INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS INC, 424B3, 1998-06-03

INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS INC
424B3, 1998-06-03
COMPUTER PROGRAMMING SERVICES

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PROSPECTUS

3,500,000 Shares

[LOGO] ITDS
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INTERNATIONAL
TELECOMMUNICATION
DATA SYSTEM

Common Stock

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

Of the 3,500,000 shares of common stock, par value $.01 per share (the
"Common Stock"), of International Telecommunication Data Systems, Inc. ("ITDS"
or the "Company") offered, 3,185,000 are being offered by the Company and
315,000 are being offered by certain stockholders of the Company (the "Selling
Stockholders"). See "Principal and Selling Stockholders." The Company will not
receive any of the proceeds from the sale of shares of Common Stock by the
Selling Stockholders.

The Company's Common Stock is traded on the Nasdaq National Market under
the symbol ITDS. On June 2, 1998, the last reported sale price of the Common
Stock on the Nasdaq National Market was $24.00 per share. See "Price Range of
Common Stock."

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See "Risk Factors" beginning on page 7 for a discussion of factors that should
be considered by prospective purchasers of the 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.

<TABLE>
<CAPTION>
================================================================================
Underwriting Proceeds to
Price to Discounts and Proceeds to Selling
Public Commissions (1) Company (2) Stockholders
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share ......... $24.00 $1.14 $22.86 $22.86
- --------------------------------------------------------------------------------
Total (3) ......... $84,000,000 $3,990,000 $72,809,100 $7,200,900
================================================================================
</TABLE>

(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."
(2) Before deducting estimated expenses of $600,000 payable by the Company.
(3) The Company and the Selling Stockholders have granted the Underwriters
30-day options to purchase up to an aggregate of 525,000 additional shares
of Common Stock on the same terms and conditions as set forth above solely
to cover over-allotments, if any. If such options are exercised in full,
the total Price to Public, Underwriting Discounts and Commissions, Proceeds
to Company and Proceeds to Selling Stockholders will be $96,600,000,
$4,588,500, $83,730,465 and $8,281,035, respectively. See "Underwriting."

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The shares of Common Stock offered by this Prospectus are offered severally
by the Underwriters subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
delivery of certificates for the shares will be made at the offices of Lehman
Brothers Inc., New York, New York, on or about June 8, 1998.

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

LEHMAN BROTHERS BT ALEX. BROWN

COWEN & COMPANY JEFFERIES & COMPANY, INC.

June 3, 1998
<PAGE>

[Inside cover contains Company's logo and picture of a globe.]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK IN
CONNECTION WITH THE OFFERING, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT
COVERING TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF PENALTY BIDS.

IN ADDITION, IN CONNECTION WITH THE OFFERING, CERTAIN UNDERWRITERS (AND
SELLING GROUP MEMBERS, IF ANY) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS
IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103
OF REGULATION M UNDER THE SECURITIES EXCHANGE ACT OF 1934. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information in the ITDS Consolidated Financial Statements, the Intelicom
Financial Statements, the Unaudited Pro Forma Financial Statements and Notes
thereto appearing elsewhere in this Prospectus. Except as otherwise noted
herein, all information contained in this Prospectus assumes no exercise of the
Underwriters' over-allotment options and reflects a three-for-two split of the
Company's Common Stock, effected in the form of a stock dividend on March 9,
1998. Information provided on a "Pro Forma Basis" assumes that the Intelicom
Acquisition (as defined below) occurred on January 1, 1997 unless otherwise
indicated.

The Company

ITDS is a leading provider of comprehensive billing, customer care and
management information solutions to providers of wireless and satellite
telecommunications services. The Company currently supports over 5 million
subscribers in more than 200 wireless markets. The Company uses its proprietary
software technology to develop solutions which address billing and customer
care requirements as they evolve, regardless of a service provider's market
segment, geographic area or mix of network features and billing options. The
Company currently serves leading national and regional wireless
telecommunications companies in the United States, including Aliant
Communications Co. ("Aliant"), Dobson Cellular Systems ("Dobson"), Nextel
Communications, Inc. ("Nextel"), Omnipoint Corporation ("Omnipoint"),
Southwestern Bell, Sygnet Wireless, Inc. ("Sygnet"), Western Wireless Corp.
("Western Wireless") and WorldCom, Inc. ("WorldCom"). Typically, the Company
provides its services under contracts with terms ranging from two to five
years, and bills customers monthly, on a per-subscriber basis. As a result,
substantially all of the Company's revenue is derived from bill processing
services, which are recurring in nature. This revenue generally increases as
the number of subscribers served by the Company grows. For the year ended
December 31, 1997, on a Pro Forma Basis, recurring revenues accounted for
approximately 90% of total revenues.

On January 2, 1998, ITDS acquired a subsidiary ("Intelicom") of Computer
Sciences Corporation ("CSC") (the "Intelicom Acquisition"). Intelicom provides
complete billing and customer care solutions for the wireless communication
industry, including cellular, personal communication services ("PCS"), paging
and enhanced specialized mobile radio ("ESMR"). Revenue for Intelicom for the
year ended December 31, 1997 was approximately $57.0 million, or approximately
71% of the Company's 1997 revenues on a Pro Forma Basis. Primarily as a result
of the Intelicom Acquisition, the number of subscribers supported by the
Company increased from approximately 735,000 in January 1997 to approximately
4.6 million in January 1998. The Company believes there are potentially strong
synergies between the acquired platforms and applications and the ITDS
platforms and applications existing at the time of the Intelicom Acquisition.
The Company intends to reconfigure and combine certain of its platforms to
reduce the number of total platforms offered and to migrate desirable
applications across its platform offerings.

In recent years, the telecommunications services industry has experienced
rapid growth and dramatic change. The number of wireless subscribers in the
United States has increased from 500,000 in June 1986 to 55.3 million in
December 1997, according to the Cellular Telecommunications Industry
Association ("CTIA"). Deregulation and the introduction of technologies such as
cellular, PCS and satellite communications have spurred the introduction of new
entrants and increased competitive pressures across the telecommunications
services market. Markets that were once rigidly segmented by service within
defined geographic areas are converging into a single telecommunications
market, which includes both traditional service providers and a variety of new
participants. Because of these competitive pressures and the proliferation of
service features and pricing options within the telecommunications services
industry, the billing function has evolved from primarily a service support
function to a marketing and revenue enhancement device used to differentiate
the increasingly fungible services offered by providers. Service providers need
billing, customer care and management information solutions which (i) enable
them to differentiate their services quickly and efficiently in an increasingly
competitive market; (ii) respond quickly, efficiently and accurately to
market-driven demands; (iii) integrate seamlessly with their corporate
management information services; (iv) provide a basis for the efficient
development and deployment of solutions to address common industry issues; and
(v) offer flexibility and reliability as critical components of subscriber
relations, communication and retention.

Driven by the requirements of the telecommunications services market and
the Intelicom Acquisition, the Company's revenues have increased rapidly in
recent years from approximately $6.3 million in 1994 to $23.4 million and $80.4
million in fiscal 1997 and 1997 on a Pro Forma Basis, respectively.

3
<PAGE>

The Company's core systems form the foundation for an integrated suite of
applications that provide subscriber billing, customer care and service
support. In addition, the Company's systems enable the service provider to
automate subscriber activation, remittance processing, collections, data
retrieval and reporting, fraud management, electronic funds transfer, credit
management, inventory management and data archiving. The Company's software and
services allow its customers to develop and support innovative rate and feature
offerings without the delay and cost associated with reconfiguring their
billing and information system; to identify and respond to subscriber demands
through analysis of billing and subscriber databases; to reduce costs with
accurate and timely receivables information; and to manage the subscriber
relationship in a comprehensive and cost-effective manner.

The Company's solutions are implemented for its customers by dedicated
teams with expertise in meeting the transactional billing and customer care
requirements of telecommunications services providers. The Company's software
is installed at a customer site to interface directly with the customer's
systems and generate relevant billing and other data, as well as to support a
wide range of transactional billing, customer care and subscriber management
functions. The Company processes billing information generated through the use
of its software systems, eliminating the need for customers to maintain their
own data processing operations.

To further its position as a leading provider of billing and customer care
services to telecommunications service providers worldwide, the Company intends
to (i) leverage the expanded customer base achieved through the Intelicom
Acquisition, (ii) meet the specific needs of each of its customers by offering
and supporting applications and platforms that offer functionality tailored to
such customers' specific needs, (iii) offer complete transactional billing
solutions to providers in non-wireless segments of the telecommunications
services market, such as satellite, data transmission, Internet and other
enhanced services, (iv) achieve greater economic efficiencies by combining
certain of the operations of its facilities, (v) expand internationally and
establish a service bureau operation in Brazil, and (vi) pursue strategic
acquisitions. The Company intends to meet these objectives by drawing on the
expertise of its personnel and by focusing on the further development of its
technology base. The Company believes that these efforts, coupled with the
capabilities of its existing software and the introduction of new applications,
will permit significant continued growth in its target marketplaces.

The Company was incorporated as a Connecticut corporation in June 1990 and
was reincorporated in Delaware in September 1996. The Company's principal
executive office is located at 225 High Ridge Road, Stamford, Connecticut
06905, and its telephone number is (203) 329-3300.

ITDS is a service mark of the Company. All other service marks, trademarks
or trade names referred to in this Prospectus are the property of their
respective owners.

Risk Factors

For a discussion of considerations relevant to an investment in the Common
Stock, see "Risk Factors."

The Offering

<TABLE>
<S> <C>
Common Stock offered by the Company ...... 3,185,000 shares
Common Stock offered by the
Selling Stockholders .................... 315,000 shares
Common Stock to be outstanding
after this offering ..................... 16,611,459 shares (1)
Use of proceeds by the Company ........... For repayment of indebtedness and
for working capital and other general
corporate purposes. See "Use of Proceeds."
Nasdaq National Market symbol ............ ITDS
</TABLE>

- --------
(1) Based on the number of shares outstanding as of March 31, 1998. Excludes
2,418,466 shares of Common Stock issuable upon the exercise of outstanding
options as of March 31, 1998, and an additional 127,146 shares, 282,465
shares, 79,388 shares and 1,125,000 shares of Common Stock reserved for
issuance under the Company's 1996 Stock Incentive Plan, 1996 Employee
Stock Purchase Plan, 1997 Stock Incentive Plan and 1998 Stock Incentive
Plan, respectively.

4
<PAGE>

Results of the First Quarter of 1998

On April 28, 1998, the Company reported that revenue for the first quarter
of 1998 rose to $26.0 million from $5.3 million in the first quarter of 1997.
The Company's results include the results of Intelicom from the date of
acquisition, which effectively tripled the Company's revenues for the period.

The Company reported a loss for the first quarter of $13.5 million or a
loss of $1.01 per basic share compared to net income of $1.1 million or $.08
per basic share in the first quarter of 1997. The basic weighted average number
of shares of Common Stock outstanding for the first quarter of 1998 and 1997
were 13,406,387 and 12,655,040, respectively. Excluding the non-recurring,
in-process R&D and indirect costs associated with the Intelicom Acquisition,
earnings for the first quarter of 1998 were $2.0 million or $.14 per pro forma
diluted share, compared to $1.1 million or $.08 per diluted share in the first
quarter of 1997. The diluted weighted average number of shares of Common Stock
outstanding for the first quarters of 1998 (pro forma) and 1997 were 14,451,809
and 12,855,537, respectively.

5
<PAGE>

Summary Financial Information
(in thousands, except per share data)

<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1995 1996 1997 1997 Pro Forma (1)
--------- ---------- ---------- ------------------
<S> <C> <C> <C> <C>
Statements of Operations Data:
Revenue ...................................... $10,821 $ 16,689 $ 23,429 $ 80,404
Operating income ............................. 1,608 2,714 6,545 13,333
Income before extraordinary item (2) ......... 826 1,502 4,801 5,160
Per common share data--basic (3):
Income before extraordinary item ............ .09 .15 .38 .39
Extraordinary loss .......................... (.03) -- -- --
------- -------- -------- --------
Net income .................................. $ .06 $ .15 $ .38 $ .39
======= ======== ======== ========
Shares used in computing basic income per
common share ................................ 9,291 9,890 12,728 13,335
======= ======== ======== ========
Per common share--diluted (3):
Income before extraordinary item ............ $ .09 $ .15 $ .36 $ .37
Extraordinary loss .......................... (.03) -- -- --
------- -------- -------- --------
Net income ................................... $ .06 $ .15 $ .36 $ .37
======= ======== ======== ========
Shares used in computing diluted income per
common share ................................ 9,291 10,109 13,193 13,800
======= ======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
As of December 31, 1997
-----------------------------------------------
Pro Forma
Actual Pro Forma (4) as Adjusted (5)
---------- --------------- ----------------
<S> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and short
term investments .................... $28,967 $ 23,140 $ 25,349
Current assets ....................... 34,936 33,737 35,946
Total assets ......................... 44,452 123,409 124,618
Current liabilities .................. 2,364 16,801 16,801
Total long-term debt and capital
lease obligations ................... 74 70,074 74
Total stockholders' equity ........... 40,318 34,838 106,047
</TABLE>

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(1) Pro forma to reflect the Intelicom Acquisition, as if it occurred on
January 1, 1997. See "Unaudited Pro Forma Consolidated Financial
Statements."

(2) In 1995, the Company experienced an extraordinary loss of $223,696 (net of
a $158,038 tax benefit) in connection with the refinancing of long-term
debt.

(3) Computed on the basis described in Note 3 of the Notes to the ITDS
Consolidated Financial Statements.

(4) Pro forma to reflect the Intelicom Acquisition as if it occurred on
December 31, 1997. See "Unaudited Pro Forma Consolidated Financial
Statements."

(5) Pro forma to reflect the Intelicom Acquisition as if it occurred on
December 31, 1997, and as adjusted to give effect to the sale by the
Company of 3,185,000 shares of Common Stock offered hereby (after deducting
the underwriting discount and commission and estimated offering expenses),
the application of the net proceeds therefrom, and the estimated cost ($1
million) of retiring the debt assumed in connection with the Intelicom
Acquisition. See "Use of Proceeds" and "Capitalization."

6
<PAGE>

RISK FACTORS

The following risk factors should be considered carefully in addition to
the other information in this Prospectus before purchasing the Common Stock
offered by this Prospectus. Except for the historical information contained
herein, the discussion in this Prospectus contains certain forward-looking
statements that involve risks and uncertainties. The cautionary statements made
in this Prospectus should be read as being applicable to all related
forward-looking statements wherever they appear in this Prospectus. The
Company's actual results could differ materially from those discussed here.
Important factors that could cause or contribute to such differences include
those discussed below, as well as those discussed elsewhere herein.

Management of Growth

The Company has historically experienced rapid growth and expects to
experience considerable growth in the foreseeable future. The Company's total
revenues have increased from $3.1 million in fiscal 1993 to $23.4 million and
$80.4 million for fiscal 1997 and fiscal 1997 on a Pro Forma Basis,
respectively. As a result of the Intelicom Acquisition in early January 1998,
the Company substantially increased the size of its operations, as well as the
number of subscribers it serves. The growth in the size and complexity of its
business, as well as its customer base, has placed, and is expected to continue
to place, significant demands on the Company's administrative, operational and
financial personnel and systems. Additional expansion by the Company may
further strain the Company's management, financial and other resources. There
can be no assurance that the Company's systems, procedures, controls and
existing facilities will be adequate to support expansion of its operations.
The Company's future operating results will depend on the ability of its
officers and key employees to manage changing business conditions and to
implement and improve the operational, financial control and reporting
functions of the Company. If the Company is unable to manage expansion of its
operations, the quality of the Company's services, its ability to retain key
personnel and its business, financial condition and results of operations could
be materially adversely affected.

From January 1993 to March 1998, the number of the Company's employees
increased from 26 to 560 and the number of the Company's full-time consultants
increased from zero to 117. A substantial portion of the Company's current
employees and consultants joined the Company in January 1998, in conjunction
with the Intelicom Acquisition. The Company anticipates that continued growth
will require it to recruit and hire a substantial number of new development,
managerial, finance, sales and marketing support personnel. There can be no
assurance that the Company will be successful in hiring or retaining any of the
foregoing personnel. The Company's ability to compete effectively and to manage
future growth, if any, will depend on its ability to improve operational
systems and to expand, train, motivate and manage its workforce.

Integration of Intelicom; Payment of Contingent Purchase Price

In January 1998, the Company completed the Intelicom Acquisition and
substantially increased the size of the Company's operations. For fiscal year
1997 on a Pro Forma Basis, revenue generated from the Intelicom business
represented approximately 70% of the Company's revenues, and Intelicom
employees and consultants represented 61.3% of the Company's employees and
consultants. The future success of the Company will depend in part upon whether
the integration of the two companies' businesses is achieved in an efficient
and effective manner; there can be no assurance that this will occur. The
integration of the finance and administrative operations and the product
offerings and platforms, and the coordination of the respective sales,
marketing and research and development efforts of ITDS and Intelicom will
require significant financial resources and attention from management. There
can be no assurance that such integration and coordination will be successful
or accomplished in a timely manner or that the anticipated economic,
operational and other benefits of the Intelicom Acquisition will be achieved.
The difficulties of such integration may be increased by the necessity of
coordinating the activities of ITDS facilities in Stamford, Connecticut with
Intelicom's facilities in Champaign, Illinois, each of which has a distinct
culture. The integration of Intelicom has required, and will continue to
require, the dedication of management resources which may temporarily divert
attention from the daily operations of the combined company.

In addition, in connection with the Intelicom Acquisition and subject to
the satisfaction of certain performance criteria, the Company may be required
to pay to CSC up to $6.0 million in cash on January 1, 1999.

Reliance On Significant Customers

The Company's largest two customers, Nextel and Western Wireless,
represented 25.7% and 10.3%, respectively, of the Company's 1997 revenues on a
Pro Forma Basis and 29.3% and 12.7%, respectively, of the Company's revenues

7
<PAGE>

for the first three months of 1998. It is likely that Nextel and Western
Wireless will each continue to represent over 10 percent of the Company's
revenues in the future. The Company has long-term contracts, ranging from two
to five years, with all of its significant customers. However, as a result of
the Intelicom Acquisition, the Company's relationships with its largest
customers have only been in place since January 1998. In addition, certain of
such customers have from time to time expressed concern regarding service
performed by Intelicom prior to the Intelicom Acquisition. The Company has
worked and continues to work with such customers to address these concerns.
There can be no assurance that the Company's customers will renew their
contracts with the Company at the end of the contract term or may not seek to
terminate their contracts on the basis of alleged contractual defaults or other
grounds. Certain of the Company's contracts do not require customers to make
any minimum purchases. Loss of all or a significant part of the business of any
of the Company's significant customers would have a material adverse effect on
the Company's business, financial condition and results of operations.
Additionally, the acquisition by a third party of one of the Company's
significant customers could result in the loss of that customer and have a
material adverse effect on the business, financial condition and results of
operations of the Company. The Company is currently engaged in discussions with
Frontier Cellular, a cellular telephone service provider with which the Company
has an agreement for the development and delivery of a billing and customer
care system. The purpose of these discussions is to review and renegotiate the
terms of the development and delivery schedule for such system, including the
proposed functionality, cost of development and delivery schedule for such
system. There can be no assurance that any such proposed functionality, cost or
schedule will be mutually agreeable to the Company and Frontier Cellular, that
the Company's system will be adopted by Frontier Cellular or that Frontier
Cellular will be a customer of the Company in the future. See "Business--Sales
and Marketing."

Dependence on Key Personnel; New Management

The Company's performance depends substantially on the performance of its
executive officers and key employees. The Company's long-term success will
depend upon its ability to recruit, retain and motivate highly skilled
personnel. Competition for such personnel is intense, and there can be no
assurance that the Company will be able to attract, assimilate or retain highly
skilled personnel in the future. In addition, several members of the Company's
senior management team have only recently joined the Company. For example,
Peter P. Bassermann, the Company's President, joined the Company in September
1997, Paul K. Kothari joined the Company in late 1997 and began serving as the
Company's Chief Financial Officer in February 1998, and Susan L. Yezzi joined
the Company in late 1997 and assumed the role of the Company's Executive Vice
President of Operations--Champaign in February 1998. Although each of Mr.
Bassermann, Mr. Kothari, Ms. Yezzi, Lewis D. Bakes, Joseph A. Juliano, Barry K.
Lewis, Peter L. Masanotti and Kevin Piltz has executed an employment contract
with the Company, there can be no assurance that they will serve their full
employment terms. Mark D. Spitzer resigned as Chief Financial Officer in
September 1997 and was replaced by Alan K. Greene, who served as Chief
Financial Officer from September 1997 to February 1998. See "Business--Legal
Proceedings." Although the Company believes that the extensive industry
experience of new members of management is essential to the Company's growth
and outweighs short employment history with the Company, there can be no
assurance that the assimilation of the new officers into their managerial roles
with the Company will be successful.

