GST TELECOMMUNICATIONS INC
S-3, 1996-11-06
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)
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    As filed with the Securities and Exchange Commission on November 6, 1996
                                                           Registration No. 333-

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

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                    FORM S-3
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933

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

                          GST TELECOMMUNICATIONS, INC.

          ------------------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)

                                     Canada
          ------------------------------------------------------------
                         (State or other jurisdiction of
                         incorporation or organization)

                                       N/A
          ------------------------------------------------------------
                                  (IRS Employer
                             Identification Number)

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

                             4317 N.E. Thurston Way
                           Vancouver, Washington 98662
                                 (360) 254-4700
          ------------------------------------------------------------
                        (Address and telephone number of
                    Registrant's Principal Executive Offices)

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

                     Robert H. Hanson, Senior Vice President
                          GST Telecommunications, Inc.
                         1285 Sheridan Street, Suite 245
                               Cody, Wyoming 82413
                                 (307) 527-6048
          ------------------------------------------------------------
                       (Name, Address and Telephone Number
                              of Agent for Service)

                                    Copy to:
                              David J. Adler, Esq.
                     Olshan Grundman Frome & Rosenzweig LLP
                                 505 Park Avenue
                            New York, New York 10022

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

                  Approximate  date  of  commencement  of  proposed  sale to the
public:  As  soon as  practicable  after  this  Registration  Statement  becomes
effective.

                  If the only securities being registered on this Form are being
offered pursuant to dividend or interest  reinvestment  plans,  please check the
following box. / /

<PAGE>
                  If any of the securities  being registered on this Form are to
be offered  on a delayed  or  continuous  basis  pursuant  to Rule 415 under the
Securities Act of 1933, check the following box. /X/

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

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

                  If delivery of the  prospectus is expected to be made pursuant
to Rule 434, please check the following box. / /

                         CALCULATION OF REGISTRATION FEE
================================================================================
                                         Proposed Maximum
                                             Aggregate            Amount of
  Title of Shares to be Registered       Offering Price(1)     Registration Fee
- --------------------------------------------------------------------------------
Common Shares, without par value,
issuable upon conversion of
Convertible Notes                         $50,995,467.75          $15,453.15
================================================================================

(1) Estimated  solely for the purpose of  calculating  the  registration  fee in
accordance  with Rule 457 under the Securities  Act, based upon $9.875,  the per
Share average of high and low sale prices of the  Registrant's  Common Shares as
reported by the American  Stock Exchange (the "AMEX") for trading on October 30,
1996.

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

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

<PAGE>
INFORMATION   CONTAINED  HEREIN  IS  SUBJECT  TO  COMPLETION  OR  AMENDMENT.   A
REGISTRATION  STATEMENT  RELATING  TO THESE  SECURITIES  HAS BEEN FILED WITH THE
SECURITIES  AND EXCHANGE  COMMISSION.  THESE  SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION  STATEMENT  BECOMES
EFFECTIVE.  THIS  PROSPECTUS  SHALL  NOT  CONSTITUTE  AN  OFFER  TO  SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE  SECURITIES
IN ANY STATE IN WHICH SUCH OFFER,  SOLICITATION  OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

PROSPECTUS

                  SUBJECT TO COMPLETION, DATED NOVEMBER 6, 1996

                             5,164,089 COMMON SHARES

                          GST TELECOMMUNICATIONS, INC.

         This  Prospectus  relates to the  issuance  of up to  5,164,089  Common
Shares, without par value (the "Common Shares"), of GST Telecommunications, Inc.
(the  "Company")  upon conversion of the Company's  13-7/8%  Convertible  Senior
Subordinated  Discount  Notes due 2005 (the  "Convertible  Notes").  The  Common
Shares  that are being  registered  hereby  are  issuable  upon such  conversion
without  the  payment  of any  additional  consideration  by the  holders of the
Convertible Notes.

         The  Convertible  Notes are  convertible  (in  denominations  of $1,000
principal amount at maturity or integral  multiples thereof) into Common Shares,
at the  option  of the  holders  of the  Convertible  Notes,  at any time  after
December 18, 1996. The number of Common Shares  issuable upon  conversion of the
Convertible  Notes is that number of Common  Shares equal to the accreted  value
("Accreted  Value") of the  Convertible  Notes being  converted  (on the date of
conversion) divided by $7.563,  subject to adjustment (the "Conversion  Ratio").
Accordingly,  the  number of  Common  Shares  issuable  upon  conversion  of the
Convertible  Notes will increase as the Accreted Value of the Convertible  Notes
increases. On December 15, 1996, the Convertible Notes would be convertible into
an aggregate of  approximately  3,020,000  Common Shares.  Immediately  prior to
maturity  in  December  2005,  assuming  no  Convertible  Notes  have  yet  been
converted,  the  Convertible  Notes would be  convertible  into an  aggregate of
5,164,089 Common Shares.

         The Company  will not receive any cash  proceeds  from the  issuance of
Common Shares upon conversion of the  Convertible  Notes,  but will  immediately
retire, without the payment of additional  consideration,  the debt attributable
to the Convertible Notes converted.  All costs,  expenses and fees in connection
with the  registration  of the Common Shares offered by this  Prospectus will be
borne by the Company. See "Plan of Distribution."

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

             AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES
                             A HIGH DEGREE OF RISK.
                      SEE "RISK FACTORS" AT PAGE 4 HEREOF.

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

         The Common  Shares are traded on the AMEX under the symbol "GST" and on
the VSE under the symbol  "GTE.U." On October 31, 1996,  the last sale price for
the Common Shares on the AMEX was $10.375.

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

                The date of this Prospectus is           , 1996.

<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 reports and other  information with the Securities
and Exchange Commission (the  "Commission").  Such reports and other information
can be inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W.,  Washington,  D.C. 20549;
500 West Madison Street,  Suite 1400,  Chicago,  Illinois 60661; and Seven World
Trade Center,  Suite 1300, New York, New York 10048. Copies of such material can
be obtained  from the Public  Reference  Section of the  Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Such
material may also be accessed  electronically  by means of the Commission's home
page on the Internet at http://www.sec.gov.  The Common Shares are listed on the
AMEX and such reports and other information may also be inspected at the offices
of the AMEX, 86 Trinity Place, New York, New York 10006.

                                TABLE OF CONTENTS

AVAILABLE INFORMATION..........................................................2

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE................................3

RISK FACTORS...................................................................4

THE COMPANY...................................................................13

MATERIAL CHANGES..............................................................13

USE OF PROCEEDS...............................................................15

PLAN OF DISTRIBUTION..........................................................15

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS.......................16

LEGAL MATTERS.................................................................17

EXPERTS  .....................................................................17

ADDITIONAL INFORMATION........................................................18

INDEX TO FINANCIAL STATEMENTS................................................F-1


                                       -2-
<PAGE>
                 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

         The  Company's  Annual  Report on Form 20-F for the  fiscal  year ended
September  30, 1995, as amended;  Reports of Foreign  Issuer on Form 6-K for the
quarters ended December 31, 1995, as amended,  and March 31, 1996; the Company's
Quarterly  Report on Form 10-Q for the  quarter  ended  June 30,  1996;  and the
Company's  Current  Report on Form 8-K dated  October  31,  1996  reporting  the
acquisition  of assets and other  events are  incorporated  by reference in this
Prospectus  and shall be  deemed  to be a part  hereof.  All  subsequent  annual
reports filed by the Company on Form 20-F, 40-F, 10-K or otherwise, prior to the
termination of this offering, are deemed to be incorporated by reference in this
prospectus  and shall be deemed to be a part  hereof  from the date of filing of
such documents.  All documents filed by the Company  pursuant to Sections 13(a),
13(c), 14 or 15 of the Exchange Act,  subsequently filed by the Company prior to
the termination of this offering,  are deemed to be incorporated by reference in
this  Prospectus and shall be deemed to be a part hereof from the date of filing
of such documents.

         The Company's  Application for  Registration of its Common Shares under
Section  12(b) of the  Exchange  Act filed on March 3, 1994 is  incorporated  by
reference in this Prospectus and shall be deemed to be a part hereof.

         The Company hereby  undertakes to provide without charge to each person
to whom a copy of this  Prospectus  has been  delivered,  on the written or oral
request of any such person,  a copy of any or all of the  documents  referred to
above which have been or may be  incorporated  in this  Prospectus by reference,
other than exhibits to such documents.  Written  requests for such copies should
be directed to GST  Telecommunications,  Inc. at 1030-999 West Hastings  Street,
Vancouver,  British Columbia,  Canada V6C 2W2, Attention:  Robert M. Blankstein.
Oral  requests  should be directed to such  individual  (telephone  number (604)
688-0553).

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

         No dealer,  salesman or other  person has been  authorized  to give any
information or to make any  representations  other than those  contained in this
Prospectus in connection with the offer made hereby, and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company or the Selling Shareholders.  This Prospectus does not constitute
an offer to sell, or a solicitation  of an offer to buy, the securities  offered
hereby to any person in any state or other  jurisdiction  in which such offer or
solicitation  is unlawful.  The delivery of this Prospectus at any time does not
imply that information  contained herein is correct as of any time subsequent to
its date.


                                       -3-
<PAGE>
                                  RISK FACTORS

         THE   SECURITIES   OFFERED  HEREBY  INVOLVE  A  HIGH  DEGREE  OF  RISK.
PROSPECTIVE  INVESTORS  SHOULD  CAREFULLY  CONSIDER THE  FOLLOWING  RISK FACTORS
BEFORE  MAKING  AN  INVESTMENT  DECISION.  CERTAIN  MATTERS  DISCUSSED  IN  THIS
PROSPECTUS OR WHICH ARE INCORPORATED BY REFERENCE ARE FORWARD-LOOKING STATEMENTS
THAT ARE SUBJECT TO RISKS AND  UNCERTAINTIES  THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE PROJECTED.

DEVELOPMENT AND EXPANSION RISK AND POSSIBLE INABILITY TO MANAGE GROWTH

         The Company is in the early  stages of its  operations.  Certain of its
networks have only recently become commercially  operational and the Company has
only recently begun to deploy switches in its networks.  The continued expansion
and  development  of the  Company's  networks  and the success of the  Company's
switched  and  enhanced  services  will  depend,  among other  things,  upon the
Company's ability to assess potential markets, design fiber backbone routes that
provide ready access to a substantial  customer base, secure  financing,  obtain
required  rights-of-way,  building access and  governmental  permits,  implement
expanded interconnection and collocation with facilities owned by local exchange
telephone  companies  ("LECs") and achieve a sufficient  customer base, and upon
subsequent changes in state and federal  regulations.  There can be no assurance
that any  networks to be  developed  or further  developed  will be completed on
schedule,   at  a   commercially   reasonable   cost  or  within  the  Company's
specifications.  In  addition,  the  expansion  of the  Company's  business  has
involved and is expected to continue to involve acquisitions, which could divert
the resources and management  time of the Company and could require  integration
with  the  Company's  existing  networks  and  services.  The  Company's  future
performance  will  depend,  in part,  upon its  ability  to  manage  its  growth
effectively,  which will  require it to  continue to  implement  and improve its
operating,  financial and accounting  systems,  to expand,  train and manage its
employee base and to effectively manage the integration of acquired  businesses.
These  factors and others could  adversely  affect the expansion of the customer
base and  service  offerings  of the  Company's  existing  networks,  as well as
commencement of operations of new networks.  The Company's  inability  either to
expand in  accordance  with its  plans or to  manage  its  growth  could  have a
material  adverse  effect on its  business,  financial  condition and results of
operations.

HISTORICAL AND ANTICIPATED FUTURE OPERATING LOSSES AND NEGATIVE EBITDA

         The Company has  incurred  and expects to continue to incur  increasing
operating  losses and  negative  EBITDA while it expands its business and builds
its customer  base. The Company has incurred  significant  increases in expenses
associated with these  activities and there can be no assurance that an adequate
customer  base with  respect to any or all of its  services  will be achieved or
sustained. The Company does not expect to achieve a significant market share for
any of its services.  The Company had a net loss of approximately  $37.1 million
and  negative  EBITDA of $19.9  million for the nine months ended June 30, 1996.
The Company had a net loss of approximately $11.3 million and negative EBITDA of
$8.8  million  for  the  year  ended  September  30,  1995  and  a net  loss  of
approximately $3.5 million and negative EBITDA of $0.8 million for the 13 months
ended  September  30,  1994.  There can be no  assurance  that the Company  will
achieve or sustain  profitability or generate  positive EBITDA. At September 30,
1995, the Company had a U.S. net operating loss  carryforward  of  approximately
$8.5 million and Canadian net operating loss carryforward of approximately  $5.8
million.  While such loss  carryforwards  are available to offset future taxable
income of the  Company,  it is more likely  than not that the  Company  will not
generate sufficient taxable income so as to utilize all or a substantial portion
of such loss carryforwards prior to their expiration.

