and $447,221,       
respectively. There was no amortization during 1996 as the software had not yet 
been complete and ready for its intended use.                                   

Stock Option Plan                                                             

The Company accounts for its stock option plan using the intrinsic value  
based method prescribed by Accounting Principles Board Opinion No. 25,          
Accounting for Stock Issued to Employees (APB No. 25), and related              
interpretations. As such, compensation expense is recorded on the date of grant 
only if the current market price of the underlying stock exceeds the exercise   
price. On January 1, 1996, the Company adopted Statement of Financial           
Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation    
(SFAS No. 123), which permits entities to recognize as expense over the vesting 
period the fair value of all stock-based awards on the date of grant.           
Alternatively, SFAS No. 123 also allows entities to continue to apply the       
provisions of APB No. 25 and provide pro forma net income disclosures as if the 
fair-value method defined in SFAS No. 123 had been applied. The Company has     
elected to continue to apply the provisions of APB No. 25 and provide the pro   
forma disclosure provisions of SFAS No. 123.                                    

Impairment of Long-lived Assets                                               

  The Company accounts for long-lived assets in accordance with the provisions
of SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for     
Long-Lived Assets to be Disposed of. This statement requires that long-lived    
assets and certain identifiable intangibles be reviewed for impairment whenever 
events or changes in circumstances indicate that the carrying value of an asset 
may not be recoverable. Recoverability of assets to be held and used is         
measured by a comparison of the carrying amount of an asset to future cash      
flows expected to be generated by the asset. If such assets are considered to   
be impaired, the impairment to be recognized is measured by the amount by which 
the carrying amount of the assets exceed the fair value of the assets. Fair     
value is determined using valuation techniques such as quoted market prices or  
the discounted present value of expected future cash flows. Assets to be        
disposed of are reported at the lower of the carrying amount or fair value less 
costs to sell.                                                                  

Goodwill                                                                      

Goodwill results from the application of the purchase method of accounting
for business combinations and represents the excess of purchase price over fair 
value of net assets acquired. Amortization is provided using the straight-line  
method over a maximum of fifteen years. For business combinations relating to   
the purchase of an entity's customers, goodwill is amortized using an           
accelerated method over the estimated life of the customers purchased or three  
years, whichever is shorter. Impairment is determined pursuant to the           
methodology used for other long-lived assets.                                   

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NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)     

December 31, 1996, 1997 and 1998      

Income Taxes                                                                  

 The Company accounts for income taxes under the provisions of SFAS No. 109,
Accounting for Income Taxes (SFAS No. 109). Under the asset and liability       
method of SFAS No. 109, deferred tax assets and liabilities are recognized for  
the future tax consequences attributable to differences between the financial   
statement carrying amounts of existing assets and liabilities and their         
respective tax bases. Deferred tax assets and liabilities are measured using    
enacted tax rates expected to apply to taxable income in the years in which     
those temporary differences are expected to be recovered or settled. Under SFAS 
No. 109, the effect on deferred tax assets and liabilities of a change in tax   
rates is recognized in income in the period that includes the enactment date.   

Estimates                                                                     

The preparation of financial statements in conformity with generally      
accepted accounting principles requires management to make estimates and        
assumptions that affect the reported amounts of assets and liabilities at the   
date of the financial statements and the reported amounts of revenue and        
expenses during the reporting period. Actual amounts could differ from those    
estimates.                                                                      

Business and Credit Concentration                                             

Financial instruments which potentially expose the Company to a           
concentration of credit risk, as defined by SFAS No. 105, Disclosure of         
Information about Financial Instruments with Off-Balance-Sheet Risk and         
Financial Instruments with Concentrations of Credit Risk (SFAS No. 105),        
consist primarily of accounts receivable. At December 31, 1998, the Company's   
accounts receivable balance from customers in countries outside of the U.S. was 
approximately $31,400,000 with an associated reserve for credit losses of       
approximately $2,400,000. The Company estimates an allowance for doubtful       
accounts based on the credit worthiness of its customers as well as general     
economic conditions. Consequently, an adverse change in those factors could     
effect the Company's estimate of its bad debts.                                 

Foreign Currency Contracts                                                    

The Company uses foreign currency contracts to hedge foreign currency risk
associated with its international accounts receivable balances. Gains or losses 
pursuant to these foreign currency contracts are reflected as an adjustment of  
the carrying value of the hedged accounts receivable. At December 31, 1997 and  
1998, the Company had no material deferred hedging gains or losses.             

Revenues, Cost of Revenues and Commissions Expense                            

Revenues from retail telecommunications services are recognized when      
customer calls are completed. Revenues from wholesale telecommunications        
services are recognized when the wholesale carrier's customers' calls are       
completed. Cost of retail and wholesale revenues are based primarily on the     
direct costs associated with owned and leased transmission capacity and the     
cost of transmitting and terminating traffic on other carriers' facilities. The 
Company does not differentiate between the cost of providing transmission       
services on a retail or wholesale basis. Commissions paid to acquire customer   
call traffic are expensed in the period when associated call revenues are       
recognized.                                                                     

Prepaid Phone Cards                                                           

Substantially all the prepaid phone cards sold by the Company have an     
expiration date of twenty-four months after issuance or six months after last   
use. The Company records the net sales price as deferred revenue                

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NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)     

December 31, 1996, 1997 and 1998      

when cards are sold and recognizes revenue as the ultimate consumer utilizes    
calling time. Deferred revenue relating to unused calling time remaining at     
each card's expiration is recognized as revenue upon the expiration of such     
card.                                                                           

Comprehensive Income                                                          

On January 1, 1998, the Company adopted SFAS No. 130, Reporting           
Comprehensive Income (SFAS No. 130). SFAS No. 130 establishes standards for     
reporting and presentation of comprehensive income and its components in a full 
set of financial statements. Comprehensive income consists of the Company's net 
losses and foreign currency translation adjustments and is presented in the     
combined statements of comprehensive losses. SFAS No. 130 requires only         
additional disclosures in the combined financial statements; it does not affect 
the Company's financial position or results of operations.                      

Foreign Currency Translation                                                  

The functional currency of the Company is the U.S. dollar. The functional 
currency of the Company's foreign operations generally is the applicable local  
currency for the foreign subsidiary. Assets and liabilities of its foreign      
subsidiaries are translated at the spot rate in effect at the applicable        
reporting date, and the combined statements of operations and the Company's     
share of the results of operations of its foreign subsidiaries are translated   
at the average exchange rates in effect during the applicable period. The       
resulting unrealized cumulative translation adjustment is recorded as a         
separate component of equity and is included in other comprehensive income      
(deficit).                                                                      

Fair Value of Financial Instruments                                           

The fair values of cash and cash equivalents and receivables are estimated
to approximate carrying value due to the short-term maturities of these         
financial instruments. The carrying value of accounts payable, commissions      
payable, lease obligations, notes payable and long-term debt cannot be          
reasonably estimated at December 31, 1998 due to the Company's financial and    
liquidity problems and uncertainties surrounding the Bankruptcy proceedings     
(see note 1).                                                                   

Valuation of Common Stock Issuances                                           

The Company issues shares of common stock for consideration on certain    
transactions. The Company values the shares issued based on the fair-market     
value of the securities issued.                                                 

Segment Reporting                                                             

On January 1, 1998, the Company adopted SFAS No. 131, Disclosures about   
Segments of an Enterprise and Related Information (SFAS No. 131). SFAS No. 131  
establishes standards for the way that public business enterprises report       
information about operating segments. The basis for determining an enterprise's 
operating segments is the manner in which management operates the business.     

New Accounting Pronouncements                                                 

 SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,
was issued in June 1998. This statement provides new accounting and reporting   
standards for the use of derivative instruments. Adoption of this statement is  
required by the Company effective January 1, 2001. Management believes that the 
impact of such adoption will not be material to the financial statements.       

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NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)     

December 31, 1996, 1997 and 1998      

(3) Debt                                                                        

Long-term debt at December 31, 1997 and 1998 is shown below:              

                                                                [Download Table]

                                                      1997          1998     
                                                  ------------  ------------ 
                                                                             
8.00% convertible subordinated notes, due April                              
 15, 2005, unsecured............................  $ 25,000,000    25,000,000 
10.50% senior discount notes, net of discount,                               
 due November 1, 2004, unsecured................    76,442,135    84,667,827 
8.50% note payable, paid in April 1998..........        11,082           --  
10.80% note payable, paid in November 1998......        80,955           --  
8.75% note payable, due monthly through February                             
 1999, balloon payment due March 1999, secured                               
 by building....................................           --        578,584 
15.00% note payable, due monthly through June                                
 1999, secured by building......................           --        450,512 
2.50% above prime note payable, due monthly                                  
 through fiscal 2002, secured by office unit,                                
 London.........................................           --        105,118 
8.00% note payable, due monthly through July                                 
 1999, unsecured................................           --        360,575 
10.35% note payable, due monthly through 2001,                               
 secured by vehicle.............................           --         20,061 
8.25% note payable, due monthly through 2001,                                
 secured by vehicle.............................           --         23,963 
9.28% note payable, due monthly through 2001,                                
 secured by vehicle.............................           --         38,793 
6.85% note payable, due monthly through 1999,                                
 unsecured......................................         8,204         3,835 
8.00% note payable, paid in April 1998..........         2,363           --  
                                                  ------------  ------------ 
  Total long-term debt..........................   101,544,739   111,249,268 
  Less current installments.....................       (93,788) (111,130,591)
                                                  ------------  ------------ 
  Long-term debt, excluding current                                          
   installments.................................  $101,450,951       118,677 
                                                  ============  ============ 

Senior Subordinated Notes                                                     

On November 27, 1996, the Company completed a private placement (Private  
Offering) of 12% senior subordinated notes (the Subordinated Notes) for gross   
proceeds of $20,000,000 which was due and payable on November 27, 2003. Net     
proceeds from the Private Offering, after issuance costs of $1,450,281, were    
$18,549,719. In connection with the Private Offering, the Company issued 20,000 
warrants to purchase 1,160,107 shares of the Company's common stock (see note   
8).                                                                             

The Subordinated Notes were originally recorded at $10,846,049 (a yield of
26.8%), which represents the $20,000,000 in proceeds less the $9,153,951 value  
assigned to the detachable warrants, which is included in additional paid-in    
capital. The value assigned to the warrants was being accreted to the debt      
using the interest method over seven years. The accretion of the value assigned 
to the warrants is included in interest expense in the accompanying combined    
financial statements.                                                           

On September 5, 1997, the Company prepaid in full all of the outstanding  
Subordinated Notes. The Company paid $21,400,000, which included $20,000,000 in 
principal and $1,400,000 for a prepayment penalty. In addition, the Company     
recognized a loss of $8,741,419 and $1,298,882 for the write-off of the         
unamortized original issue discount and debt issuance costs, respectively. The  
early extinguishment of the Subordinated Notes is reflected on the combined     
statement of operations as an extraordinary item, net of income taxes.          

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NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)     

December 31, 1996, 1997 and 1998      

Convertible Subordinated Notes                                                

  On September 30, 1997, the Company issued $25,000,000 in aggregate principal
amount of convertible subordinated notes due April 15, 2005. Net proceeds from  
the convertible notes, after issuance costs of $890,475, were $24,109,525.      

The convertible notes bear interest at 8% per annum, payable on each April
15 and October 15. The convertible notes are convertible into shares of common  
stock of the Company at any time before April 15, 2005, at a conversion price   
of $12.00 per share, subject to adjustment upon the occurrence of certain       
events.                                                                         

 The convertible notes are redeemable, in whole or in part, at the option of
the Company, at any time on or after October 15, 2000 at redemption prices      
(expressed as a percentage of the principal amount) declining annually from     
104% beginning October 15, 2000 to 100% beginning October 15, 2003 and          
thereafter, together with accrued interest to the redemption date and subject   
to certain conditions.                                                          

The convertible notes are unsecured obligations of the Company and are    
subordinated to all existing and future senior indebtedness of the Company.     

Senior Discount Notes                                                         

On October 23, 1997, the Company issued $97,000,000 in aggregate principal
amount of 10.5% senior discount notes due November 1, 2004. Net proceeds from   
the senior discount notes, after issuance costs of $2,863,083, were             
$72,069,417. The discount of $22,067,500 recorded on the senior discount notes  
is being accreted to the debt through May 1, 2000 using the interest method,    
resulting in an effective interest rate of 10.5%. The accreted value of the     
notes will equal the following on their semi-annual accrual dates.              

                                                                [Download Table]

   Semi-annual                                                     Accreted 
       date                                                         value   
   -----------                                                    ----------
                                                                            
May 1, 1999...................................................... 87,576,365
November 1, 1999................................................. 92,167,906
May 1, 2000...................................................... 97,000,000

Interest on the senior discount notes will neither accrue nor be payable  
prior to May 1, 2000 and are payable on each May 1 and November 1 thereafter.   
The notes are redeemable, in whole or in part, at the option of the Company, at 
any time on or after November 1, 2001 at redemption prices (expressed as a      
percentage of the principal amount) declining annually from 105.25% beginning   
November 1, 2001 to 100% beginning November 1, 2004 and thereafter, together    
with accrued interest to the redemption date and subject to certain conditions. 

