U S LONG DISTANCE CORP, 424B4, 1997-08-20

U S LONG DISTANCE CORP
424B4, 1997-08-20
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)

Previous: BIOCIRCUITS CORP, S-3/A, 1997-08-20

Next: LIDAK PHARMACEUTICALS, 8-K, 1997-08-20

PROSPECTUS

543,133 Shares
U.S. LONG DISTANCE CORP.
Common Stock

The 543,133 shares (the "Shares") of common stock, par value
$.01 per share (the "Common Stock"), of U.S. Long Distance Corp.
(the "Company") to which this Prospectus relates are being offered
on behalf of and for the account of certain stockholders (the
"Selling Stockholders") of the Company. The Company anticipates
that the Shares will be offered for sale until the earlier of (i)
the sale of all of the Shares, or (ii) the one-year anniversary of
the issuance of the Shares after the effectiveness of this
Registration Statement. The Company has agreed to pay all expenses
of registration in connection with this offering, but will not
receive any of the proceeds from the sale of the Shares being
offered hereby. All fees and disbursements of counsel for each of
the Selling Stockholders, and all brokerage commissions and other
similar expenses incurred by such Selling Stockholders will be
borne by such Selling Stockholders. The aggregate proceeds to the
Selling Stockholders from the sale of the Shares will be the
purchase price of the Shares sold, less the aggregate brokerage
commissions and underwriters' discounts, if any, and other expenses
of issuance and distribution not borne by the Company. See "Use of
Proceeds," "Plan of Distribution" and "Selling Stockholders."

The Common Stock is included in the Nasdaq Stock Market's
National Market (the "Nasdaq National Market") under the symbol
"USLD." On August 8, 1997, the last reported sales price for the
Common Stock was $15.25 per share.

This offering of the Shares is currently not being
underwritten. However, the Selling Stockholders, brokers, dealers
or underwriters that participate with the Selling Stockholders in
the distribution of the Shares may be deemed "underwriters," as
that term is defined in the Securities Act of 1933, as amended (the
"Securities Act"), and any commissions received by broker-dealers,
agents or underwriters and any profit on the resale of the Shares
purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Although neither the Company
nor the Selling Stockholders have entered into any arrangement or
underwriting agreement with any broker-dealer or agent, the Shares
being offered hereby, when sales thereof are made, may be made in
one or more transactions (which may involve one or more block
transactions) through customary brokerage channels, either through
brokers acting as brokers or agents for the sellers, or through
dealers or underwriters acting as principals who may resell the
Shares in the Nasdaq National Market or in privately negotiated
sales, or otherwise, or by a combination of such methods of
offering. Each sale may be made either at market prices prevailing
at the time of the sale or at negotiated prices.

If and to the extent required, the specific number of Shares
to be sold, the names of the Selling Stockholders, the purchase
price, the public offering price, the names of any such agents,
dealers or underwriters and any applicable commissions or discounts
with respect to a particular offer will be set forth in an
accompanying Prospectus Supplement.

SEE "RISK FACTORS" ON PAGE 5 FOR A DISCUSSION OF CERTAIN
MATERIAL FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN
INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

August 18, 1997

<PAGE>

AVAILABLE INFORMATION

The Company is subject to the informational reporting
requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and, in accordance therewith, files reports,
proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the
Commission may be inspected and copied at the Public Reference
Section of the Commission at Judiciary Plaza, Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the following Regional
Offices of the Commission: Chicago Regional Office, Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and New York Regional Office, Seven World Trade
Center, New York, New York 10048. Copies of such materials also
may be obtained by mail at prescribed rates from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. In addition, such materials
filed electronically by the Company with the Commission are
available at the Commission's World Wide Web site at
http://www.sec.gov.

The Common Stock is listed on the Nasdaq National Market, and
reports and other information concerning the Company may be
inspected and copied at the offices of the Nasdaq National Market
at 1735 K Street, N.W., Washington, D.C. 20006.

The Company has filed with the Commission Registration
Statements on Form S-3 under the Securities Act with respect to the
Shares of Common Stock offered hereby. As permitted by the rules
and regulations of the Commission, this Prospectus omits certain
information contained in the Registration Statements. For further
information with respect to the Company and the Shares offered
hereby, reference is hereby made to the Registration Statements and
their respective exhibits and schedules. The Registration
Statements may be inspected without charge at the Public Reference
Section of the Commission at Judiciary Plaza, Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and copies may be obtained
therefrom at prescribed rates. Statements contained herein
concerning provisions of documents are necessarily summaries of
such documents, and each statement is qualified in its entirety by
reference to the copy of the applicable document filed with the
Commission.

The mark "U.S. Long Distance Corp. and Design" appearing on
the front and back cover pages of this Prospectus is a federally
registered service mark of U.S. Long Distance Corp. The mark "U.S.
Long Distance" is a federally registered service mark of U.S. Long
Distance, Inc., a wholly owned subsidiary of U.S. Long Distance
Corp.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by the Company with the
Commission under the Exchange Act are hereby incorporated by
reference in this Prospectus: (i) the Company's Annual Report on
Form 10-K for the fiscal year ended September 30, 1996, (ii) the
Company's Proxy Statement for the Annual Meeting of Stockholders
held February 25, 1997, and (iii) the Company's Quarterly Reports
on Form 10-Q for the quarters ended December 31, 1996, March 31, 1997
and June 30, 1997.

All reports and other documents filed by the Company with the
Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Shares made hereby shall be
deemed to be incorporated by reference herein and to be a part
hereof from the date of filing of such reports and documents. Any
statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this
Prospectus and the Registration Statement of which it is a part to
the extent that a statement contained herein or in a subsequently
filed document modifies or supersedes such statement. Any statement
so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus or
the Registration Statement.

Upon written or oral request, the Company will provide without
charge to each person to whom a copy of this Prospectus is
delivered, a copy of any and all of the documents incorporated
herein by reference (other than exhibits to such documents, unless
such exhibits are specifically incorporated by reference into such
documents). Requests should be directed to U.S. Long Distance
Corp., 9311 San Pedro, Suite 100, San Antonio, Texas 78216,
Attention: Investor Relations (210) 525-9009.

-2-

<PAGE>

PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE
DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS OR IN
THE DOCUMENTS INCORPORATED BY REFERENCE.

THE COMPANY

General
- -------

U.S. Long Distance Corp. (the "Company") is a fully-integrated
long distance communications company offering an integrated group
of communication services, including direct dial long distance,
operator and local services, prepaid calling cards, travel cards,
data transmission and calling center services.

On July 10, 1996, the Company's Board of Directors approved a
plan to spin off the Company's commercial billing clearinghouse and
information management services business ("Billing Group Business")
as a separate public company (the "Distribution"). To effect the
spin-off, the Board approved the distribution of the outstanding
shares of common stock of its wholly owned subsidiary that owned
and operated the Billing Group Business, Billing Information
Concepts Corp. ("Billing"), to its stockholders. The Distribution
was tax-free for federal income tax purposes to the stockholders of
the Company, and the Company will not recognize income, gain or
loss as a result of the Distribution, except for direct spin-off
costs. The Distribution was completed on August 2, 1996.

Direct Dial Long Distance Services
- ----------------------------------

The Company is a full-service long distance carrier currently
providing direct dial long distance services to small and medium-
sized commercial customers and, to a lesser extent, residential
customer accounts. The Company began offering direct dial long
distance services following its entry into the direct dial long
distance business in August 1991 through the acquisition of three
related direct dial long distance companies in Texas. The Company
focuses its direct sales efforts in the West Coast, Pacific
Northwest, Southwest and Southeast regions of the United States to
take advantage of network efficiencies. In addition to its basic
"one-plus" service, the Company provides inbound 800/888 service,
travel and prepaid calling card services, private line services,
data transmission services, wholesale carrier services and other
customer-specific products.