Fluctuations in Quarterly Performance

The Company's revenues and operating results may fluctuate from quarter to
quarter due to a number of factors, including the timing, size and nature of
the Company's contracts; the integration into the Company's consolidated
financial results of Intelicom and the lack of actual historical financial
results as a combined entity; long sales cycles typically associated with large
customers, which require the Company to make a substantial investment in the
conversion process prior to the generation of revenue; the hiring of additional
staff; seasonal variations in cellular telephone subscriptions; the timing of
the introduction and the market acceptance of new products or product
enhancements by the Company or its competitors; changes in the Company's
operating expenses; and fluctuations in economic and financial market
conditions. Fluctuations in quarterly operating results may result in
volatility in the price of the Common Stock. See "1997 Pro Forma Financial
Condition and Results of Operations."

Rapidly Changing Telecommunications Market

Over the last decade, the market for telecommunications services has been
characterized by rapid technological developments, evolving industry standards,
dramatic changes in the regulatory environment and frequent new product
introductions. The Company's success will depend upon its ability to enhance
its existing products and services and to introduce new products and services
which will respond to these market requirements as they evolve.

8
<PAGE>

To date, substantially all of the Company's revenues are attributable to
wireless customers. While the Company believes that its current systems and
services will also permit it to attract customers in other segments of the
telecommunications services industry, there can be no assurance that it will be
able to do so. In addition, technologies, services or standards may be
developed which could require significant changes in the Company's business
model, development of new products, or provision of additional services, at
substantial cost to the Company. Such developments may also result in the
introduction of additional competitors into the marketplace. Furthermore, if
the overall market for telecommunications services fails to evolve and converge
in the manner contemplated by the Company or grows more slowly than
anticipated, or if the Company's products and services fail in any respect to
achieve market acceptance, there could be a material adverse effect on the
Company's business, financial condition and results of operations. The
telecommunications industry is also characterized by significant and rapid
changes in strategic alignment. Merger or consolidation of one or more
telecommunications services providers could result in the loss to the Company
of customers or sales opportunities.

Demand for New Product Development

The Company believes that its future success depends in part upon its
ability to enhance its current solutions and develop new products and services
that address the increasingly complex needs of its customers. In addition, the
introduction of new products or services by third parties could render the
Company's existing solutions obsolete or unmarketable. The Company's ability to
anticipate changes in technology and successfully develop and introduce new or
enhanced products incorporating such technology on a timely basis will be
significant factors in its ability to remain competitive. There can be no
assurance that the Company will complete the development of new or enhanced
products or services on a timely or successful basis or successfully manage
transitions from one product release to the next, that the Company will not
encounter difficulties or delays in the introduction of new or enhanced
products, or that defects will not be found in such new or enhanced products
after installation, resulting in a loss of, or delay in, market acceptance. In
particular, the Company is currently developing a series of enhancements to its
existing software system, including incorporation of a Windows 95 compatible
user interface, incorporation of an Oracle relational database management
system, and support of Unix based file servers. The Company believes that these
enhancements will permit the Company to compete effectively as technology
evolves and facilitate its ability to address the requirements of larger
telecommunications services providers. If the Company is unable to introduce
these new enhancements on a timely basis, or such enhancements result in the
introduction of "bugs" or other performance impairments in the Company's
systems, the Company's business, financial condition and results of operations
could be materially adversely affected, and its ability to expand its sales
activities could be significantly limited. See "Business--New Products."

Competition

The market for billing, customer care and management information systems
for the telecommunications services industry is highly competitive and the
Company expects that the high level of growth within the telecommunications
services industry will encourage new entrants, both domestically and
internationally, in the future. The Company competes with independent providers
of transactional systems and services, with internal billing departments of
telecommunications services providers and with the billing services of
management consulting companies. The Company anticipates continued growth in
competition in the telecommunications services industry and consequently the
entrance of new competitors into its market in the future.

Many of the Company's current and potential future competitors have
significant financial, technical and marketing resources and have greater name
recognition than the Company. In addition, many of the Company's competitors
have established commercial relationships or joint ventures with major cellular
and other telecommunications services providers. As a result, the Company's
competitors may be able to adapt more quickly to new or emerging technologies
and changes in customer requirements, or to devote greater resources to the
promotion and sale of products than the Company. See "Business--Competition."

Dependence on Cellular Telephone Industry

Although the Company's products have been designed to adapt to a variety
of current and future technologies, substantially all of the Company's revenues
to date have been generated by sales of its solutions to service providers in
the cellular telephone industry. A decrease in the number of cellular service
subscribers served by the Company's customers could result in lower revenues
for the Company. Although the cellular market has experienced substantial

9
<PAGE>

growth in the number of subscribers in the past, there can be no assurance that
such growth will be sustained. In addition, industry reports have indicated
that the average monthly bill per subscriber has decreased in recent years.
Such decreases could result in increased price competition among billing
service providers. Furthermore, any adverse development in the cellular
telephone industry could have a material adverse effect on the business,
financial condition and results of operations of the Company. See
"Business--Customers."

Dependence on Proprietary Technology

The Company's success is dependent in part upon its proprietary software
technology. The Company relies on trademark, copyright and trade secret laws,
employee and third-party non-disclosure agreements and other methods to protect
its proprietary rights. There can be no assurance that its agreements with
employees, consultants and others who participate in the development of its
software will not be breached, that the Company will have adequate remedies for
any breach, or that the Company's trade secrets will not otherwise become known
to or independently developed by competitors. Furthermore, there can be no
assurance that the Company's efforts to protect its rights through trademark
and copyright laws will prevent the development and design by others of
products or technology similar to or competitive with those developed by the
Company. The computer technology industry is characterized by frequent and
substantial intellectual property litigation. The Company is not aware of any
patent infringement or any violation of other proprietary rights claimed by any
third party relating to the Company or the Company's products.

The Company's success will depend in part on its continued ability to
obtain and use licensed technology that is important to certain functionalities
of its products. The inability to continue to procure or use such technology
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business--Proprietary Rights and
Licenses."

Government Regulation

Currently, the Company's business is not subject to direct government
regulation; however, the Company's existing and potential customers are subject
to extensive regulation. Changes in regulation which adversely affect the
Company's existing and potential customers could have a material adverse effect
on the business, financial condition and results of operations of the Company.
See "Business--Industry Background."

Limited Public Market; Possible Volatility of Stock Price

The Common Stock has traded on the Nasdaq National Market since October
1996 and has a limited public market history. There can be no assurance that
future market prices for the shares will equal or exceed the price to public
set forth on the cover page of this Prospectus. The price at which the Common
Stock will trade could be subject to wide fluctuations in response to quarterly
fluctuations in operating results; announcements of technological innovations
or new products by the Company or its competitors; changes in financial
estimates by securities analysts; fluctuations in economic and financial market
conditions, or other events or factors. In addition, the stock market has
experienced significant price and volume fluctuations that have particularly
affected the market price of equity securities of many high technology
companies and that often have been unrelated to the operating performance of
such companies. In the past, following periods of volatility in the market
price of a company's securities, securities class action litigation has often
been instituted against such a company. Such litigation could result in
substantial costs and a diversion of management's attention and resources,
which would have a material adverse effect on the Company's business, financial
condition and results of operations. These broad market fluctuations may
adversely affect the market price of the Common Stock. See "--Fluctuations in
Quarterly Performance."

Risks Related to Possible Acquisitions

The Company's strategy includes pursuing additional acquisitions that will
complement its business. See "Business--The ITDS Strategy." There can be no
assurance that the Company will be able to identify, acquire on commercially
reasonable terms or at all, or profitably manage additional businesses or
successfully integrate acquired businesses into the Company without substantial
expenses, delays or other operational or financial difficulties. Furthermore,
acquisitions may involve a number of special risks, including, but not limited
to: (i) diversion of management's attention, (ii) possible failure to retain
acquired key personnel, (iii) unanticipated events or circumstances, (iv) risks
of entering markets in which the Company has no or limited prior experience,
(v)

10
<PAGE>

financial integration or (vi) legal liabilities. Customer satisfaction or
performance problems at a single acquired business could have a material
adverse effect on the reputation of the Company as a whole. In addition, there
can be no assurance that acquired businesses will achieve anticipated financial
performance. While the Company from time to time considers acquisition
opportunities, it has no existing agreements, understandings or commitments to
effect any material acquisition. The failure of the Company to manage its
acquisition strategy successfully could have a material adverse effect on the
Company's business, operation results and financial condition. See
"--Integration of Intelicom; Payment of Contingent Purchase Price."

Certain Anti-Takeover Effect Provisions Affecting Stockholders

The Company's certificate of incorporation (the "Certificate of
Incorporation") and by-laws (the "By-laws") provide that any action required or
permitted to be taken by stockholders of the Company must be effected at a duly
called annual or special meeting of stockholders and may not be effected by any
consent in writing, and require reasonable advance notice by a stockholder of a
proposal or director nomination which such stockholder desires to present at
any annual or special meeting of stockholders. Special meetings of stockholders
may be called only by the Chairman of the Board, the Chief Executive Officer
or, if none, the President of the Company or by the Board of Directors. The
Certificate of Incorporation and By-laws provide for a classified Board of
Directors, and members of the Board of Directors may be removed only for cause
upon the affirmative vote of holders of at least two-thirds of the shares of
capital stock of the Company entitled to vote. The Board of Directors has the
authority, without further action by the stockholders, to fix the rights and
preferences of, and issue shares of, the Company's authorized Preferred Stock.
The rights of the holders of Common Stock will be subject to, and may be
adversely affected by, the rights of any holders of Preferred Stock that may be
issued in the future. The Company has no present plans to issue any shares of
the Company's Preferred Stock. In addition, the Company is subject to the anti-
takeover provisions of Section 203 of the Delaware General Corporation Law,
which prohibit the Company from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which such stockholder became an "Interested Stockholder" unless
the business combination is approved in a prescribed manner. The application of
Section 203 could have the effect of delaying or preventing a change of control
of the Company. These provisions, and the provisions of the Certificate of
Incorporation and By-laws, may have the effect of deterring hostile takeovers
or delaying or preventing changes in control or management of the Company,
including transactions in which stockholders might otherwise receive a premium
for their shares over then current market prices. In addition, these provisions
may limit the ability of stockholders to approve transactions that they may
deem to be in their best interests.

Shares Eligible for Future Sale

Sales of a substantial number of shares of Common Stock in the public
market following this offering could adversely affect the market price for the
Common Stock. Upon completion of this offering, the Company will have
approximately 16,611,459 outstanding shares of Common Stock (based on the
number of shares outstanding on March 31, 1998), of which approximately
1,147,653 shares will be held by affiliates (as that term is defined in Rule
144 under the Securities Act of 1933, as amended (the "Securities Act")) of the
Company and 606,673 shares are held by CSC (the "CSC Shares"). The shares held
by affiliates may only be resold in the public market in accordance with the
provisions of Rule 144. The CSC Shares will become eligible for resale in the
public market in accordance with the provisions of Rule 144 on January 2, 1999.
However, the Company has agreed to use its best efforts to cause a registration
statement covering the CSC Shares to be declared effective by the Securities
and Exchange Commission (the "Commission") on or before July 1, 1998. Pursuant
to such registration rights, (i) beginning July 1, 1998, CSC may sell up to 50%
of the CSC Shares; (ii) beginning January 1, 1999, CSC may sell up to the sum
of (x) 50% of the CSC Shares and (y) the maximum number of CSC Shares that CSC
would otherwise be entitled to sell under Rule 144 of the Securities Act and
(iii) beginning July 2, 1999, CSC may sell any remaining CSC Shares.

11
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of 3,185,000 shares of
Common Stock offered by the Company hereby are estimated to be $72,209,100,
after deducting the underwriting discount and commission and estimated offering
expenses payable by the Company. The Company will not receive any proceeds from
the sale of shares of Common Stock by the Selling Stockholders.

The Company intends to use the net proceeds from this offering to repay
$70 million outstanding under the Company's current term loan under the Amended
and Restated Credit Agreement dated as of March 18, 1998, among ITDS,
Intelicom, the lenders party thereto, First Union National Bank as
Administrative Agent and Lehman Commercial Paper, Inc. as Arranger (the "Credit
Agreement"), which amount was borrowed to finance a portion of the purchase
price in the Intelicom Acquisition. The Credit Agreement contains normal
covenants which include meeting certain financial ratios and it requires
payments of interest only at the rate of LIBOR plus up to two and one quarter
percent through March 30, 2000, at which time periodic principal payments will
become due. Principal payments of $1.25 million, $4.375 million, $5.625 million
and $6.25 million, respectively, will become due on a quarterly basis,
beginning March 30, 2000, 2001, 2002 and 2003, respectively. See
"Underwriting."

In addition, the Company may seek acquisitions of businesses, products and
technologies that are complementary to those of the Company, and a portion of
the remaining net proceeds, if any, may be used for such acquisitions. While
the Company engages from time to time in discussions with respect to potential
acquisitions, the Company has no plans, commitments or agreements with respect
to any such acquisitions as of the date of this Prospectus, and there can be no
assurances that any such acquisitions will be made. Pending such uses, the
Company intends to invest the net proceeds from this offering not used to repay
indebtedness in short-term, investment grade, interest-bearing instruments.

PRICE RANGE OF COMMON STOCK

The Common Stock has been quoted on the Nasdaq National Market under the
symbol "ITDS" since the Initial Public Offering on October 24, 1996. The
following table sets forth the high and low sales prices of the Common Stock on
the Nasdaq National Market for the periods indicated.

<TABLE>
<CAPTION>
High Low
----------- --------
<S> <C> <C>
Fiscal Year Ended December 1996:
- --------------------------------
Fourth Quarter (from October 24, 1996) ......... $16.33 $10.00

Fiscal Year Ended December 1997:
- --------------------------------
First Quarter .................................. $16.00 $10.67
Second Quarter ................................. $16.58 $ 6.92
Third Quarter .................................. $20.17 $15.17
Fourth Quarter ................................. $21.33 $14.33

Fiscal Year Ending December 1998:
- --------------------------------
First Quarter .................................. $29.00 $20.83
Second Quarter (through June 2, 1998) .......... $34.25 $22.00
</TABLE>

On June 2, 1998, the last reported sale price for the Common Stock as
reported by the Nasdaq National Market was $24.00 per share. As of May 8, 1998,
there were approximately 82 holders of record of the Common Stock.

12
<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company on
December 31, 1997, on a Pro Forma Basis, and Pro Forma as adjusted to reflect
the sale of 3,185,000 shares of Common Stock offered hereby by the Company and
the application of the estimated net proceeds therefrom. This table should be
read in conjunction with the ITDS Consolidated Financial Statements, the
Unaudited Pro Forma Financial Statements and Notes thereto included elsewhere
in this Prospectus.

<TABLE>
<CAPTION>
As of December 31, 1997
(in thousands)
--------------------------------------------
Pro Forma
Actual Pro Forma (1) as Adjusted(2)
--------- ------------- --------------
<S> <C> <C> <C>
Term loan ........................................ -- $ 70,000 --
Long-term capital lease obligations .............. $ 74 74 $ 74
Stockholders' equity:
Common Stock, $.01 par value; 40,000,000
shares authorized, 12,786,740 shares issued
and outstanding, actual; 13,393,413 shares
issued and outstanding, pro forma; and
16,611,459 shares issued and outstanding
pro forma, as adjusted (3) ...................... 128 134 166
Additional paid-in capital ....................... 44,447 54,441 126,618
Retained deficit ................................. (4,026) (19,506) (20,506)
Unearned compensation ............................ (231) (231) (231)
------- -------- --------
Total stockholders' equity ..................... 40,318 34,838 106,047
------- -------- --------
Total capitalization ......................... $40,392 $104,912 $106,121
======= ======== ========
</TABLE>

- --------

(1) Pro forma to reflect the Intelicom Acquisition as if it had occurred on
December 31, 1997.
(2) Pro forma to reflect the Intelicom Acquisition and as adjusted to give
effect to the sale by the Company of 3,185,000 shares of Common Stock
offered hereby (after deducting the underwriting discount and commission
and estimated offering expenses), the application of the net proceeds
therefrom, and the estimated cost ($1 million) of retiring the debt assumed
in connection with the Intelicom Acquisition.
(3) Excludes 2,489,099 shares of Common Stock issuable upon the exercise of
outstanding options as of December 31, 1997, and an additional 290,922
shares, 87,600 shares and 48,301 shares of Common Stock reserved for
issuance pursuant to the Company's 1996 Stock Incentive Plan, 1996 Employee
Stock Purchase Plan and 1997 Stock Incentive Plan.

13
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)

The following selected financial information has been derived from the
ITDS Consolidated Financial Statements, which have been audited by Ernst &
Young LLP, independent auditors, and, except for the statements of operations
for the years ended December 31, 1993 and 1994 and the balance sheets as of
December 31, 1993, 1994, 1995 and 1996, appear elsewhere in this Prospectus,
and the unaudited Pro Forma Financial Statements. This information should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997 and incorporated herein by
reference and the ITDS Consolidated Financial Statements, the Unaudited Pro
Forma Financial Statements and Notes thereto included elsewhere herein.

<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------
1997
1993 1994 1995 1996 1997 Pro Forma(1)
--------- --------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Statements of Operations Data:
Revenue .................................. $3,146 $6,324 $10,821 $16,689 $23,429 $ 80,404
Costs and expenses:
Operating expenses ...................... 834 1,647 2,788 4,283 5,617 25,764
General, administrative and selling
expenses .............................. 1,575 2,410 4,601 6,523 6,760 22,175
Depreciation and amortization ........... 242 406 641 1,054 1,596 9,571
Systems development and
programming costs ..................... 298 755 1,183 2,115 2,911 9,561
------ ------ ------- ------- ------- --------
Total cost and expenses .................. 2,949 5,218 9,213 13,975 16,884 67,071
------ ------ ------- ------- ------- --------
Operating income ......................... 197 1,106 1,608 2,714 6,545 13,333
Other income ............................. 50 29 49 316 1,702 1,382
Interest expense ......................... (329) (390) (453) (416) (120) (5,970)
------ ------ ------- ------- ------- --------
Income (loss) before income tax
expense and extraordinary item .......... (82) 745 1,204 2,614 8,127 8,745
Income tax expense ....................... -- 37 378 1,112 3,326 3,585
------ ------ ------- ------- ------- --------
Income (loss) before extraordinary
item (2) ................................ (82) 708 826 1,502 4,801 5,160
Extraordinary loss (net of $158 tax
benefit) ................................ -- -- (224) -- -- --
------ ------ ------- ------- ------- --------
Net income (loss) ........................ $ (82) $ 708 $ 602 $ 1,502 $ 4,801 $ 5,160
====== ====== ======= ======= ======= ========
Per common share data--Basic (3):
Income before extraordinary item ......... $ .09 $ .15 $ .38 $ .39
Extraordinary loss ....................... (.03) -- -- --
------- ------- ------- --------
Net income ............................... $ .06 $ .15 $ .38 $ .39
------- ------- ------- --------
Shares used in determining basic
income per common share ................. 9,291 9,890 12,728 13,335
======= ======= ======= ========
Per common share date--Diluted (3):
Income before extraordinary item ......... $ .09 $ .15 $ .36 $ .37
Extraordinary loss ....................... (.03) -- -- --
------- ------- ------- --------
Net income ............................... $ .06 $ .15 $ .36 $ .37
------- ------- ------- --------
Shares used in determining diluted
income per common share ................. 9,291 10,109 13,193 13,800
======= ======= ======= ========
</TABLE>

14
<PAGE>

<TABLE>
<CAPTION>
As of December 31, 1997
(in thousands)
-----------------------------------------------
Pro Forma
Actual Pro Forma (4) as Adjusted (5)
---------- --------------- ----------------
<S> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and short
term investments ................... $28,967 $ 23,140 $ 25,349
Current assets ....................... 34,936 33,737 35,946
Total assets ......................... 44,452 123,409 124,618
Current liabilities .................. 2,364 16,801 16,801
Total long-term debt and capital
lease obligations ................... 74 70,074 74
Total stockholders' equity ........... 40,318 34,838 106,047
</TABLE>

- --------
(1) Pro forma to reflect the Intelicom Acquisition, as if it occurred on
January 1, 1997. See "Unaudited Pro Forma Consolidated Financial
Statements."

(2) In 1995, the Company experienced an extraordinary loss of $223,696 (net of
a $158,038 tax benefit) in connection with the refinancing of long-term
debt.

(3) Computed on the basis described in Note 3 of the Notes to the ITDS
Consolidated Financial Statements.