The senior discount notes are unsecured obligations of the Company and are
subordinated to all existing and future indebtedness of the Company, with the   
exception of the convertible subordinated notes.                                

 The convertible subordinated note and senior discount note indentures place
certain restrictions on the ability of the Company and its subsidiaries to (i)  
incur additional indebtedness, (ii) make restricted payments (dividends,        
redemptions and certain other payments), (iii) incur liens, (iv) enter into     
mergers, consolidations or acquisitions, (v) sell or otherwise dispose of       
property, business or assets, (vi) issue and sell preferred stock of a          
subsidiary, and (vii) engage in transactions with affiliates.                   

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NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)     

December 31, 1996, 1997 and 1998      

Subsequent to December 31, 1998, the Company defaulted on the convertible 
subordinated note and senior discount note indentures by filing for protection  
under Chapter 11 of the U.S. Bankruptcy Code (see note 1). As a result, these   
notes are due and payable upon the request of the note holders. At December 31, 
1998, these notes are presented as current liabilities in the combined          
financial statements.                                                           

Line of Credit                                                                

At December 31, 1998, the Company had a $15,000,000 asset-based line of   
credit and a $10,000,000 term loan with Foothill which provided for up to       
$25,000,000 in committed credit. Aggregate borrowings under the line of credit  
and term loan were $24,832,437 at December 31, 1998. Interest was payable at    
Norwest Bank's most recently announced base rate (Reference Rate) plus 2%       
(9.75% at December 31, 1998) and 12% per annum, respectively. Subsequent to     
December 31, 1998, these rates increased due to an event of default. The        
default rates were the Reference Rate plus 6% and 16% per annum, respectively.  
The credit line and term loan were collateralized by the Company's accounts     
receivable and substantially all other Company assets. The line of credit and   
term loan were paid by the Company with the proceeds received from the sale of  
the Company's assets on June 30, 1999 (see note 1).                             

(4) Business Combinations                                                       

 During 1996, 1997 and 1998, the Company acquired assets and/or common stock
of various companies providing products or services in the telecommunications   
industry. Each acquisition was accounted for using the purchase method of       
accounting and, accordingly, the net assets and results of operations are       
included in the combined financial statements from the date of acquisition.     

 On August 21, 1996, the Company purchased TeleContinent, S.A. for $200,000.
Also on August 21, 1996, the Company purchased Telegroup South Europe, Inc.     
Consideration for the purchase was $1,031,547 and 262,116 shares of common      
stock of the Company valued at $573,984, for total consideration of $1,605,531. 
The value of the common stock was determined by management based on information 
obtained from the Company's independent financial advisors. The aggregate       
purchase price of the acquisitions was allocated based on estimated fair values 
as follows:                                                                     

                                                                [Download Table]
                                                                             
Current assets................................................... $  794,452 
Property and equipment...........................................     54,571 
Goodwill.........................................................  1,024,609 
Current liabilities..............................................    (68,101)
                                                                  ---------- 
  Total.......................................................... $1,805,531 
                                                                  ========== 

  During the fourth quarter of 1998, the Company recognized an impairment loss
of $1,221,729 for unamortized goodwill and other long-term intangible assets    
relating to these subsidiaries.                                                 

Pro forma operating results of the Company, assuming the 1996 acquisitions
were consummated on January 1, 1996, do not significantly differ from reported  
amounts.                                                                        

On August 14, 1997, the Company acquired 60% of the common stock of, and  
controlling interest in, PCS Telecom, Inc. (PCS). Consideration for the         
purchase was $1,340,000 and 40,000 shares of unregistered common stock of the   
Company valued at $470,000, for total consideration of $1,810,000. PCS is a     
developer                                                                       

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NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)       

December 31, 1996, 1997 and 1998      

and manufacturer of calling card platforms used by the Company and other        
companies. The aggregate purchase price of the acquisition was allocated based  
on estimated fair values as follows:                                            

                                                                [Download Table]
                                                                             
Current assets.................................................. $ 1,279,971 
Property and equipment..........................................     534,600 
Other assets....................................................       1,855 
Goodwill........................................................   2,041,258 
Current liabilities.............................................  (2,047,684)
                                                                 ----------- 
  Total......................................................... $ 1,810,000 
                                                                 =========== 

 The minority interest deficit of 40% was included in the calculation of the
Company's goodwill due to the Company recognizing 100% of PCS's net earnings    
or losses until the historical shareholder's equity of PCS becomes positive.    
No minority interest relating to PCS is reflected in the accompanying           
financial statements, as PCS's net assets remained at a deficit since it's      
acquisition.                                                                    

During the third quarter of 1998, the Company decided to significantly    
scale back the development and assembly of calling card platforms at PCS. This  
decision significantly reduced the Company's estimated future cash flows for    
this subsidiary. As a result of the Company's estimated shortfalls of cash      
flows, the Company recognized an impairment loss of $1,888,064 for unamortized  
goodwill relating to this subsidiary. During the fourth quarter of 1998, the    
Company abandoned the remaining operations of PCS. This resulted in an          
impairment loss on the remaining long-lived assets of $552,996.                 

Pro forma operating results of the Company, assuming the PCS acquisition  
was consummated on January 1, 1996, do not significantly differ from reported   
amounts.                                                                        

On January 15, 1998, the Company acquired the operations of its Australian
country coordinator. Consideration for the Australian country coordinator was   
$107,584 and 107,036 shares of unregistered common stock of the Company valued  
at $1,422,382, for total consideration of $1,529,966.                           

The agreement also contained provisions which called for additional       
consideration if certain financial measures of the acquired operations were     
met subsequent to the date of acquisition. On June 5, 1998, the Company issued  
an additional 39,600 shares of unregistered common stock valued at $426,639 to  
the Australian coordinator to cancel such contingent consideration provisions   
in the original purchase agreement.                                             

The aggregate purchase price of the acquisition was allocated based on    
estimated fair values as follows:                                               

                                                                [Download Table]
                                                                             
Property and equipment............................................ $   18,104
Goodwill..........................................................  1,938,501
                                                                   ----------
  Total........................................................... $1,956,605
                                                                   ==========

The excess of the purchase price over fair value, financial position,     
results of operations, comprehensive losses, and cash flows for the Australian  
coordinator is not included in the combined financial statements (see note 1).  

Also on January 15, 1998, the Company acquired the operations of its New  
Zealand country coordinator. Consideration for the New Zealand country          
coordinator was $105,649 and 160,554 shares of unregistered common stock of     
the Company valued at $2,135,368, for total consideration of $2,241,017.        

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NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)       

December 31, 1996, 1997 and 1998      

The agreement also contained provisions which called for additional       
consideration if certain financial measures of the acquired operations were     
met subsequent to the date of acquisition. On June 5, 1998, the Company issued  
an additional 59,400 shares of unregistered common stock valued at $639,959 to  
the New Zealand coordinator to cancel such contingent consideration provisions  
in the original purchase agreement.                                             

The aggregate purchase price of the acquisition was allocated based on    
estimated fair values as follows:                                               

                                                                [Download Table]
                                                                             
Property and equipment............................................ $   18,122
Goodwill..........................................................  2,862,854
                                                                   ----------
  Total........................................................... $2,880,976
                                                                   ==========

The excess of the purchase price over fair value, financial position,     
results of operations, comprehensive losses, and cash flows for the New         
Zealand coordinator is not included in the combined financial statements (see   
note 1).                                                                        

On January 21, 1998, the Company acquired the telephone portion of the    
operations of its Japan country coordinator. Consideration for the Japan        
country coordinator was $472,500. The aggregate purchase price for this         
acquisition was allocated based on estimated fair values as follows:            

                                                                [Download Table]
                                                                             
Current assets...................................................... $ 22,241
Property and equipment..............................................   10,115
Goodwill............................................................  440,144
                                                                     --------
  Total............................................................. $472,500
                                                                     ========

During the fourth quarter of 1998, the Company recognized an impairment   
loss of $475,061 for unamortized goodwill and other long-term intangible        
assets relating to this subsidiary.                                             

On February 3, 1998, the Company acquired a 9.9% interest in Newsnet ITN  
Limited (Newsnet), an Australian-based provider of international and long-      
distance facsimile services, for $880,770. On May 31, 1998, the Company         
acquired the remaining 90.1% of Newsnet for an additional $8,909,565 bringing   
the total consideration paid to $9,790,335. The aggregate purchase price for    
this acquisition was allocated based on estimated fair values as follows:       

                                                                [Download Table]
                                                                             
Current assets.................................................. $ 6,504,055 
Property and equipment..........................................     682,398 
Goodwill........................................................   8,719,794 
Current liabilities.............................................  (5,747,820)
Non-current liabilities.........................................    (368,092)
                                                                 ----------- 
  Total......................................................... $ 9,790,335 
                                                                 =========== 

The excess of the purchase price over fair value, financial position,     
results of operations, comprehensive losses, and cash flows for Newsnet is not  
included in the combined financial statements (see note 1).                     

On February 27, 1998, the Company acquired 60% of the common stock of, and
controlling interest in, Redicall Pty Limited (Redicall) for $531,751 and       
7,179 shares of unregistered common stock valued at $105,254, for total         
consideration of $637,005. Redicall is an Australian-based entity engaged in    
the wholesale                                                                   

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NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)     

December 31, 1996, 1997 and 1998      

distribution of prepaid telephone calling cards. The aggregate purchase price   
for this acquisition was allocated based on estimated fair values as follows:   

                                                                [Download Table]
                                                                             
Current assets.................................................... $ 156,337 
Property and equipment............................................     1,672 
Deposits..........................................................     8,207 
Goodwill..........................................................   760,110 
Current liabilities...............................................  (147,532)
Non-current liabilities...........................................  (141,789)
                                                                   --------- 
  Total........................................................... $ 637,005 
                                                                   ========= 

 The minority interest deficit of 40% was included in the calculation of the
Company's goodwill due to the Company recognizing 100% of Redicall's net        
earnings or losses until the historical shareholder's equity of Redicall        
becomes positive.                                                               

The excess of the purchase price over fair value, financial position,     
results of operations, comprehensive losses, and cash flows of Redicall is not  
included in the combined financial statements (see note 1).                     

On April 20, 1998, the Company purchased South East Telecom Limited, Phone
Centre Communications Limited, and Corporate Networks Limited (collectively     
Corporate Networks). Corporate Networks is engaged in the supply, installation, 
and maintenance of telecommunications equipment. Consideration for the purchase 
was $261,600 and 164,463 shares of unregistered common stock of the Company     
valued at $2,336,922, for total consideration of $2,598,522. The agreement also 
contained provisions which called for additional consideration based on monthly 
usage of telephone related services by customers over a predetermined length of 
time as specified in the agreement. The aggregate purchase price for this       
acquisition was allocated based on estimated fair values as follows:            

                                                                [Download Table]
                                                                             
Current assets.................................................. $ 2,171,640 
Property and equipment..........................................     501,673 
Goodwill........................................................   3,877,964 
Current liabilities.............................................  (3,952,755)
                                                                 ----------- 
  Total......................................................... $ 2,598,522 
                                                                 =========== 

On February 10, 1999, the Company entered into an agreement that outlined 
the final consideration to be paid by the Company relating to the Corporate     
Networks acquisition. Additional consideration of $519,027 and 323,966 shares   
of unregistered common stock of the Company valued at $207,338 was paid and     
issued by Telegroup, respectively. The $519,027 was paid by Telegroup by        
relieving a note receivable due from the seller of Corporate Networks. At       
December 31, 1998, this note receivable is included in non-current other assets 
in the combined financial statements.                                           

On June 5, 1998, the Company purchased approximately 2,500 long distance  
customer accounts of Mediacom Telefacilities Limited (Mediacom). Mediacom       
provides national and international long distance services to corporate         
customers throughout the United Kingdom. In accordance with the purchase        
agreement, the Company paid consideration of $576,100. The agreement also       
contained provisions which called for additional consideration based on average 
monthly usage of the acquired customer accounts from April 1, 1998              

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NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)     

December 31, 1996, 1997 and 1998      

through October 31, 1998. As a result of this contingent consideration, the     
Company paid an additional $1,317,698 in the fourth quarter of 1998. The        
aggregate purchase price of $1,893,798 was allocated to goodwill and will be    
amortized using an accelerated method over the estimated life of the acquired   
customers or three years, whichever is shorter.                                 