Operator Services
- -----------------

The Company provides operator assisted services for private
pay telephones, hotels, motels, university dormitories and
hospitals. The Company's operator services are accessed when calls
requiring operator assistance and/or alternate billing options are
placed from customer locations. Such services involve the use of
live and automated operators to receive, validate and complete the
calls. The Company processes collect, third-party, person-to-
person and calling card calls and, generally, shares a percentage
of call revenues with its customers.

Local Services
- --------------

Beginning in February 1997, the Company initiated local
telephone services on a resale basis. The Company currently
provides local telephone services to over 7,000 lines. The vast
majority of these lines are pay telephone lines located in
Southwestern Bell Telephone Company ("Southwestern Bell") exchanges
within the State of Texas.

-3-

<PAGE>

THE OFFERING

Common Stock Offered by the
Selling Stockholders................. 543,133 shares

Percent of Outstanding Common
Stock of the Company held by
the Selling Stockholders............. 3.2%(1)

Nasdaq National Market Symbol........ USLD

Use of Proceeds....................... The Company will not
receive any of the
proceeds from the sale of
the Shares being offered
hereby
_______________
(1) Percentage indicated is based upon 16,567,335 shares of Common
Stock outstanding as of August 8, 1997.

-4-

<PAGE>

RISK FACTORS

OTHER THAN HISTORICAL AND FACTUAL STATEMENTS, THE MATTERS AND
ITEMS DISCUSSED IN THIS PROSPECTUS ARE FORWARD-LOOKING STATEMENTS
THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS
MAY DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN THE FORWARD-
LOOKING STATEMENTS. IN ADDITION TO OTHER INFORMATION CONTAINED IN
THIS PROSPECTUS, THE FOLLOWING FACTORS COULD CONTRIBUTE TO SUCH
DIFFERENCES. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE
FOLLOWING FACTORS AND CAUTIONARY STATEMENTS IN DETERMINING WHETHER
TO PURCHASE SHARES OF COMMON STOCK IN THE OFFERING MADE HEREBY.
ALL FACTORS SHOULD BE CONSIDERED IN CONJUNCTION WITH THE OTHER
INFORMATION AND FINANCIAL DATA APPEARING ELSEWHERE IN THIS
PROSPECTUS AND IN THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE.
SEE "DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS."

GOVERNMENT REGULATION; PROPOSED ACTIONS. The Company's
activities are subject to the regulations of the Federal
Communications Commission (the "FCC") and the public utility
commissions of the various states in which the Company operates.
These regulatory agencies are governed by respective federal or
state legislation, and therefore, any change or modification to
such regulation or legislation can result in positive or negative
effects upon the Company. State and federal regulatory actions
have had, and are expected to continue to have, both positive and
negative effects upon the Company. Decisions by the state or
federal legislative or regulatory bodies with respect to the
permissible business activities or pricing practices of the
Company's dominant competitors, such as American Telephone and
Telegraph Company ("AT&T") and the seven Regional Bell Operating
Companies ("RBOCs"), also may have an adverse impact on the
Company's operations. Moreover, any significant change in
regulations by federal or state governmental agencies could
significantly increase the Company's costs or otherwise have an
adverse effect on the Company's activities and on its expansion
efforts.

ACQUISITION PROGRAM. The Company is actively engaged in an
acquisition program, focusing primarily on acquisitions in the
direct dial long distance industry. One or more of such
acquisitions could result in a substantial change in the Company's
operations and financial condition. The success of the Company's
acquisition program will depend upon, among other things, the
availability of acquisition candidates, the availability of funds
to finance acquisitions and the availability of management
resources to oversee the operation of acquired businesses. No
assurance can be given that the Company will succeed in
consummating any additional acquisitions or that the Company will
be able to successfully integrate and manage any acquisitions.
While the Company has, from time to time, had discussions with
direct dial long distance companies, other than as described in the
documents incorporated herein by reference, the Company has no
pending negotiations or agreements for any acquisitions at the date
of this Prospectus.

As consideration for any acquisitions, in addition to or in
lieu of the payment of cash, the Company may issue Common Stock,
preferred stock, convertible debt or other securities that could
result in substantial dilution of the percentage ownership of
public stockholders. The Company does not intend to seek
stockholder approval for any such acquisitions or security
issuances unless required by applicable law or regulations. See
"Description of Capital Stock."

TECHNOLOGICAL CHANGE AND NEW SERVICES. The telecommunications
industry has been characterized by steady technological change,
frequent new service introductions and evolving industry standards.
The Company believes that its future success will depend on its
ability to anticipate such changes and to offer on a timely basis
market responsive services that meet these evolving industry
standards. There can be no assurance that the Company will have
sufficient resources to make the investments necessary to acquire
new technology or to introduce new services that would satisfy an
expanded range of customer needs.

DEPENDENCE UPON THIRD PARTY TRANSMISSION FACILITIES. The
Company currently owns only a portion of the transmission
facilities needed to complete long distance and local telephone
calls and does not own any transmission facilities for the local
services it renders. Therefore, the Company's operator, direct
dial long distance and local services telephone businesses are
dependent upon contractual arrangements, both long and short-term,
with facilities-based carriers for the transmission of calls.
While the Company believes that it has ample access to transmission

-5-

<PAGE>

facilities at competitive rates and expects to continue to have
such access in the foreseeable future, this ongoing availability
cannot be assured.

SERVICE INTERRUPTIONS; EQUIPMENT FAILURES. The Company's
business requires that transmission and switching facilities and
other equipment be operational 24 hours per day, 365 days per year.
Telecommunications companies such as the Company on occasion may
experience temporary service interruptions or equipment failures,
in some cases resulting from causes beyond their control. Any such
event experienced by the Company would impair the Company's ability
to service its customers and could have a material adverse effect
on the Company's business.

INCREASED EXPENDITURES FOR ANTICIPATED EXPANSION. To
facilitate and support the growth anticipated in its business, the
Company is significantly expanding its level of operations, and
thus increasing its investments in personnel and facilities. Due
to the increases in the Company's overhead and operating expenses
resulting from this expansion, the Company's operating results may
be adversely affected if its revenues remain flat or do not
increase to the extent expected.

SEASONAL VARIATIONS IN REVENUES. Approximately 95% of the
Company's direct dial long distance revenues are generated by
commercial customers, and accordingly, the Company experiences
general decreases in long distance revenues around national
holidays when commercial traffic is reduced. The Company typically
experiences decreases in operator services revenues in the fall and
winter months as pay telephone usage declines due to cold and
inclement weather in many parts of the United States. As a result
of the seasonal variations discussed above, revenue reported in the
Company's first fiscal quarter ending December 31 (which includes
Thanksgiving, Christmas and New Year's holidays) historically has
been the lowest level of any quarter of the year. Conversely, due
to increased traffic from pay telephones during the spring and
summer months and a lower concentration of national holidays, the
Company historically has experienced its highest revenue levels in
the third and fourth quarters of the fiscal year. Because the
Company's fixed operating expenses do not decrease during the first
quarter, the Company's profitability is also, generally, at its
lowest level for any quarter of the year.

CUSTOMER ATTRITION. The Company believes that a high level of
customer attrition is common in the direct dial long distance and
operator services industries. Although the Company has not
experienced significant attrition in its various businesses, the
Company's historical levels of customer attrition may not be
indicative of future attrition levels, and there can be no
assurance that any steps taken by the Company to counter increased
customer attrition would accomplish the Company's objectives. In
addition, recent acquisitions and consolidations in the
telecommunications industry have resulted in, and may in the future
result in, the loss of customers by the Company because of the
acquisition of these customers by large companies that have
existing contractual relationships with the Company's competitors.