(4) Pro forma to reflect the Intelicom Acquisition as if it occurred on
December 31, 1997. See "Unaudited Pro Forma Consolidated Financial
Statements."

Results of the First Quarter of 1998

15
<PAGE>

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

The following unaudited pro forma consolidated financial statements
reflect the Intelicom Acquisition and combine the historical consolidated
financial statements of ITDS and Intelicom for the periods indicated using the
purchase method of accounting.

The unaudited pro forma consolidated balance sheet reflects the
adjustments as if the Intelicom Acquisition had occurred on December 31, 1997.
The unaudited pro forma consolidated statement of income has been prepared
assuming the Intelicom Acquisition had occurred on January 1, 1997. These pro
forma statements should be read in conjunction with "Capitalization," "1997 Pro
Forma Financial Condition and Results of Operations" and the historical
financial statements and related notes of ITDS and Intelicom. The historical
financial statements of Intelicom have been adjusted to conform with the
Company's December 31 year-end for purposes of the pro forma financial
statements.

The pro forma consolidated financial statements have been prepared using
the following assumptions:

[bullet] ITDS acquired the outstanding capital stock of Intelicom for $75.8
million in cash (which amount is net of working capital of $14.2
million retained by CSC), subject to adjustment based on the level of
receivables, payables and employment related items at the closing date,
and 606,673 shares of Common Stock of ITDS (then valued at $10 million)
on January 2, 1998. Additionally, ITDS will be required to pay CSC up
to $6 million on January 1, 1999 if certain performance criteria have
been met on that date. The amount paid, if any, will be recorded as
goodwill when the final amount is known. ITDS also incurred direct
costs of approximately $2 million. These costs consist primarily of
legal, accounting and financial advisory fees.

[bullet] ITDS borrowed $70 million, on a long-term basis, to finance a portion
of the cash component of the Intelicom Acquisition and incurred direct
financing fees of approximately $1.5 million. See "1997 Pro Forma
Financial Condition and Results of Operations."

[bullet] It was assumed that ITDS incurred approximately $5 million, before
income tax benefit, in indirect transaction and combination costs.
These costs consist primarily of employment and personnel related
costs, the majority of which were expensed in the first quarter of
1998. The purchase price has been allocated to the assets and
liabilities of Intelicom based on their fair values at the date of
acquisition. The purchase price in excess of the fair value of the net
assets acquired was assumed to be approximately $51.6 million and will
be amortized over 15 years. In addition, purchased research and
development costs of approximately $20.8 million, before income tax
benefit, were expensed in the first quarter of 1998. The $5 million and
the $20.8 million discussed above have been excluded from the pro forma
statement of income for the year ended December 31, 1997 and are
included in the adjustments to the pro forma balance sheet as of
December 31, 1997.

Pro forma adjustments to the consolidated statement of income reflecting
anticipated cost savings and other synergies, if any, resulting from the
integration of ITDS and Intelicom are, under most circumstances, not permitted
and, accordingly, have not been reflected in the pro forma financial
statements. However, an adjustment to reverse a credit granted by Intelicom to
a major customer ($4.7 million) for obligations relating to services provided
prior to the acquisition by ITDS was recorded as this item is non-recurring and
directly related to the transaction.

The pro forma financial results are not intended to be a projection of
future results and are not necessarily indicative of the results which would
have occurred if the business combination had been in effect on the dates
presented.

16
<PAGE>

Unaudited Pro Forma Consolidated Balance Sheet As of December 31, 1997
(in thousands)

<TABLE>
<CAPTION>
ITDS Intelicom Adjustments Pro Forma
---------- ------------ -------------- ----------
<S> <C> <C> <C> <C>
Cash and cash equivalents .............. $28,967 $ -- $ (5,827) (1) $ 23,140
Accounts receivable, net ............... 5,008 18,310 (1) (13,885) (1) 9,433
Prepaid expenses ....................... 741 203 (1) -- 944
Deferred income taxes .................. 220 -- -- 220
------- -------- -------- --------
Total Current assets ................. 34,936 18,513 (19,712) 33,737
Computers .............................. 4,844 3,879 -- 8,723
Furniture and fixtures ................. 446 2,008 -- 2,454
Equipment .............................. 373 -- -- 373
Leasehold improvements ................. 590 736 -- 1,326
------- -------- -------- --------
6,253 6,623 -- 12,876
Accumulated depreciation ............... (2,319) (3,648) -- (5,967)
------- -------- -------- --------
Property and equipment, net .......... 3,934 2,975 (1) -- 6,909
Product development costs .............. 3,698 13,530 2,270 19,498
Goodwill, net .......................... -- 12,743 38,818 51,561
Purchased software, net ................ -- 535 (535) (1) --
Deferred income taxes .................. -- -- 8,320 8,320
Other .................................. 1,884 -- 1,500 3,384
------- -------- -------- --------
Total assets ....................... $44,452 $ 48,296 $ 30,661 $123,409
======= ======== ======== ========
</TABLE>

17
<PAGE>

Unaudited Pro Forma Consolidated Balance Sheet As of December 31, 1997
(in thousands)

<TABLE>
<CAPTION>
ITDS Intelicom Adjustments Pro Forma
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
LIABILITIES AND EQUITY
Accounts payable and accrued expenses .............. $ 2,086 $ 5,548 $ 3,000 (4)
1,500
3,293 $ 15,427
Customer advances .................................. -- 1,096 -- 1,096
Current maturities of capital lease obligations 278 -- -- 278
------- ------- -------- --------
Current liabilities .............................. 2,364 6,644 7,793 16,801
Capital lease obligations .......................... 73 -- -- 73
Deferred income taxes .............................. 1,667 7,416 (7,416) (1) 1,667
Long term debt ..................................... -- -- 70,000 70,000
Other .............................................. 30 -- -- 30
Common stock ....................................... 128 -- 6 134
Additional paid-in capital ......................... 44,447 -- 9,994 54,441
Retained deficit ................................... (4,026) -- (20,800) (1)
(3,000) (4)
8,320 (19,506)
Unearned compensation .............................. (231) -- -- (231)
Shareholders' net investment ....................... -- 34,236 (34,236) (1) --
------- ------- -------- --------
Stockholders' equity ............................. 40,318 34,236 (39,716) 34,838
------- ------- -------- --------
Total liabilities and stockholders' equity ......... $44,452 $48,296 $ 30,661 $123,409
======= ======= ======== ========
</TABLE>

- --------
(1) To record assets acquired and liabilities assumed at their estimated fair
values consisting of the following (in thousands):

<TABLE>
<S> <C>
Product development costs ........... $ 15,800
In-process R & D .................... 20,800
Accounts receivable, net ............ 4,425
Pre-paid expenses ................... 203
Property and equipment, net ......... 2,975
Goodwill ............................ 51,561
Liabilities ......................... (7,937)
--------
$ 87,827
========
</TABLE>

The purchase price was satisfied as follows (in thousands):

<TABLE>
<S> <C>
Cash ............................. $ 5,827
Debt ............................. 70,000
Issuance of common stock ......... 10,000
Other liabilities ................ 2,000
-------
$87,827
=======
</TABLE>

(2) To record deferred tax asset related to the $20.8 million of purchased
research and development costs which were expensed for financial statement
purposes and will be amortized over a 15 year period for tax purposes.

(3) To capitalize direct financing costs associated with the Company's $70
million loan under the Credit Agreement.

(4) To record the indirect costs related to the Intelicom Acquisition of
approximately $5 million, less the applicable income tax benefit.

18
<PAGE>

Unaudited Pro Forma Consolidated Statement of Income Year Ended December 31,
1997
(in thousands, except per share data)

<TABLE>
<CAPTION>
ITDS Intelicom Adjustments Pro Forma
---------- ----------- ------------------- ----------
<S> <C> <C> <C> <C>
Revenue ................................. $23,429 $52,269 $ 4,706 (1) $ 80,404
Costs and expenses:
Operating expenses ..................... 5,617 20,147 -- 25,764
General, administrative and selling
expenses .............................. 6,760 15,415 -- 22,175
Depreciation and amortization .......... 1,596 10,693 6,597
(9,315) (3) 9,571
Systems development and programming
costs ................................. 2,911 6,650 -- 9,561
------- ------- ---------- --------
Total costs and expenses ................ 16,884 52,905 (2,718) 67,071
------- ------- ---------- --------
Operating income (loss) ................. 6,545 (636) 7,424 13,333
Other income (loss) ..................... 1,702 -- (320) (4) 1,382
Interest expense ........................ (120) -- (5,850) (5) (5,970)
------- ------- ---------- --------
Income (loss) before income tax
expense ................................ 8,127 (636) 1,254 8,745
Income tax expense (benefit) ............ 3,326 (75) 334 3,585
------- ------- ---------- --------
Net income (loss) ....................... $ 4,801 $ (561) $ 920 $ 5,160
======= ======= ========== ========
Average shares outstanding:
Basic .................................. 12,728 -- 607 13,335
Diluted ................................ 13,193 -- 607 13,800
Earnings per share:
Basic .................................. $ .38 -- -- $ .39
Diluted ................................ $ .36 -- -- $ .37
</TABLE>

- --------
(1) To reverse credits given to an Intelicom customer for obligations relating
to services provided prior to the Intelicom Acquisition.

(2) To record amortization expense related to the $51.6 million of goodwill
over 15 years and the $15.8 million of software development costs over 5
years.

(3) To reverse amortization expense recorded by Intelicom prior to the
Intelicom Acquisition.

(4) To reflect reduced earnings on investments (assumed to be at a rate of 5.5%
per year after expenses) related to the cash component of the purchase
price.

(5) To record interest expense (assumed to be at a rate of 8% per year) and the
amortization of financing costs over the six-year term of the Company's $70
million loan under the Credit Agreement.

(6) To adjust the income tax expense on a Pro Forma Basis to an effective tax
rate of 41%.

19
<PAGE>

1997 PRO FORMA FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The Company derives substantially all of its revenue (i) primarily from
service contracts, which are generally billed monthly, under which a customer
contracts with the Company to operate and maintain such customer's
transactional billing system; (ii) to a lesser extent, from the development of
new software, the enhancement of existing installed systems and the provision
of related customer maintenance and training, which are largely billed on a
time and materials basis. Service revenue is recognized in the period in which
the services are provided and revenue from the development of software is
recognized at the time the services are performed. On a Pro Forma Basis,
service revenue relating to the operation of customers' billing systems
accounted for approximately 90% of total revenue in 1997.

Operating expenses are comprised primarily of the salaries and benefits of
technical service representatives, operations personnel, quality assurance
representatives and consultants and costs to produce and distribute invoices
for customers.

General, administrative and selling expenses consist mainly of the
salaries and benefits of management and administrative personnel and general
office administration expenses (rent and occupancy, telephone and other office
supply costs) of the Company.

The Company capitalizes software development costs incurred in the
development of software used in its product and service line only after
establishing commercial and technical viability and ceases capitalizing such
costs when the product is available for general release. The capitalized costs
include salaries and related payroll costs incurred in the development
activities. Software development costs are carried at cost less accumulated
amortization. Amortization is computed by using the greater of the amount that
results from applying the ratio of current revenue for the product over total
revenue for the product or the straight-line method over the remaining useful
life of the product. Generally, such deferred costs are amortized over five
years.

Results of Operations on a Pro Forma Basis

On a Pro Forma Basis, revenue was approximately $80.4 million for fiscal
1997, reflecting revenue for ITDS (not including Intelicom) of approximately
$23.4 million, and revenue for Intelicom of approximately $57.0 million,
including an adjustment of $4.7 million. Revenue for Intelicom increased from
approximately $31.2 million for the fiscal year ended March 29, 1996 to
approximately $42.2 million for the fiscal year ended March 28, 1997.

On a Pro Forma Basis, operating costs and expenses were approximately
$35.3 million for 1997, reflecting operating costs and expenses for ITDS (not
including Intelicom) of approximately $8.5 million and operating costs and
expenses for Intelicom of approximately $26.8 million. Also included in
operating costs and expenses on a Pro Forma Basis were system development and
programming costs of $9.5 million (including $2.9 million for ITDS (not
including Intelicom) and $6.6 million for Intelicom), which were comprised
primarily of employee salaries and benefits and consultant fees related to
internal software development.

General, administrative and selling expenses on a Pro Forma Basis were
approximately $22.2 million for 1997, reflecting general, administrative and
selling expenses for ITDS (not including Intelicom) of approximately $6.8
million and general, administrative and selling expenses for Intelicom of
approximately $15.4 million.

Operating income on a Pro Forma Basis was approximately $13.3 million for
1997, reflecting operating income for ITDS (not including Intelicom) of
approximately $6.5 million and operating income for Intelicom of approximately
$6.8 million. The Intelicom operating income reflects pro forma adjustments of
(i) $4.7 million to reverse credits given to an Intelicom customer for
obligations relative to services provided prior to the Intelicom Acquisition,
(ii) $6.6 million to record an amortization expense related to goodwill and
software development costs recorded as part of the Intelicom Acquisition and
(iii) $9.3 million to reverse historical amortizations recorded by Intelicom.

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<PAGE>

Interest expense on a Pro Forma Basis was approximately $6.0 million for
1997, reflecting interest expense for ITDS (not including Intelicom) of
$100,000 and a pro forma adjustment of $5.9 million to reflect interest expense
(assuming an interest rate of 8%) and the amortization of financing costs for
the Company's $70 million term loan under the Credit Agreement.

Net income on a Pro Forma Basis was approximately $5.2 million for 1997
reflecting net income of $4.8 million for ITDS (not including Intelicom) and
net income of $400,000 for Intelicom, including net adjustments of $920,000. On
a Pro Forma Basis, 1997 basic and diluted earnings per share were $.39 and
$.37, respectively. The actual 1997 basic and diluted earnings per share for
ITDS (not including Intelicom) were $.38 and $.36, respectively. The pro forma
net income and per share amounts reflect the adjustments described above.

The Intelicom Acquisition is expected to more than triple the Company's
revenue in 1998 compared to ITDS' actual revenue in 1997. However, management
expects 1998 margins as a percentage of revenue to decline when compared to
actual 1997 margins, due to the historically lower margins of Intelicom and an
expected increase in the Company's overall development and customer service
costs. Management anticipates cost savings in 1998, resulting primarily from
the elimination of CSC's overhead allocation. These lower margins are expected
to improve during 1999 as the efficiencies of the Intelicom Acquisition are
realized.

Liquidity

As of December 31, 1997, on an actual and pro forma basis as if the
Intelicom Acquisition occurred on December 31, 1997, respectively, ITDS had
cash and cash equivalents of $29.0 million and $23.1 million, trade accounts
and receivables of $5.0 million and $9.4 million, and working capital of $32.6
million and $16.9 million.

On January 2, 1998, ITDS acquired Intelicom for 606,673 shares of Common
Stock of the Company and $75.8 million in cash, plus a future contingent
payment of up to $6 million. A portion of the cash purchase price for Intelicom
was obtained by ITDS under the Credit Agreement which provides for a $70
million term loan and a $30 million line of credit. See "Use of Proceeds" and
"Underwriting." The Credit Agreement contains normal covenants which include
meeting certain financial ratios and it requires payments of interest only, at
a rate of LIBOR plus up to two and one quarter percent, through March 30, 2000,
at which time periodic principal payments will become due. Principal payments
of $1.25 million, $4.375 million, $5.625 million and $6.25 million will become
due quarterly beginning March 30, 2000, 2001, 2002 and 2003, respectively. In
addition, the Company has entered into a hedging agreement with a third party,
pursuant to which the Company currently pays a fixed interest rate of 8% with
respect to $35 million of the amount outstanding under the Credit Agreement.
The Company plans to use the proceeds of this offering to pay off all amounts
under the Credit Agreement. See "Use of Proceeds."

The Company believes that its existing capital resources as well as funds
available under the Credit Agreement are adequate to meet its cash requirements
for the foreseeable future. There can be no assurance, however, that changes in
the Company's plans or other events affecting the Company's operations will not
result in accelerated or unexpected expenditures.

In addition to the proceeds to the Company from this offering, the Company
may seek additional funding through public or private financing. There can be
no assurance, however, that additional financing will be available from any of
these sources or will be available on terms acceptable to the Company.

Year 2000

The Company is preparing all of its products and internal computer systems
to be Year 2000 compliant. A compliance task force has been established, and is
currently identifying and developing conversion strategies for the Company's
systems. The Company expects to replace some of its systems and to upgrade
others. The Company currently estimates the compliance effort, including
planning, implementation and testing, to cost approximately $2 million to $3
million, and expects that a substantial portion of this expenditure will occur
in 1998. Although the Company does not expect the cost to have a material
adverse effect on its business or future results of operations, there can be no
assurance that the Company will not be required to incur significant
unanticipated costs in relation to its compliance obligations. The Company
currently estimates that compliance will be achieved in early 1999, however,
there can be no assurance that the Company will be able to complete the
conversion in a timely manner or that third party software suppliers will be
able to timely provide Year 2000 compliant products for the Company to install.

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<PAGE>

BUSINESS

ITDS is a leading provider of comprehensive billing, customer care and
management information solutions to providers of wireless and satellite
telecommunications services. The Company currently supports over 5 million
subscribers in more than 200 wireless markets. The Company uses its proprietary
software technology to develop solutions which address billing and customer
care requirements as they evolve, regardless of a service provider's market
segment, geographic area or mix of network features and billing options. The
Company currently serves leading national and regional wireless
telecommunications companies in the United States, including Aliant, Dobson,
Nextel, Omnipoint, Southwestern Bell, Sygnet, Western Wireless and WorldCom.
Typically, the Company provides its services under contracts with terms ranging
from two to five years, and bills customers monthly, on a per-subscriber basis.
As a result, substantially all of the Company's revenue is derived from bill
processing services, which are recurring in nature, and such revenue generally
increases as the number of subscribers served by the Company grows.

In January 1998, the Company completed the Intelicom Acquisition.
Intelicom provides complete billing and customer care solutions for the
wireless communication industry, including cellular, PCS, paging and ESMR.
Revenue for Intelicom for the year ended December 31, 1997 was approximately
$57.0 million, or approximately 71% of the Company's 1997 revenues on a Pro
Forma Basis. Primarily as a result of the Intelicom Acquisition, the number of
subscribers supported by the Company increased from 735,000 in January 1997 to
approximately 4.6 million in January 1998. Intelicom's data center is located
in Champaign, Illinois. The Company believes there are strong synergies between
the acquired platforms and applications and the ITDS platforms and applications
existing at the time of the Intelicom Acquisition. The Company intends to
reconfigure and combine certain of its platforms to reduce the number of total
platforms offered and to migrate desirable applications across its platform
offering.

In recent years, the telecommunications services industry has experienced
rapid growth and dramatic change, ranging from the introduction of such
technologies as cellular, PCS and satellite communications, to new features and
services, in a wide variety of combinations and at a great diversity of prices.
The Company's systems are designed to respond to the dynamic requirements of
this market for cost-effective billing and customer care solutions by drawing
on the Company's core technology and significant human resources. The Company's
systems support customers with subscriber bases ranging from under 100,000 to
in excess of 1 million. The Company's software currently supports leading
wireless telecommunications protocols, including Advanced Mobil Phone Systems
("AMPS"), Global System for Mobile Communication ("GSM"), Time Division
Multiple Access ("TDMA") and Code Division Multiple Access ("CDMA").

The Company's advanced billing, customer care and management information
systems form the foundation for a suite of applications that provide not only
subscriber billing and service support, but also the means to automate
subscriber activation, remittance processing, collections, data retrieval and
reporting, fraud management, electronic funds transfer, credit management,
inventory management and data archiving. The systems architecture permits
service providers to package functions and features, such as short messaging
service ("SMS"), dispatch and pre-paid calling, to meet a customer's specific
requirements. The Company's software and services allow its customers to
address the demands of a rapidly evolving marketplace by enabling them to
develop and support innovative rate and feature offerings without the delay and
cost associated with reconfiguring their billing and information systems; to
identify and respond to subscriber demands through analysis of billing and
subscriber databases; to reduce costs with accurate and timely receivables
information; and to manage the subscriber relationship in a comprehensive and
cost-effective manner.

Industry Background

General

In 1996, the U.S. telecommunications services industry generated
approximately $222 billion in revenue and has experienced rapid change and
greatly increased competition in recent years. Deregulation and rapid
technological advances are resulting in convergence of previously separate
segments of the telecommunications market. Markets that were once rigidly
segmented by service within geographical areas are converging into a single,
world-wide communications market, which includes both traditional service
providers and a variety of new participants. Each segment of these converging
markets is experiencing significant growth, increased complexity in service
offerings and greater competition.