  During the fourth quarter of 1998, the Company recognized an impairment loss
of $1,485,327 for a portion of the carrying value of goodwill relating to the   
purchase of the Mediacom customers.                                             

On August 7, 1998, the Company purchased Switch Telecom Pty Ltd (Switch   
Telecom). Switch Telecom is a full service telecommunications provider serving  
medium-sized businesses throughout Australia. Consideration for Switch Telecom  
was $12,952,500. The purchase price for Switch Telecom was allocated based on   
estimated fair values as follows:                                               

                                                                [Download Table]
                                                                             
Current assets................................................. $  6,441,499 
Property and equipment.........................................    2,195,538 
Goodwill.......................................................   16,932,383 
Current liabilities............................................  (12,616,920)
                                                                ------------ 
  Total........................................................ $ 12,952,500 
                                                                ============ 

  The Company, through its subsidiary Switch Telecom, purchased all the assets
of Frame Relay Pty Ltd (Frame Relay). Frame Relay owns an extensive data        
network throughout Australia and the Pacific Rim. Consideration for Frame Relay 
was $3,333,000. The purchase price for Frame Relay was allocated based on       
estimated fair values as follows:                                               

                                                                [Download Table]
                                                                             
Current assets................................................... $  486,716 
Property and equipment...........................................  2,862,597 
Goodwill.........................................................    657,177 
Current liabilities..............................................   (673,490)
                                                                  ---------- 
  Total.......................................................... $3,333,000 
                                                                  ========== 

The excess of the purchase price over fair value, financial position,     
results of operations, comprehensive losses, and cash flows of Switch Telecom   
and Frame Relay are not included in the combined financial statements (see note 
1).                                                                             

Pro forma operating results of the Company, assuming the 1998 acquisitions
were consummated on January 1, 1997 do not differ significantly from reported   
amounts.                                                                        

(5) Related Parties                                                             

 During 1996, the Company had a management agreement with an affiliate owned
by certain shareholders of the Company whereby it paid a management fee,        
determined annually, plus an incentive fee based upon performance. Amounts paid 
under this agreement totaled $415,000. The management agreement was terminated  
on May 15, 1996.                                                                

In August of 1998, the Company advanced $441,000 and $1,361,000 to its    
Chairman of the Board of Directors and Chief Executive Officer, respectively.   
These advances were repaid to the Company in September 1998 with the exception  
of $85,777. This remaining unpaid balance is reflected as a receivable from     
shareholder at December 31, 1998. No interest was earned by the Company on      
these advances.                                                                 

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NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)     

December 31, 1996, 1997 and 1998      

(6) Property and Equipment                                                      

Property and equipment, including network equipment owned under capital   
leases of $720,782 and $669,261 in 1997 and 1998, respectively, is comprised of 
the following:                                                                  

                                                                [Download Table]

                                                    December 31             
                                               ---------------------- Useful
                                                  1997        1998    lives 
                                               ----------- ---------- ------
                                                                            
Network equipment not in-service.............. $       --   2,118,158   --  
Land..........................................     155,707    155,707   --  
Building and leasehold improvements...........     900,660  4,439,150 2--20 
Furniture, fixtures and office equipment......     816,085  1,540,702  5--7 
Computer equipment............................  10,692,148 17,646,176     5 
Network equipment.............................  20,997,896 32,394,701     5 
Indefeasible right of use agreements..........         --  11,156,410    25 
Automobiles...................................     193,426    196,362     5 
                                               ----------- ----------       
                                                33,755,922 69,647,366       
Less accumulated depreciation, including                                    
 amounts applicable to assets acquired under                                
 capital leases of $315,805 in 1997 and                                     
 $533,241 in 1998.............................   6,383,350 14,971,262       
                                               ----------- ----------       
  Net property and equipment.................. $27,372,572 54,676,104       
                                               =========== ==========       

 On April 23, 1998, the Company entered into a 25-year indefeasible right of
use (IRU) agreement with Cable and Wireless Communications Services Limited     
(Cable and Wireless) for the right to use network                               

capacity in an under-sea fiber cable system. The Company paid $975,000 upon     
execution of the agreement and $8,775,000 on June 15, 1998, the date of         
activation. The cost of the IRU will be amortized over the life of the 25 year  
agreement. In addition, the Company will be responsible for its pro rata share  
of the cost and fees in relation to the operation and maintenance of the cable  
system.                                                                         

On May 21, 1998, the Company entered into an IRU agreement with Southern  
Cross Cable Network (Southern Cross) for the right to use network capacity in   
an under-sea fiber cable system. The Company paid $2,520,000 upon execution of  
the agreement. The IRU is scheduled to be ready for service by December 1999.   
Provided that the cable system is ready for service by this date, the Company   
will owe an additional $17,480,000, payable $2,480,000 in December 1999, and in 
three annual installments of $5,000,000 thereafter. Until such time as the      
cable system is ready for service, the Company is accounting for the initial    
payment of $2,520,000 as a deposit. In addition, the Company will be            
responsible for its pro rata share of the cost and fees in relation to the      
operation and maintenance of the cable system. As a result of the Company's     
financial and liquidity problems (see note 1), the Company does not intend to   
make the scheduled payments on the Southern Cross IRU. The Company is           
attempting to sell its interests in this IRU. The Company recorded an           
impairment loss of $2,020,000 in 1998 on the Southern Cross deposit.            

In October 1998, the Company developed a restructuring plan (see note 10).
As part of this restructuring plan, management of the Company committed to a    
plan to stop providing wholesale services to customers. Certain network         
equipment assets and leasehold improvements were identified by the Company that 
supported the wholesale business exclusively. These assets are reported on the  
combined financial statements at the lower of net carrying value or estimated   
fair value less costs to sell. The net carrying value of these assets at        
December 31, 1998 is $1,254,354 and is included in network equipment. Upon      
recording these assets at the lower of net carrying value or estimated fair     
value, the Company recognized a loss of $1,263,991. This loss is                

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NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)     

December 31, 1996, 1997 and 1998      

included in selling, general, and administrative expenses on the combined       
financial statements. No further depreciation is being recorded on these        
assets. The majority of these assets were sold in June 1999. All remaining      
assets are expected to be sold by December 1999.                                

 As a result of the Company's financial and liquidity problems (see note 1),
management of the Company decided not to complete their Saville Systems         
Convergent Billing Platform. Capitalized costs of $6,414,878 relating to this   
billing system were recognized by the Company as an impairment loss in the      
fourth quarter of 1998.                                                         

Also in the fourth quarter of 1998, the Company recognized an impairment  
loss of $740,775 relating to certain network equipment assets. Management       
concluded that the future cash flows expected from these assets were less than  
their net carrying value.                                                       

(7) Leases                                                                      

The Company leases certain network equipment under capital leases and     
certain network equipment and office space under operating leases. Future       
minimum lease payments under these lease agreements are summarized as follows:  

                                                                [Download Table]

                                                             Capital   Operating
                                                              leases    leases  
                                                             --------  ---------
                                                                                
Year ending December 31:                                                        
  1999...................................................... $138,805   519,461 
  2000......................................................   39,327   273,495 
  2001......................................................      --    134,483 
                                                             --------  -------- 
    Total minimum lease payments............................  178,132  $927,439 
                                                                       ======== 
Less amount representing interest...........................  (16,993)          
                                                             --------           
                                                             $161,139           
                                                             ========           

Rent expense under operating leases totaled $682,630, $1,423,104 and      
$1,896,844 for the years ended December 31, 1996, 1997 and 1998, respectively.  

(8) Shareholders' Equity                                                        

Initial Public Offering (IPO)                                                 

  On July 14, 1997, the Company consummated an IPO. The Company sold 4,000,000
shares of common stock at a price to the public of $10 per share for net        
proceeds of $35,640,343. On August 12, 1997, the underwriters exercised their   
over-allotment option and purchased an additional 450,000 shares at $10 per     
share which yielded net proceeds to the Company of $4,185,000.                  

Stock Option Plan                                                             

The Company has a stock option plan (the Plan) pursuant to which the      
Company's Board of Directors may grant nonqualified and performance-based       
options to employees. The Plan authorizes grants of option to purchase up to    
4,750,000 shares of authorized but unissued common stock. All options           
subsequent to September 30, 1996 have been granted with an exercise price equal 
to the stock's fair market value at the date                                    

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NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)     

December 31, 1996, 1997 and 1998      

of grant. All stock options have a three or ten-year term and become fully      
exercisable on the date of grant or in increments over a three-year vesting     
period. At December 31, 1998, there were 825,077 shares available for grant     
under the Plan.                                                                 

Stock option activity during the periods indicated is summarized below:   

                                                                [Download Table]

                                                 Weighted           Weighted
                           Shares                average   Options  average 
                          reserved     Options   exercise exercis-  exercise
                         for options outstanding  price     able     price  
                         ----------- ----------- -------- --------- --------
                                                                            
Outstanding at January                                                      
 1, 1996................  4,000,000         --    $  --                     
  Granted...............  2,368,969   1,631,031     1.31                    
  Exercised.............        --          --       --                     
  Canceled..............  2,373,079      (4,110)    1.31                    
                          ---------   ---------                             
Outstanding at December                                                     
 31, 1996...............  2,373,079   1,626,921     1.31    513,888  $1.31  
                                                          =========  =====  
  Granted...............  1,889,640     483,439    10.06                    
  Exercised.............        --     (188,367)    1.31                    
  Canceled..............  1,915,055     (25,415)    1.39                    
                          ---------   ---------                             
Outstanding at December                                                     
 31, 1997...............  1,915,055   1,896,578     3.54  1,036,544  $2.21  
                                                          =========  =====  
  Additional shares                                                         
   authorized...........  2,665,055         --       --                     
  Granted...............    378,168   2,286,887    12.84                    
  Exercised.............        --     (537,503)    1.31                    
  Canceled..............    825,077    (446,909)   11.82                    
                          ---------   ---------                             
Outstanding at December                                                     
 31, 1998...............    825,077   3,199,053   $ 9.40  1,477,270  $6.25  
                          =========   =========   ======  =========  =====  

On May 19, 1998, the Company increased the number of shares available for 
grant under the stock option plan from 4,000,000 to 4,750,000.                  

                                                                [Download Table]

                                                    Options exercisable at 
     Options outstanding at December 31, 1998          December 31, 1998   
---------------------------------------------------------------------------
                                Weighted                                   
                                 average                                   
                    Number      remaining  Weighted     Number     Weighted
Range of        outstanding at contractual average  exercisable at average 
exercise         December 31,     life     exercise  December 31,  exercise
 prices              1998        (years)    price        1998       price  
--------        -------------- ----------- -------- -------------- --------
                                                                           
$ 1.31              800,184       7.26      $ 1.31      702,324     $ 1.31 
  1.31 - 2.00       138,600       9.80        1.34       25,000       1.34 
  2.09 - 9.00       258,200       3.82        7.55      170,000       8.51 
 10.00              427,288       8.44       10.00      308,702      10.00 
 10.06 - 14.47      583,110       8.95       13.43      217,244      13.34 
 14.50               10,000       9.35       14.50       10,000      14.50 
 14.81              600,000       9.11       14.81          --         --  
 15.00              347,671       9.33       15.00       12,000      15.00 
 15.25                4,000       9.34       15.25        2,000      15.25 
 16.27 - 16.28       30,000       9.18       16.28       30,000      16.28 
                  ---------       ----      ------    ---------     ------ 
$ 1.31 - 16.28    3,199,053       8.16      $ 9.40    1,477,270     $ 6.25 
                  =========       ====      ======    =========     ====== 

The Company applies the intrinsic value method prescribed by APB No. 25 in
accounting for the Plan and, accordingly, compensation costs of $1,032,646,     
$342,380 and $285,317 have been recognized for its stock                        

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NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)     

December 31, 1996, 1997 and 1998      

options in the combined financial statements for the years ended December 31,   
1996, 1997 and 1998, respectively. Had the Company determined compensation cost 
based on the fair value at the grant date for its stock options under SFAS No.  
123, the Company's net loss would have been:                                    

                                                                [Download Table]

                          December 31,                                              
                              1996         December 31, 1997     December 31, 1998  
                         --------------- --------------------- ---------------------
                            As     Pro       As        Pro         As        Pro    
                         reported forma   reported    forma     reported    forma   
                         -------- ------ ---------- ---------- ---------- ----------
                                                                                    
Loss before                                                                         
 extraordinary item..... $118,322 79,767 13,524,361 14,296,982 81,326,763 88,620,000
                         -------- ------ ---------- ---------- ---------- ----------
Net loss................ $118,322 79,767 23,495,176 24,267,797 81,326,763 88,620,000
                         ======== ====== ========== ========== ========== ==========

  The pro forma impact on income assumes no options will be forfeited. The pro
forma effects are not representative of the effects on reported net income for  
future years, as most of the Company's employee stock option grants vest in     
increments over a period of three years.                                        

 Under SFAS No. 123, the per-share minimum value of stock options granted in
1996 was $0.61. For the year ended December 31, 1996, the minimum value,        
estimated as of the grant date, does not take into account the expected         
volatility of the underlying stock as prescribed by SFAS No. 123 for privately  
held companies. The input variables used to calculate the per-share minimum     
value included a weighted-average risk-free interest rate of 6.43%, no expected 
dividend yields, and an estimated option life of 3 years.                       