COMPETITION. The telecommunications industry is intensely
competitive and is significantly affected by new service
introductions and the market activities of major industry
participants. Competition is based upon pricing, customer service,
network quality and value-added services. In operator services,
the Company competes with AT&T, MCI Telecommunications Corporation
("MCI"), Sprint Incorporated ("Sprint") and approximately 125 other
operator services companies across the continental United States.
AT&T continues to dominate competition in the direct dial long
distance telecommunications market, with other competitors in this
business being MCI and Sprint as well as a large number of regional
and local providers of long distance services. The local
telecommunications market has only recently been opened to
competition by virtue of the Telecommunications Act of 1996 (the
"Telecommunications Act"). Local carriers who have significant
facilities in place will be strongly positioned in terms of their
underlying costs, while new providers, such as the Company, will
aggressively seek to capture market share in the local services
market. Additionally, the Telecommunications Act provides the
conditions for RBOCs' entry into the long distance industry. To
date, the FCC has not determined that any RBOC has satisfied the
conditions set forth in the Telecommunications Act as prerequisites
to their entry into the long distance market. The Company cannot
determine at what point such a decision might be rendered favorably
for an RBOC.

-6-

<PAGE>

Some of the Company's competitors have greater name
recognition, more extensive transmission networks and greater
engineering and marketing capabilities than the Company and have,
or have access to, substantially greater financial and personnel
resources than those available to the Company. The ability of the
Company to compete effectively in the telecommunications industry
will depend upon its continued ability to maintain high quality,
market driven services at prices generally equal to or below those
charged by its competitors. There can be no assurance that the
Company will be able to compete successfully with existing or
future competitors.

SHARES ELIGIBLE FOR FUTURE SALE. Upon the sale of all of the
Shares of Common Stock offered hereby, and assuming no further
issuance of shares of Common Stock by the Company, 16,679,835
shares of Common Stock will be outstanding, substantially all of
which will be freely tradeable without restriction (except to the
extent owned by affiliates of the Company). In addition to the
foregoing, at August 8, 1997, 2,592,674 shares of Common Stock were
issuable upon the exercise of outstanding employee and director
stock options (of which 849,733 were exercisable on such date) and
options exercisable for 451,874 shares of Common Stock and grants
for 487,000 shares of Common Stock remained available for grant
under the Company's employee and non-employee director stock option
plans and restricted stock plans, respectively. Any shares issued
upon the exercise of stock options may be freely sold in the public
market (except to the extent issued to affiliates of the Company).

Pursuant to certain telecommunications service agreements, the
Company agreed, among other things, to grant certain warrants,
exercisable for a period of seven years, to purchase up to an
aggregate of 225,000 shares of the Company's Common Stock at an
exercise price of $3.24 per share. One half of the shares
underlying the warrants (112,500 shares) vested and were exercised,
and the remaining one half of such shares (112,500 shares) vest on
January 15, 1998. The Company has filed a registration statement
(of which this prospectus forms a part) to register for sale with
the Commission the number of shares that may be sold by the Selling
Stockholders upon the exercise of the warrants.

Any future sales of substantial amounts of Common Stock in the
open market by the Selling Stockholders, by employees or directors
exercising stock options, by stockholders or warrantholders whose
shares have been registered with the Commission by the Company or
by other stockholders may adversely impact the market price of the
Common Stock.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Prospectus contains certain "forward-looking statements"
within the meaning of the Section 27A of the Securities Act and
Section 21E of the Exchange Act. Specifically, all statements
other than statements of historical facts included in this report
regarding the Company's financial position, business strategy and
plans and objectives of management of the Company for future
operations are forward-looking statements. These forward-looking
statements are based on the beliefs of the Company's management, as
well as assumptions made by and information currently available to
the Company's management. When used in this report, the words
"anticipate," "believe," "estimate," "expect" and "intend" and
words or phrases of similar import, as they relate to the Company
or Company management, are intended to identify forward-looking
statements. Such statements reflect the current view of the
Company with respect to future events and are subject to certain
risks, uncertainties and assumptions related to certain factors
including, without limitation, competitive factors, general
economic conditions, customer relations, relationships with
vendors, the interest rate environment, governmental regulation and
supervision, seasonality, the operation of the Company's networks,
transmission costs, product introductions and acceptance,
technological change, changes in industry practices, one-time
events and other factors described herein ("cautionary
statements"). Although the Company believes that the expectations
are reasonable, it can give no assurance that such expectations
will prove to be correct. Based upon changing conditions, should
any one or more of these risks or uncertainties materialize, or
should any underlying assumptions prove incorrect, actual results
may vary materially from those described herein as anticipated,
believed, estimated, expected or intended. All subsequent written
and oral forward-looking statements attributable to the Company or
persons acting on its behalf are expressly qualified in their
entirety by the applicable cautionary statements.

-7-

<PAGE>

THE COMPANY

OTHER THAN HISTORICAL AND FACTUAL STATEMENTS, THE MATTERS AND
ITEMS DISCUSSED HEREIN ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES. ACTUAL RESULTS OF THE COMPANY MAY DIFFER
MATERIALLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING
STATEMENTS. CERTAIN FACTORS THAT COULD CONTRIBUTE TO SUCH
DIFFERENCES ARE DISCUSSED IN "RISK FACTORS," WITH THE FORWARD-
LOOKING STATEMENTS THROUGHOUT THIS PROSPECTUS AND IN "DISCLOSURE'S
REGARDING FORWARD-LOOKING STATEMENTS."

GENERAL

The Company is a fully-integrated communications company.
From fiscal 1991 through fiscal 1996, the Company's revenues
increased at a compounded annual rate of 60%, totaling $180.3
million for fiscal 1996. Revenues were $162.0 million for the
first nine months of fiscal 1997. The Company offers an integrated
group of communication services including direct dial long
distance, operator and local services, prepaid calling cards, data
transmission and calling center services.

The long distance telephone industry has changed significantly
since the mandated divestiture by AT&T of its 22 local telephone
companies in 1984. Regulations mandating equal access to the
existing telecommunications network led to the creation of hundreds
of new long distance companies. Competition now pervades across
all categories of long distance telephone services, including both
domestic and international direct dial long distance telephone
services, operator assisted and calling card services and 800/888
specialized in-bound long distance telephone services. With the
enactment of the Telecommunications Act, the local
telecommunications market has been opened to competition. While
AT&T and, to a lesser extent, MCI and Sprint, together dominate the
estimated $78 billion long distance telecommunications industry,
management believes that a growing share of the market is serviced
by smaller long distance companies such as the Company. Industry
sources estimate that approximately 80% of the long distance market
is shared among AT&T, MCI and Sprint.

The Telecommunications Act, which was signed into law on
February 8, 1996, is the first major overhaul of the
telecommunications law since the divestiture of AT&T. This act
allows telecommunications providers such as the Company to provide
local telephone services. The local telephone service industry is
estimated to be a $95 billion industry and is dominated by the
RBOCs. The Company currently is authorized to offer local service
in 12 states and has certification pending in 11 other states. The
Company has signed an interconnection agreement with Southwestern
Bell enabling the Company to provide local telephone service to
business and residential customers in Southwestern Bell's five-
state service area. The Company also has entered into a local
resale agreement with BellSouth Telecommunications for their nine-
state service territory. The Company began providing local
telephone service in February 1997, and at the date hereof provided
local services on a resale basis to over 7,000 lines, the vast
majority of which were pay telephone lines located in Texas.
Additionally, the Telecommunications Act allows the RBOCs to
compete in the long distance industry. However, the applicant RBOC
first must satisfy a legislative "checklist" that outlines the
steps required for an RBOC to open its network to competition on a
local basis.