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<PAGE>

At the same time, rapidly evolving technical changes have dramatically
increased the features and services available to subscribers. These changes
have ranged from the evolution of entirely new communications media, such as
satellite transmission, to innovative services, such as PCS, to a rapidly
evolving and growing range of vertical services, such as short messaging
services, voice mail and paging. Many cellular providers are now offering such
innovative features as group ringing, which initiates a call on all of an
individual's lines (whether business, personal or mobile) and connects the call
as soon as one line is answered, and cell site sensitive billing, which, for
example, enables carriers to apply local wireline rates for calls to or from a
telephone within the vicinity of the subscriber's home or business and apply
cellular rates elsewhere. In addition, improved switching technology is
permitting local exchange telecommunications services providers to offer a
variety of new features and services to their subscribers such as call delivery
beyond the subscriber's home area, call waiting, voice mail and others.
Internationally, privatization and deregulation are resulting in similar
increases in competition, the emergence of newly authorized telecommunications
providers, and the provision of additional features over a variety of media.

Wireless Communications

CTIA estimates that the number of wireless subscribers in the United
States increased from 500,000 in June 1986 to 55.3 million in December 1997. In
the twelve months ended December 1997, wireless providers generated more than
$27 billion in revenue in the United States. In addition to growth in the
cellular telephone market, the emergence of new wireless communications
technologies and services, such as PCS and satellite-based telephony, is
expected to increase the quality and capabilities of wireless communications,
including, to varying degrees, seamless roaming, increased service coverage,
improved signal quality and greater data transmission capacity.

While the number of cellular service subscribers in the United States has
grown substantially in recent years, the average revenue per user has declined
and is expected to decrease further. The CTIA has reported that revenue per
subscriber declined over 55% from December 1987 to December 1997. Cellular
service providers are experiencing increased price competition in the wireless
telecommunications industry as providers of PCS and other services enter the
geographic markets previously served only by cellular carriers, requiring the
cellular service providers to differentiate their services and adopt innovative
rate tariffs.

Other Segments

Other segments of the telecommunications services industry are
experiencing similar change and convergence. Wireline providers, including
providers of local, long-distance, network access and related services,
provided services to approximately 171 million customers in the U.S.,
generating more than $196 billion in revenue in 1996. Deregulation has spurred
the creation of new entrants in both the local and long distance market,
created an environment for mergers and consolidation and has increased
competitive pricing pressures among all providers. Regional Bell Operating
Companies (RBOCs) and long-distance providers compete with providers of
wireless services through the purchase of cellular companies and PCS licenses,
wireline providers are pursuing opportunities in the cable market and wireless
providers are examining wireless local loop and the traditional long distance
market. At the same time, utility companies are leveraging their existing
electrical and fiber optic infrastructures to provide telecommunications
services to their customers. In addition, on-line service providers, including
companies such as America Online and CompuServe, have generated a large and
rapidly growing market for the provision of a range of services including
electronic mail, news, and other information, as well as home shopping and
access to the Internet.

Traditional Transactional Billing

Transactional billing is the process of matching specific calling events
with a subscriber database. Historically, this was primarily a billing process,
used in order to generate invoices for wireless, long-distance and local
service by individual and business users. The Company believes that recurring
billing is a carrier's most significant interface with the subscriber, and is
therefore a critical element of attracting, communicating with, and retaining
subscribers.

Many telecommunications services providers in the U.S. have traditionally
used transactional billing systems developed internally or through cooperative
joint ventures for operation on a provider's mainframe computer. These "legacy"
systems typically are difficult to maintain and modify, and often do not meet
the multiple and evolving needs of a service provider. Such systems often
cannot be integrated with other information sources within a provider's
organization, or databases outside an organization. Introduction of changes in
parameters such as price and service often requires significant reconfiguration
or reprogramming. These traditional means of billing and

23
<PAGE>

monitoring service have proven inadequate to respond to the evolving and
dynamic requirements of the telecommunications services marketplace. The
enormous growth in the number of subscribers, the decreasing revenue per
subscriber and the proliferation and range of services offered, require highly
capable, flexible and scalable support systems, which can adequately support
the size and nature of customer offerings on a cost effective basis.

Other service providers have elected to out-source billing and management
information-related functions because of the significant level of technological
expertise and capital resources required to implement systems successfully. In
addition, many emerging telecommunications services providers lack any
transactional billing infrastructure at all. One of the primary challenges that
these newer service providers face is to bring new services to market quickly.
They typically focus their capital resources on developing networking and
switching technology and on creating marketable services rather than on
managing billing systems. These providers typically seek to outsource the
billing functions because efficient flexible billing solutions are often too
costly and time consuming to develop, manage and staff internally.

As a result, service providers need billing, customer care and management
solutions which:

[bullet] enable them to differentiate their services in a highly competitive and
fungible market through the development, implementation and support of
a broad range of rate structures, services and features;

[bullet] respond quickly, efficiently and accurately to market-driven demands,
such as frequent changes in rate structures and innovative marketing
programs;

[bullet] integrate seamlessly with their corporate management information
services, so that providers can use the data generated for operational
and other strategic purposes as an integral part of their marketing and
sales plans;

[bullet] provide a basis for the efficient development and deployment of
solutions to address common industry issues such as authentication
management and local number portability; and

[bullet] offer reliability and accuracy as critical components of subscriber
relations, communication and retention.

The ITDS Solutions

The Company's solutions are based upon software systems that provide
reliable and accurate billing, customer care and management information
support, and enable the service provider to automate subscriber activation,
remittance processing, collections, data retrieval and reporting, fraud
management, electronic funds transfer, credit management, automation of
inventory management, and data archiving, running in either single or multiple
telecommunications services markets, including wireless, ESMR, paging and
satellite. In comparison with traditional solutions, the Company's software and
services:

[bullet] permit providers to develop, validate, implement and support rate
changes without the corresponding requirement to develop or change
support systems, reducing the time to introduce new marketing or sales
strategies;

[bullet] permit providers to introduce new features or combinations of features,
either directly or with others, on a timely basis;

[bullet] assure that providers have immediate access to multiple databases on a
fully-integrated basis, to improve marketing and sales planning;

[bullet] deliver accurate, timely and useful billing information to customers,
regardless of mix or change in level of service and rates, to
facilitate customer attraction and retention; and

[bullet] improve providers' cash flows and reduce bad debt by detecting fraud
and delivering accurate and timely receivable and collection
information across systems and service offerings.

The Company's range of solutions enables the Company to deliver some or all
of the functionality described above to wireless service providers serving
different sized subscriber bases, employing different technologies and serving
different industry segments.

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<PAGE>

The ITDS Strategy

The Company's objective is to further its position as a leading provider
of billing and customer care services to telecommunications service providers
worldwide. Key elements of the Company's strategy include:

[bullet] Leverage Its Expanded Customer Base. Historically, the Company's
customer base had been limited to smaller and mid-sized wireless
providers. The Intelicom Acquisition in January 1998 enabled the
Company to penetrate the market of larger service providers and
substantially expanded the Company's subscriber base. The Company
believes that the new customers that it acquired as a result of the
Intelicom Acquisition will enable it to further penetrate the market
for larger telecommunications service providers. The Company's expanded
customer base enhances the Company's presence as a provider of billing
and customer care services to large wireless service providers and
demonstrates the Company's technological capabilities in servicing
additional customers with large subscriber bases. In addition, the
Company anticipates further growth of its subscriber base as customers
expand into new markets and acquire businesses in new market segments.

[bullet] Efficiently Support Customer Needs. The Company intends to continue to
meet the specific needs of each of its existing customers by using its
broad technology base and its knowledge and experience in the
telecommunications industry to offer and support solutions and
platforms that offer functionality tailored to such customers' specific
needs. In addition, the Company intends to leverage its technological
expertise by making certain modules and functionalities that are
currently offered on some of its platforms more broadly available
across its platform offerings. By drawing on the strengths of its
overall product line, the Company expects to offer its customers
greater flexibility on its larger systems and increased capacity and
scalability on its smaller systems.

[bullet] Leverage Technology Features to Penetrate Related Market Segments. The
Company believes it is well positioned to leverage its technology base
by offering billing, customer care and management information solutions
to providers in non-wireless telecommunications services market
segments including satellite, data transmission, Internet and other
enhanced services. Expansion into these additional sources of potential
revenue are not expected to require commensurate investment in software
development because the Company's existing core technology already
meets the more challenging and demanding requirements of the wireless
segment of the market, while enabling the Company to offer features and
functions to meet provider requirements.

[bullet] Achieve Greater Economic Potential of Combined Operations. The Company
currently sustains separate operations, including research and
development and customer support, in its Stamford, Connecticut and
Champaign, Illinois facilities. The Company believes that it has
significant opportunity to achieve greater economic efficiencies by
combining certain of its facilities' operations. The Company intends to
devote significant management and financial resources to streamlining
and combining operations in order to achieve future cost reductions and
improved product and services margins.

[bullet] Expand International Operations. The Company believes that the
flexibility of its system will permit it to address the billing,
customer care and management information solutions requirements of
international telecommunications services providers without the need
for significant reconfiguration. For example, the Company's systems
currently support the provision of cellular services based on GSM
technology, which has been widely adopted outside the United States, as
well as other emerging digital services. The Company, through its
subsidiary ITDS LTDA, a Brazilian limitada, provides billing services
to MCOMCAST, S.A., a Brazilian limitada owned by COMCAST International
Holdings, Inc. and MCOM Wireless, S.A. In 1997, the Company established
a presence in South America by opening an office in Sao Paulo, Brazil
and by the end of 1998, it expects to establish a service bureau
operation there from which it will be able to provide billing services
and support to Brazil.

[bullet] Continue to Pursue Strategic Acquisitions. As part of the Company's
expansion strategy, the Company completed the Intelicom Acquisition in
January 1998. The Company will continue to examine the possibility of
acquiring complementary organizations. The Company's approach to
acquisitions is to target firms that provide customers with subscribers
in new markets and product offerings and features that complement or
extend those of the Company.

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<PAGE>

Products and Services

Core Systems

The Company provides its customers with billing, customer care and
management information solutions through the use of its software systems and
the provision of billing and customer care services. The Company's software is
installed at a customer site to interface directly with the customer's systems
and generate relevant subscriber billing and other data, as well as to support
a wide range of transactional billing and subscriber management functions. The
Company uses its software to process the billing information, eliminating the
need for customers to maintain their own data processing operations.

As a result of the Intelicom Acquisition, the Company acquired additional
software platforms used to perform billing and customer care functions. The
Company believes there are strong synergies between the acquired platforms and
applications and the ITDS platforms and applications existing at the time of
the Intelicom Acquisition. The Company intends to reconfigure and combine
certain of its platforms to reduce the number of total platforms offered and to
migrate desirable applications across its platform offerings. The Company
believes this strategy will improve the capabilities of its billing and
customer care services; reduce operating costs, both internally and for its
customers; and reduce subscriber impact in the event its customers change
platforms.

The Company's suite of applications allows customers the flexibility of
changing their billing and customer care services to implement, for example,
rate plan changes for access, toll usage or toll discounts. Drawing on their
client/server architecture, the Company's solutions can be integrated with a
customer's communication and data systems to provide customers with the ability
to generate up-to-date subscriber analysis and reports. To further assure their
operational flexibility and usefulness, the Company's systems support leading
industry standards such as the CIBER standard for the wireless clearinghouse
for AMPS, CDMA and TDMA wireless systems in the U.S. and the TAP standard for
international clearinghouse for GSM cellular systems.

The Company's solutions perform a broad range of transactional billing and
customer care functions, including customer acquisition and provisioning,
message rating and billing, customer care and revenue assurance. The
functionality available to the Company's customers depends upon the specific
solution deployed by the customer, and includes some or all of the applications
described below.

Customer Acquisition and Provisioning
-------------------------------------

The Company's customer acquisition and provisioning applications are
designed to facilitate customers' efforts to manage sales leads, qualify
subscribers, administer inventories, assign price plans, create and update
subscriber accounts and provision the appropriate network services. Some of the
key applications include:

Point Of Sale. The Company's Point Of Sale (POS) application creates and
controls work flows for the entire sales process. These work flows make
data entry more efficient and easier for the system user, and ensure that
all of the required subscriber information is accurately recorded. Advanced
hardware and software enable sales staff to quickly process initial service
applications, perform on-line credit checks with automatic scoring, update
inventories, print service agreements and payment receipts and accept
credit card payments. Although the Company's POS application is currently
limited to use with certain of the Company's platforms, the Company expects
that future versions of the application will be available for use with the
Company's other platforms and with other vendors' billing systems.

Inventory Administration. The Company's inventory administration
applications allow customers to perform extensive inventory management of
equipment, services and subscriber data, such as account numbers, mobile
directory numbers and international mobile subscriber identification
numbers. The Company's applications enable customers to manage and control
these inventory items, not only at the time of activation, but also during
the process of ordering, receiving and verification.

Provisioning of Network Services. The Company's TSI Vision application
integrates with a variety of network elements and databases to automate the
provisioning of servicing such as voice, voice mail, dispatch and short
message service.

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Message Rating and Billing

The Company's message rating and billing applications provide its
customers robust capabilities in the following areas:

Data Collection. The Company's data collection application interfaces with
a variety of network elements to collect, forward and manage the process
flow of network calls, events and activities. This information is
distributed to a number of applications such as real-time rating, fraud
control and message rating and processing modules. The data collection
application supports real-time data collection from a network element via
electronic transmission over a direct network connection.

Message Rating. The Company's message rating applications provide its
customers with flexibility and control over their market pricing. The
authorized user can establish independent rating schedules for system usage
(airtime) and long distance (toll), enabling the Company's customers to
exercise a high degree of creativity and flexibility when developing
pricing strategy. In addition, real-time rating, which is currently
available on one of the Company's platforms, allows the Company's customers
to monitor subscriber account balances in real time. This application
allows the Company's customers to offer to their subscribers innovative
features, such as pre-paid calling. The Company's message rating
applications also support a variety of customer defined features including
flexible discounting, variable rounding of time, bundled minutes and
special phone numbers.

Message Processing. The Company's message processing applications manage a
complex set of rules and business logic to accurately calculate usage-based
pricing for customers' subscribers. These applications make the
determination of call inclusion or exclusion, length of call or event and
subscriber feature utilization, based in part upon the subscriber's price
plan, the physical location of the caller, time of day, day of week and
service utilized.

Bill Calculation and Processing. The Company's bill calculation and
processing applications ensure accuracy in the calculation of subscribers'
bills by performing a series of pre-runs, error correction and bill
verification routines. These activities are executed by both the Company
and its customers and ensure that billing information is timely and
accurate.

Customer Care
-------------

The Company's customer care applications permit a customer to apply and
execute a variety of subscriber payment options, to create service credit and
adjustments on-line, to generate notes and reminders and to execute alternate
collection strategies.

Front-End Services. The Company's front-end services applications support
the day-to-day operation of customers' billing and customer care functions
and forms the core of the Company's product and service offerings. The
applications consist of two components:

Credits and Adjustments. This application allows a customer's Customer
Service Representative ("CSR") to perform a variety of maintenance and
service functions on a subscriber's account. For example, the CSR can
issue call credits at the individual call level, groups of calls or
total amount, in order to correct erroneous bills. In addition, this
application allows a customer to control the degree of credit and
adjustment functionality given to each CSR.

Customer Maintained System Parameters. This application allows
customers to modify and update their business rules within various
functions, including rate plans, toll rates, discount schedules, cell
site, application profile and security. The application provides
customers the flexibility to address their dynamic market needs in
real-time, without the need for significant re-programming on the part
of ITDS.

Payment Capabilities. The Company's payment applications provide several
methods and options for the receipt and processing of subscriber payments.
These processes, which are optional modules, can be independently deployed
by the customer and include not only traditional lockbox, but also credit
card, direct debit and bank draft.

Revenue Assurance
-----------------

The Company's revenue assurance applications include system security,
general ledger interface and reporting capability, which ensure that customers'
processes are subject to the appropriate levels of control and system
auditability. The Company's applications satisfy the audit and control
requirements of the SAS 70 Accounting Standard.

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<PAGE>

New Products

The Company continues to refine its existing software and to introduce new
applications to meet evolving customer requirements. The Company is currently
developing a new platform, based on an open systems architecture, that has a
Windows 95-compatible user interface, supports an Oracle relational database
management system and operates on a UNIX-based file server. The Company
believes that this enhanced platform will address the needs of larger customers
that require substantial functionality on a scalable and interoperable basis.
The Company expects this platform to become available during the second half of
1998.

In addition, the Company intends to maximize its technological expertise
by developing new applications for use on all of its platforms and by making
certain applications that are currently offered on some of its platforms more
broadly available across its platform offerings. By drawing on the strengths of
its overall product line, the Company expects to offer greater flexibility on
its larger systems and increased capacity and scalability on its smaller
systems. The Company is currently evaluating its products and those of third
parties to determine an implementation strategy for such applications.

In 1997, the Company announced the successful implementation of fraud
management and authentication ("A-Key") functionality into its solutions. The
feature is compliant with EDI A-Key Guidelines published by CTIA and is also
capable of utilizing other formats pursuant to a customer's specific needs. The
Company is currently enhancing the product to provide a greater range of
functionality in A-Key management and expects the enhanced version to become
available by the middle of 1998.

In anticipation of possible future enhancements, the Company continually
reviews technological innovations and changing standards and services in the
industry. See "System Development."

Customers

The ITDS solutions currently support over 5 million subscribers in over
200 wireless markets, including 29 of the top 30 domestic markets. The Company
has 54 customers, including two customers that each represent more than 10% of
the Company's total revenue. These customers include a broad range of wireless
telecommunications service providers, serving different sized subscriber bases,
employing different technologies and focusing on different industry segments.
The Company's current customers include Aliant, Dobson, Nextel, Omnipoint,
Southwestern Bell, Sygnet, Western Wireless and WorldCom.

Many of the customers acquired by the Company through the Intelicom
Acquisition in January of 1998 have substantially larger subscriber bases than
the Company's existing customers at the time of the Intelicom Acquisition. The
Company's customers, other than those acquired in the Intelicom Acquisition,
have subscriber bases of up to approximately 300,000, while the customers
obtained through the Intelicom Acquisition have subscriber bases of up to in
excess of one million. Nextel and Western Wireless each represent over ten
percent of the Company's 1997 revenues on a Pro Forma Basis and it is likely
that they will continue to represent over ten percent of the Company's revenue
in the future. The loss of any such customer could have a material adverse
effect on the operating results of the Company. See "Risk Factors--Reliance on
Significant Customers."

The following provides a brief description of certain of the Company's key
customers:

<TABLE>
<S> <C>
Aliant Aliant provides wireline and wireless services to customers in
Nebraska and Iowa. Aliant's wireless services include cellular
operations and wide-area paging services. Aliant operates a cellular
telecommunications system in the Lincoln, Nebraska metropolitan
area. The company also manages the limited partnership which is the
license holder for the southwestern six counties of Iowa. As of
December 31, 1997, Aliant served approximately 200,000 wireless
subscribers. Aliant has been a customer of the Company since 1992.

Dobson Dobson provides diversified telecommunications products and services
in eight states across the country. Dobson's wireless operations
focus on the ownership, operation and development of rural cellular
systems primarily in portions of certain mid-western, southwestern
and mid-atlantic states. In addition, Dobson recently purchased PCS
licenses in Oklahoma, Kansas and Missouri. As of December 31, 1997,
Dobson served approximately 100,000 wireless subscribers. Dobson has
been a customer of the Company since July 1994.
</TABLE>

28
<PAGE>

<TABLE>
<S> <C>
Nextel Nextel provides a wide array of digital and analog wireless
communications services throughout the United States. Nextel offers
a differentiated integrated package of digital wireless
communications services under the Nextel brand name, primarily to
business users. The Company provides services to Nextel's digital
subscriber base. As of December 31, 1997, Nextel provided service to
approximately 1,270,700 digital subscriber units in the United
States. Nextel's digital network constitutes one of the largest
integrated wireless communications systems utilizing a single
transmission technology in the United States. At December 31, 1997,
Nextel's digital network was operational in areas in which
approximately 65% of the total United States population lives or
works, providing coverage in or around 75 of the top 100
metropolitan statistical areas in the United States. Nextel became a
customer of the Company in January 1998 as a result of the Intelicom
Acquisition. Previously, Nextel had been a customer of Intelicom
since March 1995. Revenue from Nextel accounted for approximately
25.7% of the Company's 1997 pro forma revenue.

Omnipoint Omnipoint is a leader in commercializing PCS. As of December 31,
1997, Omnipoint marketed wireless communications services to over 16
million people covered by networks primarily in the New York Major
Trading Area and Philadelphia area Basic Trading Areas ("BTA") and
surrounding BTAs. Omnipoint has licenses to provide such services in
areas covering a population of approximately 96.5 million, of which
approximately 60% are located in a contiguous region of the
northeast U.S. from Maine to Virginia. In addition, Omnipoint has
licenses in southeast Florida and the Midwest. As of December 31,
1997, Omnipoint had approximately 141,000 active subscribers. In
January 1998, Omnipoint became a customer of the Company as a result
of the Intelicom Acquisition. Previously, Omnipoint had been a
customer of Intelicom since July 1996.