The per-share weighted-average fair value of stock options granted during 
1997 and 1998 was $4.79 and $9.57, respectively. For the year ended December    
31, 1997 and 1998, the fair value was estimated as of the grant date using the  
Black-Scholes option pricing model. Input variables used in the model for 1997  
and 1998 included a weighted-average risk-free interest rate of 5.33% and       
4.70%, respectively, no expected dividend yields, an expected volatility factor 
of 65% and 120%, respectively and an estimated option life of 3.05 and 3.00     
years, respectively.                                                            

Options granted during 1996 included performance based options. The       
compensation expense recorded for these performance based options under APB No. 
25 was greater than the expense recorded if the Company had determined          
compensation cost under SFAS No. 123.                                           

Independent Agent Stock Option Plan                                           

  During 1998, the Company adopted an incentive program for independent agents
that allows these non-employees to obtain stock options for certain             
contributions made to the Company. Total options granted to agents were         
321,400. The Company recognized commission expense of $474,241 as a result of   
granting these options. The weighted-average grant-date fair value of these     
options was approximately $1.48.                                                

Warrants--Private Offering                                                    

In connection with the Private Offering, the Company issued warrants to   
purchase 1,160,107 shares of the Company's common stock which, at the time of   
closing of the Private Offering, represented 4% of the Company's fully diluted  
common stock. On July 2, 1997, in accordance with the provisions of the Private 
Offering Agreement, the warrants increased in value by 167,393 shares to        
represent 4.5% of the Company's fully diluted common stock. During 1998, these  
warrants were exercised in a cashless transaction. Total warrants exercised     
were 1,327,333, which represented the total warrants outstanding of 1,327,500   
less 167 warrants which were canceled. The canceled warrants represent the      
value of the consideration (exercise price) due from the warrant holder at the  
time of exercise.                                                               

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NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)     

December 31, 1996, 1997 and 1998      

Warrants -- Forbearance Agreements                                            

During November and December 1998, the Company entered into forbearance   
agreements with certain telecommunications carriers and vendors. The            
forbearance agreements include terms of repayment to satisfy a portion of the   
amount the Company owed the carrier or vendor at a date agreed to in the        
agreement. At December 31, 1998, the Company owed $31,324,381 to carriers and   
vendors under the terms of these agreements. The amounts owed by the Company    
subject to the forbearance agreements is included in accounts payable in the    
combined financial statements. The Company is to pay the carrier or vendor the  
amount included in the forbearance agreement in equal installments over a three 
to six month period. Interest on the forbearance agreements range from 7.75% to 
12.00%. At December 31, 1998, accrued interest of $381,505 relating to these    
agreements is included in accrued expenses on the combined financial            
statements. Certain forbearance agreements provide for the Company to issue     
warrants to the carrier or vendor upon the last monthly payment made under the  
agreement. The number of warrants to be issued by the Company is equal to a     
certain percent, ranging from 2% to 5% of the amount included in the            
forbearance agreement. The total number of warrants to be issued by the Company 
under these forbearance agreements at December 31, 1998 is 924,567. The         
warrants are exercisable at any time after issuance and have an exercise price  
of $1.00. Each warrant can be exercised for one common share of the Company's   
common stock. The weighted-average grant-date fair value of these warrants was  
$1.30.                                                                          

The Company entered into forbearance agreements with other                
telecommunications carriers subsequent to December 31, 1998 totaling $579,482.  
The total number of warrants to be issued under these forbearance agreements is 
5,500, which can be exercised for one common share of the Company's common      
stock.                                                                          

Warrants -- Building Purchase                                                 

  During December 1998, the Company issued 11,010 warrants for partial payment
on a building purchase. These warrants are exercisable through December 2001 at 
an exercise price of $1.00. The weighted-average grant-date fair value of these 
warrants was approximately $0.89. Each warrant can be exercised for one common  
share of the Company's common stock.                                            

(9) Income Tax Matters                                                          

  Income tax expense (benefit) for the years ended December 31 is comprised of
the following:                                                                  

                                                                [Download Table]

                                                  1996        1997      1998 
                                                ---------  ----------  ------
                                                                             
Current:                                                                     
  Federal...................................... $(172,478) (1,309,398)    -- 
  State........................................   (64,903)    (42,202)    -- 
  Foreign......................................       --      139,907  29,908
                                                ---------  ----------  ------
                                                 (237,381) (1,211,693) 29,908
Deferred:                                                                    
  Federal......................................   167,066     552,571     -- 
  State........................................    62,867      82,596     -- 
  Foreign......................................       --          --      -- 
                                                ---------  ----------  ------
                                                  229,933     635,167     -- 
                                                ---------  ----------  ------
                                                $  (7,448)   (576,526) 29,908
                                                =========  ==========  ======

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NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)     

December 31, 1996, 1997 and 1998      

Income tax expense (benefit) differs from the amount computed by applying 
the federal income tax rate of 34% to losses before taxes, as follows:          

                                                                [Download Table]

                                           1996       1997        1998     
                                         --------  ----------  ----------- 
                                                                           
Expected federal income tax (benefit)... $(42,762) (4,872,309) (27,640,931)
State income tax (benefit), net of                                         
 federal effect.........................   (1,344)     26,660          --  
Increase in valuation allowance, net of                                    
 amount allocated to extraordinary                                         
 item...................................      --    3,695,829   21,354,691 
Foreign and unconsolidated subsidiary,                                     
 net operating losses...................      --      853,407    7,636,991 
Stock options exercised.................      --     (416,960)  (2,438,767)
Nondeductible goodwill..................      --        3,537      747,464 
Other nondeductible expenses, net.......   36,658     133,310      370,460 
                                         --------  ----------  ----------- 
                                         $ (7,448)   (576,526)      29,908 
                                         ========  ==========  =========== 

 The tax effect of significant temporary differences giving rise to deferred
income tax assets and liabilities as of December 31 are shown below:            

                                                                [Download Table]

                                                     1997         1998     
                                                  -----------  ----------- 
                                                                           
Deferred income tax liabilities:                                           
  Property and equipment, principally                                      
   depreciation adjustments...................... $ 1,404,074    1,898,908 
  Capitalized software...........................     605,321    1,133,747 
  Unearned foreign exchange difference...........         323       13,483 
                                                  -----------  ----------- 
    Total gross deferred tax liabilities.........   2,009,718    3,046,138 
                                                  -----------  ----------- 
Deferred income tax assets:                                                
  Allowance for credit losses....................   2,115,503    1,061,404 
  Accrued compensation...........................     603,001      631,116 
  Net operating loss carryforward................   4,986,678   28,092,567 
  Charitable contribution carryforward...........         --       151,339 
  Unearned revenue...............................      65,552        9,062 
  Amortization of goodwill.......................         --       246,251 
  Tax credit carryforward........................     248,985      249,150 
  Other..........................................     106,044       75,985 
                                                  -----------  ----------- 
    Total gross deferred tax assets..............   8,125,763   30,516,874 
Less valuation allowance.........................  (6,116,045) (27,470,736)
                                                  -----------  ----------- 
    Net deferred tax assets......................   2,009,718    3,046,138 
                                                  -----------  ----------- 
    Net deferred tax asset (liability)........... $       --           --  
                                                  ===========  =========== 

 The valuation allowance for deferred tax assets as of December 31, 1997 and
1998 was $6,116,045 and $27,470,736, respectively. The net change in the total  
valuation allowance for the years ended December 31, 1997 and 1998 was an       
increase of $6,116,045 and $21,354,691, respectively. In assessing the          
realizability of deferred tax assets, management considers whether it is more   
likely than not that some portion or all of the deferred tax assets will not be 
realized. The ultimate realization of deferred tax assets is dependent upon the 
generation of future taxable income during the periods in which those temporary 
differences become deductible. Management considers the scheduled reversal of   
deferred tax liabilities, projected future taxable income, and tax planning     
strategies in making this assessment. In order to fully realize the deferred    
tax asset,                                                                      

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TELEGROUP, INC. AND CERTAIN SUBSIDIARIES      

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)     

December 31, 1996, 1997 and 1998      

the Company will need to generate future taxable income of approximately        
$80,000,000 prior to the expiration of the net operating loss carryforwards in  
2018. Taxable loss for the years ended December 31, 1997 and 1998 was           
approximately $22,000,000 and $68,500,000, respectively. Based upon the level   
of historical taxable income and projections for future taxable income over the 
periods which the deferred tax assets are deductible, a valuation allowance has 
been established for the Company's net deferred tax assets as of December 31,   
1997 and 1998.                                                                  

At December 31, 1998, the Company has net operating loss carryforwards for
federal income tax purposes of approximately $82,600,000, which are available   
to offset future federal taxable income, if any, through 2018. In addition, the 
Company has alternative minimum tax credit carryforwards of approximately       
$249,000 which are available to reduce future federal regular income taxes, if  
any, over an indefinite period.                                                 

(10) Restructuring Plan                                                         

  In the fourth quarter of 1998, the Company recorded provisions of $2,060,770
for restructuring expenses. These expenses are included in selling, general,    
and administrative expenses in the combined financial statements. Included in   
this charge are severance and other costs of $1,938,501 and costs related to    
losses on contractual obligations of $122,269. The Company's restructuring plan 
commitments in 1998, which are expected to be fully completed in 1999, included 
initiatives to cease all activities related to the strategy to create a multi-  
service network, including terminating all employees assigned specifically to   
this task and abandoning all contractual obligations. The restructuring plan    
also committed to terminate and pay severance to certain personnel. As part of  
the restructuring initiative, 130 employees have been eliminated from the       
Company as of December 31, 1998. The remaining restructuring accrual of         
$1,256,628 at December 31, 1998 is included with accrued expenses in the        
combined financial statements.                                                  

(11) Commitments and Contingencies                                              

Commitments with Telecommunications Companies                                 

The Company has a $3,000,000 usage commitment with MFS/WorldCom in        
Frankfurt, Germany, to use MFS/WorldCom's fiber-optic network in its delivery   
of telecommunications services. This agreement began on September 5, 1997 and   
extends through June 30, 1999. A charge to cost of revenues of $2,150,496 was   
recognized by the Company for a shortfall in the usage commitment during        
December 1998.                                                                  

  The Company also has a two-year minimum usage commitment of $55,000,000 with
WorldCom which began on May 1, 1998.                                            

The Company has an agreement with Epoch Networks, Inc. for internet       
services, with a minimum usage commitment of $875,000 over the next two years.  
This agreement began June 1, 1998. A charge to cost of revenues of $875,000 was 
recognized by the Company for a shortfall in the usage commitment during        
December 1998.                                                                  

  Shortfalls in usage commitments, if any, are recorded as cost of revenues in
the period identified.                                                          

Letters of Credit                                                             

The Company has outstanding irrevocable letters of credit in the amount of
$418,520 as of December 31, 1998 with certain lessors and carriers. These       
letters of credit, which have expiration dates from March 15, 1999 through June 
15, 1999, collateralize the Company's obligations for lease commitments and     
network usage on                                                                

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TELEGROUP, INC. AND CERTAIN SUBSIDIARIES      

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)     

December 31, 1996, 1997 and 1998      

the carriers' networks. The fair value of these letters of credit is estimated  
to be the same as the contract values based on the nature of the arrangement    
with the issuing banks.                                                         

Retirement Plan                                                               

Effective January 1, 1996, the Company adopted the Telegroup, Inc. 401(k) 
Retirement Savings Plan (the 401(k) Plan). The 401(k) Plan is a defined         
contribution plan covering all employees of the Company who have one year of    
service and have attained the age of twenty-one. Participants may contribute up 
to 15% of their base pay in pretax dollars. The Company will match employee     
contributions on a discretionary basis. Vesting in Company contributions is     
100% after five years in the 401(k) Plan. The Company made no contributions to  
the 401(k) Plan in 1996, 1997 and 1998.                                         

Litigation                                                                    

The Company is a party to certain litigation which has arisen in the      
ordinary course of business. The most significant of these is described below.  

Subsequent to December 31, 1998, the Company was contacted by Cygnus      
Telecommunications Technology (Cygnus) asserting that the Company has infringed 
upon its patent rights. Cygnus is currently seeking relief from the automatic   
stay provision of the Bankruptcy Code (see note 1) to proceed with the          
infringement suit asserting an administrative claim of $1,200,000 against the   
Company. While it is not possible to predict with certainty the outcome of the  
litigation pending against the Company, it is the opinion of management that    
the ultimate disposition of these matters will not have a material adverse      
effect on the financial statements of the Company.                              

Other Commitments                                                             

On August 3, 1998, the Company entered into a Construction and Maintenance
Agreement (C&MA) to build the Japan-U.S. Cable Network, an under-sea cable      
system that will connect Japan and the U.S. by mid-year 2000. Under the C&MA,   
the Company is committed to pay approximately $2,200,000 for ownership of its   
0.17% share of this trans-Pacific cable over the next two years. The Company    
does not intend to make any future payments on this agreement.                  

(12) Business Segment and Significant Customer                                  

 The Company operates in a single industry segment. The geographic origin of
revenue is as follows:                                                          

                                                                [Download Table]

                                               Year ended December 31,       
                                         ------------------------------------
                                             1996        1997        1998    
                                         ------------ ----------- -----------
                                                                             
United States........................... $ 60,360,882 124,195,135 164,413,294
Europe..................................   81,137,404  96,725,712 107,308,784
Pacific Rim.............................   42,185,403  81,248,379  56,473,521
Other...................................   29,523,820  30,931,649  31,736,088
                                         ------------ ----------- -----------
                                         $213,207,509 333,100,875 359,931,687
                                         ============ =========== ===========

All revenue was derived from unaffiliated customers. For the years ended  
December 31, 1996 and 1997, approximately 12% and 13%, respectively, of the     
Company's total revenues were derived from a single customer. There were no     
customers representing over 10% of total revenues during 1998.                  