SIGNIFICANT CAPITAL REQUIREMENTS

         The Company  believes  that the net  proceeds of  approximately  $192.2
million from private  placement  offerings  consummated  in December  1995 ("the
December  Offering")  and October 1996 (the "October  Offering"),  together with
cash on hand and borrowings  expected to be available  under both a $100 million
credit facility


                                       -4-
<PAGE>
with Tomen  America and its  affiliates  ("Tomen")  (the "Tomen  Facility")  and
equipment  financing  currently  available  and being  negotiated,  will provide
sufficient funds for the Company to expand its business as presently planned and
to fund its  operating  expenses  through  June 1997.  Thereafter,  the  Company
expects  to  require  additional  financing.  However,  in the  event  that  the
Company's plans or assumptions change or prove to be inaccurate,  or its cash on
hand,  net  proceeds  from  the  December  Offering  and  October  Offering  and
borrowings  under the  Tomen  Facility  and the  equipment  financing  currently
available and being  negotiated,  prove to be insufficient to fund the Company's
growth and operations,  or if the Company  consummates  acquisitions,  or if the
Company's operating cash flow does not increase  substantially,  the Company may
be required  to seek  additional  capital  sooner  than  currently  anticipated.
Sources of financing may include public or private equity or debt  financings by
the  Company  or its  subsidiaries,  sales  of  non-strategic  assets  or  other
financing  arrangements.   The  Company  has  been  discussing  with  Tomen  the
possibility of modifying the Tomen Facility to provide additional  financing for
the Hawaiian  inter-island  network.  There can be no assurance that  additional
financing under the Tomen Facility or otherwise will be available to the Company
or, if  available,  that it can be  obtained on  acceptable  terms or within the
limitations contained in the indentures relating to the notes (the "Notes") sold
in the December Offering (the "Indentures") in any future financing arrangement.
Failure to obtain such  financing  could result in the delay or  abandonment  of
some or all of the Company's  development and expansion  plans and  expenditures
and could have a material adverse effect on the Company's business. Such failure
could also limit the  ability of the  Company  to make  principal  and  interest
payments on its outstanding  indebtedness,  which would have a material  adverse
effect on the value of the Common Shares.

         The Company has no working capital or other credit facility under which
it may borrow for working capital and other general  corporate  purposes.  There
can be no assurance that such a facility will be available to the Company in the
future or that if such a facility were available,  that it would be available on
terms and conditions acceptable to the Company.

SUBSTANTIAL INDEBTEDNESS

         At June 30, 1996, the Company had  outstanding on a consolidated  basis
approximately  $225.3 million of  indebtedness.  The accretion of original issue
discount on the Notes will cause an increase in  indebtedness  of $158.7 million
by December 15, 2000. The Indentures limit, but do not prohibit,  the incurrence
of additional  indebtedness by the Company. The Company anticipates that it will
incur substantial  additional  indebtedness in the future. At June 30, 1996, the
Company had $70.9 million of  availability  under the Tomen  Facility to finance
the development and  construction of additional  networks,  if and to the extent
that proposals for funding projects are approved by Tomen.  Since June 30, 1996,
approximately  $2.2 million was borrowed under the Tomen  Facility.  The Company
has entered  into a loan  agreement  with an equipment  manufacturer  for $116.0
million in equipment  financing and is negotiating with equipment  manufacturers
for approximately $360.0 million of additional equipment financing.

         The  level  of  the  Company's   indebtedness   could  have   important
consequences to its future prospects,  including the following:  (i) the ability
of the  Company  to obtain any  necessary  financing  in the future for  working
capital,  capital expenditures,  debt service requirements or other purposes may
be  limited;  (ii)  a  substantial  portion  of the  Company's  cash  flow  from
operations,  if any,  must be  dedicated  to the  payment  of  principal  of and
interest on its indebtedness and other obligations and will not be available for
other  purposes;  (iii) the  Company's  level of  indebtedness  could  limit its
flexibility  in planning for, or reacting to changes in, its business;  (iv) the
Company will be more highly  leveraged than some of its  competitors,  which may
place it at a  competitive  disadvantage;  and (v) the  Company's  high level of
indebtedness  will make it more  vulnerable  in the event of a  downturn  in its
business.


                                       -5-
<PAGE>
POSSIBLE INABILITY TO SERVICE DEBT

         The Company has been  experiencing  increasing  negative EBITDA and the
Company's earnings before fixed charges were insufficient to cover fixed charges
for the nine months ended June 30, 1996,  the year ended  September 30, 1995 and
the 13 months ended September 30, 1994 by $38.4 million,  $13.8 million and $3.0
million,  respectively.  There can be no assurance that the Company will be able
to improve its earnings  before fixed charges or EBITDA or that the Company will
be able to meet its debt service obligations.  As the Company does not currently
have a revolving credit facility,  if a shortfall occurs,  alternative financing
would be necessary in order for the Company to meet its  liquidity  requirements
and there can be no assurance  that such financing  would be available.  In such
event, the Company could face substantial liquidity problems.  In addition,  the
Company  anticipates that cash flow from operations may be insufficient to repay
the Notes in full at maturity in which event such indebtedness  would need to be
refinanced.  There can be no  assurance  that the Company will be able to effect
such  refinancing.  The  ability of the Company to meet its  obligations  and to
effect such refinancings will be dependent upon, among other things,  the future
performance  of the  Company,  which  will be  subject  to  prevailing  economic
conditions  and to  financial,  business and other  factors,  including  factors
beyond  the  control  of  the  Company.  Failure  by the  Company  to  meet  its
obligations could result in a default on its indebtedness,  including the Notes,
which would permit the holders of such  indebtedness  to accelerate the maturity
thereof.

FINANCIAL AND OPERATING RESTRICTIONS IMPOSED BY EXISTING INDEBTEDNESS

         The Indentures and the Tomen Facility impose significant  operating and
financial  restrictions on the Company. Such restrictions affect, and in certain
cases  significantly  limit or prohibit,  among other things, the ability of the
Company to incur additional  indebtedness or to create liens on its assets,  pay
dividends,  sell assets,  engage in mergers or acquisitions or make investments.
Failure to comply with any such covenant  could result in a default  thereunder,
which could result in an acceleration of such indebtedness.

DIFFICULTIES IN IMPLEMENTING LOCAL AND ENHANCED SERVICES

         The Company  plans to deploy  high  capacity,  digital  switches in the
cities in which it operates or plans to operate networks,  as well as in certain
cities where the Company will rely on LEC facilities for transmission. This will
enable  the  Company  to offer  interstate  switched  access  services  and,  as
regulatory conditions permit,  intrastate switched access, enhanced services and
local dial  tone.  The  Company  expects  negative  operating  margins  from its
switched services,  during the 12 to 18 month period after a switch is deployed.
For switches operating in conjunction with the Company's  networks,  the Company
expects  operating  margins  to improve as the  network is  expanded  and larger
volumes of traffic are carried on the Company's  network.  Until such time,  the
Company will rely on the LEC to originate and terminate a significant portion of
its  switched  services  traffic.  For  switches  operating  in cities where the
Company will rely on LEC facilities for transmission, negative operating margins
are  expected   under   current  LEC  pricing   tariffs.   Although   under  the
Telecommunications Act of 1996 (the "Telecommunications  Act"), the LECs will be
required to unbundle  local  tariffs and permit the Company to purchase only the
origination  and termination  services it needs,  thereby  decreasing  operating
expenses,  there can be no assurance that such  unbundling will be effected in a
timely manner and result in prices  favorable to the Company.  In addition,  the
Company's  ability to successfully  implement its switched and enhanced services
will  require  the  negotiation  of  resale   agreements  with  LECs  and  other
competitive local exchange telephone  companies ("CLECs") and the negotiation of
interconnection  agreements  with incumbent LECs. In October 1996, U.S. Court of
Appeals for the Eighth Judicial  Circuit (the "Eighth  Circuit")  stayed certain
aspects of the Federal  Communications  Commission's  (the "FCC") order adopting
rules to implement the interconnection  portions of the  Telecommunications  Act
(the  "Interconnection  Decision").  On October 24, 1996, the FCC asked the U.S.
Supreme  Court  to  vacate  the  Eighth   Circuit's  stay  of  portions  of  the
Interconnection Decision.  Although there is no time limit for the Supreme Court
to respond, because the issue is time sensitive, it is expected that the Supreme
Court will render a decision on


                                       -6-
<PAGE>
the Eighth  Circuit's  stay before the middle of November 1996. The stay creates
uncertainty  regarding  the rules  governing  price,  terms,  and  conditions of
interconnection  agreements,  and therefore may affect the Company's negotiation
of  interconnection  agreements  with  incumbent  LECs.  The Company's  switched
services may not be  profitable  due to, among other  factors,  lack of customer
demand,  competition  from  other  CLECs  and  pricing  pressure  from the LECs.
Implementation of the Company's switched and enhanced services is subject to the
Company's ability to obtain equipment  financing for switches and upon equipment
manufacturers'  ability  to  meet  the  Company's  switch  deployment  schedule.
Although  the  Company  has  entered  into a loan  agreement  with an  equipment
manufacturer  for $116.0  million of  equipment  financing  and the  Company has
negotiated  with equipment  manufacturers  for  approximately  $360.0 million of
additional  equipment  financing,  there  can be no  assurance  that all of such
switches will be deployed or that,  if deployed,  such switches will be utilized
to the  degree  contemplated  by the  Company.  The  Company  has no  experience
providing  switched  access  services  and  there can be no  assurance  that the
Company  will  be able to  successfully  implement  its  switched  and  enhanced
services strategy.

RECENT COMMENCEMENT OF MARKETING

         The Company has only recently  begun  marketing the services of certain
of its networks and, as a result,  the Company has  relatively few customers and
has  generated  limited  revenue  from its CLEC  services.  Although the Company
actively  markets its products and services,  there can be no assurance that the
Company will be able to attract new customers or retain existing customers.

DEPENDENCE ON KEY CUSTOMERS

         The  Company's  five  largest  telecommunications   services  customers
accounted for approximately 45.1%, 26.8% and 0.7% of the Company's  consolidated
revenues for the nine months ended June 30, 1996,  the year ended  September 30,
1995 and the 13 months ended September 30, 1994,  respectively.  During the year
ended  September  30,  1995,  a former  customer of the  Company's  wholly-owned
subsidiary,   International   Telemanagement  Group,  Inc.,  which  customer  is
presently  the subject of a  bankruptcy  proceeding,  accounted  for 5.3% of the
Company's  consolidated revenues. It is anticipated that during the early stages
of development of individual  networks,  before obtaining a sufficient amount of
end-user  revenues,  the Company will be  dependent on a limited  number of long
distance carriers for a significant portion of its revenues. While long distance
carriers have high volume  requirements and have utilized CLECs,  they generally
are more price  sensitive  than  end-users.  The five  largest  customers of the
Company's  manufacturing  operations  accounted for 4.6%, 16.1% and 22.2% of the
Company's  consolidated  revenues for the nine months  ended June 30, 1996,  the
year ended  September  30,  1995 and the 13 months  ended  September  30,  1994,
respectively. The loss of, or decrease of business from, one or more significant
customers  could  have a  material  adverse  effect on the  business,  financial
condition and results of operations of the Company.

COMPETITION

         The telecommunications industry is highly competitive. In most markets,
the Company's  principal  competitor for local exchange services is the Regional
Bell Operating  Company ("RBOC") or GTE Corporation  ("GTE").  Other competitors
may  include   other  CLECs,   microwave  and   satellite   carriers,   wireless
telecommunications  providers  and private  networks  built by large  end-users.
Potential  competitors (using similar or different  technologies)  include cable
television  companies,  utilities and local  telephone  companies  outside their
current  local  service  areas.  In  addition,  the Company  anticipates  future
competition from large long distance carriers,  such as AT&T Corp. ("AT&T"), MCI
Communications Corporation ("MCI") and Sprint Corporation ("Sprint"), which have
announced plans to offer integrated  local and long distance  telecommunications
services as regulations allow. Consolidation of telecommunications companies and
the formation of strategic alliances within the telecommunications  industry, as
well as the development of new technologies,  could give rise to significant new
competitors to the Company.


                                       -7-
<PAGE>
         As a  recent  entrant  in the  integrated  telecommunications  services
industry,  the  Company  has not  achieved  and does not  expect  to  achieve  a
significant market share for any of its services. In particular,  the RBOCs, GTE
and other local telephone companies have long-standing  relationships with their
customers,  have  financial,  technical  and marketing  resources  substantially
greater than those of the Company,  have the potential to subsidize  competitive
services with revenues from a variety of businesses  and currently  benefit from
certain  existing  regulations  that favor the LECs over the  Company in certain
respects.  While recent  regulatory  initiatives,  which allow CLECs such as the
Company  to  interconnect  with  LEC  facilities,   provide  increased  business
opportunities  for the Company,  such  interconnection  opportunities  have been
accompanied by increased  pricing  flexibility  for and relaxation of regulatory
oversight of the LECs. For example, the FCC granted LECs additional  flexibility
in pricing their  interstate  special and switched  access services on a central
office specific basis.  Under this pricing  scheme,  LECs may establish  pricing
zones based on access traffic  density and charge  different  prices for central
offices  in each  zone.  The  Company  anticipates  that the FCC will grant LECs
increasing pricing flexibility as the number of interconnections and competitors
increases.  In addition,  the FCC enacted interim pricing rules that restructure
LEC switched  transport  rates in order to facilitate  competition  for switched
access.  If regulators  allow LECs to charge CLECs increased fees in conjunction
with  interconnection to their networks,  the financial condition of the Company
could be  adversely  affected.  If the LECs lower their  rates,  the Company and
others  providing  CLEC and other  telecommunications  services may be forced by
market  conditions to charge less for their services in order to compete.  There
can be no  assurance  that  the  Company  will be able to  achieve  or  maintain
significant revenue or compete effectively in any of its markets.