On July 10, 1996, the Company's Board of Directors approved a
plan to spin off the Company's Billing Group Business as a separate
public company. To effect the Distribution, the Board approved the
distribution of the outstanding shares of common stock of Billing
to its stockholders. The Distribution was tax-free for federal
income tax purposes to the stockholders of the Company, and the
Company will not recognize income, gain or loss as a result of the
Distribution, except for direct spin-off costs. The Distribution
was completed on August 2, 1996.

-8-

<PAGE>

DIRECT DIAL LONG DISTANCE SERVICES

General
- -------

The Company is a full-service long distance carrier currently
providing direct dial long distance services to small and medium-
sized commercial customers and, to a lesser extent, residential
customer accounts. The Company was authorized to provide direct
dial long distance services to customers in 48 states at
June 30, 1997. However, the Company focuses its direct sales
efforts in the West Coast, Pacific Northwest, Southwest and
Southeast regions of the United States to take advantage of network
efficiencies. In addition to its basic "one-plus" service, the
Company provides inbound 800/888 service, travel and prepaid
calling card services, private line services, data transmission
services, wholesale carrier services and other customer-specific
products.

The Company began offering direct dial long distance services
following its entry into the direct dial long distance business in
August 1991 through the acquisition of three related direct dial
long distance companies in Texas. At June 30, 1997, the Company
serviced approximately 75,400 commercial and residential customer
accounts. The Company carried an average of 139.8 million minutes
per month of long distance traffic during the fiscal quarter ended
June 30, 1997, as compared to 106.3 million, 62.7 million and 45.7
million during the fiscal quarters ended September 30, 1996, 1995
and 1994, respectively. In the nine month period ended
June 30, 1997 and in fiscal year 1996, 1995 and 1994, the Company
had $120.4 million, $119.4 million, $84.5 million and $62.8 million,
respectively, in direct dial long distance revenues, comprising
74%, 66%, 59% and 53% of total operating revenues in each period,
respectively.

Industry Overview
- -----------------

Direct dial long distance revenues industrywide are estimated
to be approximately $78 billion in 1996, up from approximately $73
billion in 1995. AT&T, MCI and Sprint dominate the long distance
industry. Industry sources estimate that these companies control
a combined market share of approximately 80%. These companies
offer comprehensive communications services in a wider array of
products than other long distance companies and typically target
national, multi-state business customers and millions of
residential long distance users through national television and
media advertising. The Company believes that over 500 smaller long
distance companies account for the remaining 20% of the market.
These companies typically concentrate on smaller regional and local
business customers. Competition in the direct dial long distance
industry has historically been based upon price. More recently, the
focus has been moving towards customer service, product design and
innovation, customized billing capabilities, transmission quality
and availability of service.

Sales and Marketing
- -------------------

The Company's direct dial long distance personnel are located
throughout the Company's service area and are responsible for
marketing to commercial accounts. The Company supervises sales and
marketing efforts from its corporate headquarters and utilizes
various advertising media to enhance its commercial marketing
efforts and to attract and retain residential customers. The
Company examines the calling profiles of target markets and designs
long distance services that specifically fill certain demands. For
example, the Company issues long distance calling cards customized
to include a customer's corporate logo and also has customized
prepaid calling cards to be used as promotional marketing tools.
The Company also markets directly to employees of commercial
customers for their residential service. In addition to its own
sales force, the Company markets its direct dial long distance
services through authorized agents, other carriers and affinity
organizations (strategic partnerships).

The Company currently has an exclusive marketing agreement
with Nolan Ryan, formerly a player with the Texas
Rangers(REGISTERED) professional baseball team and a potential hall
of fame candidate, who acts as the Company's spokesman for its
direct dial long distance services and whose picture appears in the
Company's advertisements and product literature, including prepaid
calling cards.

-9-

<PAGE>

Operations
- ----------

The Company completes calls that are originated when a pre-
subscriber customer dials "1" plus the area code and number or when
a customer selects the Company's network through dial-up access to
reach any domestic or international destination. All long distance
calls placed over the Company's network are directed to call
designation points by computerized digital network switching
equipment operating at one of the Company's switching centers. The
switching equipment receives a customer's direct dial call,
verifies the caller's billing status and authorization codes,
routes the call to the dialed destination, monitors the call's
duration and collects other information for billing purposes. The
Company's switching equipment selects the most cost-efficient
transmission circuit or path available prior to switching and
completing each call. The Company employs state-of-the-art digital
switching equipment at the Company's switching centers in Houston,
Texas; Waco, Texas; Seattle, Washington; and Los Angeles,
California. The Company has also purchased a digital switch in
Atlanta, Georgia, which it took possession of in January 1997.

To satisfy increasing or anticipated usage of its long
distance network and to ensure that its network is optimally
accessible when network demand is heavy, the Company, from time to
time, adds circuit capacity at each existing switching center by
increasing the number of telecommunications ports and access lines.
The Company utilizes state of the art Common Channel Signaling
System 7, which is currently operational for virtually all
originating and terminating traffic within the Company's markets.
This network protocol significantly reduces connect time delays and
provides additional technical capabilities and efficiencies for the
routing of calls.

Competitive Advantages
- ----------------------

The Company competes with AT&T, MCI and Sprint and numerous
local, regional and national carriers on the basis of its products
and services, competitive pricing and local identity. The Company
generally prices its services up to 20% below AT&T, MCI and Sprint
comparable service offerings. In addition, by designing long
distance products and services that fill specific market needs, the
Company enhances its ability to compete with AT&T, MCI and Sprint
and others.

The Company believes that its emphasis on customer service
distinguishes the Company from many of its competitors. The
Company has taken an integrated team approach to sales and service
by increasing the number of sales support representatives in its
field offices to maintain responsive service after the sale. The
Company has issued notebook computers to the sales force to enhance
marketing presentations and automate the customer order entry
function. Additionally, the Company implemented a computerized
bulletin board service called Advantage Direct, which is similar to
the remote access service offered to its operator services
customers. This service allows customers to monitor and evaluate
calling patterns and volume by department or location. Moreover,
in competing with certain regional and local long distance
carriers, the Company believes it holds a competitive advantage
within its territory because the Company's regional concentration
of traffic over its network facilities allows for certain cost
efficiencies of a national carrier. In addition, the Company
believes that its local identity in the markets it serves provides
an advantage in marketing its services and competing with long
distance carriers based outside of the target regions. Management
believes that the Company has developed the expertise in
information systems necessary to meet the needs of its direct dial
long distance customers. For instance, the Company provides an
invoice indicating call detail in a form that assists customers in
controlling and monitoring communications costs for various
projects or departments.

The Company employs digital switching equipment utilizing a
network comprised largely of high quality fiber-optic circuitry to
maximize communications quality. The Company believes that its use
of a digital network is particularly advantageous in marketing both
its voice and data transmission services. The Company also designs
redundant and diverse routes to each major service area to ensure
service availability.

The communications industry is ever-changing, and the recently
passed Telecommunications Act is expected to have a major impact on
the industry's competitive environment. In essence, the RBOCs will
be competing with long distance carriers for both domestic and
international long distance customers. The Company believes it is
prepared to

-10-

<PAGE>

meet this challenge by capitalizing on its experienced management
team and sales force, personalized customer service, quality
products and services and competitive pricing structures.