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TELEGROUP, INC. AND CERTAIN SUBSIDIARIES      

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)     

December 31, 1996, 1997 and 1998      

(13) Consideration Given In-Lieu of Future Commissions                          

On January 15, 1998, the Company prepaid sales commissions owed to certain
independent sales agents. Total consideration was $700,000 and 40,000 shares of 
unregistered common stock valued at $565,000.                                   

On April 30, 1998, the Company prepaid sales commissions owed to an       
independent sales agent. Total consideration was $210,000.                      

On May 31, 1998, the Company prepaid sales commissions owed to its Latin  
American coordinator. Consideration was 25,294 shares of unregistered common    
stock valued at $337,193.                                                       

On June 30, 1998, the Company entered into an agreement to prepay         
commissions owed to an independent sales agent. Total consideration paid on     
June 30, 1998 was $1,100,000. Per the agreement, common stock valued at         
$1,000,000 was to be issued. On August 29, 1998, the agreement was amended.     
Instead of common stock valued at $1,000,000, the Company agreed to issue       
85,179 shares of registered common stock valued at $574,671 and a promissory    
note for $500,000. The promissory note bears interest at 8.0% per annum. At     
December 31, 1998, $360,575 remains outstanding on this note and is included in 
long-term debt on the financial statements.                                     

On September 18, 1998, the Company prepaid sales commissions owed to a    
country coordinator. Total consideration was 31,264 shares of unregistered      
common stock valued at $115,370.                                                

The consideration given by the Company for the prepayment of these        
commissions is being amortized to selling, general and administrative expenses  
using an accelerated method over the estimated life of the agent or             
coordinator's customers or three years, whichever is shorter.                   

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TELEGROUP, INC. AND CERTAIN SUBSIDIARIES

COMBINED BALANCE SHEETS 
December 31, 1998 and March 31, 1999

                                                                [Download Table]

                                                      December 31,     March 31,   
                                                          1998           1999      
                                                      -------------  ------------- 
                                                                                   
                       Assets                                                      
Current assets:                                                                    
  Cash and cash equivalents.......................... $  19,101,837     14,118,503 
  Accounts receivable and unbilled services, less                                  
   allowance for credit losses of $4,423,308 at                                    
   December 31, 1998 and $5,582,388 at                                             
   March 31, 1999....................................    52,492,330     40,623,867 
  Prepaid expenses and other assets..................     3,194,644     11,562,433 
  Receivables from shareholders......................        85,777            --  
  Receivables from employees.........................        54,901         44,633 
                                                      -------------  ------------- 
    Total current assets.............................    74,929,489     66,349,436 
                                                      -------------  ------------- 
Net property and equipment...........................    54,676,104     51,881,283 
                                                      -------------  ------------- 
Other assets:                                                                      
  Deposits and other assets..........................     4,418,531      3,583,161 
  Goodwill, net of amortization of $223,458 at                                     
   December 31, 1998 and $355,080 at March 31, 1999..     4,148,679      4,610,327 
  Capitalized software, net of amortization..........     3,334,549      2,350,056 
  Debt issuance costs, net of amortization...........     3,513,108      3,365,482 
                                                      -------------  ------------- 
                                                         15,414,867     13,909,026 
                                                      -------------  ------------- 
    Total assets..................................... $ 145,020,460  $ 132,139,745 
                                                      =============  ============= 
   Liabilities and Shareholders' Equity (Deficit)                                  
Current liabilities:                                                               
  Accounts payable................................... $  88,602,750     81,537,529 
  Commissions payable................................     4,173,700      3,054,966 
  Accrued expenses...................................     6,551,162      8,757,396 
  Notes payable......................................    24,832,437     25,234,421 
  Customer deposits..................................       693,781        639,691 
  Unearned revenue...................................       153,430        115,215 
  Current portion of capital lease obligations.......       123,656        124,195 
  Current portion of long-term debt..................   111,130,591    113,130,460 
                                                      -------------  ------------- 
    Total current liabilities........................   236,261,507    232,593,873 
                                                      -------------  ------------- 
Capital lease obligations, excluding current por-                                  
 tion................................................        37,483         30,564 
Long-term debt, excluding current portion............       118,677        107,194 
Common stock, no par or stated value; 150,000,000                                  
 shares authorized, 33,689,785 and 33,851,728 issued                               
 and outstanding at December 31, 1998 and March 31,                                
 1999, respectively..................................           --             --  
Additional paid-in capital...........................    63,313,048     63,521,300 
Retained deficit.....................................  (155,267,829)  (164,224,629)
Accumulated other comprehensive income...............       557,574        111,443 
                                                      -------------  ------------- 
    Total shareholders' equity (deficit).............   (91,397,207)  (100,591,886)
                                                      -------------  ------------- 
Commitments and contingencies                                                      
    Total liabilities and shareholders' equity (defi-                              
     cit)............................................ $ 145,020,460    132,139,745 
                                                      =============  ============= 

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TELEGROUP, INC. AND CERTAIN SUBSIDIARIES

COMBINED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSSES      

Three months ended March 31, 1998 and 1999      

                                                                [Download Table]

                                                         1998         1999    
                                                     ------------  ---------- 
                                                                              
Revenues:                                                                     
  Retail............................................ $ 54,644,211  59,607,224 
  Wholesale.........................................   28,846,014   4,947,228 
                                                     ------------  ---------- 
    Total revenues..................................   83,490,225  64,554,452 
Cost of revenues....................................   66,940,491  43,448,399 
                                                     ------------  ---------- 
    Gross profit....................................   16,549,734  21,106,053 
                                                     ------------  ---------- 
Operating expenses:                                                           
  Selling, general and administrative expenses......   23,464,359  21,227,910 
  Depreciation and amortization.....................    2,098,760   3,499,058 
  Stock option-based compensation...................       85,595         --  
                                                     ------------  ---------- 
    Total operating expenses........................   25,648,714  24,726,968 
                                                     ------------  ---------- 
    Operating loss .................................   (9,098,980) (3,620,915)
Other income (expense):                                                       
  Interest expense..................................   (2,490,005) (3,910,386)
  Interest income...................................    1,123,819     145,213 
  Foreign currency transaction gain (loss)..........     (135,306)    149,587 
  Other.............................................       42,565      65,436 
                                                     ------------  ---------- 
    Loss before income taxes .......................  (10,557,907) (7,171,065)
Income tax expense..................................      (87,880)   (117,331)
                                                     ------------  ---------- 
    Net loss........................................ $(10,645,787) (7,288,396)
Foreign currency translation adjustment, net of                               
 tax................................................     (162,913)   (446,131)
                                                     ------------  ---------- 
    Comprehensive loss.............................. $(10,808,700) (7,734,527)
                                                     ============  ========== 

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TELEGROUP, INC. AND CERTAIN SUBSIDIARIES

COMBINED STATEMENTS OF CASH FLOWS 
Three Months Ended March 31, 1998 and 1999

                                                                [Download Table]

                                                          1998         1999    
                                                      ------------  ---------- 
                                                                               
Cash flows from operating activities:                                          
  Net loss........................................... $(10,645,787) (7,288,396)
  Adjustments to reconcile net loss to net cash used                           
   in operating activities:                                                    
    Depreciation and amortization....................    2,098,760   3,499,058 
    Loss on sale of equipment........................          378     131,675 
    Provision for credit losses on accounts                                    
     receivable......................................    1,369,658   2,652,876 
    Accretion of debt discounts......................    1,969,473   2,181,402 
    Stock option-based compensation expense..........       85,595         --  
  Changes in operating assets and liabilities,                                 
   excluding the effects of business combinations:                             
    Accounts receivable and unbilled services........    5,070,133   9,215,587 
    Prepaid expenses and other assets................    1,015,181  (8,367,789)
    Deposits and other assets........................   (2,539,503)    835,370 
    Accounts payable, commissions payable and accrued                          
     expenses........................................     (776,218) (5,977,721)
    Unearned revenue.................................      (90,953)    (38,215)
    Customer deposits................................      301,786     (54,090)
                                                      ------------  ---------- 
      Net cash used in operating activities..........   (2,141,497) (3,210,243)
                                                      ------------  ---------- 
Cash flows from investing activities:                                          
  Purchases of equipment.............................   (5,708,070)   (151,344)
  Sales of securities available-for-sale.............    9,208,572         --  
  Proceeds from sale of equipment....................          250     194,155 
  Capitalization of software.........................     (394,068)        --  
  Cash paid in business combinations, net of cash                              
   acquired..........................................     (424,050)        --  
  Net change in receivables from shareholders and                              
   employees.........................................       41,999      96,045 
                                                      ------------  ---------- 
  Net cash provided by investing activities..........    2,724,633     138,856 
                                                      ------------  ---------- 
Cash flows from financing activities:                                          
  Net proceeds from notes payable....................          --      401,984 
  Debt issuance costs................................     (164,194)        --  
  Net proceeds from options exercised................      579,489         --  
  Net principal payments on other long-term                                    
   borrowings........................................      (22,099)   (193,016)
  Principal payments under capital lease                                       
   obligations.......................................      (40,054)     (6,380)
  Proceeds received on note due from shareholders....       31,420         --  
                                                      ------------  ---------- 
      Net cash provided by financing activities......      384,562     202,588 
                                                      ------------  ---------- 
Exchange rate changes................................     (162,913)   (446,131)
Carve-out of uncombined subsidiaries.................   (5,100,079) (1,668,404)
Shares issued in connection with business                                      
 combinations of uncombined subsidiaries.............    4,056,504         --  
                                                      ------------  ---------- 
      Net decrease in cash and cash equivalents......     (238,790) (4,983,334)
                                                      ------------  ---------- 
Cash and cash equivalents at beginning of year.......   72,763,095  19,101,837 
                                                      ------------  ---------- 
Cash and cash equivalents at end of year............. $ 72,524,305  14,118,503 
                                                      ============  ========== 
Supplemental disclosures of cash flow information:                             
  Interest paid...................................... $     20,532     718,592 
                                                      ============  ========== 
  Income taxes paid.................................. $     10,370         --  
                                                      ============  ========== 
Supplemental disclosures of noncash investing and                              
 financing activities:                                                         
  Common stock issued in connection with business                              
   combinations...................................... $  4,056,504     208,252 
                                                      ============  ========== 
  Common stock issued in-lieu of future sales                                  
   commissions....................................... $    565,000         --  
                                                      ============  ========== 

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REPORT OF INDEPENDENT AUDITORS

The Board of Directors                                                          
TresCom International, Inc.                                                     

We have audited the consolidated financial statements of TresCom          
International, Inc. and its subsidiaries ("TresCom") as of December 31, 1997    
and 1996, and for each of the three years in the period ended December 31,      
1997, and have issued our report thereon dated February 27, 1998. Our audit     
also included the accompanying financial statement schedule of TresCom. This    
schedule is the responsibility of TresCom's management. Our responsibility is   
to express an opinion based on our audits.                                      

In our opinion, the financial statement schedule referred to above, when  
considered in relation to the basic financial statements taken as a whole,      
presents fairly in all material respects the information set forth therein.     