Sygnet Sygnet owns and operates cellular telephone systems serving one
large cluster with a population of approximately 2.4 million in
northeastern Ohio, western Pennsylvania and western New York. As of
December 31, 1997, Sygnet had approximately 143,000 subscribers.
Sygnet has been a customer of the Company since September 1995.

Western Western Wireless provides wireless communications services in the
Wireless western United States. Western Wireless owns an aggregate
of 199 cellular and PCS licenses for a geographic area covering a
population of approximately 68.0 million. In addition, Western
Wireless is a partner in ventures owning 25 PCS licenses for a
geographic area covering a population of approximately 15.6 million.
Western Wireless' combined cellular and PCS licenses, together with
licenses held by the ventures in which it is a partner, cover
approximately 59% of the land in the continental United States. As
of December 31, 1997, Western Wireless served 648,600 subscribers in
its consolidated cellular and PCS markets. Western Wireless became a
customer of the Company as a result of the Intelicom Acquisition.
Previously, Western Wireless had been a customer of Intelicom since
February 1993. Revenue from Western Wireless accounted for
approximately 10.3% of the Company's 1997 pro forma revenue.

WorldCom WorldCom is one of the largest telecommunications companies in the
United States, based on 1996 revenues, serving local, long distance
and Internet customers domestically and internationally. The
products and services provided by WorldCom include switched and
dedicated long distance and local products, dedicated and dial-up
Internet access, resale cellular services, 800 services, calling
cards, domestic and international private lines, broadband data
services, debit cards, conference calling, advanced billing systems,
enhanced fax and data connections, high speed data communications,
facilities management and local access to long distance companies.
The Company currently provides services to a portion of WorldCom's
wireless subscribers base. WorldCom has been a customer of the
Company since October 1997.
</TABLE>

29
<PAGE>

Customer Support and Training

The Company believes that because its solutions are critical to the
competitive success of its customers, the Company must provide a high level of
support from the time a customer converts to the Company's software and
continuing through the on-going provision of transactional billing and customer
care services. The Company assigns to each new customer a dedicated conversion
team that specializes in facilitating the transition onto the Company's
solutions by applying an implementation methodology which includes study of the
customer's needs, definition of relevant conversion requirements, and on-site
installation and training. This is followed up by systematic analysis of the
implementation process, live conversion and follow-up training as required to
meet the customer's requirements.

Thereafter, the Company assigns a support team, which may include an
account manager, a customer service team and a team of programmer/analysts for
on-going support of the customer's requirements, including implementation of
additional functionality if requested by the customer. In addition, the Company
provides a fully-staffed customer service department and 24-hour, 7 day a week
access to customer service representatives. The Company's senior management
meets with customers on a regularly scheduled basis to maintain a dialogue with
the customers and to identify, anticipate and meet evolving customer needs. The
Company also conducts focus groups to identify ways to improve system
efficiency.

The Company's service and support activities are supplemented by the
provision of on-going training classes to assist customers in utilizing the
system capabilities more effectively. Typically, the Company schedules two to
three such classes a month addressing different aspects of the customer care
billing and management information service process.

On March 31, 1998, the Company's customer service and support department
consisted of 141 people, with an additional 17 dedicated quality assurance
employees.

Sales and Marketing

ITDS targets telecommunications and non-telecommunications companies with
a need for transaction billing and customer care solutions. The Company's
strategy has been to establish, maintain and expand long-term customer
relationships.

Service providers' subscriber bases increase both through organic growth
and through additional market acquisitions. This generally results in
increasing recurring revenue for ITDS based on contract prices and volume of
subscribers. Additionally, as customers choose to add functionality and
capabilities to the Company's billing and customer care system, the Company
receives additional revenue for the development, integration, and maintenance
of these enhancements into the system platform. In the future, the Company
expects that an increasing percentage of its total revenues will be derived
from such development projects. The Company has also developed applications,
such as A-Key fraud management and Point Of Sale system, that can stand alone,
either as part of the Company's platform or a competitors platform. The Company
believes these products are viable solutions to solving fraud and customer
acquisition issues for customers. The Company continues to explore
opportunities with new customers and expand its business with its existing
customers. In addition, the Company intends to pursue opportunities in the
international market which it finds advantageous to its distribution and
marketing strategy.

The Company has contracts with its customers with terms ranging from two
to five years. Although these contracts are generally of a long-term nature,
there can be no assurance that any customer will renew its contract with the
Company at the end of the contract term or may not seek to terminate its
contract on the basis of alleged contractual defaults or other grounds. Loss of
all or a significant part of the business of any of the Company's substantial
customers would have a material adverse effect on the Company's business,
financial condition, and results of operations.

Historically, the Company has achieved substantial growth with a core
marketing team of senior executives. Although the Company has recently begun to
expand its sales and marketing group as part of its overall strategy to add
customers, the Company's senior executives continue to be heavily involved in
the sales and marketing processes.

30
<PAGE>

System Development

The Company's research and development efforts are focused on enhancing
existing products and services as well as developing products, features and
services that can be integrated into the Company's current solutions. The
Company's product development team reviews product and service development
proposals and establishes internal guidelines for efficient development. The
Company's research and development team also works closely with customers to
perform customization of products to meet specific needs, which may include the
integration of third party applications into the Company's existing products.
In addition to internal development, the Company works with its strategic
partners, such as Hewlett-Packard and Oracle, to develop products compatible
with their product offerings. Currently, the Company has a number of new
enhancements under development to meet evolving customer requirements.

The Company intends to reconfigure and combine certain of its platforms to
reduce the number of total platforms offered and to migrate desirable
applications across its platform offerings. No assurance can be given, however,
that the Company will be able to successfully develop and implement such
functionality, or that the Company will be able to introduce such functionality
on a timely or cost-effective basis.

The Company actively participates in industry standards associations to
assure that its development efforts are in compliance with standards as they
evolve and to assure that the Company's software can be used on a fully open
and interoperable basis. For example, the Company works closely with a variety
of standards committees and working groups of CIBERNET, the standards body of
CTIA. The Company participates in the CIBERNET Advisory Committee, which
evaluates proposed changes to standards for wireless industry data exchange;
the CIBERNET Net Settlement Working Group, which evaluates proposed changes to
the subscriber net settlement process; and the CIBERNET Data Message Handler
Working Group, which focuses on billing aspects of the TIA IS-124 standard. In
addition, the Company participates in CTIA's International Forum for AMPS
Standard, and the Bellcore Ordering and Billing Forum and CTIA's Local Number
Portability group.

On March 31, 1998, the Company employed 351 people in product and systems
development and engaged 99 independent contractors in conjunction with the
continued development of its software products, programming and development.

Competition

The market for billing, customer care and management information systems
for the telecommunications service industry is highly competitive and the
Company expects that the high level of growth within the telecommunications
service industry will encourage new entrants, both domestically and
internationally, in the future. The Company competes with independent providers
of transactional systems and services, with internal billing departments of
telecommunications services providers and with the billing services of
management consulting companies. The Company believes its most significant
competitors in the wireless telecommunications segment are, within the service
bureau model, Alltel Information Systems, Inc. and Cincinnati Bell Information
Systems, Inc. and, within the licensing model, Amdocs, Ltd., LHS Group Inc. and
Saville Systems PLC. In the future, the Company may compete in both the
wireless and wireline markets with additional companies that currently compete
in market segments other than wireless. In addition, the Company competes with
several international providers of billing, customer care and management
information systems and, as the Company continues to expand into international
markets, it will compete with additional providers abroad.

The Company believes that principal competitive factors include the
ability to provide timely products, features and services that are responsive
to evolving customer needs in an industry characterized by rapidly changing
technologies and ongoing deregulation. The Company must provide statement
accuracy, meet billing cycle deadlines, offer competitive pricing and maintain
high product and service quality. The Company believes that its architecture
enables it to compete favorably in the telecommunications services industry by
offering its customers a high degree of flexibility to quickly modify their
billing, customer care and management systems as their needs and the needs of
their subscribers change. See "Risk Factors--Competition."

Proprietary Rights and Licenses

The Company relies in part on trademark, copyright and trade secret laws
to protect its proprietary rights. The Company distributes its products under
service and software license agreements which typically grant customers
non-exclusive licenses, subject to terms and conditions prohibiting
unauthorized reproduction, transfer or use. The

31
<PAGE>

Company believes that because of the rapid pace of technological change in the
telecommunications and software industries, the technological expertise of its
personnel, the complexity of its system architecture and the frequency and
timeliness of product and service offerings are more significant than the legal
protection of its products. In addition, the Company enters into non-disclosure
agreements with each employee and consultant and each third-party to whom the
Company provides proprietary information. Access to the Company's core source
code is greatly restricted.

The Company licenses from third parties technology that is important to
certain functionalities of its products. The Company is not aware of any patent
infringement or any violation of other proprietary rights claimed by any third
party relating to the Company or the Company's products. See "Risk
Factors--Dependence on Proprietary Technology."

Employees

As of March 31, 1998, the Company had a total of 560 employees, of whom
132 were engaged in customer service, 351 were engaged in systems programming
and development, 17 in quality assurance, 7 in sales and marketing, 38 in
administration and 15 in documentation and training. None of the Company's
employees is represented by labor unions. The Company believes that its
employee relations are good. The Company also employs 117 full-time
consultants.

Properties

The Company subleases a 48,222 square foot facility in Stamford,
Connecticut, and a 60,000-square foot facility in Champaign, Illinois for
systems and programming, client service, operations, quality assurance,
documentation and training, and administration. The Company's headquarters are
located at the Stamford facility.

Legal Proceedings

On April 2, 1998, the Company was served with a complaint in Connecticut
Superior Court alleging that the Company had breached the terms of its
employment contract with Alan K. Greene, the Company's former Chief Financial
Officer, and breached other obligations to Mr. Greene. The Company intends to
vigorously defend itself in the action and is currently preparing a response to
the claim and file a counterclaim against Mr. Greene.

In addition, Intelicom, a wholly owned subsidiary of the Company acquired
in January 1998 from CSC, is party to litigation and has been threatened with
litigation in connection with the operation of its business prior to its
acquisition by the Company. Pursuant to the terms of the Intelicom Acquisition,
CSC and certain of its affiliates are obligated to defend and indemnify the
Company against obligations arising out of such litigation or threatened
litigation.

The Company does not believe that any liabilities relating to any of the
legal proceedings to which it is a party are likely to be, individually or in
the aggregate, material to its consolidated financial position or results of
operations.

32
<PAGE>

MANAGEMENT

Executive Officers and Directors

The following table sets forth the names, ages and positions of all
executive officers and directors of the Company.

<TABLE>
<CAPTION>
Name Age Position
- ------------------------ ----- ---------------------------------------------------
<S> <C> <C>
Peter P. Bassermann 48 President, Chief Executive Officer and Director
Paul K. Kothari 44 Chief Financial Officer
Lewis D. Bakes 40 Chairman of the Board of Directors, Executive Vice
President, Chief Operating Officer and Secretary
Peter L. Masanotti 43 Executive Vice President of Operations--Stamford,
General Counsel and Director
Joseph A. Juliano 48 Executive Vice President of Strategic Product
Management
Susan L. Yezzi 48 Executive Vice President of Operations--
Champaign
Stuart L. Bell (1)(2) 44 Director
Stephen J. Saft (1)(2) 53 Director
</TABLE>

- --------
(1) Member of Audit Committee

(2) Member of Compensation Committee

Peter P. Bassermann became President and Chief Executive Officer of the
Company in September 1997 and became a director in November 1997. From 1987
until he joined the Company, Mr. Bassermann served as President of SNET
Mobility, Inc., an affiliate of Southern New England Telecommunications
Corporation.

Paul K. Kothari became Chief Financial Officer of the Company in February
1998. From 1993 until he joined the Company, Mr. Kothari served as Vice
President of Finance for Bellcore, a software consulting and research and
development operation owned jointly by the seven Regional Bell Operating
Companies. From 1989 until 1993, Mr. Kothari served as Vice President of
Operations and Chief Financial Officer of Greenwich Associates, a marketing
research and consulting firm, specializing in financial institutions.

Lewis D. Bakes co-founded the Company in 1990 and has served as Executive
Vice President, Chief Operating Officer and a director since that time. He was
elected Chairman of the Company in February 1998.

Peter L. Masanotti joined the Company in 1996 as Vice President and
General Counsel, and was appointed Executive Vice President of
Operations--Stamford and General Counsel in January 1998. Mr. Masanotti became
a director in August 1997. Prior to joining the Company, Mr. Masanotti served
as Managing Partner of the law firm Kleban & Samor, P.C., where he worked as an
attorney from 1980 until 1996.

Joseph A. Juliano joined the Company in November 1996 and has served as
Executive Vice President of Strategic Product Management since that time. Mr.
Juliano has been involved with the wireless industry since 1983. He served as
Industry Consultant-Wireless Strategies at GTE TSI, a service provider for
wireless carriers, from December 1995 to October 1996 and as Director Industry
Matters for SNET Cellular from 1983 until 1995. In recent years, Mr. Juliano
has been a participant in a number of industry advisory boards, including the
CIBERNET Advisory Committee, CIBERNET DMH Working Group, CTIA Roamer Committee,
CTIA Fraud Task Force (including as Chairperson of the Fraud Technology Working
Group), and CTIA Authentication Working Group. In addition, Mr. Juliano is a
Certified Management Accountant.

Susan L. Yezzi joined the Company in late 1997 and became Executive Vice
President of Operations--
Champaign in February 1998. Prior to joining the Company, Ms. Yezzi served as
Vice President of Customer Billing

33
<PAGE>

for Bell Atlantic Corporation since 1996. Prior to that, Ms. Yezzi worked for
NYNEX Corporation for 24 years, and served as that Company's Assistant Vice
President of Customer Billing.

Stuart L. Bell has been a director of the Company since August 1996. From
1995 to 1998, he served as Chairman of the Board of Innovative Medical
Research, Inc., a company that executes clinical trials. Mr. Bell is a director
of Harbinger Corporation, an electronic commerce company, and he is Vice
Chairman of Interval International, a vacation exchange company. From 1981 to
1995, he served as Chief Financial Officer, Treasurer and Executive Vice
President, Office of the President, of CUC International.

Stephen J. Saft has been a director of the Company since June 1997. He has
been an attorney with Kleban & Samor, P.C. since 1979.

The Board of Directors is divided into three classes, each of whose
members serve for a staggered three-year term. The Board consists of two Class
I Directors (Messrs. Bell and Saft), two Class II Directors (Messrs. Bakes and
Bassermann) and one Class III Director (Mr. Masanotti). At each annual meeting
of stockholders, a class of directors is elected for a three-year term to
succeed the directors or director of the same class whose terms are then
expiring. The terms of the Class I Directors, Class II Directors and Class III
Directors expire upon the election and qualification of successor directors at
the annual meeting of stockholders held during the calendar years 2000, 1998
and 1999, respectively.

Each officer serves at the discretion of the Board of Directors.

34
<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information as of April 30, 1998
with respect to the beneficial ownership of shares of Common Stock by (i) each
person known to the Company to own beneficially more than 5% of the outstanding
shares of Common Stock, (ii) each of the Company's directors and executive
officers, (iii) the Selling Stockholders and (iv) the directors and executive
officers of the Company as a group.

<TABLE>
<CAPTION>
Stock Beneficially Number of Stock Beneficially
Owned Prior to the Shares of Owned After the
Offering (2) Common Offering (2)
Name and Address (1) ----------------------- Stock Being -------------------------
of Beneficial Owner Number Percent Offered Number Percent
- -------------------------------------- ----------- --------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C>
5% Stockholders

Portia K. Bakes (3) .................. 729,241 5.4% -- 729,241 4.4%

Dresdner RCM Global Investors
LLC; RCM Limited L.P.;
RCM General Corporation (4) ......... 1,268,550 9.4% -- 1,268,550 7.6%
4 Embarcadero Center
San Francisco, CA 94111

Essex Investment Management
Company (5) ......................... 1,965,176 14.6% -- 1,965,176 11.8%
125 High Street
Boston, MA 02110

Executive Officers and Directors

Lewis D. Bakes (6) ................... 1,360,939 10.1% 304,049 1,056,890 6.4%

Peter P. Bassermann (7) .............. 28,125 * -- 28,125 *

Stuart L. Bell (8) ................... 46,875 * -- 46,875 *

Joseph A. Juliano (9) ................ 65,137 * -- 65,137 *

Paul K. Kothari ...................... -- * -- -- *

Peter L. Masanotti (10) .............. 83,077 * 10,951 72,126 *

Stephen J. Saft (11) ................. 21,000 * -- 21,000 *

Susan L. Yezzi ....................... -- * -- -- *

All directors and executive officers
as a group (8 persons) (12) ......... 1,605,153 11.9% 315,000 1,290,153 7.7%
</TABLE>

- --------
* Less than 1%

(1) The address of each person for whom no address is included in the table is
225 High Ridge Road, Stamford, Connecticut 06905.

(2) The number of shares beneficially owned by each director and executive
officer is determined under rules promulgated by the Commission, and the
information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, beneficial ownership includes any shares
as to which the individual has sole or shared voting power or investment
power and also any shares which the individual has the right to acquire
within 60 days after April 30, 1998 through the exercise of any stock
option or other right. The inclusion herein of such shares, however, does
not constitute an admission that the named stockholder is a direct or
indirect beneficial owner of such shares. Unless otherwise indicated, each
person or entity named in the table has sole voting power and investment
power (or shares such power with his or her spouse) with respect to all
shares of capital stock listed as owned by such person or entity. The
number of shares outstanding includes 13,491,807 shares of Common Stock
outstanding as of April 30, 1998, plus any shares subject to outstanding
stock options held by the person in question. Assumes no exercise of the
Underwriters' over-allotment options.

(3) Ms. Bakes is the wife of Charles L. Bakes, the Company's former President,
Chief Executive Officer and Chairman of the Board of Directors.

(4) Represents beneficial ownership as of December 31, 1997. According to
Schedule 13G filed with the Securities and Exchange Commission, Dresdner
RCM Global Investors LLC ("Dresdner") is an investment

35
<PAGE>

adviser of which RCM Limited L.P. ("RCM Limited") is the managing agent;
RCM General Corporation ("RCM General") is the General Partner of RCM
Limited. RCM General and RCM Limited disclaim beneficial ownership of the
shares except to the extent they are deemed to have beneficial ownership of
shares beneficially owned by Dresdner.

(5) Represents beneficial ownership on or about April 30, 1998, according to
Schedule 13G/A filed with the Securities and Exchange Commission on May 7,
1998.

(6) Consists of 1,351,849 shares beneficially owned by Mr. L. Bakes' wife and
9,090 shares held in trust for the benefit of Mr. L. Bakes' children, as to
all of which shares Mr. L. Bakes disclaims beneficial ownership. Mr. L.
Bakes serves as the Company's Executive Vice President, Chief Operating
Officer, and Chairman of the Board of Directors and Secretary.

(7) Represents 28,125 shares issuable pursuant to outstanding options
exercisable within 60 days after April 30, 1998.

(8) Includes 16,875 shares issuable pursuant to outstanding options exercisable
within 60 days after April 30, 1998.

(9) Includes 37,875 shares issuable pursuant to outstanding options exercisable
within 60 days after April 30, 1998.

(10) Includes 42,202 shares beneficially owned by Mr. Masanotti's wife, as to
which shares Mr. Masanotti disclaims beneficial ownership. Also includes
40,875 shares issuable pursuant to outstanding options exercisable within
60 days after April 30, 1998.

(11) Represents 2,250 shares beneficially owned by Mr. Saft's wife, as to which
shares Mr. Saft disclaims beneficial ownership. Includes 18,750 shares
issuable pursuant to outstanding options exercisable within 60 days after
April 30, 1998.

(12) Includes 142,500 shares issuable pursuant to outstanding options
exercisable within 60 days after April 30, 1998.