Strategy and Growth Opportunities
- ---------------------------------

The Company's strategic focus in the direct dial long distance
industry is to compete with AT&T, MCI and Sprint primarily on the
basis of competitive pricing, while offering a comparable or higher
level of service. Moreover, the Company intends to remain focused
on small and medium-sized commercial customers and will continue
its efforts to develop innovative and cost-efficient services that
meet the needs of its customers. The Company intends to introduce
new communications products, such as local service, Internet
access, paging, frame relay/ISDN and cellular service, over the
next 12 to 18 months. The introduction of the local service
product provides the Company the largest opportunity for growth.
The local services industry is estimated to be a $95 billion
market. Each of the Company's existing 47,000 customer accounts is
already utilizing this service from the local exchange carrier in
each locality. The Company believes that it has the potential to
capitalize on its relationship with existing customers to bundle
the local product with its existing products and services. The
bundling of these services with long distance service will enhance
the Company's product offerings and provide new and existing
customers with the integrated communication services they desire.
To a lesser extent, the Company also continues to market to
residential customers.

The Company expects to look for opportunities to expand its
long distance business, both by internal growth and through
acquisitions. The primary focus of the Company's acquisition
activities is to make additional acquisitions that will grow the
Company's direct dial long distance business. The Company believes
its operator services business affords it the opportunity to expand
its direct dial long distance business on a more cost-effective
basis than many of its competitors. By having a concentration of
operator services call traffic in a particular geographic region,
the Company can utilize any long distance facilities it installs or
acquires to service a ready base of call traffic, thereby lowering
the marginal transmission costs for any direct dial long distance
traffic that the Company acquires or develops in that region. The
Company believes this cost advantage not only improves the
potential profitability of both the Company's operator services and
direct dial long distance services business in such region, but
also expands the number of companies that would be attractive
acquisition candidates in that region.

The Company continually evaluates business opportunities,
including potential acquisitions. One or more of such acquisitions
could result in a substantial change in the Company's operations
and financial condition. The success of the Company's acquisition
activities will depend upon, among other things, the availability
of acquisition candidates, the availability of funds to finance
acquisitions and the availability of management resources to
oversee the operation of acquired businesses. While the Company
has, from time to time, had discussions with communications
companies, it has no agreements or pending negotiations with
respect to any acquisition at the date of this report that would
have a material impact on the Company's financial position or
results of operations. There is no assurance that any acquisitions
will be completed.

OPERATOR SERVICES

General
- -------

At June 30, 1997, the Company provided operator services to
approximately 140,600 hotel, motel, hospital and dormitory rooms.
In addition, at June 30, 1997, the Company had service contracts
with private pay telephone owners covering approximately 64,700 pay
telephones. The Company carried 6.2 million average monthly
minutes of operator services traffic during the third quarter of
fiscal 1997, as compared to 7.6 million, 8.3 million and 9.1
million

-11-

<PAGE>

average monthly minutes during the fourth quarters of fiscal 1996,
1995 and 1994, respectively. The Company's operator services
revenues amounted to $40.9 million in the first nine months of
fiscal 1997 compared to $60.9 million, $59.6 million and $54.7
million in fiscal 1996, 1995 and 1994, respectively.

Industry Overview
- -----------------

Management believes that there are approximately 125 operator
services providers competing within the long distance
communications industry. AT&T continues to dominate the operator
services market, supplying operator services for traffic
originating from both the hospitality and pay telephone industries.
Additionally, MCI and Sprint provide operator services and are
considered by management to be major competitors. Excluding AT&T,
MCI, Sprint, General Telephone Operating Companies ("GTE") and the
RBOCs, management believes the Company is one of the five largest
providers of operator services.

Many operator services providers, including the Company,
initially focused on the hospitality industry. More recently, as
the private pay telephone industry has grown and taken market share
from the public pay telephone market traditionally served by AT&T,
many operator services providers gained increased market share by
providing service to the owners of private and public pay
telephones. Competition between the Company and other operator
services providers is based upon commission programs, quality of
service, reporting and customer service.

Sales and Marketing
- -------------------

The Company markets its operator services nationally through
the combined effort of regional sales representatives based in
Illinois, Texas, Florida and California and a network of agents.
The Company's corporate sales force focuses on larger accounts,
such as hotel management companies, multi-unit franchises, hospital
chains, large private pay telephone companies and universities. The
Company's agents market the Company's operator services on a
nationwide basis and typically receive a commission based upon the
volume of business generated. The Company also participates in
various industry trade shows and promotes its operator services
through advertisements in trade magazines. The Company customizes
its communications services to provide, among other things,
individualized reports and specialized call branding to customers.

Operations
- ----------

The Company owns and operates its own operator center in San
Antonio, Texas, which employed 227 operators and support staff at
June 30, 1997. The Company provides live and automated operator
services 24 hours per day, 365 days per year, and features multi-
lingual operators versed in Spanish, French, German, Japanese and
a variety of other languages. The Company maintains a
sophisticated emergency call handling system that enables its
operator to access police, fire and other emergency agencies within
the jurisdiction of the telephone from which the call is placed.
The Company utilizes its own transmission facilities when possible
or contracts to use facilities of other long distance network
providers as necessary.

The Company switches the majority of its operator assisted
calls at its four main switching centers. Many operator assisted
calls are transmitted to the Company's switching centers via call
processing equipment installed at customer locations or in customer
pay telephone equipment. This call processing equipment is
programmed to recognize calls requiring operator assistance and to
access the Company's network by dialing the Company's access
number, then passing the call record information to one of the
switching centers. The Company validates the authorization code or
telephone number to be billed and then completes the call, while
recording the date, destination, duration and time of day for
subsequent billing purposes. At June 30, 1997, the Company was
authorized to complete international and interstate calls placed
throughout the United States, as well as intrastate calls within 48
states.

-12-

<PAGE>

Competitive Advantages
- ----------------------

Management believes that the Company enjoys several
competitive advantages over many others in the operator services
industry. By virtue of the Company's large call volumes relative
to many other operator services providers and the cost efficiencies
it realizes by routing a large portion of its operator services
traffic over its own facilities and maintaining its own operator
center, the Company is able to provide high quality transmission on
an efficient and economical basis. Additionally, because it is the
source of commission payments to its operator services customers,
the Company believes that its financial stability and history of
timely payments allow it to compete effectively against many
smaller, under-capitalized operator services providers. Moreover,
the Company's flexible rate operations allow it to offer customized
commission programs to its customers as compared to larger operator
services providers.

In 1994, the Company implemented a computerized bulletin board
service called Stealth that allows its customers to access the
system from remote locations and obtain customized and
sophisticated reporting of calling patterns and volumes for each
customer location or pay telephone. This advanced reporting system
allows the Company's operator services customers to analyze their
traffic on a daily basis and maximize telecommunications revenues
by, for example, relocating underutilized telephones. The
Company's detailed reporting also allows its customers to reconcile
the accuracy or integrity of their commissions. The Company
employs a skilled, professional staff of customer service employees
and technicians, who provide service 24 hours per day, 365 days per
year.

Strategy and Growth Opportunities
- ---------------------------------

The Company has developed a strong presence in operator
services throughout the United States. Through its direct sales
force and agents and its participation in state, regional and
national trade associations, the Company intends to pursue
geographic expansion on a nationwide basis. The Company will
continue to market its operator services business to both the
private pay telephone and hospitality industries and present new
products and services for these markets.

The Company's existing relationship with operator service
customers, who typically own or manage numerous private pay
telephones or hotels, provides a unique opportunity for the
Company. The Company will have the potential to provide local
access to a large volume of phones lines, yet limited number of
customers. These characteristics will allow the Company to quickly
and efficiently enter the local services market in targeted areas.

LOCAL SERVICES

General
- -------

The Telecommunications Act provides for certain significant
changes to the regulatory market structure of the domestic
telecommunications industry. For example, competitive
telecommunications providers such as the Company now are permitted
to offer local telephone services in competition with the incumbent
local exchange companies throughout most areas in each state. The
Company, therefore, can offer local services either by reselling
services over the network of the incumbent local exchange carrier
or over its own network and facilities, or any combination of the
two.