                     Ernst & Young LLP

Atlanta, Georgia                                                                
February 27, 1998                                                               

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SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

TRESCOM INTERNATIONAL, INC. 
(In Thousands)

                                                                [Download Table]

                                   Additions                                  
                         ------------------------------                       
                         Balance at Charged to Charged                Balance 
                         Beginning  Costs and  to Other               at End  
Description              of Period   Expenses  Accounts  Deductions  of Period
-----------              ---------- ---------- --------  ----------  ---------
                                                                              
Year ended December 31,                                                       
 1997:                                                                        
Reserve and allowance                                                         
 deducted from asset                                                          
 accounts:                                                                    
  Allowance for doubtful                                                      
   accounts.............   $7,588     $4,159     $500(1)   $4,098(3)  $ 8,149 
  Valuation allowance                                                         
   for deferred taxes...    8,479      5,574      --          --       14,053 
Year ended December 31,                                                       
 1996:                                                                        
Reserve and allowance                                                         
 deducted from asset                                                          
 accounts:                                                                    
  Allowance for doubtful                                                      
   accounts.............    4,140      5,036      --        1,588(3)    7,588 
  Valuation allowance                                                         
   for deferred taxes...    8,793        --       --          314(2)    8,479 
Year ended December 31,                                                       
 1995:                                                                        
Reserve and allowance                                                         
 deducted from asset                                                          
 accounts:                                                                    
  Allowance for doubtful                                                      
   accounts.............    3,761      1,791      700(4)    2,112(3)    4,140 
  Valuation allowance                                                         
   for deferred taxes...    5,737      3,056      --          --        8,793 

--------                                                                        
(1) In connection with acquisitions.                                            
(2) Change in deferred taxes.                                                   
(3) Write-off of uncollectible accounts.                                        
(4) Uncollectible accounts in U.S. Virgin Islands resulting from Hurricane      
Marilyn.                                                                

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

OFFER TO EXCHANGE ALL OUTSTANDING 

11 1/4% SENIOR NOTES DUE 2009 

($200,000,000 PRINCIPAL AMOUNT) 

FOR 11 1/4% SENIOR NOTES DUE 2009 

Primus Telecommunications Group, Incorporated 

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

PROSPECTUS

August  , 1999      

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

  All tendered initial unregistered notes, executed Letters of Transmittal and
other related documents should be directed to the exchange agent. Questions and 
requests for assistance and requests for additional copies of the Prospectus,   
the Letter of Transmittal and other related documents should be addressed to    
the exchange agent as follows:                                                  

BY MAIL, HAND OR OVERNIGHT DELIVERY:
First Union Customer Information Center 
Reorganization Department, 3C3-NC 1153
1525 West W.T. Harris Boulevard 
Charlotte, N.C. 28262 

FACSIMILE TRANSMISSION: 
(704) 590-7628

TO CONFIRM RECEIPT: 
(704) 590-7408

(Originals of all documents submitted by facsimile should be sent promptly
by hand, overnight courier or registered or certified mail)                     

--------------------------------------------------------------------------------
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PART II 

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20. Indemnification of Directors and Officers                              

Section 145 of the DGCL permits each Delaware business corporation to     
indemnify its directors, officers, employees and agents against liability for   
each such person's acts taken in his or her capacity as a director, officer,    
employee or agent of the corporation if such actions were taken in good faith   
and in a manner which he or she reasonably believed to be in or not opposed to  
the best interests of the corporation, and with respect to any criminal action, 
if he or she had no reasonable cause to believe his or her conduct was          
unlawful. Article X of our Amended and Restated By-Laws provides that we, to    
the full extent permitted by Section 145 of the DGCL, shall indemnify all of    
our past and present directors and may indemnify all of our past or present     
employees or other agents. To the extent that a director, officer, employee or  
agent of our's has been successful on the merits or otherwise in defense of any 
action, suit or proceeding referred to in such Article X, or in defense of any  
claim, issue or matter therein, he or she shall be indemnified by us against    
actually and reasonably incurred expenses in connection therewith. Such         
expenses may be paid by us in advance of the final disposition of the action    
upon receipt of an undertaking to repay the advance if it is ultimately         
determined that such person is not entitled to indemnification.                 

  As permitted by Section 102(b)(7) of the DGCL, Article 11 of our Amended and
Restated Certificate of Incorporation provides that no director shall be liable 
to us for monetary damages for breach of fiduciary duty as a director, except   
for liability                                                                   

(i) for any breach of the director's duty of loyalty to us or our     
stockholders,                                                               

(ii) for acts or omissions not in good faith or which involve         
intentional misconduct or a knowing violation of law,                       

(iii) for the unlawful payment of dividends on or redemption of our   
capital stock or                                                            

(iv) for any transaction from which the director derived an improper  
personal benefit.                                                           

  We have obtained a policy insuring us and our directors and officers against
certain liabilities, including liabilities under the 1933 Act.                  

Pursuant to Section 5(h) of the TresCom merger agreement, we will provide 
each individual who served as a director or officer of TresCom at any time      
prior to the effective time of the TresCom merger with liability insurance for  
a period of six years after the effective time, having no less favorable        
coverage than any applicable insurance of TresCom in effect immediately prior   
to the effective time; provided, however, if the existing liability insurance   
expires, or is terminated or canceled by the insurance carrier during such six- 
year period, the company which survived the merger will use its best efforts to 
obtain as much liability insurance as can be obtained for the remainder of such 
period for a premium not in excess (on an annualized basis) of 150% of the last 
annual premium paid prior to the date of the merger agreement.                  

Item 21. Exhibits                                                               

                                                                [Download Table]

Exhibit                                                                     
Number                         Description of Exhibits                      
-------                        -----------------------                      
                                                                            
  2.1   Agreement and Plan of Merger by and among Primus, TresCom and Taurus
        Acquisition Corp. ("TAC"), dated as of February 3, 1998, and as     
        amended by Amendments No. 1 and 2 to Agreement and Plan of Merger   
        dated as of April 8, 1998 and as of April 16, 1998, respectively;   
        Incorporated by reference to Appendix A to the Joint Proxy          
        Statement/Prospectus on Form S-4, No. 333-51797 dated May 4, 1998.  

  2.2   Amendment No. 1 to Agreement and Plan of Merger among Primus TresCom
        and TAC, dated as of April 8, 1998; Incorporated by reference to    
        Exhibit 2.1 of Primus's Current Report on Form 8-K dated April 10,  
        1998.                                                               


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Exhibit                                                                       
Number                          Description of Exhibits                       
-------                         -----------------------                       
                                                                              
  2.3   Amendment No. 2 to Agreement and Plan of Merger among Primus, TresCom 
        and TAC, dated as of April 16, 1998; Incorporated by reference to     
        Exhibit 2.1 of Primus's Current Report on Form 8-K dated April 23,    
        1998 (the "Form 8-K for Amendments"), as amended by the Primus Current
        Report on Form 8-K/A dated April 23, 1998.                            

  2.4   Asset Purchase Agreement by and among USFI, Inc. Primus               
        Telecommunications, Inc., Primus and US Cable Corporation dated as of 
        October 20, 1997; Incorporated by reference to Exhibit 2.1 of Primus's
        Current Report on Form 8-K dated November 3, 1997. (The exhibits and  
        schedules listed in the table of contents to the Asset Purchase       
        Agreement have been omitted in accordance with Item 601(b)(2) of      
        Regulation S-K. A copy of such exhibits and schedules shall be        
        furnished supplementally to the Commission upon request.)             

  2.5   Equity Purchase Agreement by and among Messrs. James D. Pearson,      
        Stephen E. Myers, Michael C. Anderson, Primus Telecommunications,     
        Inc., and Primus, dated as of October 20, 1997; Incorporated by       
        reference to Exhibit 2.2 of Primus's Current Report on Form 8-K dated 
        November 3, 1997. (The exhibits and schedules listed in the table of  
        contents to the Equity Purchase Agreement have been omitted in        
        accordance with Item 601(b)(2) of Regulation S-K. A copy of such      
        exhibits and schedules shall be furnished supplementally to the       
        Commission upon request.)                                             

  2.6   Asset and Stock Purchase Agreement dated June 30, 1999, by and between
        Telegroup, Inc. and Primus; Incorporated by reference to Exhibit 2.1  
        of Primus's Current Report on From 8-K dated July 14, 1999. (The      
        exhibits and schedules listed in the table of contents to the Asset   
        and Stock Purchase Agreement have been omitted in accordance with Item
        601(b)(2) of Regulation S-K. A copy of such exhibits and schedules    
        shall be furnished supplementally to the Commission upon request.)    

  3.1   Amended and Restated Certificate of Incorporation of Primus;          
        Incorporated by reference to Exhibit 3.1 of the Registration Statement
        on Form S-8, No. 333-56557 (the "S-8 Registration Statement").        

  3.2   Amended and Restated Bylaws of Primus; Incorporated by reference to   
        Exhibit 3.2 of the Registration Statement on Form S-1, No. 333-10875  
        (the "IPO Registration Statement").                                   

  4.1   Specimen Certificate of Primus Common Stock; Incorporated by reference
        to Exhibit 4.1 of the IPO Registration Statement.                     

  4.2   Form of Indenture of Primus regarding the 1997 Senior Notes (the "1997
        Indenture"); Incorporated by reference to Exhibit 4.1 of the          
        Registration Statement on Form S-1, No 333-30195 (the "1997 Senior    
        Note Registration Statement").                                        

  4.3   Form of Supplemental Indenture of Primus to the 1997 Indenture dated  
        January 20, 1999, between Primus and First Union National Bank.+      

  4.4   Form of Warrant Agreement of Primus; Incorporated by reference to     
        Exhibit 4.2 of the 1997 Senior Note Registration Statement.           

  4.5   Indenture, dated May 19, 1998, between Primus Telecommunications      
        Group, Incorporated and First Union Nation Bank; Incorporated by      
        reference to Exhibit 4.4 of the Registration Statement on Form S-4, No
        333-58547 (the "1998 Senior Note Registration Statement").            

  4.6   Specimen 9 7/8% Senior Note due 2008; Incorporated by reference to    
        Exhibit A included in Exhibit 4.4 of the 1998 Senior Note Registration
        Statement.                                                            

  4.7   Indenture, dated January 29, 1999, between Primus and First Union     
        National Bank (the "January 1999 Indenture").+                        

  4.8   Specimen 11 1/4% Senior Note due 2009; Incorporated by reference to   
        Exhibit A included in Exhibit 4.7.                                    

  4.9   First Supplemental Indenture to the January 1999 Indenture, dated as  
        of June 30, 1999, between Primus and First Union National Bank;       
        Incorporated by reference to Exhibit 4.1 of Primus's Current Report on
        From 8-K dated July 14, 1999.                                         


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Exhibit                                                                       
Number                          Description of Exhibits                       
-------                         -----------------------                       
                                                                              
  4.10  Rights Agreement, dated as of December 23, 1998, between Primus and   
        StockTrans, Inc., including the Form of Rights Certificate (Exhibit   
        A), the Certificate of Designation (Exhibit B) and the Form of Summary
        of Rights (Exhibit C); Incorporated by reference to Exhibit 4.1 to the
        Company's Registration Statement on Form 8-A, No 000-29092 filed with 
        the Commission on December 30, 1998.                                  

  4.11  Form of legend on certificates representing shares of Common Stock    
        regarding Series B Junior Participating Preferred Stock Purchase      
        Rights; Incorporated by reference to Exhibit 4.2 to the Company's     
        Registration Statement on Form 8-A, No 000-29092 filed with the       
        Commission on December 30, 1998.                                      

  5.1   Opinion of Pepper Hamilton LLP regarding the validity of the          
        securities being registered.+                                         

 10.1   Stockholder Agreement among Warburg, Pincus, K. Paul Singh and Primus,
        dated as of February 3, 1998; Incorporated by reference to Exhibit    
        10.1 of the Primus Current Report on Form 8-K dated February 6, 1998  
        (the "Form 8-K").                                                     

 10.2   Voting Agreement between Primus and Wesley T. O'Brien, dated as of    
        February 3, 1998; Incorporated by reference to Exhibit 10.4 of the    
        Form 8-K.                                                             

 10.3   Voting Agreement between Primus and Rudy McGlashan, dated as of       
        February 3, 1998; Incorporated by reference to Exhibit 10.5 of the    
        Form 8-K.                                                             

 10.4   Voting Agreement between TresCom and K. Paul Singh, dated as of       
        February 3, 1998; Incorporated by reference to Exhibit 10.2 of the    
        Form 8-K.                                                             

 10.5   Voting Agreement between TresCom and John F. DePodesta, dated as of   
        February 3, 1998; Incorporated by reference to Exhibit 10.3 of the    
        Form 8-K.                                                             

 10.6   Amendment No. 1 to Stockholder Agreement among Warburg, Pincus, K.    
        Paul Singh, Primus, and TresCom, dated as of April 16, 1998;          
        Incorporated by reference to Exhibit 10.1 of the Form 8-K for         
        Amendments.                                                           

 10.7   Amendment No. 1 to Voting Agreement between Wesley T. O'Brien and     
        Primus, dated as of April 16, 1998; Incorporated by reference to      
        Exhibit 10.2 of the Form 8-K for Amendments.                          

 10.8   Amendment No. 1 to Voting Agreement between Rudolph McGlashan and     
        Primus, dated as of April 16, 1998; Incorporated by reference to      
        Exhibit 10.3 of the Form 8-K for Amendments.                          

 10.9   Switched Transit Agreement, dated June 5, 1995, between Teleglobe USA,
        Inc. and Primus for the provision of services to India; Incorporated  
        by reference to Exhibit 10.2 of the IPO Registration Statement.       

 10.10  Hardpatch Transit Agreement, dated February 29, 1996, between         
        Teleglobe USA; Incorporated by reference to Exhibit 10.3 of the IPO   
        Registration Statement.                                               

 10.11  Agreement for Billing and Related Services, dated February 23, 1995,  
        between Primus and Electronic Data System Inc.; Incorporated by       
        reference to Exhibit 10.4 of the IPO Registration Statement.          

 10.12  Employment Agreement, dated June 1, 1994, between Primus and K. Paul  
        Singh, Inc.; Incorporated by reference to Exhibit 10.5 of the IPO     
        Registration Statement.**                                             

 10.13  Primus 1995 Stock Option Plan; Incorporated by reference to Exhibit   
        10.6 of the IPO Registration Statement.**                             

 10.14  Amendment 1999-1 to the Primus Telecommunications Group, Incorporated 
        Stock Option Plan.*                                                   

 10.15  Primus 1995 Director Stock Option Plan; Incorporated by reference to  
        Exhibit 10.7 of the IPO Registration Statement.**                     

 10.16  Registration Rights Agreement, dated July 31, 1996, among Primus,     
        Quantum Industrial Partners LDC, S-C Phoenix Holdings, L.L.C., Winston
        Partners II LDC and Winston Partners LLC; Incorporated by reference to
        Exhibit 10.11 of the IPO Registration Statement.                      