36
<PAGE>

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
form of which is filed as an exhibit to the Registration Statement of which
this Prospectus forms a part, the Company and the Selling Stockholders have
agreed to sell to each of the Underwriters named below, and each of such
Underwriters, for whom Lehman Brothers Inc., BT Alex. Brown Incorporated, Cowen
& Company and Jefferies & Company, Inc. are acting as representatives (the
"Representatives"), has severally agreed to purchase from the Company and the
Selling Stockholders, the respective number of shares of Common Stock set forth
opposite its name below:

<TABLE>
<CAPTION>
Number of
Underwriters Shares
------------ -----------
<S> <C>
Lehman Brothers Inc. ................. 1,115,000
BT Alex. Brown Incorporated .......... 1,115,000
Cowen & Company ...................... 485,000
Jefferies & Company, Inc. ............ 485,000
Furman Selz LLC ...................... 100,000
Lazard Freres & Co. LLC .............. 100,000
Wheat First Securities, Inc. ......... 100,000
---------
Total ............................ 3,500,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters to purchase the shares of Common Stock are subject to certain
conditions, and that if any of the foregoing shares of Common Stock are
purchased by the Underwriters pursuant to the Underwriting Agreement, then all
of the shares of Common Stock agreed to be purchased by the Underwriters
pursuant to the Underwriting Agreement must be so purchased.

The Company and the Selling Stockholders have been advised that the
Underwriters propose to offer the shares of Common Stock in part directly to
the public at the offering price set forth on the cover page of this
Prospectus, and in part to certain selected dealers (who may include the
Underwriters) at such public offering price less a selling concession not in
excess of $0.66 per share. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $0.10 per share to certain brokers and
dealers. After this offering, the public offering price, the concession to
selected dealers and the reallowance may be changed by the Underwriters.

The Company and the Selling Stockholders have granted to the Underwriters
options to purchase up to an aggregate of 525,000 additional shares of Common
Stock, at the public offering price, less the aggregate underwriting discounts
and commissions shown on the cover page of this Prospectus, exercisable solely
to cover over-allotments, if any. Such options may be exercised at any time
until 30 days after the date of the Underwriting Agreement. To the extent that
the options are exercised, the Underwriters will be committed, subject to
certain conditions, to purchase a number of additional shares of Common Stock
proportionate to such Underwriter's initial commitment as indicated in the
preceding table and the Company and the Selling Stockholders will be obligated,
pursuant to such over-allotment options to sell such shares of Common Stock to
the Underwriters.

The Company has agreed that, without the prior written consent of Lehman
Brothers Inc., it will not, subject to certain limited exceptions, directly or
indirectly, offer, sell or otherwise dispose of any shares of Common Stock, or
any securities convertible into or exchangeable or exercisable for any such
shares, for the period ending 90 days after the date of this Prospectus. All of
the executive officers and directors of the Company and the Selling
Stockholders have agreed pursuant to lock-up agreements that, without the prior
written consent of Lehman Brothers Inc., they will not, subject to certain
limited exceptions, directly or indirectly, offer, sell or otherwise dispose of
any shares of Common Stock or any securities convertible into or exchangeable
or exercisable for any such shares for the period ending 90 days after the date
of this Prospectus.

The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act and to contribute, under certain circumstances, to payments that
the Underwriters may be required to make in respect thereof.

Until the distribution of the Common Stock is completed, rules of the
Commission may limit the ability of the Underwriters and certain selling group
members to bid for and purchase shares of Common Stock. As an exception to
these rules, the Representatives are permitted to engage in certain
transactions that stabilize the price of the Common Stock. Such transactions
may consist of bids or purchases for the purpose of pegging, fixing or
maintaining the price of the Common Stock.

37
<PAGE>

If the Underwriters create a short position in the Common Stock in
connection with this offering (i.e., if they sell more shares of Common Stock
than the number of shares set forth on the cover page of the Prospectus), the
Representatives may reduce that short position by purchasing Common Stock in
the open market. The Representatives also may elect to reduce any short
position by exercising all or part of the over-allotment options described
herein.

The Representatives also may impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representatives purchase
shares of Common Stock in the open market to reduce the Underwriters' short
position or to stabilize the price of the Common Stock, they may reclaim the
amount of the selling concession from the Underwriters and selling group
members who sold those shares as part of this offering.

In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of such purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it were to discourage resales of the security by purchasers in
an offering.

Neither the Company nor any of the Underwriters makes any representation
or prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the Common Stock. In
addition, neither the Company nor any of the Underwriters makes any
representation that the Representatives will engage in such transactions or
that such transactions, once commenced, will not be discontinued without
notice.

Any offers in Canada will be made only pursuant to an exemption from the
requirements to file a prospectus in the relevant province of Canada in which
such offer is made.

Purchasers of the Common Stock offered hereby may be required to pay stamp
taxes and other charges in accordance with the laws and practices of the
country of purchase in addition to the offering price set forth on the cover
page hereof.

The Representatives have informed the Company that they do not intend to
confirm sales of Common Stock offered hereby to any accounts over which they
exercise discretionary authority.

Lehman Brothers Inc. acted as a financial advisor to the Company in its
acquisition of Intelicom in January 1998 and received customary fees and
expenses for its services. In addition, Lehman Commercial Paper, Inc., an
affiliate of Lehman Brothers Inc., initially acted as administrative agent and
arranger and currently acts as arranger under the Company's Credit Agreement.
Lehman Commercial Paper, Inc. received a customary financing fee in connection
with the Credit Agreement, and has retained approximately $13.0 million of such
indebtedness. The Company plans to use $70 million of the net proceeds from
this offering to repay such indebtedness, including all amounts owed to Lehman
Brothers Commercial Paper, Inc. An affiliate of Lehman Brothers Inc. and
certain of its employees own in the aggregate approximately 600,000 shares of
Common Stock of the Company.

LEGAL MATTERS

The validity of the shares of Common Stock offered by the Company hereby
will be passed upon for the Company by Hale and Dorr LLP, Boston,
Massachusetts, and for the Underwriters by Chadbourne & Parke LLP, New York,
New York.

EXPERTS

The consolidated financial statements of ITDS appearing in ITDS' Annual
Report on Form 10-K/A for the year ended December 31, 1997, have been audited
by Ernst & Young LLP, independent auditors, as set forth in their report
thereon included therein and included herein and incorporated herein by
reference. The financial statements of Intelicom appearing in ITDS' Current
Report on Form 8-K/A dated March 18, 1998 have been audited by Ernst & Young
LLP, as set forth in their report included therein and included herein and
incorporated herein by reference. The information under the caption "Selected
Financial Data" for each of the five years in the period ended December 31,
1997 included elsewhere herein, have been derived from the ITDS consolidated
financial statements audited by Ernst & Young LLP. Such financial statements
and selected financial data referred to above are included herein and
incorporated herein by reference in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.

38
<PAGE>

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files periodic reports, proxy statements and other information with
the Commission. Such reports, proxy statements and other information filed by
the Company can be inspected and copied at the public reference facilities
maintained by the Commission at its principal office at Judiciary Plaza, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at its regional
offices in Chicago (Citicorp Center, Suite 1400, 500 West Madison Street,
Chicago, Illinois 60611), and in New York (Seven World Trade Center, New York,
New York 10007). Any interested party may obtain copies of all or any portion
of such information at prescribed rates from the Public Reference Section of
the Commission at its principal office at Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549. The Commission also maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants, such as the Company, that file
electronically with the Commission. Any interested party may access such
information at Web site http:// www.sec.gov. The Company's Common Stock is
traded on the Nasdaq National Market and reports, proxy statements and other
information concerning the Company can be inspected at the Nasdaq National
Market, 1735 K Street, N.W., Washington, D.C. 20006.

The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act, with respect to the shares. For the purposes
hereof, the term "Registration Statement" means the original Registration
Statement and any and all amendments thereto, including the schedules and
exhibits to such original Registration Statement or any such amendment. This
Prospectus does not contain all of the information set forth in the
Registration Statement, to which reference hereby is made. Each statement made
in this Prospectus concerning a document filed as an exhibit to the
Registration Statement is qualified in its entirety by reference to such
exhibit for a complete statement of its provisions. Any interested person may
inspect the Registration Statement, without charge, at the public reference
facilities of the Commission as described in the previous paragraph.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The Company's Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1998, the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, including the amendment thereto on Form 10-K/A filed
with the Commission on March 31, 1998, the Company's Current Report on form 8-K
dated January 13, 1998, including the amendment thereto on Form 8-K/A filed
with the Commission on March 18, 1998, and the description of the Common Stock
contained in the Company's Registration Statement on Form 8-A filed by the
Company with the Commission on October 10, 1996, including any amendment or
reports filed for the purpose of updating such description, are incorporated by
reference into this Prospectus. All documents filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the offering made hereby shall
be deemed to be incorporated by reference into this Prospectus and to be made a
part hereof from the respective dates of filing of such documents. Any
statement in any document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
the Registration Statement and this Prospectus to the extent that a statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of the Registration
Statement or this Prospectus.

Copies of the above documents (other than exhibits to such documents
unless such exhibits are specifically incorporated by reference in such
documents) may be obtained without charge upon written or oral request to the
Company, Attention: Chief Financial Officer, 225 High Ridge Road, Stamford,
Connecticut 06905, telephone (203) 329-3300.

39
<PAGE>

[THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
-----
<S> <C>
Consolidated Financial Statements--ITDS
Report of Independent Auditors ................................................. F-2
Consolidated Balance Sheets as of December 31, 1996 and 1997 ................... F-3
Consolidated Statements of Income for the years ended
December 31, 1995, 1996 and 1997 .............................................. F-5
Consolidated Statements of Stockholders' Equity (Deficiency) for the
years ended December 31, 1995, 1996 and 1997 .................................. F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1996 and 1997 .............................................. F-8
Notes to Consolidated Financial Statements ..................................... F-9
Financial Statements--ITDS Intelicom Services, Inc.
Report of Independent Auditors ................................................. F-19
Balance Sheets as of March 28, 1997 and January 2, 1998 ........................ F-20
Statements of Operations and Shareholders' Net Investment for the
years ended March 29, 1996 and March 28, 1997 and the thirty-nine week
period ended January 2, 1998 .................................................. F-21
Statements of Cash Flows for the years ended March 29, 1996 and
March 28, 1997 and the thirty-nine week period ended January 2, 1998 .......... F-22
Notes to Financial Statements .................................................. F-23
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
International Telecommunication Data Systems, Inc.

We have audited the accompanying consolidated balance sheets of International
Telecommunication Data Systems, Inc. as of December 31, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1997. 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, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of International
Telecommunication Data Systems, Inc. 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.

/s/ Ernst & Young LLP

Stamford, Connecticut
February 10, 1998,
except for information describing
the three-for-two stock split in Note 1
and Note 3 as to which the
date is February 23, 1998.

See accompanying notes.

F-2
<PAGE>

INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,
------------------------------
1996 1997
------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ....................................... $ 4,138,575 $28,967,173
Accounts receivable, net of allowance for doubtful accounts of
$52,370 and $486,422, respectively ............................ 3,232,967 5,007,581
Securities available for sale, at market value .................. 25,023,454 --
Prepaid expenses and other current assets ....................... 1,503,209 741,297
Deferred income taxes ........................................... 44,000 220,000
----------- -----------
Total current assets ....................................... 33,942,205 34,936,051
Property and equipment:
Computers, including leased property under capital leases of
$1,863,103 and $1,104,507, respectively ....................... 2,986,056 4,843,816
Furniture and fixtures, including leased property under capital
leases of $33,119 in 1996 and 1997 ............................ 446,535 446,535
Equipment, including leased property under capital leases of
$53,508 in 1996 and 1997 ...................................... 251,850 373,093
Leasehold improvements .......................................... 589,479 589,479
----------- -----------
4,273,920 6,252,923
Less: accumulated depreciation and amortization ................. 1,328,228 2,318,936
----------- -----------
2,945,692 3,933,987
Other assets:
Product development costs--at cost, net of accumulated
amortization of $586,215 and $1,104,613, respectively ......... 1,343,727 3,697,726
Other ........................................................... 165,913 1,884,688
----------- -----------
1,509,640 5,582,414
----------- -----------
Total assets ............................................... $38,397,537 $44,452,452
=========== ===========
</TABLE>

See accompanying notes.

F-3
<PAGE>

INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS--Continued

<TABLE>
<CAPTION>
December 31,
---------------------------------
1996 1997
--------------- ---------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .......................................... $ 685,739 $ 1,191,825
Accrued expenses .......................................... 806,772 560,861
Accrued compensation ...................................... 272,059 332,700
Current maturities of capital lease obligations ........... 538,238 278,634
------------ ------------
Total current liabilities ............................ 2,302,808 2,364,020
Capital lease obligations .................................. 878,432 73,532
Deferred income taxes ...................................... 407,000 1,667,000
Other ...................................................... 91,879 29,580
Commitments and contingencies (Note 7) .................... -- --
Stockholders' equity
Common Stock, $.01 par value; 40,000,000 shares authorized,
12,654,756 shares issued and outstanding
as of December 31, 1996, 12,786,740 shares issued
and outstanding as of December 31, 1997 ................. 126,548 127,868
Additional paid-in capital ................................ 43,790,517 44,447,507
Retained deficit .......................................... (8,826,674) (4,026,055)
Unearned compensation ..................................... (336,000) (231,000)
Unrealized loss on securities available for sale .......... (36,973) --
------------ ------------
Total stockholders' equity ................................. 34,717,418 40,318,320
------------ ------------
Total liabilities and stockholders' equity ................. $ 38,397,537 $ 44,452,452
============ ============
</TABLE>

See accompanying notes.

F-4
<PAGE>

INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------------
1995 1996 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Revenue ......................................................... $10,820,815 $16,689,401 $23,428,810
Costs and expenses:
Operating expenses ............................................. 2,787,687 4,283,364 5,617,245
General, administrative and selling expenses ................... 4,601,242 6,522,900 6,760,053
Depreciation and amortization .................................. 640,917 1,053,472 1,595,706
Systems development and programming costs ...................... 1,183,141 2,115,305 2,910,331
----------- ----------- -----------
Total costs and expenses ........................................ 9,212,987 13,975,041 16,883,335
----------- ----------- -----------
Operating income ................................................ 1,607,828 2,714,360 6,545,475
Other income .................................................... 49,477 315,914 1,701,881
Interest expense ................................................ (452,925) (416,148) (120,355)
----------- ----------- -----------
Income before income tax expense and extraordinary item ......... 1,204,380 2,614,126 8,127,001
Income tax expense .............................................. 378,786 1,111,788 3,326,382
----------- ----------- -----------
Income before extraordinary item ................................ 825,594 1,502,338 4,800,619
Extraordinary loss (net of $158,038 tax benefit) ................ (223,696) -- --
----------- ----------- -----------
Net income ...................................................... $ 601,898 $ 1,502,338 $ 4,800,619
=========== =========== ===========
Income per common share--basic:
Income before extraordinary item ............................... $ .09 $ .15 $ .38
Extraordinary loss ............................................. (.03) -- --
----------- ----------- -----------
Net income ...................................................... $ .06 $ .15 $ .38
=========== =========== ===========
Shares used in computing basic income per common share .......... 9,291,257 9,889,809 12,728,214
=========== =========== ===========
Income per common share--diluted:
Income before extraordinary item ............................... $ .09 $ .15 $ .36
Extraordinary loss ............................................. (.03) -- --
----------- ----------- -----------
Net income ...................................................... $ .06 $ .15 $ .36
=========== =========== ===========
Shares used in computing diluted income per
common share ................................................... 9,291,257 10,109,121 13,192,830
=========== =========== ===========
</TABLE>

See accompanying notes.

F-5
<PAGE>

INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
Preferred Stock
-------------------------------------------------------
Class A Class B Common Stock
--------------------------- --------------------------- -------------------------
Number Number Number
of Shares $25,000 of Shares $250 of Shares
Outstanding Par Value Outstanding Par Value Outstanding Par Value
------------- ------------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1994 as previously
reported ................. 18 $ 400,400 1,500 $ 327,600 4,875,200 $ 51,248
Three-for-two stock
split effected in the
form of a 50%
stock dividend .......... 2,437,600 24,376
--------- --------
Balance at
December 31,
1994 as restated
for the three-for-
two stock split ......... 18 400,400 1,500 327,600 7,312,800 75,624
Net income ...............
Preferred stock
dividends
declared ................
Balance at
December 31, 1995 ........ 18 400,400 1,500 327,600 7,312,800 75,624
Net income ...............
Preferred stock
dividends
declared ................
Retirement of treasury
stock ................... (2,496)
Recapitalization of
Class A & B
preferred stock ......... (18) (400,400) (1,500) (327,600) 1,279,218 12,792
Compensation paid in
common stock ............ 106,152 1,062
Conversion of Class C
convertible
preferred stock ......... 154,800 1,548
Exercise of warrants ..... 501,786 5,018

<CAPTION>
Unearned Net Unrealized
Additional Treasury Retained Compensation Gain (Loss)
Paid-in Stock at Earnings Restricted on Securities
Capital Cost (Deficit) Stock Awards Held for Sale Total
-------------- -------------- ---------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1994 as previously
reported ................. $ 28,112 $ (400,030) $ (593,600) $ -- $-- $ (186,270)
Three-for-two stock
split effected in the
form of a 50%
stock dividend .......... (24,376) --
-------------- ----------
Balance at
December 31,
1994 as restated
for the three-for-
two stock split ......... 28,112 (400,030) (617,976) (186,270)
Net income ............... 601,898 601,898
Preferred stock
dividends
declared ................ (28,112) (8,482) (36,594)
------------ -------------- ----------
Balance at
December 31, 1995 ........ -- (400,030) (24,560) -- 379,034
Net income ............... 1,502,338 1,502,338
Preferred stock
dividends
declared ................ (79,236) (79,236)
Retirement of treasury
stock ................... (397,534) 400,030 --
Recapitalization of
Class A & B
preferred stock ......... 10,115,424 (10,225,216) (825,000)
Compensation paid in
common stock ............ 969,487 (336,000) 634,549
Conversion of Class C
convertible
preferred stock ......... 638,452 640,000
Exercise of warrants ..... 817,941 822,959
</TABLE>

See accompanying notes.

F-6
<PAGE>

INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY--Continued

<TABLE>
<CAPTION>
Preferred Stock
---------------------------------------------------
Class A Class B Common Stock
------------------------- ------------------------- -------------------------
Number Number Number
of Shares $25,000 of Shares $250 of Shares
Outstanding Par Value Outstanding Par Value Outstanding Par Value
------------- ----------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Sale of common
stock, net of
expenses ................ 3,300,000 33,000
Net unrealized loss on
securities available
for sale ................
Balance at
December 31, 1996 ........ -- -- -- -- 12,654,756 126,548
Net income ...............
Secondary sale of
common stock ............ 75,000 750
Employee stock
purchase plan ........... 9,078 91
Exercise of stock
options ................. 47,906 479
Amortization of
unearned
compensation ............
Net unrealized gain
on securities
available for sale ......
Balance at
December 31, 1997 ........ -- $-- -- $-- 12,786,740 $127,868
== === == === ========== ========

<CAPTION>
Unearned Net Unrealized
Additional Treasury Retained Compensation Gain (Loss)
Paid-in Stock at Earnings Restricted on Securities
Capital Cost (Deficit) Stock Awards Held for Sale Total
-------------- ---------- --------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Sale of common
stock, net of
expenses ................ 31,646,747 31,679,747
Net unrealized loss on
securities available
for sale ................ (36,973) (36,973)
------- ----------
Balance at
December 31, 1996 ........ 43,790,517 -- (8,826,674) (336,000) (36,973) 34,717,418
Net income ............... 4,800,619 4,800,619
Secondary sale of
common stock ............ 172,126 172,876
Employee stock
purchase plan ........... 113,113 113,204
Exercise of stock
options ................. 371,751 372,230
Amortization of
unearned
compensation ............ 105,000 105,000
Net unrealized gain
on securities
available for sale ...... 36,973 36,973
------- ----------
Balance at
December 31, 1997 ........ $44,447,507 -- $ (4,026,055) $ (231,000) -- $40,318,320
=========== == ============ ========== ======= ===========
</TABLE>

See accompanying notes.