         To the extent the Company  interconnects  with and uses LEC networks to
service the Company's  customers,  the Company is dependent  upon the technology
and  capabilities  of the LECs to meet certain  telecommunications  needs of the
Company's  customers  and to maintain  its service  standards.  The Company will
become increasingly  dependent on interconnection with LECs as switched services
become a greater percentage of the Company's  business.  The  Telecommunications
Act imposes  interconnection  obligations on LECs, but there can be no assurance
that the Company will be able to obtain the  services it requires at rates,  and
on terms and conditions,  that permit the Company to offer switched  services at
rates that are both profitable and  competitive.  Moreover,  as described above,
certain   provisions   of  the  FCC's  August  1996   Interconnection   Decision
implementing the  interconnection  portions of the  Telecommunications  Act have
been stayed by the Eighth Circuit.  The stayed  provisions relate to pricing and
the rules that would have  permitted  new  entrants to "pick and  choose"  among
various  provisions of existing  interconnection  agreements.  Although the stay
does not prevent the Company from  negotiating  interconnection  agreements,  it
does create uncertainty about the rules governing  negotiating,  pricing,  terms
and  conditions  of  interconnection  agreements.  In the event that the Company
experiences  difficulties  in obtaining  high quality,  reliable and  reasonably
priced service from the LECs, the  attractiveness  of the Company's  services to
its customers could be impaired.

         The  long   distance   telecommunications   industry   has   relatively
insignificant  barriers  to  entry,  numerous  entities  competing  for the same
customers  and a high average churn rate,  as customers  frequently  change long
distance  providers  in response to the  offering of lower rates or  promotional
incentives by  competitors.  The Company  competes  with major  carriers such as
AT&T,  MCI and Sprint,  as well as other  national  and regional  long  distance
carriers and resellers,  many of whom are able to provide services at costs that
are lower than the  Company's  current  costs.  In addition,  as a result of the
Telecommunications  Act, RBOCs also will become competitors in the long distance
telecommunications  industry upon the  satisfaction of certain  conditions.  The
Company  believes  that the  principal  competitive  factors  affecting its long
distance  operations are pricing,  customer  service,  accurate  billing,  clear
pricing  policies and, to a lesser extent,  variety of services.  The ability of
the Company to compete  effectively  will depend upon its  continued  ability to
maintain high quality,  market driven  services at prices  generally equal to or
below those charged by its competitors.  The FCC has, on several occasions since
1984, approved or required price


                                       -8-
<PAGE>
reductions by AT&T. The FCC has announced a decision pursuant to which AT&T will
no longer be  regulated  as a dominant  long  distance  carrier.  This  decision
removes  AT&T from  price-cap  regulations  with  respect  to its long  distance
services as well as other regulatory and reporting  requirements that previously
only  applied to AT&T as the sole carrier  designated  by the FCC as dominant in
the long  distance  market.  This  decision,  which is subject to certain  other
commitments and  undertakings  agreed to by AT&T, is expected to increase AT&T's
flexibility  in  competing  in  the  long  distance   services  market  and,  in
particular,  will  eliminate the longer tariff  notice  requirements  previously
applicable  only to AT&T.  To  maintain  its  competitive  posture,  the Company
believes  that it must be in a  position  to reduce  its prices in order to meet
reductions in rates,  if any, by others.  Any such  reductions  could  adversely
affect the Company.

         The  Internet  services  market  is  highly  competitive.  There are no
substantial  barriers to entry,  and the Company expects that  competition  will
continue to intensify. The Company's competitors in this market include Internet
service providers, other telecommunications companies, online services providers
and  Internet  software  providers.  Many  of  these  competitors  have  greater
financial,  technological  and marketing  resources than those  available to the
Company.

         The  Company's  wholly-owned  subsidiary,   National  Applied  Computer
Technologies, Inc. ("NACT"), competes with other lower to medium capacity switch
manufacturers and software providers.  As its business develops and new switches
are   introduced,   NACT's   competitors   may   include   larger   switch   and
telecommunications  equipment  manufacturers  such as Lucent  Technologies Inc.,
Harris Corp.,  Siemens AG, Alcatel  Alsthom  Compagnie  Generale  D'Electricite,
Telefonaktiebolaget  L.M.  Ericsson and Northern  Telecom,  Ltd.  Most of NACT's
potential  competitors  have  substantially  greater  financial,  technical  and
marketing  resources  than NACT and may threaten  the  viability of NACT if such
other  companies  commence  efforts  to  compete  in the  segment  of the switch
manufacturing market in which NACT operates.

GOVERNMENT REGULATION

         The  Company's  networks and the provision of switched and private line
services are subject to significant  regulation at the federal,  state and local
levels.  Delays in receiving required  regulatory  approvals or the enactment of
new adverse  regulation or regulatory  requirements  may have a material adverse
effect upon the Company.

         The FCC  exercises  jurisdiction  over the  Company  to the  extent its
services  involve the provision,  origination  and  termination of interstate or
international telecommunications, including resale of long distance services. As
such a provider,  the Company must file  tariffs with the FCC. In addition,  the
Company must obtain prior FCC authorization for domestic and international  long
distance services.  State regulatory  commissions exercise jurisdiction over the
Company to the extent it provides intrastate services.  As such a provider,  the
Company is required to obtain  regulatory  authorization  and/or file tariffs at
state  agencies in most of the states in which it  operates.  Local  authorities
control the Company's access to municipal  rights-of-way.  The networks are also
subject to numerous local regulations such as building codes and licensing. Such
regulations  vary on a city by city and county by county basis.  There can be no
assurance that state or federal  commissions  will grant  required  authority or
refrain from taking action against the Company,  if it is found to have provided
services  without  obtaining the necessary  authorizations.  If authority is not
obtained or if tariffs are not filed,  or are not  updated,  or otherwise do not
fully  comply  with the  tariff  filing  rules  of the FCC or  state  regulatory
agencies,  third parties or  regulators  could  challenge  these  actions.  Such
challenges could cause the Company to incur substantial legal and administrative
expenses. The recently enacted Telecommunications Act provides for a significant
deregulation of the domestic  telecommunications  industry,  including the local
exchange, long distance and cable television industries.  The Telecommunications
Act, enacted in February 1996, remains subject to judicial review and additional
FCC  rulemaking,  and thus is difficult  to predict what effect the  legislation
will  have  on  the  Company  and  its  operations.  In  particular,  the  FCC's
implementation


                                       -9-
<PAGE>
of  the  interconnection  provisions  of the  Telecommunications  Act  has  been
challenged.  The FCC  released  in  August  1996  its  Interconnection  Decision
establishing rules for negotiation of  interconnection  agreements and providing
guidelines  for the FCC and the state  public  utility  commissions  to evaluate
interconnection  agreements with LECs. In September 1996, in response to various
petitions,  the FCC  issued a  decision  reconsidering  certain  aspects  of its
Interconnection  Decision.  Moreover,  as described  above, in October 1996, the
Eighth Circuit stayed certain provisions of the FCC's Interconnection  Decision,
pending a decision on the merits.  Although this court stay does not prevent the
Company from negotiating  interconnection agreements, it does create uncertainty
about  the  rules  governing  negotiating,  pricing,  terms  and  conditions  of
interconnection  agreements.  Moreover,  the Company cannot predict the eventual
outcome   of  the   interconnection   provisions   or  other   aspects   of  the
Telecommunications Act.

         In  addition,  the FCC imposes  restrictions  on foreign  ownership  of
communications service providers utilizing radio frequencies.  The operations of
the  Company's  Hawaiian  network  use,  among  other  transmission  facilities,
microwave radio facilities operating pursuant to FCC licenses granted to Pacwest
Network,  Inc.,  an entity  that is  controlled  by John  Warta,  the  Company's
President and Chief Executive Officer. The FCC also has the authority,  which it
is not presently  exercising,  to impose  restrictions  on foreign  ownership of
communications  service providers not utilizing radio  frequencies,  which could
have a material adverse effect on the Company's CLEC and other businesses.

NEED TO ADAPT TO TECHNOLOGICAL CHANGE

         The  telecommunications  industry  is subject to rapid and  significant
changes  in  technology,  with the  Company  relying  on third  parties  for the
development  of and  access  to new  technology.  The  effect  of  technological
changes,  including changes to wireline and wireless transmission  technologies,
on the business of the Company  cannot be  predicted.  The Company  believes its
future  success will depend,  in part,  on its ability to anticipate or adapt to
such  changes  and to offer,  on a timely  basis,  services  that meet  customer
demands.

         The future success of NACT will depend in part upon its ability to keep
pace with  advancing  technology and standards  within the switch  manufacturing
industry.  There can be no assurance  that NACT's  products will not be rendered
obsolete by switch products  incorporating  technological  advances  designed by
competitors that are not available to NACT.

POSSIBLE ADVERSE LITIGATION OUTCOME

         An action  was  commenced  against  NACT  alleging  that its  telephone
systems  incorporating prepaid calling features infringe upon a patent issued in
1987.  An  unfavorable  decision  in this action  could have a material  adverse
effect on the Company.

DEPENDENCE ON KEY PERSONNEL

         The efforts of a small number of key management and operating personnel
will largely determine the Company's success and the loss of any of such persons
could adversely  affect the Company.  The success of the Company also depends in
part upon its ability to hire and retain highly skilled and qualified operating,
marketing,  financial and technical  personnel.  The  competition  for qualified
personnel in the telecommunications industry is intense and, accordingly,  there
can be no assurance  that the Company  will be able to hire or retain  necessary
personnel.


                                      -10-
<PAGE>
DEPENDENCE ON RIGHTS-OF-WAY AND OTHER THIRD PARTY AGREEMENTS

         The Company must obtain  easements,  rights-of-way,  entry to premises,
franchises  and licenses  from various  private  parties,  actual and  potential
competitors  and state and local  governments  in order to construct and operate
its  networks.   There  can  be  no  assurance  that  the  Company  will  obtain
rights-of-way  and franchise  agreements on acceptable  terms or that current or
potential  competitors  will not  obtain  similar  rights-of-way  and  franchise
agreements  that will allow them to compete  against the Company.  If any of the
existing  franchise or license agreements were terminated or not renewed and the
Company  were forced to remove its fiber optic  cables or abandon its network in
place, such termination could have a material adverse effect on the Company.

VARIABILITY OF QUARTERLY OPERATING RESULTS

         As a result of the limited revenues and significant expenses associated
with the expansion  and  development  of its networks and services,  the Company
anticipates that its operating results could vary  significantly  from period to
period. In addition,  revenues relating to the Company's network  businesses are
and may continue to be dependent upon a small number of customers and contracts,
revenues under which are likely to vary significantly from period to period.

RISK OF JOINT INVESTMENTS

         The Company's Phoenix network is operated by Phoenix Fiber Access, Inc.
("Phoenix Fiber"). The Company currently has a 50% ownership interest in Phoenix
Fiber and has agreed in principle to acquire the remaining 50% interest. Phoenix
Fiber has been  managed by a governing  board that the Company does not control.
The risk is present in this joint venture,  and in other joint ventures in which
the Company may  subsequently  determine  to  participate,  that the other joint
venture  partners may at any time have economic,  business or legal interests or
goals that are inconsistent with those of the joint venture or the Company.  The
risk is also  present  that a joint  venture  partner  may be unable to meet its
economic  or other  obligations  to the  venture  and that  the  Company  may be
required  to  fulfill  some or all of those  obligations.  In  addition,  if the
Company  enters  into  international  joint  ventures,  the  operations  of such
ventures will be subject to various risks not present in the Company's  domestic
operations, such as fluctuations in currency exchange rates,  nationalization or
expropriation  of  assets,   import/export   controls,   political  instability,
limitations  on  foreign  investment,  restrictions  on the  ability  to convert
currency and the additional expenses and risks inherent in conducting operations
in geographically  distant locations with customers speaking different languages
and having different cultural approaches to the conduct of business.

VOLATILITY OF MARKET PRICE OF COMMON SHARES

         Since the Common Shares have been publicly  traded,  their market price
has  fluctuated  over a wide range and may continue to do so in the future.  The
market price of the Common Shares could be subject to  significant  fluctuations
in response to various  factors and events,  including  among other things,  the
depth and liquidity of the trading  market of the Common  Shares,  variations in
the Company's  operating  results and the difference  between actual results and
the results expected by investors and analysts.  In addition,  from time to time
the stock market has experienced  broad price and volume  fluctuations that have
often been  unrelated to the operating  performance  of  companies.  These broad
market  fluctuations  also may  adversely  affect the market price of the Common
Shares.

RISKS OF INVESTMENT IN A CANADIAN CORPORATION

         The Company is a Canadian  corporation.  Certain directors and officers
and certain of the Company's professionals are residents of Canada. As a result,
it may be difficult for U.S.  shareholders  to effect  service of process within
the  United  States  upon the  Company  or upon  such  directors,  officers  and
professionals  or to collect  judgments  of U.S.  courts  predicated  upon civil
liability  under U.S.  federal  securities  and other laws. The Company has been
advised that there is substantial  doubt as to whether Canadian courts would (i)
enforce judgements of


                                      -11-
<PAGE>
U.S.  courts  obtained  against  the  Company or such  directors,  officers  and
professionals  predicated upon the civil  labilities  provisions of U.S. laws or
(ii)  impose  liabilities  in  original  actions  against  the  Company  or  its
directors,  officers and  professionals  predicated  solely upon U.S.  laws.  In
addition,  the Company's  status as a Canadian company limits the ability of the
Company to hold or control common carrier radio frequency licenses in the United
States.