The Company has entered into interconnection agreements with
certain incumbent local exchange companies for the resale of local
services. The Company intends to acquire local switches over which
it may offer facilities-based local services, and anticipates
delivery of these facilities beginning in July 1997. By combining
resold and facilities-based local services into its retail product
offering, the Company expects to expand its revenue per customer in
certain geographic markets and expects to obtain new customers who
cannot otherwise combine the provision of their local and long
distance service under one carrier. Revenues from inception of
local services in February 1997 through June 30, 1997 were
$707,000.

-13-

<PAGE>

The Company currently provides local services on a resale
basis to over 7,000 lines. The vast majority of these lines are
pay telephone lines located in Southwestern Bell exchanges within
the State of Texas. Through its interconnection agreement with
Southwestern Bell, the Company receives a discount from the retail
rate of this service and arranges to provide, bill and collect
customer services to local accounts itself. The Company receives
orders for service from its customers and interfaces with
Southwestern Bell to fulfill those orders on its customers' behalf.

Industry Overview
- -----------------

The local telecommunications market is estimated to be a $95
billion industry. Prior to the Telecommunications Act, regulations
prohibited competition in this industry, and, therefore, the
geographic markets were exclusively controlled by the incumbent
local exchange company. The introduction of competition in 1996
has yet to have any measurable effect on the overall market
dominance of the collective incumbent local exchange carriers.
These carriers' marketing practices traditionally have been driven
by regulations rather than customer demand, and as a result the
local services offered currently are not as diverse or
competitively priced as direct dial long distance services today.
Also, because prices for local services sometimes contain intrinsic
built-in subsidies for other local exchange products, some services
are priced well over their actual costs and, therefore, are highly
vulnerable to competition in a competitive market.

Entry into the local market by niche providers has been slow
due to the tremendous amount of coordination and investment
necessary. For example, a competitive local exchange company, such
as the Company, needs to negotiate an interconnection agreement
with an incumbent local exchange carrier and submit such agreement
to the applicable state regulatory agency for approval. The
competitive local exchange carrier also must obtain the appropriate
license and/or certification from that state before it can offer
local services. The competitive local exchange carrier and
incumbent local exchange carrier then must coordinate their order
entry/service delivery process and address related issues such as
911 services, city franchise requirements, rights-of-way permits,
intraLATA toll transiting agreements and service and maintenance
obligations. Once these issues are resolved, niche providers will
have a unique opportunity to design local services that meet actual
customer demand.

Sales and Marketing
- -------------------

Currently, the Company is offering local services in the
geographic areas in which it can provide such services through its
direct sales force, with emphasis on the Company's existing
customer base. To date, the Company has relied upon its
traditional marketing channels - radio and television advertisement
as well as billboard and print ad campaigns in geographically
concentrated markets - to market and sell local services.

Operations
- ----------

To date, the Company has been a reseller of local telephone
services, which have been carried and completed by the incumbent
local exchange carrier. The incumbent local exchange carrier
applies the contractual discount to the monthly retail rate and
renders the Company a consolidated bill/statement.

Competitive Advantages
- ----------------------

To the extent the Company can provide the necessary billing,
customer service and back-office support for local services for
less cost per line than the contractual wholesale discount, the
Company can offer its customer a lower rate for the same service
than the incumbent local exchange carrier. The Company also
believes that its optional billing methods (i.e., bulletin board
service), its customer service, and its ability to combine an
invoice for local and long distance services on a single bill from
a single source serve as competitive advantages. These advantages
are even greater in geographical areas where similarly situated
carriers have not yet entered the local market.

-14-

<PAGE>

Strategy and Growth Opportunities
- ---------------------------------

The Company will continue to pursue interconnection
agreements, regulatory authority and technical functionality to
carry, sell and provide local telephone services. The Company
intends to offer local services to its existing customers as each
of the foregoing criteria are met on a geographic basis and
anticipates attracting new customers for both its local and long
distance products due to the Company's ability to serve as those
customers' single source for communications services. The Company
plans to offer resale local services in each market prior to
purchasing its own local switching facilities in order to ensure
that adequate revenue producing traffic exists to offset the
initial cost of such installation.

USE OF PROCEEDS

The Shares being offered hereby are for the account of the
Selling Stockholders. Accordingly, the Company will not receive any
of the proceeds from the sale of the Shares by the Selling
Stockholders. See "Selling Stockholders."

DILUTION

The net tangible book value of the Company at June 30, 1997
was $59.9 million, or $3.70 per share. "Net tangible book value per
share" is equal to the Company's total tangible assets less total
liabilities (excluding deferred income taxes), divided by the
number of shares of Common Stock outstanding. Based on an assumed
public offering price of $15.25 (the closing price of the Common
Stock on the Nasdaq National Market on August 8, 1997), new
investors purchasing shares at the public offering price would
experience an immediate dilution of $11.55 in net tangible book
value per share.

The following table illustrates the per-share dilution at
March 31, 1997:

Assumed public offering price $ 15.25
Net tangible book value $ 3.70
Assumed dilution to new
investors in the offering $ 11.55

SELLING STOCKHOLDERS

The following table sets forth the name of each of the Selling
Stockholders and the number of shares that may be offered by each.
The number of Shares that may be actually sold by the Selling
Stockholders will be determined by each Selling Stockholder, and
may depend upon a number of factors, including, among other things,
the market price of the Common Stock. Because each Selling
Stockholder may offer all, some or none of the Shares that each
holds, and because the offering contemplated by this Prospectus is
currently not being underwritten, no estimate can be given as to
the number of Shares that will be held by any Selling Stockholder
upon or prior to termination of this offering. See "Plan of
Distribution." The table below sets forth information as of
July 31, 1997, concerning the beneficial ownership of the Shares of
each Selling Stockholder. All information as to beneficial
ownership has been furnished by each of the Selling Stockholders.

-15-

<PAGE>

Shares of
Common Stock
Stock Offered in Shares
the Offering Previously
Shares of Common Stock (Including Shares Sold in Shares of Common Stock
Owned Before Offering Previously Sold) the Offering Owned After Offering(1)
---------------------- ----------------- ------------ -----------------------
Name of Selling Stockholder Number Percent Number Number Number Percent
- -------------------------- ---------- ------- ----------------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Parris H. Holmes, Jr. 290,000(2) 1.5 80,000(3) 55,000 210,000(2) *
Neil J. Gaeta 25,500 * 22,500(4) 0 3,000 *
Jason P. Judge 22,500 * 22,500(4) 0 0 0
Louis A. Gaeta, Jr. 16,500 * 16,500(4) 0 0 0
Mathew B. Sellers 21,500(5) * 16,500(4) 0 5,000(5) *
Jack W. Nicklaus 8,250 * 8,250(4) 0 0 0
Gary T. Nicklaus 8,250 * 8,250(4) 0 0 0
Burton W. Lewis 5,500 * 5,500(4) 0 0 0
Communications Central, Inc. 125,000(6) * 125,000(6) 62,500 0 0
Ronald I. McDougall 33,334(7) * 33,334(7) 0 0 0
John W. Savery 33,333(8) * 33,333(8) 0 0 0
Neil T. Ingram 33,333(9) * 33,333(9) 0 0 0
Frederick E. Trust 138,133(10) * 138,133(10) 0 0 0