F-7
<PAGE>

INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------------
1995 1996 1997
------------- --------------- ---------------
<S> <C> <C> <C>
Operating activities
Income before extraordinary loss ............................. $ 825,594 $ 1,502,338 $ 4,800,619
Adjustments to reconcile income before extraordinary loss to
net cash provided by operating activities:
Depreciation and amortization ............................... 640,917 1,053,472 1,595,706
Amortization of unearned compensation ....................... -- -- 105,000
Compensation paid in Common Stock ........................... -- 634,549 --
Deferred income taxes ....................................... (93,960) 612,079 1,084,000
Change in operating assets and liabilities:
Accounts receivable ....................................... (457,609) (1,884,180) (1,774,614)
Prepaid expenses and other current assets ................. (236,378) (875,072) 413,717
Accounts payable and accrued expenses ..................... 781,049 390,831 320,816
Other assets and liabilities, net ......................... (157,659) 11,775 (1,788,785)
---------- ------------- -------------
Net cash provided by operating activities .................... 1,301,954 1,445,792 4,756,459
Investing activities
Capital expenditures ......................................... (17,358) (1,852,701) (2,737,598)
Proceeds from sale of equipment .............................. 13,500 -- --
Purchase of securities available for sale .................... (245,069) (25,060,427) (25,328,551)
Purchase of investments held to maturity ..................... -- (353,126) (3,062,361)
Proceeds from maturities of investments ...................... 99,286 300,000 3,410,556
Proceeds from maturities of securities available
for sale .................................................... -- -- 50,388,977
Product development costs .................................... (479,316) (858,827) (2,872,397)
---------- ------------- -------------
Net cash (used for) provided by investing activities ......... (628,957) (27,825,081) 19,798,626
Financing activities
Principal payments on long-term debt ......................... (276,507) (1,811,273) --
Payment to retire Preferred Stock ............................ -- (825,000) --
Principal payments on notes payable .......................... (76,001) (76,958) --
Principal payments on capital lease obligations .............. (166,297) (362,223) (384,558)
Proceeds from sale of Common Stock ........................... -- 32,502,706 658,071
Proceeds from sale of Preferred Stock ........................ 640,000 -- --
Dividends paid ............................................... (33,750) (82,080) --
---------- ------------- -------------
Net cash provided by financing activities .................... 87,445 29,345,172 273,513
Net increase in cash and cash equivalents .................... 760,442 2,965,883 24,828,598
Cash and cash equivalents at beginning of year ............... 412,250 1,172,692 4,138,575
---------- ------------- -------------
Cash and cash equivalents at end of year ..................... $1,172,692 $ 4,138,575 $ 28,967,173
========== ============= =============
Supplemental disclosures of cash flow information:
Cash paid during the year for interest ....................... $ 447,241 $ 434,092 $ 120,355
Cash paid during the year for taxes .......................... $ 419,700 $ 819,897 $ 2,342,081
</TABLE>

Supplemental disclosure of noncash financing activities:
Capital lease obligations totaling $960,059 and $685,604 in the years ended
December 31, 1995 and 1996, respectively, were incurred for the acquisition of
new equipment. No leases were entered into in 1997.

See accompanying notes.

F-8
<PAGE>

INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Description of Business

ITDS is a leading provider of comprehensive transactional billing and
management information solutions to providers of wireless and satellite
telecommunications services. The Company uses its proprietary software
technology to develop billing solutions which address customer requirements as
they evolve, regardless of a service provider's market segment, geographic area
or mix of network features and billing options. Typically, the Company provides
its services under contracts with terms ranging from two to five years, and
bills customers monthly, on a per-subscriber basis. As a result, substantially
all of the Company's revenue is recurring in nature, and increases as a
provider's subscriber base grows.

Basis of Presentation

Stock Split

The Company effected a three-for-two stock split in the form of a 50%
stock dividend, to be distributed on March 9, 1998 to stockholders of record on
February 23, 1998. Accordingly, all share and per share amounts have been
adjusted to reflect this split.

Property and Equipment

Property and equipment are carried at cost, less accumulated depreciation
computed using the straight-line method over the estimated useful lives of the
assets.

The Company capitalizes software development costs incurred in the
development of software used in its product and service line only after
establishing commercial and technical viability and ceases when the product is
available for general release. The capitalized costs include salaries and
related payroll costs incurred in the development activities. Software
development costs are carried at cost less accumulated amortization.
Amortization is computed by using the greater of the amount that results from
applying the ratio that current revenue for the product bears to total revenue
for the product or the straight-line method over the remaining useful life of
the product. Generally, such deferred costs are amortized over five years.
During the years ended December 31, 1995, 1996 and 1997, $166,292, $300,105 and
$518,398, respectively, of capitalized software development costs were
amortized.

Revenue Recognition

Revenues and costs associated with the recurring process of providing
billing and other service/software solutions are recognized at the time
services are performed. License fees and related costs are recognized upon
execution of the licensing agreement and delivery of the software to the
customer, provided that the Company has no significant related obligations or
collection uncertainties remaining. Where there are significant obligations
related to the development and enhancement of the software, license fees are
recorded over the expected installation period or the term of the respective
contract. As of December 31, 1997, other assets includes approximately $865,000
for installation and related services that are being recorded over the
installation period. In addition, accounts receivable at December 31, 1996 and
1997 include $1,278,412 and $2,296,451, respectively, for services rendered
prior to December 31 which were billed in January of the following year when
the billing cycles were complete.

In 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of" ("FAS 121"). FAS 121, which was adopted in 1996, requires companies to
investigate potential impairments of long-lived assets on an exception basis,
when there is evidence that events or changes in circumstances have made
recovery of an asset's carrying value unlikely. The adoption of FAS 121 has not
had a material effect on the Company's financial position or results of
operations.

F-9
<PAGE>

INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Cash Equivalents

The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.

Consolidation

The financial statements include the accounts of ITDS and consolidated
subsidiaries after elimination of intercompany accounts and transactions.

Advertising Costs

The Company expenses advertising costs as incurred. Advertising expenses
for the years ended December 31, 1995, 1996, and 1997 were $115,835, $194,097,
and $233,673, 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 and disclosures reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

Reclassifications:

Certain reclassifications were made to conform prior years' data to the
current year's presentation.

Major Customers

Revenues generated from two customers accounted for approximately 15.2%
and 12.7% of 1995 revenues, 19.1% and 12.5% of 1996 revenues and 18.4% and
11.7% of 1997 revenues.

New Accounting Pronouncements

In 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income"
("FAS 130") and SFAS 131, "Disclosures About Segments of an Enterprise and
Related Information" ("FAS 131"). FAS 130 and FAS 131 are effective for
financial statements for fiscal years beginning after December 15, 1997. In
addition, in October 1997 AcSEC issued Statement of Position 97-2 "Software
Revenue Recognition" which is effective for transactions entered in fiscal
years beginning after December 15, 1997. The Company is studying the
application of the new standards to evaluate the effect on the Company's
financial statements.

2. INVESTMENTS

Prepaid expenses and other current assets includes short-term investments
of $348,195 as of December 31, 1996. These investments are recorded at cost
plus accrued interest (approximates market) and consist of United States
Treasury Bills, maturing on or before April 3, 1997. These short-term
investments are classified as held to maturity.

Securities available for sale at December 31, 1996 consisted of United
Stated Treasury Notes with a 6% coupon rate maturing on August 15, 1999. These
securities are recorded at fair value. The unrealized gains or loss, net of tax
are reported in a separate component of stockholder equity. During 1997, these
investments were disposed of and invested in cash equivalents.

Other income for the years ended December 31, 1995, 1996 and 1997 includes
$20,269, $313,132 and $1,646,630, respectively, of investment income.

F-10
<PAGE>

INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

3. CAPITAL STOCK

Stock Split

The Company effected a three-for-two stock split, in the form of a 50%
stock dividend, distributed on March 9, 1998 to stockholders of record on
February 23, 1998. Accordingly, all share and per share amounts have been
adjusted to reflect this split.

Public Offerings

The Company completed its Initial Public Offering ("IPO") in October 1996.
The Company sold 3 million shares at $10.67 per share, resulting in proceeds to
the Company of approximately $28.7 million, after deducting expenses. In
addition, on November 18, 1996 the Company received approximately $3.0 million,
net of expenses, upon the exercise of the underwriters' over-allotment option
to purchase 300,000 shares of Common Stock from the Company in connection with
the IPO.

In connection with the IPO, the Company's Certificate of Incorporation was
amended to authorize the issuance of up to 40,000,000 shares of Common Stock,
$.01 par value per share and the issuance of up to 2,000,000 shares of
Preferred Stock, $.01 par value per share.

A portion of the proceeds from the Company's IPO were used to retire
substantially all of the Company's outstanding debt. In addition, the Company's
Class A and B Preferred Stock was retired and the holders of such shares were
issued an aggregate of 1,279,218 shares of the Company's Common Stock and were
paid an aggregate amount of $825,000. The distribution of the 1,279,218 shares
of the Company's Common Stock, valued at $8 per share, for an aggregate of
$10.2 million, resulted in a one-time, noncash charge to retained earnings and
a corresponding increase to additional paid-in-capital. Further, immediately
prior to the IPO, Connecticut Innovations Incorporated ("CII") exercised
outstanding warrants to purchase 501,786 shares of the Company's Common Stock
at an aggregate purchase price of $822,959. In addition, upon the closing of
the IPO all of the outstanding shares of Series C Preferred Stock of the
Company (all of which were held by CII) converted into an aggregate of 154,800
shares of Common Stock.

During April 1997, the Company received net proceeds of $172,876 from the
sale of 75,000 shares of its Common Stock in a follow-on offering.

Earnings Per Share

In February 1997, the FASB issued Statement of Financial Accounting
Standards SFAS No. 128, "Earnings Per Share" FAS 128, which revises the
methodology of calculating earnings per share. The Company adopted FAS 128 in
the fourth quarter of 1997. All earnings per share amounts for all periods have
been presented in accordance with and where appropriate, restated to conform to
the FAS No. 128 requirements.

F-11
<PAGE>

INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

3. CAPITAL STOCK (Continued)

The following table sets forth the computation of basic and diluted
earnings per share:

<TABLE>
<CAPTION>
Year ended December 31,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Numerator:
Numerator for basic and diluted earnings per share--
earnings before extraordinary item ......................... $ 825,594 $ 1,502,338 $ 4,800,619
========== =========== ===========
Denominator:
Denominator for basic earnings per
share--weighted-average shares ............................. 9,291,257 9,889,809 12,728,214
Effect of dilutive securities:
Employee stock options ..................................... -- 219,312 464,616
---------- ----------- -----------
Denominator for diluted earnings per
share--adjusted weighted-average shares
and assumed conversions .................................... 9,291,257 10,109,121 13,192,830
========== =========== ===========
Basic income per common share before extraordinary item ....... $ .09 $ .15 $ .38
========== =========== ===========
Diluted income per common share before extraordinary item ..... $ .09 $ .15 $ .36
========== =========== ===========
</TABLE>

Income per common share for the years ended December 31, 1995 and 1996 is
calculated using the weighted average number of shares of common stock
outstanding after giving effect to the retirement of the Company's Class A and
B Preferred Stock and the conversion of the Series C Preferred Stock in
conjunction with the Company's IPO.

Supplemental earnings per share, assuming, at the beginning of the
respective periods, the exercise of the warrants, the redemption and conversion
of all outstanding preferred stock, and the sale of Common Stock, the proceeds
of which were used for debt retirement, are as follows:

<TABLE>
<CAPTION>
Year ended December
31,
1995 1996
--------- ---------
<S> <C> <C>
Basic:
Income before extraordinary item ......... $ .11 $ .16
Extraordinary item ....................... (.02) --
------ -----
Net income ............................... $ .09 $ .16
====== =====
Diluted:
Income before extraordinary item ......... $ .09 $ .16
Extraordinary item ....................... (.02) --
------ -----
Net income ............................... $ .07 $ .16
====== =====
</TABLE>

F-12
<PAGE>

INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

4. STOCK PLANS

The Company's 1996 and 1997 Stock Incentive Plans authorize the grant of
options to employees, directors and consultants for up to 1,500,000 shares and
1,125,000 shares, respectively, of the Company's Common Stock. All options
granted have 10 year terms and vest and become fully exercisable at the end of
4 years of continued employment. In addition, a total of 300,000 shares of
Common Stock have been authorized for issuance under the Company's 1996
Employee Stock Purchase Plan.

Under the employee stock purchase plan, shares of the Company's Common
Stock may be purchased at six-month intervals at 85% of the lower of the fair
market value on the first or the last business day of each six-month period.
Employees may purchase shares having a value not exceeding 10% of their gross
compensation, up to $25,000 of the fair market value of such Common Stock,
during an offering period.

A summary of the Company's activity in the stock options plans, and
related information for the years ended December 31, 1995, 1996, and 1997
follows:

<TABLE>
<CAPTION>
Weighted-Average
Options Exercise Price
------------ -----------------
<S> <C> <C>
Outstanding at December 31, 1995 ................. -- --
Granted .......................................... 590,550 $ 9.29
Forfeited ........................................ 2,250 $ 9.33
------- -------
Outstanding at December 31, 1996 ................. 588,300 $ 9.29
Granted .......................................... 2,607,643 $ 12.33
Exercised ........................................ 47,910 $ 7.77
Cancelled ........................................ 534,750 $ 7.78
Forfeited ........................................ 124,184 $ 7.88
--------- -------
Outstanding at December 31, 1997 ................. 2,489,099 $ 12.33
========= =======
Options exercisable at December 31, 1997 ......... 111,583 $ 9.19
Options exercisable at December 31, 1996 ......... 24,093 $ 12.24
</TABLE>

In May 1997, 534,750 options previously issued were exchanged for new
options covering an equal number of shares and an exercise price equal to the
then current market price. The previously issued options were included in the
number of shares granted for 1997.

<TABLE>
<CAPTION>
Options Outstanding
- --------------------------------------------------------------------------------
Weighted-Average
Range of Outstanding Remaining Weighted-Average
Exercise Prices as of 12/31/97 Contractual Life Exercise Price
- -------------------------- ---------------- ------------------ -----------------
<S> <C> <C> <C>
$7.50--$10.00.......... 844,651 8.9 $ 7.75
$10.00--$12.50......... 198,750 9.4 11.50
$12.50--$15.00......... 0 0 0
$15.00--$17.50......... 1,445,698 9.9 15.48
--------- --- -------
2,489,099 9.5 $ 12.54
========= === =======
</TABLE>

Exercise prices for options outstanding as of December 31, 1997 ranged
from $7.75 to $16 per share. The weighted average remaining contractual life of
those options is 9.5 years.

F-13
<PAGE>

INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

4. STOCK PLANS (Continued)

The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
Statement No. 123, "Accounting for Stock-Based Compensation," requires use of
option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, if the exercise price of the Company's employee
stock options equals the market price of the underlying stock on the date of
grant, no compensation expense is recognized.

Pro forma information regarding net income and earnings per share is
required by Statement 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of the
Statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted average
assumptions:

<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Risk-free interest rate ............................................. 5.0% 5.0%
Dividend yield ...................................................... 0 0
Expected volatility of market price of company's
common stock ....................................................... .71 .63
Expected option life ................................................ 5 years 5 years
Weighted average fair value per share of options
granted during year ................................................ $4.86 $7.31
</TABLE>

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 the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes 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 employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:

<TABLE>
<CAPTION>
1996 1997
--------------- ---------------
<S> <C> <C>
Pro forma net income .......................... $ 1,189,597 $ 3,441,094
=========== ===========
Pro forma earnings per share:
Pro forma basic earnings per share ............ $ .12 $ .27
Pro forma diluted earnings per share .......... $ .12 $ .26
</TABLE>

5. DEFERRED COMPENSATION

In accordance with the terms of his employment agreement, as amended on
September 30, 1996, an employee became entitled to receive a payment of
$275,000 on or before December 31, 1996 and, as a result of the public offering
of the Company's Common Stock, the right to purchase 27,500 shares of the
Company's Common Stock for $.01 per share. In addition, during 1996 an employee
was given the right to purchase 42,652 shares of the Company's Common Stock for
$.01 per share. During 1996, these employees acquired the shares and the
difference between the exercise price and the fair value on the date of grant
was charged to compensation expense. In connection with an employment agreement
entered into during 1996, an employee was awarded 36,000 shares of the
Company's Common Stock with a fair value of $336,000 when awarded. The shares
vest 25% on April 1, 1997, 25% on October 31, 1998, 25% on October 31, 1999,
and 25% on October 31, 2000. The fair value of the shares on the date of award
is being amortized as compensation expense over the vesting period.

F-14
<PAGE>

INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

6. CAPITALIZED LEASE OBLIGATIONS

The Company leases computer equipment and office furniture under capital
leases expiring in various years through 1999. The assets and liabilities under
capital leases are recorded at the lower of the present value of the minimum
lease payments or the fair value of the asset. Depreciation of assets under
capital leases is included in depreciation expense.

Maturities of capital lease obligations are as follows as of December 31,
1997:

<TABLE>
<S> <C>
1998 ............................................ $322,030
1999 ............................................ 71,935
--------
Total lease obligations ......................... 393,965
Less: amount representing interest .............. 41,799
--------
Present value of minimum lease payments ......... $352,166
========
</TABLE>

7. COMMITMENTS AND CONTINGENCIES

On June 11, 1996, the Company entered into a noncancelable lease expiring
on August 31, 2000 for 48,222 square feet of office space in Stamford,
Connecticut. In connection therewith, the Company obtained a letter of credit
in the initial amount of $362,000 as security for the lease. Minimum future
rental payments due under such lease are $723,330 per year.

The Company also leases Connecticut office facilities under a
noncancelable operating lease expiring in April 1999. The Company recognizes
rental expense on a straight line basis over the term of the lease. Rent
expense was $330,914, $591,729 and $738,582 for the years ended December 31,
1995, 1996 and 1997, respectively.

Minimum future rental payments due under such leases as of December 31,
1997 are as follows:

<TABLE>
<S> <C>
1998 .............................................. $ 929,521
1999 .............................................. 773,237
2000 .............................................. 482,220
----------
2,184,978
Less: sublease income ............................. (266,850)
----------
$1,918,128
==========
</TABLE>

The Company is also obligated to pay utilities and property taxes above
the landlords' base year costs.

The Company has entered into employment contracts with various officers
and other employees. The contracts expire in one to four years and require the
Company to pay base compensation of approximately $2.1 million per year plus
benefits. The contracts provide for discretionary bonuses if approved by the
Board of Directors. In addition, as of December 31, 1997, the Company has loans
to officers aggregating $264,653.

The Company maintains an employee savings plan that qualifies as a cash or
deferred salary arrangement under Section 401(k) of the Internal Revenue Code.
Under the plan, participating employees may defer up to 15% of their pre-tax
compensation, but not more than $9,500 and $10,000 for 1996 and 1997 calendar
years. The Company does not contribute to the plan.

F-15
<PAGE>

INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

8. EXTRAORDINARY ITEM

On June 30, 1995 the Company refinanced existing debt with CII. In doing
so, the Company recorded an extraordinary loss of $223,696 which is net of a
$158,038 tax benefit. Such extraordinary loss was due to a negotiated
acceleration of payments due to early termination of the debt agreement.

9. INCOME TAXES

Significant components of income tax expense (benefit) before
extraordinary item are as follows:

<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------
1995 1996 1997
----------- ------------- -------------
<S> <C> <C> <C>
Current:
Federal .................. $ 344,360 $ 381,376 $1,667,132
State .................... 128,386 118,333 575,250
--------- ---------- ----------
472,746 499,709 2,242,382
--------- ---------- ----------
Deferred:
Federal .................. (62,640) 436,659 805,916
State .................... (31,320) 175,390 278,084
--------- ---------- ----------
(93,960) 612,079 1,084,000
--------- ---------- ----------
Total tax expense ......... $ 378,786 $1,111,788 $3,326,382
========= ========== ==========
</TABLE>

A reconciliation of the applicable federal statutory rate to the Company's
effective tax (benefit) rate from income before income tax expense and
extraordinary item follows:

<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Statutory rate ................................................. 34.0% 34.0% 34.0%
State income taxes, net of federal income tax benefit .......... 5.3 7.4 6.9
Debt consolidation expenses .................................... (10.1) -- --
Other, net ..................................................... 2.3 1.1 --
----- ---- ----
31.5% 42.5% 40.9%
===== ==== ====
</TABLE>

F-16
<PAGE>

INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

9. INCOME TAXES (Continued)

Significant components of the Company's deferred tax assets and
liabilities are as follows:

<TABLE>
<CAPTION>
December 31,
----------------------------
1996 1997
------------ -------------
<S> <C> <C>
Deferred tax liabilities:
Software development costs ............ $ 798,862 $1,965,598
Capitalized leases .................... 382,521 537,081
--------- ----------
Total deferred tax liabilities ......... 1,181,383 2,502,679
--------- ----------
Deferred tax assets:
Deferred charges ...................... 46,092 28,786
Depreciation and amortization ......... 719,748 819,855
Accrued compensation .................. 26,937 4,319
Reserve for doubtful accounts ......... 21,521 199,093
Interest .............................. 4,085 3,626
--------- ----------
Total deferred tax assets .............. 818,383 1,055,679
--------- ----------
Net deferred tax liability ............. $ 363,000 $1,447,000
========= ==========
</TABLE>

10. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a tabulation of the unaudited quarterly results of
operations for the two years ended December 31, 1997 (in thousands, except
per-share data):

<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------
3/31/97 6/30/97 9/30/97 12/31/97
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenue .............................. $5,270 $5,362 $6,039 $6,758
Gross profit ......................... 1,439 1,421 1,659 2,027
Net income ........................... 1,062 1,078 1,240 1,420
Basic net income per share ........... .08 .08 .10 .11
Diluted net income per share ......... .08 .08 .09 .11
</TABLE>

<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------
3/31/96 6/30/96 9/30/96 12/31/96
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenue .............................. $3,934 $3,931 $4,139 $4,685
Operating income ..................... 1,054 877 (273) 1,056
Net income (loss) .................... 549 445 (240) 748
Basic net income (loss) per share .... .06 .05 (.03) .07
Diluted net income (loss) per share .. .06 .05 (.03) .07
</TABLE>

The sum of the quarters' net income per share may not equal the full year
per-share amounts due to rounding differences resulting from changes in the
number of shares of Common Stock outstanding.