POTENTIAL RESALES OF A SUBSTANTIAL NUMBER OF SHARES; REGISTRATION RIGHTS

         At September 30, 1996, the Company had  outstanding  21,244,259  Common
Shares. Of these shares,  20,276,210 Common Shares are freely tradeable,  except
for (i) any Common Shares held by "affiliates" of the Company within the meaning
of Rule 144 under the  Securities Act  (2,960,182 of such  20,276,210  shares at
September 30, 1996),  which shares will be subject to the resale  limitations of
Rule 144,  and an  aggregate of 750,000  Common  Shares  subject to escrow under
regulations  of the VSE. The remaining  967,929  Common  Shares are  "restricted
securities,"  as that term is defined in Rule 144 and may only be sold  pursuant
to a registration  statement under the Securities Act or an applicable exemption
from registration  thereunder,  including  pursuant to Rule 144. Of such 967,929
shares,  the  Company  is  contractually  obligated  to  register  for resale an
aggregate of 26,624  shares.  In addition,  at September 30, 1996, (i) 3,098,623
Common  Shares were reserved for issuance  upon  exercise of  outstanding  stock
options (the "Outstanding Options"),  with exercise prices ranging from $3.55 to
$10.00 per share,  (ii) 896,155  Common  Shares were  reserved for issuance upon
exercise of outstanding  warrants (the  "Outstanding  Warrants"),  with exercise
prices ranging from $5.52 to $12.96 per share, and (iii) 3,019,598 Common Shares
were reserved for issuance upon  conversion of the  Convertible  Notes (based on
the aggregate  Accreted  Value of  Convertible  Notes on December 15, 1996).  In
addition,  3,200,000  Common  Shares were reserved for issuance upon exercise of
the warrants sold in the October Offering (the "October Warrants").  The Company
has  registered  or is  obligated  to register  the resale of the Common  Shares
issuable upon exercise of the Outstanding Options and the Outstanding  Warrants.
The Company is  registering  the  issuance of the Common  Shares  issuable  upon
conversion of the Convertible Notes in the registration  statement of which this
Prospectus  is a part.  The future sale or the  expectation  of future  sales of
Common Shares in the public market could adversely affect the prevailing  market
prices for the Common  Shares and could  impair the  Company's  ability to raise
capital through the sale of Common Shares.

POTENTIAL ANTI-TAKEOVER PROVISIONS

         The Company's Board of Directors has the authority, without any further
vote  or  action  by the  Company's  shareholders,  to  issue  up to  10,000,000
Preference Shares,  without par value (the "Preference  Shares"), in one or more
series and to determine  the  designations,  powers,  preferences  and relative,
participating,  optional or other rights thereof,  including without limitation,
the dividend rate (and whether  dividends are  cumulative),  conversion  rights,
voting rights, rights and terms of redemption,  redemption price and liquidation
preference.  Although the Company has no current  plans to issue any  Preference
Shares,  the rights of the holders of Common Shares would be subject to, and may
be  adversely  affected by, the rights of the holders of any  Preference  Shares
that may be issued in the future.  Issuance of Preference  Shares could have the
effect of delaying,  deterring or preventing a change in control of the Company,
including the imposition of various procedural and other requirements that could
make it more difficult for holders of Common Shares to effect certain  corporate
actions,  including the ability to replace incumbent directors and to accomplish
transactions opposed by the incumbent Board of Directors.


                                      -12-
<PAGE>
                                   THE COMPANY

         The  Company  provides a broad range of  integrated  telecommunications
products and services, primarily to customers located in the western continental
United  States and Hawaii.  Since  inception as a  facilities-based  competitive
access  provider,  the Company has  constructed  and operates  state-of-the-art,
digital  telecommunications  networks that provide an  alternative  to incumbent
LECs.  The  Company has  expanded  beyond the scope of  traditional  competitive
access provider  operations into CLEC services and currently provides a range of
enhanced  telecommunications  services  that  include  long  distance,  Internet
access,  and data services.  In addition,  the Company expects to offer switched
access   and   local   dial   tone   services   to   complement   its   existing
telecommunications    service   offerings.   The   Company   also   manufactures
telecommunications  switching  equipment  and  network  management  and  billing
systems through its wholly-owned subsidiary, NACT.

                                MATERIAL CHANGES

DECEMBER 1995 OFFERING

         In  the  December   Offering,   the  Company  sold  $20,000,187 137-/8%
Convertible Senior Subordinated Discount Notes due 2005 in December 1995 and its
wholly owned  subsidiary,  GST USA, Inc.  ("GST USA") sold  $160,001,496 13-7/8%
Senior  Discount Notes due 2005 in a private  placement.  Of the net proceeds of
the December  Offering,  $2.0 million was applied to the repayment of short-term
indebtedness, and the balance has been and will be used for capital expenditures
and to fund future operating deficits and for working capital purposes.

CALL AMERICA ACQUISITION

         On September 26, 1996,  the Company  entered into an agreement and plan
of merger with Call America Business  Communications  Corporation and certain of
its affiliates (collectively,  "Call America"), pursuant to which the Company is
to acquire  100% of Call America by means of a merger,  for a purchase  price of
1,307,692  Common  Shares,  subject to a post closing  adjustment  of additional
Common  Shares if, 180 days after the  effective  time of the merger,  the sales
price of the Common Shares is less than $12.50 per share.  The maximum number of
additional Common Shares to be issued pursuant to the post closing adjustment is
114,489.  The  consummation of the merger is contingent upon obtaining  required
regulatory  approvals.  Call  America,  which  is  based  in  San  Luis  Obispo,
California,  is a  facilities-based  reseller of domestic and international long
distance services, as well as a provider of operator services.

NORTHERN TELECOM NETWORK PRODUCTS PURCHASE AGREEMENT

         The Company,  through its indirect subsidiary,  GST EquipCo, Inc. ("GST
EquipCo"),  entered into a Network Products Purchase Agreement ("Nortel Purchase
Agreement") dated August 23, 1996 with Northern Telecom Inc. ("Nortel") pursuant
to which  GST  EquipCo  may from time to time  purchase  switching  and  related
equipment  from  Nortel.  The Nortel  Purchase  Agreement,  among  other  terms,
provides GST EquipCo with price  protection for 10 years for several  categories
of Nortel switching equipment and related software.

SIEMENS SWITCHING EQUIPMENT PURCHASE AGREEMENT AND LOAN AGREEMENT

         The Company, through its indirect subsidiary,  GST SwitchCo, Inc. ("GST
SwitchCo."),  entered into a Switching  Products  Sales  Agreement (the "Siemens
Sales  Agreement")  dated  September  4,  1996  with  Siemens  Stromberg-Carlson
("Siemens")  pursuant  to which  GST  SwitchCo  may from  time to time  purchase
switching and related equipment from Siemens. The Siemens Sales Agreement, among
other  terms,  provides  GST SwitchCo a credit of up to $8.0 million for certain
Siemens  software and price  protection  for 10 years for several  categories of
Siemens switching equipment and related software.

         In addition,  on the same date,  GST  SwitchCo  entered into a Loan and
Security Agreement (the "Siemens Loan Agreement") with Siemens that provides for


                                      -13-
<PAGE>
loans by Siemens of up to an aggregate of $116.0 million to finance the purchase
of Siemens  equipment  and  equipment  from other  suppliers.  Each loan made by
Siemens under the Siemens Loan Agreement  initially earns interest at an interim
loan rate of LIBOR  plus 4.5% on the  outstanding  balance of the loan until the
beginning of the calendar  quarter  following the original loan advance date, at
which  time the  outstanding  balance  of the loan  converts  to a term loan and
begins accruing interest at a term loan rate of LIBOR plus 3.5% Repayment of the
outstanding principal amount of each loan is required in quarterly  installments
commencing  on the last day of the fifth  quarter  following  the original  loan
advance date with the remaining  balance of each  outstanding loan being payable
in full on the last day of the 24th quarter following such original loan advance
date. GST SwitchCo's obligations to Siemens under the Siemens Loan Agreement are
secured by the grant to Siemens of a first  priority  security  interest  in all
product  purchased by GST SwitchCo with the proceeds of loans by Siemens and are
guarantied in part by GST USA.

TOTALNET COMMUNICATIONS, INC.

         On  September  27,  1996 the Company  entered  into an  agreement  (the
"Merger Agreement") to acquire TotalNet Communications Inc. by means of a merger
(the "TotalNet  Merger").  On October 17, 1996, the Company acquired TotalNet in
the TotalNet Merger for a purchase price payable entirely in Common Shares.

         In consideration  for the acquisition of TotalNet,  a purchase price of
approximately   $8.7  million  is  payable  in  Common   Shares  to  the  former
shareholders  of TotalNet in two  installments.  Sixty  percent of the  purchase
price (approximately $5.2 million),  for a total of 481,391 Common Shares valued
at $10.90 per share,  was paid at the closing of the TotalNet  Merger on October
17,  1996  and the  remaining  40% of the  purchase  price  (approximately  $3.5
million)  is payable in Common  Shares on October  17,  1997,  based on the then
current market value of the Common Shares at such time but in no event less than
$7.63 per share,  or more than  $20.00 per  share.  TotalNet,  which is based in
Houston, Texas, is both a facilities-based  carrier and a switchless reseller of
long distance services.

OCTOBER OFFERING

         On October 22,  1996,  the Company  completed  a private  placement  to
non-U.S.  investors of 2,000,000 special warrants (the "Special  Warrants") at a
purchase price of US $11.125 per Special  Warrant.  The Special  Warrants become
exercisable by holders for no additional  consideration  upon the later to occur
of (i) the  date  upon  which  approval  for a final  Canadian  prospectus  (the
"Canadian Prospectus")  qualifying the Common Shares and share purchase warrants
(the  "Underlying  Warrants")  issuable upon exercise of the Special Warrants is
received from the securities  commission of each of the Canadian provinces where
the Special Warrants were sold and (ii) the date that the registration statement
of which this prospectus forms a part (the "U.S. Registration  Statement") filed
with the Commission  registering  the resale of the Common Shares  issuable upon
exercise of the Special Warrants and Underlying  Warrants is declared effective,
but in any event,  no later that  September  22, 1997.  Each Special  Warrant is
exercisable  for one Common Share and one-half of one Underlying  Warrant.  Each
full Underlying  Warrant  entitles the holder to purchase one additional  Common
Share  for a  purchase  price  of U.S.  $13.00  for one  year  from  the date of
issuance.  In the event that the requisite regulatory approvals for the Canadian
Prospectus are not received by the Company and the U.S.  Registration  Statement
is not declared effective,  in each case by February 19, 1997, then each Special
Warrant  will  become  exercisable  for 1.1 Common  Shares and  one-half  of one
Underlying Warrant.

         The Company received U.S. $9,690,000, constituting 50% of the aggregate
purchase  price  of the  Special  Warrants  (net of  placement  agency  fees and
expenses), on October 22, 1996. The balance of the net purchase price of Special
Warrants  (U.S.  $11,125,000)  is being  held in escrow  and is  payable  to the
Company upon the earlier to occur of (x) the date of receipt of final regulatory
approval of a preliminary Canadian Prospectus from the securities commissions of
the  applicable  Canadian  provinces  and (y) the  initial  filing  of the  U.S.
Registration Statement with the Commission,  in each case covering the resale of
the Common


                                      -14-
<PAGE>
Shares issuable upon exercise of the Special Warrants and the Underlying
Warrants.  First Marathon Securities Limited and Thomson Kernaghan & Co. Ltd.
served as the Company's placement agents in the private placement.

                                 USE OF PROCEEDS

         The Company will not receive any of the  proceeds  from the issuance of
the Common Shares upon  conversion of the  Convertible  Notes.  The Company will
bear all expenses in connection with the preparation of this Prospectus.

                              PLAN OF DISTRIBUTION

         The  Convertible  Notes are  convertible  (in  denominations  of $1,000
principal amount at maturity or integral  multiples  thereof),  at the option of
the holders of the  Convertible  Notes,  into Common  Shares,  at any time after
December 18, 1996. The number of Common Shares  issuable upon  conversion of the
Convertible  Notes will be  determined  by  application  of a ratio equal to the
Accreted  Value  on the  date  of  conversion  of the  Convertible  Notes  being
converted divided by $7.563,  subject to adjustment.  The Accreted Value is, for
any  Specified  Date (as such term is defined in the  Indenture  relating to the
Convertible  Notes),  the amount  provided for each $1,000  principal  amount at
maturity of the Convertible Notes as follows:

         (i) if the Specified Date occurs on one of the following  dates (each a
"Semi-Annual  Accrual Date"), the Accreted Value will equal the amount set forth
below for such Semi-Annual Accrual Date:

           SEMI-ANNUAL ACCRUAL DATE                       ACCRETED VALUE
           ------------------------                       --------------
June 15, 1996..................................              $  546.80
December 15, 1996..............................                 584.73
June 15, 1997..................................                 625.30
December 15, 1997..............................                 668.68
June 15, 1998..................................                 715.07
December 15, 1998..............................                 764.68
June 15, 1999..................................                 817.72
December 15, 1999..............................                 874.45
June 15, 2000..................................                 935.12
December 15, 2000..............................              $1,000.00

         (ii) if the Specified Date occurs before the first Semi-Annual  Accrual
Date,  the Accreted Value will equal the sum of (a) the original issue price and
(b) an  amount  equal to the  product  of (1) the  Accreted  Value for the first
Semi-Annual  Accrual  Date less the  original  issue price  multiplied  by (2) a
fraction,  the numerator of which is the number of days from the Closing Date to
the  Specified  Date,  using a 360-day  year of twelve  30-day  months,  and the
denominator  of which is the number of days elapsed from the Closing Date to the
first Semi-Annual Accrual Date, using a 360-day year of twelve 30-day months;

         (iii) if the  Specified  Date occurs  between two  Semi-Annual  Accrual
Dates,  the Accreted  Value will equal the sum of (a) the Accreted Value for the
Semi-Annual  Accrual Date  immediately  preceding such Specified Date and (b) an
amount  equal to the  product  of (1) the  Accreted  Value  for the  immediately
following  Semi-Annual  Accrual Date less the Accreted Value for the immediately
preceding  Semi-Annual Accrual Date multiplied by (2) a fraction,  the numerator
of which  is the  number  of days  from the  immediately  preceding  Semi-Annual
Accrual  Date to the  Specified  Date,  using a 360-day  year of  twelve  30-day
months, and the denominator of which is 180; or

         (iv) if the Specified  Date occurs after the last  Semi-Annual  Accrual
Date, the Accreted Value will equal $1,000.