____________
* Represents less than 1%.

(1) Assumes all shares of Common Stock offered hereby are sold.
(2) Includes 75,000 shares with respect to which Mr. Holmes has
sold a call option.
(3) Parris H. Holmes, Jr. was Chairman of the Board of the Company
from September 1986 until June 1997. Mr. Holmes served as
Chief Executive Officer of the Company from September 1986
until August 1996, when he resigned as Chief Executive Officer
to become Chairman of the Board and Chief Executive Officer of
Billing. Mr. Holmes resigned as Chairman of the Board on June
2, 1997, and in connection therewith received $875,000 in cash
and a grant of 25,000 shares of the Common Stock.
(4) On January 21, 1997, the Company consummated the acquisition
of Omni Communications, Inc., a direct dial long distance
telephone company ("Omni") headquartered in Palm Beach
Gardens, Florida and owned by Neil J. Gaeta (22.5%), Jason P.
Judge (22.5%), Louis A. Gaeta, Jr. (16.5%), Mathew B. Sellers
(16.5%), Jack W. Nicklaus (8.25%), Gary T. Nicklaus (8.25%)
and Burton W. Lewis (5.5%). Omni had revenues of
approximately $1.2 million for the year ended December 31,
1996, and at December 31, 1996, served approximately 540
direct dial long distance customers. In connection with the
acquisition, Omni merged with and into a wholly owned
subsidiary of the Company, with the Omni shareholders
receiving an aggregate of 100,000 shares of the Company's
Common Stock. The Company granted certain registration rights
to the persons receiving its Common Stock in the acquisition,
and pursuant thereto, has registered for sale in the offering
made hereby 100,000 shares of Common Stock. The costs of this
registration (other than brokerage commissions and other
similar expenses) will be paid by the Company. The Company
caused a subsidiary to enter into one-year employment
agreements with each of Jason P. Judge and Neil J. Gaeta, with
annual salaries of $75,000 and $50,000, respectively, in
addition to any sales commissions and/or bonuses that each may
receive. These agreements automatically renew on their
respective anniversary dates unless notice of termination is
given. In connection with their employment, the Company
granted to Messrs. Judge and Gaeta options to purchase 15,000
and 12,500 shares of Common Stock, respectively. Mr. Judge's
options vest as to 4,167, 4,167 and 4,166 shares on each of
the first three anniversaries of the acquisition of Omni
commencing on the first anniversary, January 21, 1998, with
2,500 shares of the last portion to vest earlier if Mr. Judge
is required to relocate his residence. Mr. Gaeta's options
vest as to one-third on each anniversary date of the
acquisition of Omni commencing January 21, 1998.
(5) Includes 1,000 shares owned by Mr. Sellers' wife, Marilyn F.
Witt.

-16-

<PAGE>

(6) Constitutes shares issued or issuable upon the exercise of
warrants granted pursuant to a telecommunications service
agreement with Communications Central, Inc. Includes
62,500 shares that may be acquired under such warrants
beginning January 15, 1998.
(7) Constitutes shares issued or issuable upon the exercise of
warrants granted pursuant to a telecommunications service
agreement with Paytel Northwest, Inc., of which Mr. McDougall
was a principal stockholder. Includes 16,667 shares acquired
under such warrants on June 13, 1997 and 16,667 shares that
may be acquired thereunder beginning January 15, 1998.
(8) Constitutes shares issued or issuable upon the exercise of
warrants granted pursuant to a telecommunications service
agreement with Paytel Northwest, Inc., of which Mr. Savery was
a principal stockholder. Includes 16,667 shares acquired
under such warrants on June 13, 1997 and 16,666 shares that
may be acquired thereunder beginning January 15, 1998.
(9) Constitutes shares issued or issuable upon the exercise of
warrants granted pursuant to a telecommunications service
agreement with Paytel Northwest, Inc., of which Mr. Ingram was
a principal stockholder. Includes 16,667 shares acquired
under such warrants on June 13, 1997 and 16,666 shares that
may be acquired under such warrants beginning January 15,
1998.
(10) On May 30, 1997, the Company consummated the acquisition of
TransAmerica Communications, Inc., a direct dial long distance
telephone company ("TransAmerica") headquartered in Boca
Raton, Florida and wholly owned by Frederick E. Trust.
TransAmerica had revenues of approximately $1.95 million for
the year ended December 31, 1996, and at May 30, 1997 served
approximately 720 direct dial long distance customers. In
connection with the acquisition, TransAmerica merged with and
into a wholly owned subsidiary of the Company, with Mr. Trust
receiving an aggregate of 138,133 shares of the Company's
Common Stock, 5,000 of which are currently deposited in an
escrow account to satisfy certain post-closing obligations. The
Company granted certain registration rights to Mr. Trust and
pursuant thereto has registered for sale in the offering made
hereby 138,133 shares of Common Stock. The costs of this
registration (other than brokerage commissions and other
similar expenses) will be paid by the Company. Mr. Trust has
agreed not to sell 69,066 of his shares until after November
30, 1997. The Company caused a subsidiary to enter into a
six-month consulting agreement with Mr. Trust, the former
president and director of TransAmerica, which agreement
provides for a monthly consulting fee of $8,000

</TABLE>

PLAN OF DISTRIBUTION

The Company will not receive any proceeds from the sale of the
Shares by the Selling Stockholders. The Shares may be sold from
time to time to purchasers directly by each Selling Stockholder.
Alternatively, each Selling Stockholder may sell its Shares in one
or more transactions (which may involve one or more block
transactions) on the Nasdaq National Market, in privately
negotiated transactions or otherwise, or in a combination of such
transactions; each sale may be made either at market prices
prevailing at the time of such sale or at negotiated prices; some
or all of the Shares may be sold through broker-dealers acting as
brokers or agents on behalf of each Selling Stockholder or to
broker-dealers acting as principals for resale by such dealers; and
in connection with such sales, such broker-dealers may receive
compensation in the form of commissions, discounts or fees from
each Selling Stockholder and/or the purchasers of such Shares for
whom they may act as broker or agent. However, neither the Company
nor either of the Selling Shareholders has entered into any
arrangements or underwriting agreements with any broker-dealer or
agent relative to the Shares to be offered hereby. It is
anticipated that each Selling Stockholder will offer all of the
Shares held by it for sale. All expenses of registration incurred
in connection with this offering are being borne by the Company,
but all brokerage commissions and other similar expenses incurred
by each Selling Stockholder will be borne by such Selling
Stockholder.

At the time a particular offer of Shares is made, if and to
the extent required, a supplement to this Prospectus (the
"Prospectus Supplement") will be distributed that will identify and
set forth the aggregate amount of Shares being offered and the
terms of the offering, including the name or names of any
underwriters, dealers or agents, the purchase price paid by any
underwriter for Shares purchased from each Selling Stockholder, any
commissions, discounts and other items constituting compensation
from each Selling Stockholder and any commissions, discounts or
concessions allowed or reallowed or paid to dealers, including the
proposed selling price to the public.

-17-

<PAGE>

Each Selling Stockholder and any dealer acting in connection
with the offering of any of the Shares or any broker executing or
selling orders on behalf of that Selling Stockholder may be deemed
to be an "underwriter" within the meaning of the Securities Act, in
which event any profit on the sale of any or all of the Shares and
any commissions, discounts or concessions received by any such
dealers or brokers may be deemed to be underwriting commissions and
discounts under the Securities Act. Any dealer or broker
participating in any distribution of the Shares may be required to
deliver a copy of this Prospectus, including the Prospectus
Supplement, if any, to any person who purchases any of the Shares
from or through such dealer or broker.

Under applicable rules and regulations under the Exchange Act,
any person engaged in a distribution of the Shares may not
simultaneously engage in market making activities with respect to
the Shares for a period of nine business days prior to the
commencement of such distribution. Each Selling Stockholder will be
subject to applicable provisions of the Exchange Act and the rules
and regulations promulgated thereunder, including, without
limitation, Regulation M, which provisions may limit the timing of
purchases and sales of the Shares by such Selling Stockholder.