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Exhibit                                                                       
Number                          Description of Exhibits                       
-------                         -----------------------                       
                                                                              
 10.17  Service Provider Agreement between Telstra Corporation Limited and    
        Axicorp Pty., Ltd., dated May 3, 1995; Incorporated by reference to   
        Exhibit 10.12 of the IPO Registration Statement.                      

 10.18  Dealer Agreement between Telstra Corporation Limited and Axicorp Pty.,
        Ltd. dated January 8, 1996; Incorporated by reference to Exhibit 10.13
        of the IPO Registration Statement.                                    

 10.19  Hardpatch Transit Agreement dated October 5, 1995 between Teleglobe   
        USA, Inc. and Primus the provision of services to India; Incorporated 
        by reference to Exhibit 10.14 of the IPO Registration Statement.      

 10.20  Master Lease Agreement dated as of November 21, 1997 between NTFC     
        Capital Corporation and Primus Telecommunications, Inc.; Incorporated 
        by reference to Exhibit 10.17 of Primus's Annual Report on Form 10-K  
        for the year ended December 31, 1997 (the "1997 10-K"), as amended on 
        Form 10-K/A dated April 30, 1998.                                     

 10.21  Primus Employee Stock Purchase Plan; Incorporated by reference to     
        Exhibit 10.15 of the 1997 Senior Note Registration Statement.**       

 10.22  Primus 401(k) Plan; Incorporated by reference to Exhibit 4.4 of the   
        Primus Registration Statement on Form S-8 (No. 333-35005).            

 10.23  Purchase Agreement, dated May 14, 1998, among Primus                  
        Telecommunications Group, Incorporated, Primus Telecommunications,    
        Incorporated, Primus Telecommunications Pty. Ltd. and Lehman Brothers,
        Inc.; Incorporated by reference to Exhibit 10.22 of the 1998 Senior   
        Note Registration Statement.                                          

 10.24  Registration Rights Agreement, dated May 19, 1998, among Primus       
        Telecommunications Group, Incorporated, Primus Telecommunications,    
        Incorporated, Primus Telecommunications Pty. Ltd. and Lehman Brothers,
        Inc.; Incorporated by reference to Exhibit 10.23 of the 1998 Senior   
        Note Registration Statement.                                          

 10.25  Primus Telecommunications Group, Incorporated-TresCom International   
        Stock Option Plan; Incorporated by reference to Exhibit 4.1 of the S-8
        Registration Statement.**                                             

 10.26  Amended and Restated Employment Agreement between the Company and     
        Wesley T. O'Brien; Incorporated by reference to Exhibit 10.3 to the   
        TresCom 1996 Form 10-K.**                                             

 10.27  First Amendment to Amended and Restated Employment Agreement between  
        the Company and Wesley T. O'Brien; Incorporated by reference to       
        Exhibit 10.2 to the TresCom 1997 Form 10-K).**                        

 10.28  Employment Agreement between the Company and Rudolph McGlashan;       
        Incorporated by reference to Exhibit 10.4 to the TresCom Registration 
        Statement on Form S-1, No. 33-99738, filed on November 22, 1995 (the  
        "TresCom Form S-1").**                                                

 10.29  Amendment to Employment Agreement between the Company and Rudolph     
        McGlashan; Incorporated by reference to Exhibit 10.5 to the TresCom   
        Form S-1.**                                                           

 10.30  Warrant Agreement between the Company and Warburg, Pincus Investors,  
        L.P; Incorporated by reference to Exhibit 10.6 to the TresCom Form S- 
        1.                                                                    

 10.31  Form of Indemnification Agreement between the Company and its         
        directors and executive officers; Incorporated by reference to Exhibit
        10.23 to the TresCom Form S-1.                                        

 10.32  Revolving Credit and Security Agreement, among TresCom International, 
        Inc., TresCom U.S.A., Inc., Intex Telecommunications, Inc., The St.   
        Thomas and San Juan Telephone Company, Inc., STSJ Overseas Telephone  
        Company, Inc., PNC Bank, National Association (as lender and as agent)
        and the other lenders a party thereto (the "Loan Agreement").         
        Incorporated by reference to Exhibit 10.22 to the TresCom Quarterly   
        Report on Form 10-Q for the fiscal quarter ended June 30, 1997.       

 10.33  Revolving Credit Note, dated July 31, 1997, payable to PNC Bank,      
        National Association and the other lenders a party to the Loan        
        Agreement; Incorporated by reference to Exhibit 10.23 to the Company's
        Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,   
        1997.                                                                 


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Exhibit                                                                
Number                      Description of Exhibits                    
-------                     -----------------------                    
                                                                       
 21.1   Subsidiaries of the Registrant.*                               

 23.1   Consent of Deloitte & Touche LLP (included on page II-6 of this
        Registration Statement).                                       

 23.2   Consent of Ernst & Young LLP (included on page II-7 of this    
        Registration Statement).                                       

 23.3   Consent of Pepper Hamilton LLP (included in Exhibit 5.1).+     

 23.4   Consent of KPMG LLP (included on page II-8 of this Registration
        Statement).                                                    

 24.1   Power of Attorney (included on page II-9 of this Registration  
        Statement).+                                                   

 25     Form T-1.+                                                     

 99.1   Form of Letter of Transmittal.+                                

 99.2   Form of Notice of Guaranteed Delivery.+                        

--------                                                                        
* Filed herewith.                                                             
+ Previously filed.                                                           
** Compensatory Benefit Plan.                                                   

(B) Financial Statement Schedules.                                        

All schedules have been omitted because they are not applicable, not      
required, or the required information is included in the Financial Statements   
or the notes thereto.                                                           

Item 22. Undertakings                                                           

 Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the  
registrant pursuant to the foregoing provisions, or otherwise, the registrant   
has been advised that in the opinion of the Securities and Exchange Commission  
such indemnification is against public policy as expressed in the Securities    
Act and is, therefore, unenforceable. In the event that a claim for             
indemnification against such liabilities (other than the payment by the         
registrant of expenses incurred or paid by a director, officer or controlling   
person of the registrant in the successful defense of any action, suit or       
proceeding) is asserted by such director, officer or controlling person in      
connection with the securities being registered, the registrant will, unless in 
the opinion of counsel the matter has been settled by controlling precedent,    
submit to a court of appropriate jurisdiction the question whether such         
indemnification by it is against public policy as expressed in the Securities   
Act and will be governed by the final adjudication of such issue.               

  The undersigned registrant hereby undertakes: (1) to file, during any period
in which offers or sales are being made, a post-effective amendment to this     
registration statement: (i) to include any prospectus required by Section       
10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any   
facts or events arising after the effective date of the registration statement  
(or the most recent post-effective amendment thereof) which, individually or in 
the aggregate, represent a fundamental change in the information set forth in   
the registration statement. Notwithstanding the foregoing, any increase or      
decrease in volume of securities offered (if the total dollar value of          
securities offered would not exceed that which was registered) and any          
deviation from the low or high and of the estimated maximum offering range may  
be reflected in the form of prospectus filed with the Commission pursuant to    
Rule 424(b) if, in the aggregate, the changes in volume and price represent no  
more than 20 percent change in the maximum aggregate offering price set forth   
in the "Calculation of Registration Fee" table in the effective registration    
statement; and (iii) to include any material information with respect to the    
plan of distribution not previously disclosed in the registration statement or  
any material change to such information in the registration statement; (2)      
that, for the purpose of determining any liability under the Securities Act,    
each such post-effective amendment shall be deemed to be a new registration     
statement relating to the securities offered therein, and the offering of such  
securities at that time shall be deemed to be the initial bona fide offering    
thereof; and (3) to remove from registration by means of a post-effective       
amendment any of the securities being registered which remain unsold at the     
termination of the offering.                                                    

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CONSENT OF INDEPENDENT AUDITORS     

  We consent to the use in this Post-Effective Amendment No. 1 to Registration
Statement No. 333-76965 of Primus Telecommunications Group, Incorporated of our 
report dated February 10, 1999, except for paragraph one of Note 16 as to which 
the date is March 31, 1999, appearing in the Prospectus, which is a part of     
such Registration Statement, and to the reference to us under the headings      
"Selected Financial Data" and "Experts" in such Prospectus.                     

Deloitte & Touche LLP                                                           

McLean, Virginia                                                                

July 30, 1999                                                                   

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CONSENT OF INDEPENDENT AUDITORS     

We consent to the reference to our firm under the caption "Experts" and to
the use of our reports dated February 27, 1998, with respect to the             
consolidated financial statements and schedule of TresCom International, Inc.   
included in the Post-Effective Amendment No. 1 to Registration Statement No.    
333-76965 and related prospectus of Primus Telecommunications Group,            
Incorporated for Exchange Offer of its 11 1/4% Senior Notes due 2009.           

Ernst & Young LLP                                                               

Atlanta, Georgia                                                                

July 30, 1999                                                                   

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ACCOUNTANTS' CONSENT      

The Board of Directors                                                          

Telegroup, Inc.                                                                 

 We consent to the use of our report on the combined financial statements of
Telegroup, Inc. and certain subsidiaries included herein and to the reference   
to our firm under the heading "Experts" in this Post-Effective Amendment No.1   
to Registration Statement No. 333-76965.                                        

  Our report dated July 9, 1999, contains an explanatory paragraph that states
that the Company has filed for protection under Chapter 11 of the United States 
Bankruptcy Code due to significant financial and liquidity problems. These      
circumstances raise substantial doubt about its ability to continue as a going  
concern. The financial statements do not include any adjustments that might     
result from the outcome of this uncertainty.                                    

Lincoln, Nebraska                                                               

July 29, 1999                                                                   

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the   
undersigned, thereunto duly authorized, in McLean, Virginia on July 30, 1999.   

                                    Primus Telecommunications Group,
                  Incorporated

                                       /s/ K. Paul Singh
                                         By: _________________________________
                                           K. Paul Singh
                                           President, Chairman and Chief
                                           Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this          
Registration Statement has been signed by the following persons in the          
capacities and on the dates indicated.                                          

                                                                [Download Table]

              Signature                          Title               Date     
              ---------                          -----               ----     

                                                                              
        /s/ K. Paul Singh              Chairman, President and   July 30, 1999
______________________________________  Chief Executive Officer               
            K. Paul Singh               (principal executive                  
                                        officer and Director                  

        /s/ Neil L. Hazard             Executive Vice President  July 30, 1999
______________________________________  and Chief Financial                   
            Neil L. Hazard              Officer (principal                    
                                        financial officer)                    

                  *                    Vice President and        July 30, 1999
______________________________________  Corporate Controller                  
          Thomas R. Kloster             (principal accounting                 
                                        officer)                              

                  *                    Executive Vice President  July 30, 1999
______________________________________  and Director                          
          John F. Depodesta                                                   

                  *                    Director                  July 30, 1999
______________________________________                                        
            Herman Fialkov                                                    

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              Signature                          Title      Date     
              ---------                          -----      ----     

                                                                     
                  *                    Director         July 30, 1999
______________________________________                               
          David E. Hershberg                                         

                  *                    Director         July 30, 1999
______________________________________                               
             John Puente                                             

                  *                    Director         July 30, 1999
______________________________________                               
           Douglas M. Karp                                           

/s/ Neil L. Hazard                                          
*By:_________________________________                                           
Attorney-in-fact                                          

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EXHIBIT INDEX 

                                                                [Download Table]

Exhibit                                                                       
Number                          Description of Exhibits                       
-------                         -----------------------                       
                                                                              
  2.1   Agreement and Plan of Merger by and among Primus, TresCom and Taurus  
        Acquisition Corp. ("TAC"), dated as of February 3, 1998, and as       
        amended by Amendments No. 1 and 2 to Agreement and Plan of Merger     
        dated as of April 8, 1998 and as of April 16, 1998, respectively;     
        Incorporated by reference to Appendix A to the Joint Proxy            
        Statement/Prospectus on Form S-4, No. 333-51797 dated May 4, 1998.    

  2.2   Amendment No. 1 to Agreement and Plan of Merger among Primus TresCom  
        and TAC, dated as of April 8, 1998; Incorporated by reference to      
        Exhibit 2.1 of Primus's Current Report on Form 8-K dated April 10,    
        1998.                                                                 

  2.3   Amendment No. 2 to Agreement and Plan of Merger among Primus, TresCom 
        and TAC, dated as of April 16, 1998; Incorporated by reference to     
        Exhibit 2.1 of Primus's Current Report on Form 8-K dated April 23,    
        1998 (the "Form 8-K for Amendments"), as amended by the Primus Current
        Report on Form 8-K/A dated April 23, 1998.                            

  2.4   Asset Purchase Agreement by and among USFI, Inc. Primus               
        Telecommunications, Inc., Primus and US Cable Corporation dated as of 
        October 20, 1997; Incorporated by reference to Exhibit 2.1 of Primus's
        Current Report on Form 8-K dated November 3, 1997. (The exhibits and  
        schedules listed in the table of contents to the Asset Purchase       
        Agreement have been omitted in accordance with Item 601(b)(2) of      
        Regulation S-K. A copy of such exhibits and schedules shall be        
        furnished supplementally to the Commission upon request.)             