                                      -15-
<PAGE>
             CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

         The following is a general  discussion of certain United States federal
income tax consequences to beneficial  owners from the conversion of Convertible
Notes into Common Shares and the ownership and disposition of the Common Shares.
This  discussion is based on current  provisions  of the Internal  Revenue Code,
applicable  final,   temporary  and  proposed  Treasury  Regulations,   judicial
authorities,  and  current  administrative  rulings  and  pronouncements  of the
Internal  Revenue  Service (the  "Service"),  and upon the facts  concerning the
Company and its  subsidiaries  as of the date hereof.  There can be no assurance
that the Service will not take a contrary  view,  and no ruling from the Service
has  been  or  will  be  sought  by  the  Company.  Legislative,   judicial,  or
administrative changes or interpretations may be forthcoming that could alter or
modify the  statements  and  conclusions  set forth herein.  Any such changes or
interpretations  may  or  may  not be  retroactive  and  could  affect  the  tax
consequences to holders.

         This  discussion  does not address all aspects of United States federal
income  taxation that may be relevant to particular  holders of the  Convertible
Notes  or the  Common  Shares  in  light of  their  personal  investment  or tax
circumstances,  or to certain types of investors (including insurance companies,
financial institutions,  broker-dealers or tax-exempt  organizations) subject to
special  treatment under the United States federal income tax laws. In addition,
this  discussion  deals only with  Convertible  Notes and Common  Shares held as
capital assets within the meaning of Section 1221 of the Code.  This  discussion
does not deal with foreign, state and local consequences that may be relevant to
non-U.S. Holders in light of their personal or individual circumstances.

         As used in the discussion which follows, the term "U.S. Holder" means a
beneficial owner of Convertible Notes or Common Shares, as applicable,  that for
United  States  federal  income tax purposes is (i) a citizen or resident of the
United  States,  (ii) a  corporation,  partnership  or other  entity  created or
subdivision  thereof, or (iii) an estate or trust the income of which is subject
to United States  federal  income  taxation  regardless of its source.  The term
"Non-U.S.  Holder"  means a Holder of  Convertible  Notes or Common  Shares,  as
applicable,  that is, for United States federal income tax purposes,  not a U.S.
Holder.

         HOLDERS  SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX
         CONSEQUENCES  TO THEM OF CONVERTING THE  CONVERTIBLE  NOTES INTO COMMON
         SHARES AND HOLDING AND  DISPOSING OF THE COMMON  SHARES,  INCLUDING THE
         APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.

TAX CONSEQUENCES TO U.S. HOLDERS

Exercise Of Conversion Right

         No gain or loss will be recognized for United States federal income tax
purposes by a U.S. Holder of the Convertible  Notes upon the conversion  thereof
in exchange for Common Shares (except to the extent of cash, if any, received in
lieu of the issuance of fractional shares of Common Shares). A U.S. Holder's tax
basis in the Common  Shares will equal the sum of the  adjusted tax basis in the
Convertible  Notes reduced by the portion of adjusted tax basis allocated to any
fractional  Common  Shares  exchanged  for cash.  The  adjusted tax basis in the
Convertible  Notes is the purchase price of such  Convertible  Notes to the U.S.
Holder as increased by any accrued original issue discount (net of all amortized
acquisition  premiums) and market discount  previously included in income by the
U.S. Holder and decreased by amortizable  bond premiums,  if any,  deducted over
the term of the  Convertible  Notes.  The  holding  period of the Common  Shares
received on the  conversion  of the  Convertible  Notes will  include the period
during which the Convertible  Notes were held by such U.S.  Holder,  except that
the holding period of Common Shares allocable to accrued original issue discount
may  commence  on a later date.  If any cash is  received in lieu of  fractional
shares,  the U.S.  Holder will recognize gain or loss, and the character and the
amount of such gain


                                      -16-
<PAGE>
or loss will be  determined as if the U.S.  Holder had received such  fractional
shares and then immediately sold them for cash.

Sale Of Common Shares

         Gain or loss will  generally  be  recognized  upon a sale of the Common
Shares received upon  conversion of Convertible  Notes in an amount equal to the
difference between the amount realized on the transfer and the holder's adjusted
tax basis in the Common Shares.  Such gain or loss will be capital gain or loss,
provided the Common  Shares are held as a capital  asset,  and will be long-term
capital gain or loss with respect to Common Shares held for more than one year.

TAX CONSEQUENCES TO NON-U.S. HOLDERS

Exercise Of Conversion Right

         No gain or loss will be recognized for United States federal income tax
purposes  by  non-U.S.  Holders of the  Convertible  Notes  upon the  conversion
thereof in exchange for full shares of Common Shares.  To the extent any cash is
received in lieu of the  issuance of  fractional  shares of Common  Shares,  the
rules applicable to gain from a sale of Common Shares, as summarized below, will
apply.

Gain On Disposition Of Common Shares

         A  Non-U.S.  Holder  generally  will not be  subject  to United  States
federal  income  tax  with  respect  to  gain  recognized  on a  sale  or  other
disposition of Common Shares.

                                  LEGAL MATTERS

         Certain  legal  matters in  connection  with the issuance of the Shares
offered hereby have been passed upon for the Company by Messrs.  Olshan Grundman
Frome &  Rosenzweig  LLP,  505 Park Avenue,  New York,  New York 10022.  Stephen
Irwin,  counsel to Olshan  Grundman  Frome &  Rosenzweig  LLP, is an officer and
director of the  Company and holds  61,345  Common  Shares and has been  granted
options and  warrants  to  purchase an  additional  615,000  Common  Shares.  In
addition, other attorneys of this firm hold options to purchase Common Shares.

                                     EXPERTS

         The consolidated balance sheet of GST Telecommunications,  Inc. and its
subsidiaries  as of  September  30,  1995  and the  consolidated  statements  of
operations  and deficit and cash flows for the year ended  September  30,  1995,
have been  incorporated by reference  herein in reliance upon the report of KPMG
Peat  Marwick  LLP,  independent  certified  public  accountants,  and  upon the
authority of said firm as experts in accounting and auditing.  The  consolidated
balance  sheet  of GST  Telecommunications,  Inc.  and  its  subsidiaries  as of
September 30, 1994 and the consolidated statements of operations and deficit and
cash flows for the 13 months ended  September 30, 1994 and year ended August 31,
1993 have been  incorporated by reference  herein in reliance upon the report of
KPMG Peat Marwick Thorne, independent chartered accountants,  upon the authority
of said firm as  experts in  accounting  and  auditing.  The  audited  financial
statements of International  Telemanagement  Group, Inc. as of December 31, 1994
and 1993 and for the year ended  December  31,  1994 and the period  January 23,
1993 (date of inception)  through December 31, 1993 have been included herein in
reliance upon the report of KPMG Peat Marwick LLP, independent  certified public
accountants,  and upon the authority of said firm as experts in  accounting  and
auditing. The financial statements of the  IntelCom-Greenstar  Joint Venture for
the years ended September 30, 1994 and 1993 have been  incorporated by reference
herein upon  reliance upon the report of KPMG Peat Marwick  Thorne,  independent
chartered accountants,  and upon authority of said firm as experts in accounting
and  auditing.  The  combined  financial  statements  of Call  America  Business
Communications  Corporation and Affiliates for the years ended December 31, 1995
and 1994 have been included herein in reliance upon the report of Glenn,


                                      -17-

<PAGE>
Burdette, Phillips & Bryson, independent certified public accountants,  and upon
the authority of said firm as experts in accounting and auditing.

                             ADDITIONAL INFORMATION

         The Company has filed with the Commission a  Registration  Statement on
Form S-3 under the Securities Act with respect to the Shares offered hereby. For
further  information  with  respect to the  Company and the  securities  offered
hereby, reference is made to the Registration Statement. Statements contained in
this  Prospectus  as to the contents of any  contract or other  document are not
necessarily  complete,  and in each  instance,  reference is made to the copy of
such  contract or document  filed as an exhibit to the  Registration  Statement,
each such statement being qualified in all respects by such reference.


                                      -18-
<PAGE>
                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                            Page(s)
<S>                                                                                            <C>
INTERNATIONAL TELEMANAGEMENT GROUP, INC.

Independent Auditors' Report....................................................................F-2

Balance Sheets at December 31, 1994 and 1993 ...................................................F-3

Statements  of  Operations  for the four months ended April 30,  1995,  the year
ended December 31, 1994 and for the period January 23, 1993 (date of inception)
through December 31, 1993 ......................................................................F-4

Statements  of  Stockholders'  Deficit for the four months ended April 30, 1995,
the year ended  December  31, 1994 and for the period  January 23, 1993 (date of
inception)
through December 31, 1993.......................................................................F-5

Statements of Cash Flow for the four months ended April 30, 1995, the year ended
December 31, 1994 and for the period January 23, 1993 (date of inception)
through December 31, 1993.......................................................................F-6

Notes to Financial Statements...................................................................F-7

GST TELECOMMUNICATIONS, INC.

Proforma Condensed Financial
  Information (unaudited)......................................................................F-11

Proforma Consolidated Balance
  Sheet as of June 30, 1996 (unaudited)........................................................F-12

Proforma Consolidated Statement
  of Operations and Deficit for
  the nine months ended June 30, 1996 (unaudited)..............................................F-13

Proforma Consolidated Statement
  of Operations and Deficit for
  the year ended September 30, 1995 (unaudited)................................................F-14

Notes to Proforma Consolidated
  Financial Statements (unaudited).............................................................F-15

CALL AMERICA BUSINESS COMMUNICATIONS CORPORATION AND AFFILIATES

Independent Auditors' Report...................................................................F-16

Combined Balance Sheets at December 31, 1995 and 1994..........................................F-17

Combined Statements of Income for the six months ended
  June 30, 1996 (unaudited) and the years ended
  December 31, 1995 and 1994...................................................................F-19

Combined Statements of Changes in Stockholders'  Equity (Deficiency) for the six
  months ended June 30, 1996 (unaudited) and the
  years ended December 31, 1995 and 1994.......................................................F-20

Combined Statements of Cash Flows for the six months ended
  June 30, 1996 and the years ended December 31, 1995 and 1994.................................F-21

Notes to Financial Statements..................................................................F-23
</TABLE>

                                       F-1
<PAGE>
                          INDEPENDENT AUDITORS' REPORT



The Board of Directors
International Telemanagement Group, Inc.:

We have audited the accompanying balance sheets of International Telemanagement
Group, Inc. (the Company), as of December 31, 1994 and 1993, and the related
statements of operations, stockholders' deficit, and cash flows for the year
ended December 31, 1994, and for the period January 23, 1993 (date of inception)
through December 31 1993. 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 audit 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 financial position of International Telemanagement
Group, Inc., as of December 31, 1994 and 1993, and the results of its operations
and its cash flows for the year ended December 31, 1994 and for the period
January 23, 1993 (date of inception) through December 31, 1993 in conformity
with generally accepted accounting principles.

As discussed in note 2, effective May 1, 1995, the Company was acquired by GST
Telecom, Inc.



                                   /S/ KPMG PEAT MARWICK LLP

Detroit, Michigan
July 21, 1995


                                      F-2
<PAGE>
                    INTERNATIONAL TELEMANAGEMENT GROUP, INC.
                                 Balance Sheets
                           December 31, 1994 and 1993
<TABLE>
<CAPTION>
                                     Assets                                             1994               1993
                                     ------                                             ----               ----
<S>                                                                                  <C>                   <C>      
Current assets:
    Cash                                                                            $     702,392             71,309
    Trade accounts receivable, less allowance for doubtful accounts of $164,000
       and $52,000, at 1994 and 1993, respectively                                      1,167,346            370,643
    Due from officers and employees                                                         -                 48,690
    Other receivables                                                                       9,152              5,000
    Prepaid expenses and other current assets                                              80,713            115,805
                                                                                     ------------       ------------

                   Total current assets                                                 1,959,603            611,447

Property and equipment, net (note 3)                                                    1,318,870          1,175,495
                                                                                        ---------          ---------

                                                                                     $  3,278,473          1,786,942
                                                                                     ============          =========

                     Liabilities and Stockholders' Deficit
                     -------------------------------------

Current liabilities:
    Current installments of notes payable to related parties (note 5)                $    368,380             95,520
    Current installments of long-term debt (note 4)                                        98,185              -
    Current installments of capital lease obligations (note 7)                            175,668            144,897
    Accounts payable and accrued line charges, net                                      3,735,260          1,107,141
    Due to affiliates                                                                       -                  4,417
    Other accrued expenses and liabilities                                                157,789             22,049
    Deferred revenues                                                                      23,982             22,363
                                                                                     ------------       ------------

                   Total current liabilities                                            4,559,264          1,396,387
                                                                                        ---------          ---------

Notes payable to related parties, less current installments (note 5)                      246,040              -
Long-term debt, less current installments (note 4)                                        131,945              -
Capital lease obligations, less current installments (note 7)                             747,227            890,913
                                                                                     ------------       ------------

                   Total liabilities                                                    5,684,476          2,287,300
                                                                                        ---------          ---------

Commitments and contingencies (notes 7, 9, and 10)

Stockholders' deficit:
    Common stock, no par value, 750 shares authorized, 200 issued and
       outstanding                                                                          1,000              1,000
    Additional paid-in capital                                                            598,630            332,678
    Accumulated deficit                                                                (2,973,765)          (834,036)
                                                                                        ---------       ------------

                                                                                       (2,374,135)          (500,358)

    Less: Treasury stock, at cost of 88 shares                                            (31,868)                -
                                                                                     ------------       -----------

                   Net stockholders' deficit                                           (2,406,003)          (500,358)
                                                                                        ---------       ------------

                                                                                     $  3,278,473         1,786,942
                                                                                     ============         =========
</TABLE>
See accompanying notes to financial statements.