During the third quarter of 1996, the Company incurred a one-time charge
for compensation related to two newly hired employees of $909,548 or $.07 per
share ($.07 per share--diluted). The fourth quarter of 1996 includes a one-time
charge associated with the IPO of $200,000 or $.02 per share ($.01 per
share--diluted).

F-17
<PAGE>

INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

11. SUBSEQUENT EVENTS

On January 2, 1998, the Company acquired TRIS, a provider of billing and
care software and services, from Computer Sciences Corporation, in a
transaction accounted for in accordance with the purchase method of accounting,
by acquiring all of the outstanding Capital Stock of CSC Intelicom Inc. (now
known as ITDS Intelicom Services, Inc.). The purchases price consisted of
606,673 shares of Common Stock of the Company valued at $10,000,000 and
$75,826,777 in cash. A portion of the cash purchase price for TRIS was obtained
by the Company under a Credit Agreement dated January 2, 1998, with certain
lenders and Lehman Commercial Paper, Inc., as Administrative Agent and Arranger
(the "Credit Agreement"), that provides for a $70 million term loan and a $30
million line of credit.

The credit agreement contains normal covenants which include meeting
certain financial ratios, requires the Company to pay interest at LIBOR plus
two and one quarter percent and requires payments of interest only through
March 30, 2000. At which time periodic principal, payments will become due.

The purchase price in excess of the fair market value of the assets
acquired of approximately $57 million will be amortized over 15 years. In
addition, purchased research and development costs of approximately $21 million
before income tax benefit and other indirect transaction related costs of
approximately $5 million before income tax benefit will be expensed in the
first quarter of 1998. The fair value of the purchased research and development
costs was determined based on an independent valuation. The $21 million and $5
million discussed above have been excluded from the pro forma calculation for
the year ended December 31, 1997.

Pro Forma Financial Information (Unaudited)

For the year ended March 28, 1997 and the nine months ended December 31,
1997, TRIS had revenues and net income (loss) of $42.2 million and $3.0 million
and $39.8 million and $(1.9) million, respectively. Assuming the acquisition
had occurred as of January 1, 1997, pro forma revenues, net income and basic
net income per share and diluted net income per share would have been $80.4
million, $5.2 million, $.39 per share and $.37 per share, respectively.

Two customers accounted for 36% and 11% of TRIS' total revenues for the
nine months ended December 31, 1997. For the year ended March 28, 1997, these
two customers accounted for 17% and 13% of TRIS' total revenues.

Legal Proceedings

Neither ITDS nor any of its subsidiaries is currently party to any
material legal proceedings. However, ITDS Intelicom Services, Inc., a
wholly-owned subsidiary of the Company acquired in January 1998 from Computer
Sciences Corporation ("CSC"), is party to litigation and has been threatened
with litigation in connection with the operation of its business prior to its
acquisition by the Company. Pursuant to the terms of the acquisition, CSC and
certain of its affiliates are obligated to defend and indemnify the Company
against any obligations arising out of such litigation or threatened
litigation.

F-18
<PAGE>

REPORT OF INDEPENDENT AUDITORS

Board of Directors
ITDS Intelicom Services, Inc.

We have audited the accompanying balance sheets of ITDS Intelicom Services,
Inc., formerly known as CSC Intelicom, Inc. ("Intelicom"), as of March 28, 1997
and January 2, 1998, and the related statements of operations and shareholders'
net investment and cash flows for the years ended March 29, 1996 and March 28,
1997 and for the thirty-nine week period ended January 2, 1998. These financial
statements are the responsibility of Intelicom's management. Our responsibility
is to express an opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Intelicom at March 28, 1997
and January 2, 1998, and the results of its operations and its cash flows for
the years ended March 29, 1996 and March 28, 1997, and for the thirty-nine week
period ended January 2, 1998, in conformity with generally accepted accounting
principles.

As discussed in Note 1 to the financial statements, a change in reporting
entity occurred on January 2, 1998. The financial statements for all periods
presented have been restated to reflect this change.

/s/ Ernst & Young LLP

Stamford, Connecticut
March 5, 1998

F-19
<PAGE>

ITDS INTELICOM SERVICES, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
March 28, January 2,
1997 1998
----------- -----------
(Dollars in Thousands)
<S> <C> <C>
ASSETS
Current assets:
Trade accounts receivable, net of allowance for
doubtful accounts of $587 and $2,452, respectively............... $ 12,036 $ 18,310
Prepaid expenses and other current assets ......................... 224 203
-------- --------
Total current assets ......................................... 12,260 18,513
Property and equipment, at cost .................................... 5,243 6,623
Accumulated depreciation ........................................... (2,654) (3,648)
-------- --------
Property and equipment, net ........................................ 2,589 2,975
Other assets:
Goodwill, net of accumulated amortization of $980 and
$1,257, respectively ............................................. 13,020 12,743
Non-compete agreements ............................................ 5 --
Purchased software, net of accumulated amortization of
$388 and $481, respectively...................................... 385 535
Internally developed software, net of accumulated
amortization of $15,690 and $22,767, respectively................ 15,178 13,530
-------- --------
Total other assets ........................................... 28,588 26,808
-------- --------
Total assets ................................................. $ 43,437 $ 48,296
======== ========
LIABILITIES AND SHAREHOLDERS' NET INVESTMENT
Current liabilities:
Customer advances ................................................. $ 286 $ 1,096
Accounts payable .................................................. 837 5,548
-------- --------
Total current liabilities .................................... 1,123 6,644
Deferred income taxes .............................................. 6,869 7,416
Commitments and contingencies
Shareholders' net investment ....................................... 35,445 34,236
-------- --------
Total liabilities and shareholders' net investment ................. $ 43,437 $ 48,296
======== ========
</TABLE>

See accompanying notes.

F-20
<PAGE>

ITDS INTELICOM SERVICES, INC.

STATEMENTS OF OPERATIONS AND SHAREHOLDERS' NET INVESTMENT

<TABLE>
<CAPTION>
Thirty-Nine Week
Year Ended Year Ended Period Ended
March 29, March 28, January 2,
1996 1997 1998
------------ ------------ -----------------
(Dollars in Thousands)
<S> <C> <C> <C>
Revenues .................................................. $31,153 $42,189 $ 39,771
Costs of services ......................................... 5,359 12,584 21,277
Selling, general and administrative ....................... 11,784 15,385 12,875
Depreciation and amortization ............................. 6,579 8,996 8,444
------- ------- --------
Total costs and expenses .................................. 23,722 36,965 42,596
------- ------- --------
Income (loss) before taxes ................................ 7,431 5,224 (2,825)
Tax provision (benefit) ................................... 2,976 2,182 (972)
------- ------- --------
Net income (loss) ......................................... 4,455 3,042 (1,853)
Shareholders' net investment, beginning of period ......... 21,965 29,758 35,445
Other borrowings, net ..................................... 3,338 2,645 644
------- ------- --------
Shareholders' net investment, end of period ............... $29,758 $35,445 $ 34,236
======= ======= ========
</TABLE>

See accompanying notes.

F-21
<PAGE>

ITDS INTELICOM SERVICES, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Thirty-Nine Week
Year Ended Year Ended Period Ended
March 29, March 28, January 2,
1996 1997 1998
------------ ------------ -----------------
(Dollars in Thousands)
<S> <C> <C> <C>
Operating activities
Net income (loss) .................................... $ 4,455 $ 3,042 $ (1,853)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities: ......
Amortization ........................................ 5,961 8,079 7,354
Depreciation ........................................ 618 917 1,090
Deferred income taxes ............................... 2,484 1,447 547
Provision for doubtful accounts ..................... 31 314 1,865
Trade accounts receivable ........................... (2,863) (3,489) (8,139)
Other--net .......................................... 14 47 26
Accounts payable and customer advances .............. (678) 194 5,521
--------- --------- --------
Net cash provided by operating activities ............ 10,022 10,551 6,411
Investing activities
Purchased software ................................... (221) (230) (246)
Capitalized software ................................. (12,223) (10,749) (5,429)
Purchases of equipment ............................... (916) (2,217) (1,380)
--------- --------- --------
Net cash used in investing activities ................ (13,360) (13,196) (7,055)
Financing activities
Other borrowings, net ................................ 3,338 2,645 644
--------- --------- --------
Net cash provided by financing activities ............ 3,338 2,645 644
--------- --------- --------
Net change in cash ................................... -- -- --
Cash at beginning of period .......................... -- -- --
--------- --------- --------
Cash at end of period ................................ $ -- $ -- $ --
========= ========= ========
</TABLE>

See accompanying notes.

F-22
<PAGE>

ITDS INTELICOM SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS

March 29, 1996, March 28, 1997 and January 2, 1998
(Dollars in Thousands)

1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Change in Reporting Entity

On January 2, 1998, International Telecommunication Data Systems, Inc.
("ITDS") acquired the stock of ITDS Intelicom Services, Inc., formerly known as
CSC Intelicom, Inc. ("Intelicom"), a company of Computer Sciences Corporation
("CSC"). Concurrent with the acquisition, Intelicom was reorganized and all
divisions other than the TRIS Division ("TRIS") were transferred to CSC in a
spin-off. ITDS acquired only the assets, liabilities and operations of TRIS. As
a result of the spin-off, the accompanying financial statements were restated
to present the financial information for TRIS as a new reporting entity.

Description of Business

TRIS (the "Company") provides comprehensive transactional billing and
management information solutions to providers of wireless, long distance and
satellite telecommunications services in North America. These solutions are
built upon a flexible proprietary software technology to address customer
requirements as they evolve, regardless of market segment, geographic area or
mix of network features or billing options. The Company typically provides its
services to customers under exclusive contracts with terms ranging from three
to four years, and bills customers monthly, typically on a per subscriber
basis. As a result, substantially all of the Company's revenue is recurring in
nature, and increases as a customer's subscriber base grows.

Basis of Presentation

The accompanying financial statements have been prepared from the
historical accounting records of TRIS. As noted above, TRIS was not previously
a separate legal entity and accordingly, the balance sheets and statements of
operations and shareholders' net investment reflects shareholders' net
investment which includes amounts owed to CSC, contributed capital and retained
earnings.

Due to allocations associated with certain shared functions more fully
described in Note 4, the accompanying financial statements may not be
indicative of costs that would have been incurred had TRIS been operated as an
unaffiliated entity.

Property and Equipment

Property and equipment are carried at cost, less accumulated depreciation
computed using the straight-line method over the estimated useful lives of the
assets of three to five years. Leasehold improvements are amortized over the
life of the related lease.

Goodwill

The Company evaluates at least annually the recoverability of its excess
cost of business acquired over related net assets. In assessing recoverability,
the current and future profitability of the related operations are considered,
along with management's plans with respect to the operations and the projected
undiscounted cash flows. Goodwill, which relates to CSC's acquisition of TRIS
in 1992, is amortized using the straight-line method over 40 years.

Purchased Software

Purchased software is carried at cost, less accumulated amortization.
Amortization is computed using the straight-line method based on an estimated
life of five years.

Capitalized Software

The Company capitalizes software development costs as incurred for
software used in its product and service line only after establishing technical
viability. The capitalized costs include salaries and related payroll costs
incurred in the development activities. Software development costs are carried
at cost less accumulated amortization

F-23
<PAGE>

ITDS INTELICOM SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

March 29, 1996, March 28, 1997 and January 2, 1998
(Dollars in Thousands)

1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

computed using the straight-line method over the remaining estimated useful
life of the product; generally, three years. The establishment of technical
viability and the ongoing assessment of recoverability of capitalized costs
require considerable judgment by management with respect to certain factors
including anticipated future gross revenues, estimated economic life, market
potential and changes in technology. Total amortization expense for capitalized
software was $5,592, $7,577 and $7,076 for the two years and thirty-nine week
period ended March 29, 1996, March 28, 1997 and January 2, 1998, respectively.

Revenue Recognition

Accounts receivable at March 28, 1997 and January 2, 1998, include $3,939
and $8,834, respectively, for services rendered prior to those dates which were
billed in the month subsequent to the respective balance sheet date. The
allowance for doubtful accounts at January 2, 1998 includes $266 attributable
to unbilled accounts receivable.

Major Customers

Certain customers have individually exceeded 10% of total revenue during
the historical period, as follows:

<TABLE>
<CAPTION>
Thirty-Nine Week
Year Ended Year Ended Period Ended
March 29, 1996 March 28, 1997 January 2, 1998
---------------- ---------------- -----------------
<S> <C> <C> <C>
Nextel Communications, Inc. ............. * 16.8% 38.3%
Western Wireless Corp. .................. 19.9% 21.3% 11.2%
CommNet Cellular, Inc. .................. 13.5% 10.5% 10.6%
Bell Atlantic Mobile .................... 16.3% 10.9% 10.5%
Southwestern Bell Telephone Co. ......... 11.9% * *
</TABLE>

*Denotes that sales to this customer did not exceed 10% of total revenue
for the respective period.

Income Taxes

Income taxes have been provided on a separate return basis for the two
years and 39-week period ended March 29, 1996, March 28, 1997 and January 2,
1998, respectively. Income taxes have not been provided for periods prior to
fiscal 1996. Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.

Use of Estimates

F-24
<PAGE>

ITDS INTELICOM SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

March 29, 1996, March 28, 1997 and January 2, 1998
(Dollars in Thousands)

2. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
March 28, January 2,
1997 1998
----------- -----------
<S> <C> <C>
Computer equipment .................... $ 2,809 $ 3,879
Furniture, fixtures and other ......... 1,698 2,008
Leasehold improvements ................ 736 736
-------- --------
5,243 6,623
Less accumulated depreciation ......... (2,654) (3,648)
-------- --------
$ 2,589 $ 2,975
======== ========
</TABLE>

3. EMPLOYEE BENEFIT PLANS

Substantially all TRIS employees were eligible for the CSC contributory
defined benefit pension plan. That plan provided pay-related benefits based on
years of participation. Under CSC's funding policy, annual contributions were
made to fund the plan during the participants' time of participation.

CSC allocated pension plan expense to TRIS on the basis of payroll for
participating employees.

CSC maintained an employee savings plan that qualifies as a cash or
deferred salary arrangement under Section 401(k) of the Internal Revenue Code.
Under the plan, participating employees may defer up to 15% of their pre-tax
compensation, but not more than the applicable statutory limit per calendar
year. TRIS through a benefit allocation from CSC, offered a contribution match
to its eligible employees.

Subsequent to the acquisition of TRIS by ITDS as described in Note 1, all
TRIS employees became eligible to participant in ITDS' employee benefit plans.

4. RELATED PARTY TRANSACTIONS

TRIS is part of the centralized cash management, treasury, disbursements
and collection functions of CSC. Accordingly, TRIS maintains no separate
banking, treasury or accounting functions. Operating expenses reflected in the
statement of operations and shareholders' net investment include both direct
costs pertaining exclusively to and incurred by TRIS, as well as an allocation
of costs associated with certain functions which were performed on a shared
basis for TRIS and other CSC divisions. These functions include insurance,
legal, accounting, human resources, income taxes and technology. Costs are
allocated to TRIS based on allocation methods related to the shared function,
principally net revenues as a percentage of consolidated net revenues.
Management believes that these cost allocation methods are reasonable and
reflect TRIS' costs of doing business.

Allocated costs included in selling, general and administrative expenses
were $3,794, $3,675 and $4,519 for the two years and 39-week period ended March
29, 1996, March 28, 1997 and January 2, 1998, respectively.

Subsequent to the acquisition of TRIS by ITDS as described in Note 1,
certain support functions will be provided by CSC on a transitional basis and
other services will be discontinued.

5. COMMITMENTS AND CONTINGENCIES

In October 1996, TRIS entered into a noncancelable lease expiring in
September 2003 for 60,400 square feet of office space in Champaign, Illinois.
Minimum future rental payments due under such lease are $665 per year, which
does not include property tax or utility experiences.

Rental expense incurred (including related property taxes) was $235, $464
and $553 for the two years and 39-week period ended March 29, 1996, March 28,
1997 and January 2, 1998, respectively.

F-25
<PAGE>

ITDS INTELICOM SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

March 29, 1996, March 28, 1997 and January 2, 1998
(Dollars in Thousands)

5. COMMITMENTS AND CONTINGENCIES (Continued)

In the normal course of business, the Company is party to customer and
other disputes which involve or may involve litigation. It is the opinion of
management that ultimate liability, if any, with respect to these disputes will
not be material to the Company's results of operations or financial position.

6. INCOME TAXES

Significant components of income tax expense (benefit) are as follows:

<TABLE>
<CAPTION>
Thirty-Nine Week
Year Ended Year Ended Period Ended
March 29, 1996 March 28, 1997 January 2, 1998
---------------- ---------------- -----------------
<S> <C> <C> <C>
Current:
Federal ............... $ 411 $ 614 $ (1,268)
State ................. 81 121 (251)
------ ------ --------
Total current .......... 492 735 (1,519)
Deferred:
Federal ............... 2,074 1,208 457
State ................. 410 239 90
------ ------ --------
Total deferred ......... 2,484 1,447 547
------ ------ --------
$2,976 $2,182 $ (972)
====== ====== ========
</TABLE>

A reconciliation of the applicable federal statutory rate to the Company's
effective tax rate from income (loss) before taxes is as follows:

<TABLE>
<CAPTION>
Thirty-Nine Week
Year Ended Year Ended Period Ended
March 29, 1996 March 28, 1997 January 2, 1998
---------------- ---------------- -----------------
<S> <C> <C> <C>
Statutory federal income tax rate ......... 34.0% 34.0% (34.0)%
Non-deductible charges .................... 1.7 3.2 3.3
State income taxes, net ................... 4.3 4.6 ( 3.7)
---- ---- -----
40.0% 41.8% (34.4)%
==== ==== =====
</TABLE>

Significant components of the Company's deferred tax assets and
liabilities are as follows:

<TABLE>
<CAPTION>
March 28, January 2,
1997 1998
----------- -----------
<S> <C> <C>
Deferred tax liabilities:
Capitalized software .................. $5,773 $5,162
Unbilled revenue ...................... 1,503 3,371
------ ------
Total deferred tax liabilities ......... 7,276 8,533
Deferred tax assets:
Reserve for doubtful accounts ......... 224 936
Other ................................. 183 181
------ ------
Total deferred tax assets .............. 407 1,117
------ ------
Net deferred tax liability ............. $6,869 $7,416
====== ======
</TABLE>

F-26

<PAGE>

==================================================

No dealer, salesperson or other person has been
authorized to give any information or to make any
representations other than those contained in this
Prospectus, and, if given or made, such
information or representations must not be relied
upon as having been authorized by the Company, any
of the Selling Stockholders or any of the
Underwriters. This Prospectus does not constitute
an offer to sell or the solicitation of an offer
to buy such securities in any circumstances in
which such offer or solicitation is unlawful.
Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any
circumstances, create any implication that there
has been no change in the affairs of the Company
since the date hereof or that the information
contained herein is correct as of any time
subsequent to its date.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
-----
<S> <C>
Prospectus Summary ........................ 3
Risk Factors .............................. 7
Use of Proceeds ........................... 12
Price Range of Common Stock ............... 12
Capitalization ............................ 13
Selected Consolidated Financial Data ...... 14
Unaudited Pro Forma Consolidated
Financial Statements ................... 16
1997 Pro Forma Financial Condition
and Results of Operations .............. 20
Business .................................. 22
Management ................................ 33
Principal and Selling Stockholders ........ 35
Underwriting .............................. 37
Legal Matters ............................. 38
Experts ................................... 38
Available Information ..................... 39
Incorporation of Certain Documents
by Reference ........................... 39
Index to Financial Statements ............. F-1
</TABLE>

==================================================

3,500,000 Shares

[LOGO] ITDS
------------------
INTERNATIONAL
TELECOMMUNICATION
DATA SYSTEMS

Common Stock

----------------------
PROSPECTUS
June 3, 1998
----------------------

LEHMAN BROTHERS

BT ALEX. BROWN

COWEN & COMPANY

JEFFERIES & COMPANY, INC.

==================================================