  2.5   Equity Purchase Agreement by and among Messrs. James D. Pearson,      
        Stephen E. Myers, Michael C. Anderson, Primus Telecommunications,     
        Inc., and Primus, dated as of October 20, 1997; Incorporated by       
        reference to Exhibit 2.2 of Primus's Current Report on Form 8-K dated 
        November 3, 1997. (The exhibits and schedules listed in the table of  
        contents to the Equity Purchase Agreement have been omitted in        
        accordance with Item 601(b)(2) of Regulation S-K. A copy of such      
        exhibits and schedules shall be furnished supplementally to the       
        Commission upon request.)                                             

  2.6   Asset and Stock Purchase Agreement dated June 30, 1999, by and between
        Telegroup, Inc. and Primus; Incorporated by reference to Exhibit 2.1  
        of Primus's Current Report on From 8-K dated July 14, 1999. (The      
        exhibits and schedules listed in the table of contents to the Asset   
        and Stock Purchase Agreement have been omitted in accordance with Item
        601(b)(2) of Regulation S-K. A copy of such exhibits and schedules    
        shall be furnished supplementally to the Commission upon request.)    

  3.1   Amended and Restated Certificate of Incorporation of Primus;          
        Incorporated by reference to Exhibit 3.1 of the Registration Statement
        on Form S-8, No. 333-56557 (the "S-8 Registration Statement").        

  3.2   Amended and Restated Bylaws of Primus; Incorporated by reference to   
        Exhibit 3.2 of the Registration Statement on Form S-1, No. 333-10875  
        (the "IPO Registration Statement").                                   

  4.1   Specimen Certificate of Primus Common Stock; Incorporated by reference
        to Exhibit 4.1 of the IPO Registration Statement.                     

  4.2   Form of Indenture of Primus regarding the 1997 Senior Notes (the "1997
        Indenture"); Incorporated by reference to Exhibit 4.1 of the          
        Registration Statement on Form S-1, No 333-30195 (the "1997 Senior    
        Note Registration Statement").                                        

  4.3   Form of Supplemental Indenture of Primus to the 1997 Indenture dated  
        January 20, 1999, between Primus and First Union National Bank.+      

  4.4   Form of Warrant Agreement of Primus; Incorporated by reference to     
        Exhibit 4.2 of the 1997 Senior Note Registration Statement.           

  4.5   Indenture, dated May 19, 1998, between Primus Telecommunications      
        Group, Incorporated and First Union Nation Bank; Incorporated by      
        reference to Exhibit 4.4 of the Registration Statement on Form S- 4,  
        No 333-58547 (the "1998 Senior Note Registration Statement").         


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Exhibit                                                                       
Number                          Description of Exhibits                       
-------                         -----------------------                       
                                                                              
  4.6   Specimen 9 7/8% Senior Note due 2008; Incorporated by reference to    
        Exhibit A included in Exhibit 4.4 of the 1998 Senior Note Registration
        Statement.                                                            

  4.7   Indenture, dated January 29, 1999, between Primus and First Union     
        National Bank (the "January 1999 Indenture").+                        

  4.8   Specimen 11 1/4% Senior Note due 2009; Incorporated by reference to   
        Exhibit A included in Exhibit 4.7.                                    

  4.9   First Supplemental Indenture to the January 1999 Indenture, dated as  
        of June 30, 1999, between Primus and First Union National Bank;       
        Incorporated by reference to Exhibit 4.1 of Primus's Current Report on
        From 8-K dated July 14, 1999.                                         

  4.10  Rights Agreement, dated as of December 23, 1998, between Primus and   
        StockTrans, Inc., including the Form of Rights Certificate (Exhibit   
        A), the Certificate of Designation (Exhibit B) and the Form of Summary
        of Rights (Exhibit C); Incorporated by reference to Exhibit 4.1 to the
        Company's Registration Statement on Form 8-A, No 000-29092 filed with 
        the Commission on December 30, 1998.                                  

  4.11  Form of legend on certificates representing shares of Common Stock    
        regarding Series B Junior Participating Preferred Stock Purchase      
        Rights; Incorporated by reference to Exhibit 4.2 to the Company's     
        Registration Statement on Form 8-A, No 000-29092 filed with the       
        Commission on December 30, 1998.                                      

  5.1   Opinion of Pepper Hamilton LLP regarding the validity of the          
        securities being registered.+                                         

 10.1   Stockholder Agreement among Warburg, Pincus, K. Paul Singh and Primus,
        dated as of February 3, 1998; Incorporated by reference to Exhibit    
        10.1 of the Primus Current Report on Form 8-K dated February 6, 1998  
        (the "Form 8-K").                                                     

 10.2   Voting Agreement between Primus and Wesley T. O'Brien, dated as of    
        February 3, 1998; Incorporated by reference to Exhibit 10.4 of the    
        Form 8-K.                                                             

 10.3   Voting Agreement between Primus and Rudy McGlashan, dated as of       
        February 3, 1998; Incorporated by reference to Exhibit 10.5 of the    
        Form 8-K.                                                             

 10.4   Voting Agreement between TresCom and K. Paul Singh, dated as of       
        February 3, 1998; Incorporated by reference to Exhibit 10.2 of the    
        Form 8-K.                                                             

 10.5   Voting Agreement between TresCom and John F. DePodesta, dated as of   
        February 3, 1998; Incorporated by reference to Exhibit 10.3 of the    
        Form 8-K.                                                             

 10.6   Amendment No. 1 to Stockholder Agreement among Warburg, Pincus, K.    
        Paul Singh, Primus, and TresCom, dated as of April 16, 1998;          
        Incorporated by reference to Exhibit 10.1 of the Form 8-K for         
        Amendments.                                                           

 10.7   Amendment No. 1 to Voting Agreement between Wesley T. O'Brien and     
        Primus, dated as of April 16, 1998; Incorporated by reference to      
        Exhibit 10.2 of the Form 8-K for Amendments.                          

 10.8   Amendment No. 1 to Voting Agreement between Rudolph McGlashan and     
        Primus, dated as of April 16, 1998; Incorporated by reference to      
        Exhibit 10.3 of the Form 8-K for Amendments.                          

 10.9   Switched Transit Agreement, dated June 5, 1995, between Teleglobe USA,
        Inc. and Primus for the provision of services to India; Incorporated  
        by reference to Exhibit 10.2 of the IPO Registration Statement.       

 10.10  Hardpatch Transit Agreement, dated February 29, 1996, between         
        Teleglobe USA; Incorporated by reference to Exhibit 10.3 of the IPO   
        Registration Statement.                                               

 10.11  Agreement for Billing and Related Services, dated February 23, 1995,  
        between Primus and Electronic Data System Inc.; Incorporated by       
        reference to Exhibit 10.4 of the IPO Registration Statement.          


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Exhibit                                                                       
Number                          Description of Exhibits                       
-------                         -----------------------                       
                                                                              
 10.12  Employment Agreement, dated June 1, 1994, between Primus and K. Paul  
        Singh, Inc.; Incorporated by reference to Exhibit 10.5 of the IPO     
        Registration Statement.**                                             

 10.13  Primus 1995 Stock Option Plan; Incorporated by reference to Exhibit   
        10.6 of the IPO Registration Statement.**                             

 10.14  Amendment 1999-1 to the Primus Telecommunications Group, Incorporated 
        Stock Option Plan.*                                                   

 10.15  Primus 1995 Director Stock Option Plan; Incorporated by reference to  
        Exhibit 10.7 of the IPO Registration Statement.**                     

 10.16  Registration Rights Agreement, dated July 31, 1996, among Primus,     
        Quantum Industrial Partners LDC, S-C Phoenix Holdings, L.L.C., Winston
        Partners II LDC and Winston Partners LLC; Incorporated by reference to
        Exhibit 10.11 of the IPO Registration Statement.                      

 10.17  Service Provider Agreement between Telstra Corporation Limited and    
        Axicorp Pty., Ltd., dated May 3, 1995; Incorporated by reference to   
        Exhibit 10.12 of the IPO Registration Statement.                      

 10.18  Dealer Agreement between Telstra Corporation Limited and Axicorp Pty.,
        Ltd. dated January 8, 1996; Incorporated by reference to Exhibit 10.13
        of the IPO Registration Statement.                                    

 10.19  Hardpatch Transit Agreement dated October 5, 1995 between Teleglobe   
        USA, Inc. and Primus the provision of services to India; Incorporated 
        by reference to Exhibit 10.14 of the IPO Registration Statement.      

 10.20  Master Lease Agreement dated as of November 21, 1997 between NTFC     
        Capital Corporation and Primus Telecommunications, Inc.; Incorporated 
        by reference to Exhibit 10.17 of Primus's Annual Report on Form 10-K  
        for the year ended December 31, 1997 (the "1997 10-K"), as amended on 
        Form 10-K/A dated April 30, 1998.                                     

 10.21  Primus Employee Stock Purchase Plan; Incorporated by reference to     
        Exhibit 10.15 of the 1997 Senior Note Registration Statement.**       

 10.22  Primus 401(k) Plan; Incorporated by reference to Exhibit 4.4 of the   
        Primus Registration Statement on Form S-8 (No. 333-35005).            

 10.23  Purchase Agreement, dated May 14, 1998, among Primus                  
        Telecommunications Group, Incorporated, Primus Telecommunications,    
        Incorporated, Primus Telecommunications Pty. Ltd. and Lehman Brothers,
        Inc.; Incorporated by reference to Exhibit 10.22 of the 1998 Senior   
        Note Registration Statement.                                          

 10.24  Registration Rights Agreement, dated May 19, 1998, among Primus       
        Telecommunications Group, Incorporated, Primus Telecommunications,    
        Incorporated, Primus Telecommunications Pty. Ltd. and Lehman Brothers,
        Inc.; Incorporated by reference to Exhibit 10.23 of the 1998 Senior   
        Note Registration Statement.                                          

 10.25  Primus Telecommunications Group, Incorporated-TresCom International   
        Stock Option Plan; Incorporated by reference to Exhibit 4.1 of the S-8
        Registration Statement.**                                             

 10.26  Amended and Restated Employment Agreement between the Company and     
        Wesley T. O'Brien; Incorporated by reference to Exhibit 10.3 to the   
        TresCom 1996 Form 10-K.**                                             

 10.27  First Amendment to Amended and Restated Employment Agreement between  
        the Company and Wesley T. O'Brien; Incorporated by reference to       
        Exhibit 10.2 to the TresCom 1997 Form 10-K).**                        

 10.28  Employment Agreement between the Company and Rudolph McGlashan;       
        Incorporated by reference to Exhibit 10.4 to the TresCom Registration 
        Statement on Form S-1, No. 33-99738, filed on November 22, 1995 (the  
        "TresCom Form S-1").**                                                

 10.29  Amendment to Employment Agreement between the Company and Rudolph     
        McGlashan; Incorporated by reference to Exhibit 10.5 to the TresCom   
        Form S-1.**                                                           

 10.30  Warrant Agreement between the Company and Warburg, Pincus Investors,  
        L.P; Incorporated by reference to Exhibit 10.6 to the TresCom Form S- 
        1.                                                                    


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Exhibit                                                                       
Number                          Description of Exhibits                       
-------                         -----------------------                       
                                                                              
 10.31  Form of Indemnification Agreement between the Company and its         
        directors and executive officers; Incorporated by reference to Exhibit
        10.23 to the TresCom Form S-1.                                        

 10.32  Revolving Credit and Security Agreement, among TresCom International, 
        Inc., TresCom U.S.A., Inc., Intex Telecommunications, Inc., The St.   
        Thomas and San Juan Telephone Company, Inc., STSJ Overseas Telephone  
        Company, Inc., PNC Bank, National Association (as lender and as agent)
        and the other lenders a party thereto (the "Loan Agreement").         
        Incorporated by reference to Exhibit 10.22 to the TresCom Quarterly   
        Report on Form 10-Q for the fiscal quarter ended June 30, 1997.       

 10.33  Revolving Credit Note, dated July 31, 1997, payable to PNC Bank,      
        National Association and the other lenders a party to the Loan        
        Agreement; Incorporated by reference to Exhibit 10.23 to the Company's
        Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,   
        1997.                                                                 

 21.1   Subsidiaries of the Registrant.*                                      

 23.1   Consent of Deloitte & Touche LLP (included on page II-6 of this       
        Registration Statement).                                              

 23.2   Consent of Ernst & Young LLP (included on page II-7 of this           
        Registration Statement).                                              

 23.3   Consent of Pepper Hamilton LLP (included in Exhibit 5.1).+            

 23.4   Consent of KPMG LLP (included on page II-8 of this Registration       
        Statement).                                                           

 24.1   Power of Attorney (included on page II-9 of this Registration         
        Statement).+                                                          

 25     Form T-1.+                                                            

 99.1   Form of Letter of Transmittal.+                                       

 99.2   Form of Notice of Guaranteed Delivery.+                               

--------                                                                        
* Filed herewith.                                                             
+ Previously filed.                                                           
** Compensatory Benefit Plan.                                                   

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