                                      F-3
<PAGE>
                    INTERNATIONAL TELEMANAGEMENT GROUP, INC.
                            Statements of Operations
<TABLE>
<CAPTION>
                                                                                                     For the Period
                                                                                                       January 23,
                                                                                                          1993
                                                                                                        (Date of
                                                             Four Months           Year Ended     Inception) through
                                                        Ended April 30, 1995      December 31,        December 31,
                                                             (Unaudited)              1994                1993
                                                        --------------------      ------------    -------------------
                                                                                  
<S>                                                      <C>                         <C>                  <C>      
Net sales and services                                   $      5,010,908            12,202,063           1,494,943
Cost of goods and services                                      4,766,433            11,788,135           1,735,717
                                                                ---------            ----------           ---------

                   Gross profit (loss)                            244,475               413,928            (240,774)

Selling, general, and administrative expenses                     988,203             2,014,635             507,824
                                                             ------------        --------------        ------------

Loss from operations                                             (743,728)           (1,600,707)           (748,598)

Other income (expense):
    Interest expense                                              (53,373)             (140,338)            (16,503)
    Other expense, net                                                 -               (398,684)            (68,935)
                                                             ------------        --------------        ------------

                   Net loss                              $       (797,101)           (2,139,729)           (834,036)
                                                             ============            ==========        ============
</TABLE>

See accompanying notes to financial statements.

                                      F-4

<PAGE>
                    INTERNATIONAL TELEMANAGEMENT GROUP, INC.
                       Statements of Stockholders' Deficit
<TABLE>
<CAPTION>
                                                       For the Period January 23, 1993 (Date of Inception)
                                                                     Through December 31, 1993
                                     --------------------------------------------------------------------------------------------
                                                          Additional
                                        Common             Paid-in          Accumulated          Treasury         Stockholders'
                                         Stock             Capital            Deficit              Stock             Deficit
                                         -----             -------            -------              -----             -------
<S>                                  <C>                      <C>                <C>                                    <C>      
Balances at inception                $      -                     -                 -                -                     -
Issuance of common stock                 1,000                332,678               -                -                 332,678
Net loss                                    -                      -           (834,036)             -                (834,036)
                                        ------             ----------           -------              -                 -------

Balances at end of period            $   1,000                332,678          (834,036)             -                (500,358)
                                         =====                =======           =======              =                 =======

                                                                   Year Ended December 31, 1994
                                     --------------------------------------------------------------------------------------------
                                                          Additional
                                        Common             Paid-in          Accumulated          Treasury         Stockholders'
                                         Stock             Capital            Deficit              Stock             Deficit
                                         -----             -------            -------              -----             -------

Balances at beginning of period      $   1,000                332,678            (834,036)             -                (500,358)
Capital contributions                      -                  272,000               -                  -                 272,000
Distributions to shareholder               -                   (6,048)              -                  -                  (6,048)
Repurchase of shares                       -                      -                 -              (31,868)              (31,868)
Net loss                                    -                      -           (2,139,729)              -             (2,139,729)
                                        ------             ----------           ---------        ---------             ---------

Balances at end of period            $   1,000                598,630          (2,973,765)         (31,868)           (2,406,003)
                                         =====                =======           =========           ======             =========

                                                           Four Months Ended April 30, 1995 (Unaudited)
                                     --------------------------------------------------------------------------------------------
                                                          Additional
                                        Common             Paid-in          Accumulated          Treasury         Stockholders'
                                         Stock             Capital            Deficit              Stock             Deficit
                                         -----             -------            -------              -----             -------

Balances at beginning of period      $   1,000                598,630          (2,973,765)         (31,868)           (2,406,003)
Capital contributions                      -                   10,600               -                  -                  10,600
Repurchase of shares                       -                      -                 -               (2,050)               (2,050)
Net loss                                    -                      -             (797,101)              -               (797,101)
                                        ------             ----------        ------------        ---------          ------------

Balances at end of period            $   1,000                609,230          (3,770,866)         (33,918)           (3,194,554)
                                         =====                =======           =========           ======             =========
</TABLE>
See accompanying notes to financial statements.

                                      F-5
<PAGE>
                    INTERNATIONAL TELEMANAGEMENT GROUP, INC.
                            Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                                                     For the Period
                                                                                                                       January 23,
                                                                                                                      1993 (Date of
                                                                                 Four Months                             Inception)
                                                                                Ended April 30,      Year Ended          through
                                                                                    1995            December 31,        December 31,
                                                                                 (Unaudited)            1994               1993
                                                                                 -----------            ----               ----
<S>                                                                             <C>                  <C>                <C>
Cash flows from operating activities:
   Net loss                                                                      $ (797,101)         (2,139,729)           (834,036)
   Adjustments to reconcile net loss to net cash
      provided by (used in) operating activities:
   Depreciation and amortization                                                    114,773             318,926              57,859
   Changes in assets and liabilities:
      Trade accounts receivable                                                    (165,145)           (796,703)           (370,643)
      Due from officers and employees                                                  --                48,690             (48,690)
      Other receivables                                                               6,652              (4,152)             (5,000)
      Prepaid expenses and other current assets                                     (13,000)             35,092            (115,805)
      Accounts payable and accrued line charges                                     912,626           2,808,920           1,107,141
      Due to affiliates                                                                --                (4,417)              4,417
      Other accrued expenses and liabilities                                         35,127             135,740              22,049
      Deferred revenues                                                              92,129               1,619              22,363
                                                                                 ----------          ----------          ----------

         Net cash provided by (used in) operating
           activities                                                               186,061             403,986            (160,345)
                                                                                 ----------          ----------          ----------

Cash flows from investing activities - capital                                      (60,550)           (462,301)         (1,233,354)
   expenditures for property and equipment                                             --                  --                  --


         Net cash used in investing activities                                      (60,550)           (462,301)         (1,233,354)
                                                                                 ----------          ----------          ----------

Cash flows from financing activities:
   Repayment of long-term debt                                                     (369,121)             49,329
   Net borrowings on revolving note payable to related
      parties                                                                          --               265,000              95,520
   Net repayments on notes payable to officers and
      employees                                                                        --               253,900                --
   Repurchase of treasury stock                                                      (2,050)            (31,868)               --
   Payments made under capital leases                                                  --              (112,915)          1,035,810
   Additional paid in capital                                                        10,600             272,000                --
   Distributions to shareholder                                                        --                (6,048)               --
   Proceeds from stock issuance                                                        --                  --               333,678
                                                                                 ----------          ----------          ----------

         Net cash provided by financing activities                                 (360,571)            689,398           1,465,008
                                                                                 ----------          ----------          ----------

Net increase (decrease) in cash                                                    (235,060)            631,083              71,309

Cash at beginning of year                                                           702,392              71,309                --
                                                                                 ----------          ----------          ----------

Cash at end of year                                                              $  467,322             702,392              71,309
                                                                                 ==========          ==========          ==========

Supplemental disclosures of cash flow information -
   cash paid during the year for interest                                        $   44,025             132,073               9,513
                                                                                 ==========          ==========          ==========
</TABLE>
See accompanying notes to financial statements.

                                       F-6
<PAGE>
                    INTERNATIONAL TELEMANAGEMENT GROUP, INC.
                          Notes to Financial Statements
                           December 31, 1994 and 1993



(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     International  Telemanagement  Group, Inc. (the Company), is a domestic and
     international  interexchange  carrier offering long distance,  800, private
     line, and other services to its customers.  ITG was incorporated in January
     1993 under the laws of the state of Ohio.

     (a)  PROPERTY AND EQUIPMENT

          Property and  equipment are stated at cost.  Depreciation  of property
          and equipment is provided  principally on a  straight-line  basis over
          the  estimated  useful lives of the related  assets.  Assets  recorded
          under capital leases are amortized over the terms of the leases.

     (b)  INCOME TAXES

          The  stockholders  of the Company  have  elected to be treated as an S
          corporation, whereby taxable income and/or losses are allocated to the
          stockholder rather than to the Company.  Accordingly, the accompanying
          financial  statements do not include  provisions for federal and state
          taxes on income earned by the Company.

     (c)  REVENUE RECOGNITION

          Income from  services is  recognized  when the  contracted  service is
          rendered.

     (d)  GENERAL CREDIT RISK

          The Company grants credit to customers on open account,  substantially
          all of whom are in the telecommunications industry.

(2)    SUBSEQUENT EVENT

       On May 1, 1995, the Company entered into a purchase agreement with GST
       Telecom, Inc. (GST Net), in which all outstanding stock of the Company
       was sold for cash. GST Net has indicated its intention to fully fund the
       operations of the Company and maintain the Company operations principally
       in the lines of business in which it currently operates.

(3)    PROPERTY AND EQUIPMENT

<TABLE>
<CAPTION>
       Property and equipment at December 31, 1994 and 1993, consisted of:
                                                                                    1994                1993
                                                                                    ----                ----
<S>                                                                              <C>                 
         Leasehold improvements                                                  $      6,243              6,243
         Machinery and equipment                                                    1,689,412          1,227,111
                                                                                    ---------          ---------

                                                                                    1,695,655          1,233,354

         Less accumulated depreciation and amortization                              (376,785)           (57,859)
                                                                                 ------------       ------------

                            Property and equipment, net                           $ 1,318,870         1,175,495
                                                                                  ===========         =========
</TABLE>

                                      F-7
<PAGE>

                    INTERNATIONAL TELEMANAGEMENT GROUP, INC.
                    Notes to Financial Statements, Continued



(4)    LONG-TERM DEBT
<TABLE>
<CAPTION>
       Long-term debt at December 31, 1994 and 1993, consists of the following:
                                                                                    1994                1993
                                                                                    ----                ----
<S>                                                                           <C>                        <C>
       Note payable to customer, 0% interest, monthly payments of $6,944,     $      215,278             -
       Note payable to supplier, 7% interest, monthly payments of $14,939,
           including interest, due February 1995                                      14,852             -
                                                                                  ----------             -

                          Total long-term debt                                       230,130             -

       Less current installments                                                     (98,185)            -
                                                                                  ----------             -

                          Long-term debt, less current installments           $      131,945             -
                                                                                     =======             =
</TABLE>
     In addition,  the Company has incurred borrowings from related parties (see
     note 5).

       As of December 31, 1994, the maturities of long-term debt are as follows:

                                       Year Ended
                                      December 31,
                                      ------------

                                          1995            $     98,185
                                          1996                  83,333
                                          1997                  48,612
                                                          ------------

                                                          $    230,130
                                                          ============

(5)    RELATED PARTY TRANSACTIONS

       The Company has entered into numerous transactions with its principal
       stockholder and other related entities controlled by its stockholders.


                                      F-8
<PAGE>
                    INTERNATIONAL TELEMANAGEMENT GROUP, INC.
                    Notes to Financial Statements, Continued



(5)  RELATED PARTY TRANSACTIONS, CONTINUED

     The  Company's   principal   stockholder  or  entities  controlled  by  the
     stockholder have obtained financing from two financial institutions.  These
     funds were, in turn, loaned to the Company. The unwritten agreement between
     the  Company  and the  related  parties is that the  Company  will make all
     necessary payments under the stated bank terms. The terms are as follows:
<TABLE>
<CAPTION>
                                                                                    1994                1993
                                                                                    ----                ----

<S>                                                                              <C>                     <C>
       Note payable, bearing interest at 8.25%, payable in monthly
           installments of $8,615, due in full September 1997                    $   349,420             95,520
       Note payable, bearing interest at 1% over the prime rate, due in
           full December 12, 1994.  On March 9, 1995, the loan was renewed
           by the bank                                                               265,000                 -
                                                                                     -------          --------

                          Total notes payable related parties                        614,420             95,520

       Less current installments                                                     368,380             95,520
                                                                                     -------             ------

                          Notes payable to related parties, less current
                             installments                                        $   246,040                 -
                                                                                     =======          ========
</TABLE>
       The Company rents office space and telecommunications equipment from
       related parties on a month-to-month basis. Rental expense for the periods
       ended December 31, 1994 and 1993, totaled $248,572 and $96,057,
       respectively.

(6)  COMMON STOCK

     During 1994, the Company repurchased common shares from its stockholders at
     a cost of $31,868.

(7)  LEASES

     The Company leases  telecommunications and computer equipment under capital
     leases.  Additionally,  certain  communications  equipment  is leased under
     operating leases.  Lease terms include  per-minute  charges and minimum fee
     levels.


                                      F-9
<PAGE>
                    INTERNATIONAL TELEMANAGEMENT GROUP, INC.
                    Notes to Financial Statements, Continued



(7)  LEASES, CONTINUED

     Future  minimum lease  payments  under capital and operating  leases are as
     follows:
<TABLE>
<CAPTION>
                                                             1994                                1993
                                                 ---------------------------         --------------------------
                                                  Capital          Operating         Capital          Operating
                                                  Leases            Leases            Leases           Leases
                                                  ------            ------            ------           ------
<S>                                          <C>                   <C>               <C>            <C>
       Year ending December 31:
           1994                              $            -             -               196,988         23,924
           1995                                      261,464        143,544             283,555        143,544
           1996                                      283,555        143,544             283,555        143,544
           1997                                      276,751        143,544             283,555        143,544
           1998                                      268,714        119,620             276,650        119,620
           1999                                       44,183             -               44,183             -
                                                ------------      ---------       -------------      --------

                Total lease payments               1,134,667        550,252           1,368,486        574,176
                                                                    =======                            =======

       Less amount representing interest
                                                    (211,772)                          (332,676)
                                                ------------                      -------------

                Total obligations under
                   capital leases                    922,895                          1,035,810

       Current installments of capital
           lease obligations                         175,668                            144,897
                                                 -----------                      -------------

                Capital lease obligations,
                   less current installments     $  747,227                             890,913
                                                 ==========                             =======
                                                     
</TABLE>
     Total rental expense under operating  leases for the periods ended December
     31, 1994 and 1993, totaled $23,900 and $4,500, respectively.