In order to comply with certain states' securities laws, if
applicable, the Shares will be sold in such jurisdictions only
through registered or licensed brokers or dealers. In certain
states, the Shares may not be sold unless the Shares have been
registered and qualify for sale in such state, or unless an
exemption from registration or qualification is available and is
obtained.

DESCRIPTION OF CAPITAL STOCK

Authorized and Outstanding Capital Stock
- ----------------------------------------

The authorized capital stock of the Company currently consists
of 50,000,000 shares of Common Stock, par value $.01 per share, and
10,000,000 shares of preferred stock, par value $.01 per share (the
"Preferred Stock"), which is subject to designation and issuance by
the Board in the future. On August 8, 1997, there were 16,567,335
shares of Common Stock outstanding and held of record by
approximately 615 stockholders. There are currently no outstanding
shares of Preferred Stock. At August 8, 1997, there were a total of
2,987,673 shares of Common Stock reserved for issuance upon the
exercise of outstanding stock options under the Company's employee
stock option plan, director options under the option plan for non-
employee directors, compensation contract options and outstanding
warrants.

The following descriptions of capital stock are qualified in
all respects by reference to the Company's Restated Certificate of
Incorporation.

Common Stock
- ------------

Holders of Common Stock are entitled to receive dividends
when, as and if declared by the Board from funds legally available
therefor. Each share of Common Stock entitles the holder thereof
to one vote upon matters voted upon by the stockholders.
Cumulative voting for the election of directors is not permitted,
which means that the holders of a majority of shares voting for the
election of directors can elect all members of each class of the
Board. Except as otherwise required by applicable Delaware law, a
majority vote is sufficient for any action that requires the vote
or concurrence of stockholders, except that a plurality vote is
sufficient to elect directors.

The holders of Common Stock do not have any preemptive,
subscription, redemption or conversion rights or privileges. Upon
liquidation or dissolution of the Company, the holders of Common
Stock are entitled to share ratably in the net assets of the
Company remaining after payment of liabilities and liquidation
preferences of any outstanding shares of Preferred Stock. All
shares of Common Stock now outstanding are, and the Shares of
Common Stock to be sold by the Selling Stockholders hereby will be,
upon issuance, fully paid and non-assessable.

-18-

<PAGE>

Preferred Stock
- ---------------

The Preferred Stock may be issued from time to time by the
Board in one or more series, without further stockholder approval
or action, with such designations, powers, limitations,
restrictions, qualifications, rights, preferences and privileges as
the Board may determine.

Transfer Agent
- --------------

The transfer agent and registrar for the Common Stock is
Montreal Trust Company of Canada, Vancouver, B.C., Canada.

Indemnification
- ---------------

The Company's Certificate provides that the Company shall
indemnify any and all persons who may serve or who have served at
any time as directors or officers, or who at the request of the
Board may serve or at any time have served as directors or officers
of another corporation in which the Company at such time owned or
may own shares of stock or of which the Company was or may be a
creditor, and their respective heirs, administrators, successors
and assigns, against any and all expenses, including amounts paid
upon judgments, attorneys' fees and amounts paid in settlement
(before or after suit is commenced), actually and necessarily
incurred by such persons in connection with the defense or
settlement of any claim, action, suit or proceeding in which they,
or any of them, are made parties, or a party, or which may be
asserted against them or any of them, by reason of being or having
been a director or officer of the Company, or of such other
corporation, except in relation to matters as to which any such
director or officer or former director or officer or person is
adjudged in any action, suit or proceeding to be liable for his own
negligence or misconduct in the performance of his duties. Such
indemnification shall be in addition to any other rights to which
those indemnified may be entitled under any law, bylaw, amendment,
vote of stockholders or otherwise.

Additionally, the Company shall, to the extent required, and
may, to the extent permitted, by Section 145 of the Delaware
General Corporation Law ("DGCL"), as amended from time to time,
indemnify and reimburse all persons whom it may indemnify and
reimburse pursuant thereto. Expenses incurred by an officer or
director in defending a civil or criminal action, suit or
proceeding shall be paid by the Company in advance of the final
disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay
such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Company as authorized in Section
145(e) of the DGCL. The indemnification provided for in the
Certificate is not exclusive of any other rights to which those
entitled to receive indemnification or reimbursement thereunder may
be entitled.

Limitation of Liability
- -----------------------

Section 102 of the DGCL authorizes a Delaware corporation to
include a provision in its certificate of incorporation limiting or
eliminating the personal liability of its directors to the
corporation and its stockholders for monetary damages for breach of
directors' fiduciary duty of care. The duty of care requires that,
when acting on behalf of the corporation, directors exercise an
informed business judgment based on all material information
reasonably available to them. Absent the limitations authorized by
such provision, directors are accountable to corporations and their
stockholders for monetary damages for conduct constituting gross
negligence in the exercise of their duty of care. Although Section
102 of the DGCL does not change a director's duty of care, it
enables corporations to limit available relief to equitable
remedies such as injunction or rescission. Pursuant to such
provision, the Company adopted an amendment to its Certificate at
the 1993 Annual Meeting of Stockholders limiting the personal
liability of directors of the Company (in their capacity as
directors but not in their capacity as officers) to the Company or
its stockholders to the fullest extent permitted by the DGCL. As
a result, a director of the Company may not be held personally
liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for (i) any breach
of the director's duty of loyalty to the Company or its
stockholders, (ii) acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
unlawful payments of dividends or unlawful

-19-

<PAGE>

stock repurchases, redemptions or other distributions, and (iv) any
transaction from which the director derived an improper personal
benefit.

The adoption of this provision may have the effect of reducing
the likelihood of derivative litigation against directors and may
discourage or deter stockholders or management from bringing a
lawsuit against directors for breach of their duty of care, even
though such an action, if successful, might otherwise have
benefited the Company and its stockholders. However, the adoption
of this provision, together with the provision described above that
requires the Company to indemnify its officers and directors
against certain liabilities, is intended to enable the Company to
attract qualified persons to serve as directors who might otherwise
be reluctant to do so.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed
upon for the Company by Arter & Hadden, Dallas, Texas.

-20-

<PAGE>

============================= ==============================
No dealer, salesperson or
any other person has been
authorized to give any
information or to make any
representations other than 543,133 SHARES
those contained in this
Prospectus in connection
with the offer made by this
Prospectus, and, if given or
made, such information or U.S. LONG DISTANCE CORP.
representations must not be
relied upon as having been
authorized by the Company,
the Selling Stockholders or
any other person. This COMMON STOCK
Prospectus does not
constitute an offer to sell
or the solicitation of any
offer to buy any security
other than the Shares of
Common Stock offered by this
Prospectus, nor does it
constitute an offer to sell
or a solicitation of any
offer to buy the Shares of
Common Stock by anyone in
any jurisdiction in which
such offer or solicitation
is not authorized, or in
which the person making such
offer or solicitation is not
qualified to do so, or to
any person to whom it is
unlawful to make such offer
or solicitation. Neither the
delivery of this Prospectus
nor any sale made hereunder
shall, under any
circumstances, create any
implication that information
contained herein is correct
as of any time subsequent to
the date hereof.
---------------
------------ PROSPECTUS
---------------

TABLE OF CONTENTS

Page

Available Information 2
Incorporation of
Certain Documents
by Reference 2
Prospectus Summary 3
Risk Factors 5
Disclosure Regarding August 18, 1997
Forward-Looking
Statement 7
The Company 8
Use of Proceeds 15
Dilution 15
Selling Stockholders 15
Plan of Distribution 17
Description of Capital
Stock 18
Legal Matters 20
============================= ==============================