     The Company  also leases  certain  equipment  and office space from related
     parties (see note 5).

(8)  MAJOR CUSTOMERS

     Gross  revenues of  approximately  $3,000,000  were  derived from two major
     customers for the year ended December 31, 1994.

(9)  SERVICE CONTRACTS

     The Company has  entered  into  service  contracts  with  telecommunication
     providers  which  require a minimum  service  fee on a monthly  basis.  The
     Company has  committed  to minimum  revenues  of $350,000  per month by May
     1995, and must pay one-half of any shortfall.

(10) CONTINGENCIES

     The  Company  is a party to a number of  lawsuits  and claims  relating  to
     service  liability.  While  the  ultimate  results  of  lawsuits  or  other
     proceedings  against  the  Company  cannot  be  predicted  with  certainty,
     management does not expect that the settlement of these matters will have a
     material adverse effect on the financial position of the Company.



                                      F-10
<PAGE>
                       PRO FORMA FINANCIAL DATA

The following unaudited pro forma condensed  consolidated  financial  statements
have  been  prepared  to  reflect  the  acquisition  of  Call  America  and  the
acquisition of ITG. The unaudited pro forma condensed consolidated statements of
operations  of the Company for Fiscal 1995 gives effect to each of the Pro Forma
Transactions as if they had occurred at October 1, 1994. The unaudited pro forma
condensed  consolidated  statements  of  operations  of the Company for the nine
months ended June 30, 1996 gives effect to the Call America acquisition as if it
had occurred at October 1, 1995. The unaudited  condensed  consolidated  balance
sheet of the Company at June 30, 1996 gives  effect to the Call America as if it
had occurred June 30, 1996. The pro forma  adjustments  are based upon available
information  and certain  assumptions  that the Company  believes are reasonable
under the circumstances.

The unaudited pro forma condensed  consolidated  financial  statements and notes
thereto  should  be read in  conjunction  with  "Use of  Proceeds",  "Management
Discussion and Analysis",  the historical financial statements and notes thereto
included  elsewhere in this  Prospectus.  These  unaudited  pro forma  condensed
consolidated   financial   statements   and  notes   thereto  are  provided  for
informational  purposes  only and do not purport to be indicative of the results
that would have  actually  been  attained  had the Pro Forma  Transactions  been
completed on the dates indicated or that may be expected to occur in the future.


                                      F-11
<PAGE>
                           GST TELECOMMUNICATIONS, INC
            UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
                               AS OF JUNE 30, 1996
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                GST           CALL AMERICA
                                                             HISTORICAL       HISTORICAL (6)       ADJUSTMENTS           PRO FORMA
                                                             ----------       --------------       -----------           ---------
<S>                                                             <C>              <C>               <C>                   <C>   
ASSETS
Current assets:

          Cash and cash equivalents                             123,526                                                   123,526
          Receivables                                            11,447             2,204                                  13,651
          Investments                                             5,323             5,323
          Other current assets                                    3,432               204                                   3,636
                                                               --------          --------           --------             --------
                                                                143,728             2,408                                 146,136

Investment in joint ventures                                      1,872                                                     1,872
Property and equipment, net                                      73,816             2,458                                  76,274
Other assets, net                                                22,261             1,203             16,670(7)            40,134
Deferred financing costs, net                                     9,933                                                     9,933
                                                               --------          --------           --------             --------
                                                                251,611             6,069             16,670              274,350
                                                               ========          ========           ========             ========

LIABILITIES AND SHARE-
   HOLDERS' EQUITY
Current liabilities                                              16,145             3,455                                  19,600
Deferred compensation                                               151                                                       151
Capital lease obligations,                                          600             1,027                                   1,627
     less current portion
Long term debt, less                                            222,629             1,911                                 224,540
     current portion
Minority interest in subsidiaries                                 3,167                                                     3,167
Shareholders' equity                                              8,919              (324)            16,346(7)            25,265
                                                               --------           --------          --------             --------
                                                                                                         324(7)
                                                                                                    --------
                                                                251,611             6,069             16,670              274,350
                                                               ========          ========           ========             ========
</TABLE>


                                      F-12
<PAGE>
                           GST TELECOMMUNICATIONS, INC
       UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                    FOR THE NINE MONTHS ENDING JUNE 30, 1996
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>

                                                                GST           CALL AMERICA
                                                             HISTORICAL       HISTORICAL (6)       ADJUSTMENTS        PRO FORMA
                                                             ----------       --------------       -----------        ---------
<S>                                                         <C>               <C>                   <C>               <C>
Revenues:
         Telecommunication services                              19,453            13,934                                 33,387
         Telecommunication products                               5,771                                                    5,771
                                                            -----------       -----------          -----------       -----------
                                                                 25,224            13,934                    0            39,158
                                                            -----------       -----------          -----------       -----------

Cost of revenues:
         Telecommunication services                              20,715             6,686                                 27,401
         Telecommunication products                               2,803                                                    2,803
                                                            -----------       -----------          -----------       -----------
                                                                 23,518             6,686                    0            30,204
                                                            -----------       -----------          -----------       -----------
Gross profit                                                      1,706             7,248                    0             8,954
                                                            -----------       -----------          -----------       -----------
Operating expenses
         Sales, general and administration                       20,689             5,298                                 25,987
         Research and development                                   910                                                      910
         Depreciation and amortization                            5,385               486                2,347 (3)         8,218
                                                            -----------       -----------          -----------       -----------
Income (loss) from operations                                   (25,278)            1,464                2,347           (26,161)
                                                            -----------       -----------          -----------       -----------
Other expenses (income):
         Interest income                                         (4,209)           (4,209)
         Interest expense                                        14,801               388                                 15,189
         Other, net                                               1,564               324                                  1,888
         Minority interest in loss
             of subsidiaries                                       (334)                                                    (334)
                                                            -----------       -----------          -----------       -----------
Net income (loss)                                               (37,100)              752               (2,347)          (38,695)
                                                            ===========       ===========          ===========       ===========
Loss per share                                              $     (2.00)                                                   (1.95)
                                                            ===========                                              ===========
Weighted average  common and                                
         common equivalent shares
         outstanding                                         18,512,988                                               19,820,680 (5)
                                                            ===========                                              ===========
Pro forma ratio of earnings
         to fixed charges
</TABLE>

                                      F-13
<PAGE>
                           GST TELECOMMUNICATIONS, INC
       UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                     FOR THE YEAR ENDING SEPTEMBER 30, 1995
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                       GST        CALL AMERICA        ITG
                                                    HISTORICAL    HISTORICAL (1)    HISTORICAL (2)  ADJUSTMENTS        PRO FORMA
                                                   ------------  ----------------  ---------------  -----------      ------------
<S>                                                <C>            <C>               <C>            <C>               <C>
Revenues:
        Telecommunication services                      11,118         16,240             8,299                           35,657
        Telecommunication products                       7,563                                                             7,563
                                                   -----------    -----------       -----------    -----------       -----------
                                                        18,681         16,240             8,299                           43,220
                                                   -----------    -----------       -----------    -----------       -----------
Cost of revenues:
        Telecommunication services                      12,198          8,355             8,186                           28,739
        Telecommunication products                       3,096                                                             3,096
                                                   -----------    -----------       -----------    -----------       -----------
                                                        15,294          8,355             8,186                           31,835
                                                   -----------    -----------       -----------    -----------       -----------

Gross profit                                             3,387          7,885               113                           11,385
                                                   -----------    -----------       -----------    -----------       -----------
Operating expenses
        Sales, general and administration               11,373          6,796             1,567                           19,736
        Research and development                         1,271          1,271
        Depreciation and amortization                    2,374            636               280          3,129 (3)         6,638
                                                   -----------       -----------    -----------    -----------
                                                                                                           219 (4)
                                                                                                   -----------
Income (loss) from operations                          (11,631)           453            (1,734)        (3,348)          (16,260)
                                                   -----------    -----------       -----------    -----------       -----------
Other expenses (income):
        Interest income                                   (303)           (54)                                              (357)
        Interest expense                                   838            398                95                            1,331
        Other, net                                       1,513             95               258                            1,866
        Minority interest in loss
             of subsidiaries                            (2,364)                                                           (2,364)
                                                   -----------    -----------       -----------    -----------       -----------
Net income (loss)                                      (11,315)            14            (2,087)        (3,348)          (16,736)
                                                   ===========    ===========       ===========    ===========       ===========
Loss per share                                           (0.82)                                                            (1.11)
                                                   ===========                                                       ===========
Weighted average  common and                       
        common equivalent shares
        outstanding                                 13,780,796                                                        15,088,488 (5)
                                                   ===========                                                       ===========
</TABLE>


                                      F-14
<PAGE>
                     NOTES TO UNAUDITED PRO FORMA CONDENSED
                        CONSOLIDATED FINANCIAL STATEMENTS

                  (Dollars in thousands, except per share data)

(1)  Results are for the year ended December 31, 1995.

(2)  Results are for the seven months ended April 30, 1995 as ITG was  purchased
     effective May 1, 1995.

(3)  Reflects the amortization over 3 years of  $6,000 of customer lists and the
     amortization  over 10 years  of  $11,290  of  goodwill  resulting  from the
     purchase of Call America.

        Purchase price:

         1,307,692 shares at $12.50 per share              $16,346
                                                           =======
        Allocation of purchase price:

         Book value of tangible assets acquired              5,449
         Liabilities assumed                                (6,393)
         Customer Lists                                      6,000
         Goodwill                                           11,290
                                                            ------
                                                           $16,346
                                                           =======

(4)  Reflects the  additional  amortization  over 10 years of $3,758 in goodwill
     resulting  from the  purchase of ITG for the seven  months  ended April 30,
     1995.

        Purchase price:
         Cash and legal fees                               $    74
                                                           =======

        Allocation of purchase price
         Book value of assets acquired                     $ 3,235
         Liabilities assumed                                (6,919)
         Goodwill                                            3,758
                                                            ------
                                                           $    74
                                                           =======

(5)  Pro forma weighted average shares outstanding includes the 1,307,692 shares
     to be issued for the acquisition of Call America.

(6)  The revenues and expenses shown for Call America are the historical amounts
     for the nine months ended June 30, 1996. Because the accompanying pro forma
     Fiscal 1995  statement of  operations  includes Call  America's  historical
     operating  results  for its  fiscal  year ended  December  31,  1995,  Call
     America's  operating  results for the three months ended  December 31, 1995
     are included in both accompanying pro forma statements of operations.  Call
     America's  summary  financial  information for the three month period ended
     December 31, 1995 are as follows:

        Revenues                                           $ 4,236
        Costs and expenses                                   3,747
        Income from operations                                 489
        Non-operating expense                                  224
                                                            ------
        Net income                                         $   265
                                                           =======


(7)  Reflects the issuance of  1,307,692  common  shares at $12.50 per share for
     the purchase of Call America,  the elimination of Call America's net equity
     of $(324),  and the  allocation of the excess  purchase  price over the net
     book value of the assets acquired to customer lists and goodwill.

                                      F-15
<PAGE>
                        GLENN BURDETTE, PHILLIPS & BRYON
                          CERTIFIED PUBLIC ACCOUNTANTS
                                1150 PALM STREET
                           SAN LUIS OBISPO, CA 93401
                                 (805) 544-1441
                              (805) 805-4351 (FAX)







                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors
Call America Business Communications Corporation
San Luis Obispo, CA

We have  audited  the  accompanying  combined  balance  sheets  of Call  America
Business Communications Corporation (a California corporation) and affiliates as
of December 31, 1995 and 1994,  and the related  combined  statements of income,
changes in stockholders' equity (deficiency),  and cash flows for the years then
ended.  These  combined  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 combined financial statements.  An audit also
includes assessing the accounting principles used and significant estimates made
by  management,   as  well  as  evaluating  the  overall   financial   statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion,  the combined  financial  statements  referred to above  present
fairly,  in all  material  respects,  the  financial  position  of Call  America
Business  Communications  Corporation and affiliates as of December 31, 1995 and
1994,  and the results of its  operations  and its cash flows for the years then
ended in conformity with generally accepted accounting principles.



/s/ Glenn, Burdette, Phillips & Bryson
- --------------------------------------
Glenn, Burdette, Phillips & Bryson
Certified Public Accountants
A Professional Corporation


June 25, 1996



                                      F-16
<PAGE>



                CALL AMERICA BUSINESS COMMUNICATIONS CORPORATION
                                 AND AFFILIATES
                COMBINED BALANCE SHEETS JUNE 30, 1996 (unaudited)
                           DECEMBER 31, 1995 AND 1994


<TABLE>
<CAPTION>

                                                                                                              June 30,
                                                                   1994                    1995                 1996
                                                                   ----                    ----                 ----
                                                                                                            (Unaudited)
                        ASSETS
<S>                                                            <C>                    <C>                  <C>         
Current Assets
- --------------
Cash and cash equivalents                                      $       1,497          $          125       $        125
Accounts receivable, net of allowance for
   doubtful accounts of $50,000 and $49,093,                                                                  
   at 1994 and 1995, respectively                                  1,590,955               1,762,671          2,145,419
Income taxes receivable                                              104,568                  40,745             40,745
Equipment deposits                                                                            45,493             42,237
Other current assets                                                   5,297                  36,843            107,192
Deferred income taxes                                                 76,500                  55,000             55,000
                                                               -------------           -------------      -------------

    Total current assets                                           1,778,817               1,940,877          2,390,718

Equipment and leasehold improvements, net
- -----------------------------------------
  of accumulated depreciation of $3,181,678
  -----------------------------------------
  and $3,799,282, at 1994 and 1995,                                1,447,837               1,846,768          2,457,715
  ---------------------------------                            -------------           -------------      -------------
  respectively                                               
  ------------                                               

Other Assets
- ------------
Investment, at cost                                                   23,000                  23,000             23,000
Notes receivable from stockholders                                   416,803                 532,954            532,954
Notes receivable from related party                                                          205,285                  0
Miscellaneous deposits                                                23,936                  23,212             15,000
Deferred income taxes                                                 17,650                  25,650             25,650
Goodwill                                                                                     640,410            621,731
                                                               -------------           -------------       -------------
    Total other assets                                               481,389               1,450,511          1,218,335
                                                               -------------           -------------       -------------


    Total Assets                                                  $3,708,043              $5,238,156          $6,066,768
                                                                  ==========              ==========          ==========
</TABLE>


The accompanying notes are an integral part of these financial statements.

                                      F-17
<PAGE>

<TABLE>
<CAPTION>


                                                                                                              June 30,
                                                                     1994                   1995                1996
                                                                     ----                   ----                ----
                                                                                                             (Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

Current Liabilities
- -------------------
<S>                                                              <C>                      <C>                <C>       
Accounts payable                                                 $1,417,192               $1,284,893         $1,854,252
Accrued expenses                                                    567,109                  631,507            929,536
Bank overdrafts                                                     162,531                  254,234              3,290
Line of credit                                                      273,413                  100,000                 --
Current portion of notes payable                                    342,363                  450,368            400,512
Current portion of capital lease obligations                        185,033                  309,911            309,911
                                                                 ----------               ----------         ----------
    Total current liabilities                                     2,947,641                3,030,913          3,497,501
                                                                 ----------               ----------         ----------

Long-Term Liabilities
- ---------------------
Notes payable, less current portion                                 905,137                2,194,129          1,910,738
Capitalized lease obligations, less
current portion                                                     471,346                  824,544          1,026,747
                                                                 ----------               ----------         ----------
    Total long-term liabilities                                   1,376,483                3,018,673          2,937,485
                                                                 ----------               ----------         ----------

Commitments and Contingencies
- -----------------------------
Minority Interest                                                   (26,396)
- -----------------                                                ----------

Stockholders' Equity (Deficiency)
- ---------------------------------
Common stock                                                         26,262                   25,696             25,696
Retained earnings (deficit)                                        (837,126)                (837,126)          (393,914)
                                                                 ----------               ----------         ----------
    Total stockholders' equity (deficiency)                        (811,430)                (811,430)          (368,218)
                                                                 ----------               ----------         ----------

Total Liabilities and Stockholders' Equity
    (Deficiency)                                                 $3,708,043               $5,238,156         $6,066,768
                                                                 ==========               ==========         ==========
</TABLE>


The accompanying notes are an integral part of these financial statements.

                                      F-18
<PAGE>

<TABLE>
<CAPTION>



                CALL AMERICA BUSINESS COMMUNICATIONS CORPORATION
                                 AND AFFILIATES
                          COMBINED STATEMENTS OF INCOME
           FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) AND THE
                     YEARS ENDED DECEMBER 31, 1995 AND 1994



                                                                                                               Six Months Ended
                                                                                                               ------------------
                                                                     1994                  1995                  June 30, 1996
                                                                     ----                  ----                  --------------
                                                                                                                  (Unaudited)
                                                                                                                  -----------

<S>                                                            <C>                    <C>                      <C>       
Net sales and services                                           $14,383,649            $16,239,943             $9,679,930
Cost of goods and services                                         7,858,285              8,355,332              4,731,863
                                                               -------------           ------------            -----------

     Gross profit                                                  6,525,364              7,884,611              4,948,067

Selling, general, and administrative expenses                      6,992,670              7,431,568              4,041,493
                                                               -------------           ------------            -----------

Income (loss) from operations                                       (467,306)               453,043                906,574
- -----------------------------

Other income and expense
- ------------------------
Interest income                                                       85,287                 54,249
Interest expense                                                    (210,813)              (397,851)              (222,962)
                                                               -------------           ------------            ----------- 

Net income (loss) before provision for income taxes                 (592,832)               109,441                683,612
- ---------------------------------------------------

Provision for income taxes expense (benefit)                         (24,180)                95,200                240,400
                                                               -------------         --------------            ----------- 

Net income (loss)                                              $    (568,652)        $       14,241            $   443,212
- -----------------                                              =============         ==============            ===========

</TABLE>


The accompanying notes are an integral part of these financial statements.

                                      F-19
<PAGE>
<TABLE>
<CAPTION>

                CALL AMERICA BUSINESS COMMUNICATIONS CORPORATION
                                 AND AFFILIATES
       COMBINED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
           FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) AND THE
                     YEARS ENDED DECEMBER 31, 1995 AND 1994


                                                              Retained
                                                              --------
                                                              Earnings                 Common
                                                              --------                 ------
                                                              (Deficit)                Stock                 Total
                                                              ---------                -----                 -----

<S>                                                      <C>                         <C>                 <C>           
Balance, December 31, 1993                                    $ (47,295)             $26,262                 $ (21,033)
- --------------------------

Net loss                                                       (568,652)                                      (568,652)
                                                              ---------              -------                 --------- 

Balance, December 31, 1994                                     (615,947)              26,262                  (589,685)
- --------------------------

Net income                                                       14,241                                         14,241
Purchase of minority interest (deficit)                         (26,396)                                       (26,396)
Purchase of common stock                                       (209,024)                (566)                 (209,590)
                                                              ---------              -------                 --------- 

Balance, December 31, 1995                                     (837,126)              25,696                  (811,430)
- --------------------------

Net income for six months ended June 30, 1996
(Unaudited)                                                     443,212                                        443,212
                                                              ---------              -------                 --------- 
Balance, June 30, 1996 (Unaudited)                         $  (393,914)             $25,696               $  (368,218)
- -----------------------------------                         ===========              =======               =========== 
</TABLE>
                              


The accompanying notes are an integral part of these financial statements.

                                      F-20
<PAGE>

                CALL AMERICA BUSINESS COMMUNICATIONS CORPORATION
                                 AND AFFILIATES
                        COMBINED STATEMENTS OF CASH FLOWS
           FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) AND THE
                     YEARS ENDED DECEMBER 31, 1995 AND 1994

<TABLE>
<CAPTION>

                                                                                                      Six Months Ended
                                                                                                           June 30,
                                                                       1994             1995                 1996
                                                                       ----             ----                 ----
                                                                                                          (Unaudited)

<S>                                                                <C>              <C>                   <C>       
Cash Flows From Operating Activities
- ------------------------------------
Net income (loss)                                                  $ (568,652)      $    14,241           $  443,212
                                                                   -----------      -----------           ----------

 Adjustments to reconcile net income to
   net cash provided by operating
   activities:
   Depreciation and amortization                                      562,404           635,633              367,943
   Litigation settlement                                                                                     132,639
   Gain on disposal of assets                                                            (5,066)
   Minority interest in net loss                                       24,021
   (Increase) decrease in accounts receivable                           5,808          (171,716)            (515,387)
   Decrease in income taxes receivable                                                   63,823
   (Increase) decrease in equipment deposits                                            (45,493)               3,256
   (Increase) decrease in other current assets                         26,840           (31,546)             (70,349)
   Decrease in miscellaneous deposits                                     865               724                8,212
   (Increase) decrease in deferred income taxes                       (27,900)           13,500
   Increase (decrease) in accounts payable                            265,389          (132,299)             569,359
   Increase in accrued expenses                                        43,474            64,398              298,029
   Increase (decrease) in bank overdrafts                             162,531            91,703             (250,944)
                                                                  -----------       -----------         ------------
     Total adjustments                                              1,063,432           483,661               42,172
                                                                  -----------       -----------         ------------

        Net cash provided by operating activities                     494,780           497,902              985,970

Cash Flows From Investing Activities
- ------------------------------------
Purchases of equipment                                               (579,745)         (285,169)            (658,622)
Proceeds from sale of equipment                                                           5,600
Investment in stock                                                   (23,000)
                                                                  -----------       -----------         ------------

        Net cash used in investing activities                        (602,745)         (279,569)            (658,622)
</TABLE>

The accompanying notes are an integral part of these financial statements.


                                      F-21
<PAGE>

CALL AMERICA BUSINESS COMMUNICATIONS CORPORATION
AND AFFILIATES
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) AND THE
YEARS ENDED DECEMBER 31, 1995 AND 1994
PAGE 2

<TABLE>
<CAPTION>
                                                                                                         Six Months Ended
                                                                                                              June 30,
                                                                       1994                    1995             1996
                                                                       ----                    ----             ----
                                                                                                            (Unaudited)
Cash Flows from Financing Activities
- ------------------------------------
<S>                                                                 <C>                    <C>              <C>
Advances under notes receivable from related party                  $                      $(205,285)       $
Advances under notes receivable from stockholders                     (121,669)             (256,918)
Reduction in notes receivable from stockholders                                              140,767          205,285
Proceeds from line of credit                                           600,000               600,000
Payments on line of credit                                            (326,587)             (773,413)        (100,000)
Proceeds from notes payable                                            437,542               908,492
Principal payments on notes payable                                   (171,766)             (186,507)        (333,247)
Principal payments on stockholder notes payable                       (135,071)             (174,988)
Principal payments on capitalized leases                              (315,858)             (271,853)         (99,386)
                                                                    ----------              --------        --------- 

     Net cash used in financing activities                             (33,409)             (219,705)        (327,348)
                                                                    ----------              --------        --------- 

Net decrease in cash and cash equivalents                             (141,374)               (1,372)            -

Cash and Cash Equivalents, Beginning of Period                         142,871                 1,497              125
- ----------------------------------------------                      ----------              --------       ----------  

Cash and Cash Equivalents, End of Period                          $     1,497              $     125       $      125
- ----------------------------------------                          ============             =========       ==========

Supplemental Disclosures of Cash Flow Information
- -------------------------------------------------

  Interest                                                        $   210,961              $ 346,311       $  264,894
  Income taxes                                                    $     2,400                  2,400

Noncash Financing and Investing Activities
- ------------------------------------------

   Assets acquired under capital lease                            $   167,297              $ 749,929        $ 301,589
   Acquisition of common stock, for note payable                                           $ 209,590

   Increase in goodwill from purchase
     of common stock for not payable                                                       $ 640,410   
</TABLE>


The accompanying notes are an integral part of these financial statements.

                                      F-22
<PAGE>
                CALL AMERICA BUSINESS COMMUNICATIONS CORPORATION
                                 AND AFFILIATES
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1995 AND 1994


Note 1 - Summary of Significant Accounting Policies
- ---------------------------------------------------
A.    Organization and Nature of Business
      -----------------------------------

      Call America  Business  Communications  Corporation  (CA) was organized in
      1986 and  incorporated  under  the  laws of  California.  CA owns  100% of
      Private Exchange Network (PXN), Inc., dba Call America Salinas (CAS). CA's
      three  equal   shareholders   also  own  100%  of  Call  America  Business
      Communications   of  Fresno,   Inc.,   (CAF)  and  Call  America  Business
      Communications of Bakersfield,  Inc. (CAB). The financial statements of CA
      and it's  affiliates  CAF and CAB have been  combined (the Company) in the
      accompanying  financial  statements.   The  Company's  principle  business
      activity is providing  long-distance telephone and ancillary communication
      services to businesses and the general  public.  The Company grants credit
      to customers  on open  account,  substantially  all of whom are located in
      California.

B.    Fixed Assets
      ------------
      Fixed assets are shown at cost and are being depreciated or amortized over
      their  estimated  useful  lives  of  five to  thirty-  nine  years,  using
      accelerated and straight line methods of depreciation.

C.    Allowance for Doubtful Accounts
      -------------------------------
      Bad debts are provided on the allowance  method based on receivables  that
      have been  outstanding  for more than 120 days. The allowance for doubtful
      accounts  is  $49,093  and  $50,000,   at  December  31,  1995  and  1994,
      respectively.

D.    Use of Estimates
      ----------------
      The  preparation  of financial  statements  in conformity  with  generally
      accepted  accounting  principles requires management to make estimates and
      assumptions   that  affect  certain   reported  amounts  and  disclosures.
      Accordingly, actual results could differ from those estimates.

E.    Combined Presentation
      ---------------------
      The combined financial statements include the consolidated  balances of CA
      and its wholly owned subsidiary,  Private Exchange Network (PXN), Inc. All
      material  balances and transactions have been eliminated in consolidation.
      At December 31, 1994, CA only owned 75% of PXN. The remaining 25% has been
      shown as minority interest (deficit).

      The  consolidated  balances of CA have been combined with CAF and CAB. All
      intercompany  transactions  and  balances  have  been  eliminated  in  the
      combination.

                                      F-23
<PAGE>
CALL AMERICA BUSINESS COMMUNICATIONS CORPORATION
AND AFFILIATES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
PAGE 2


Note 1 - Summary of Significant Accounting Policies (continued)
- ---------------------------------------------------------------
F.    Revenue Recognition
      -------------------
      Income  from  services  is  recognized  when  the  contracted  service  is
      rendered.

G.    Common Stock
      ------------
      CA has 500,000  common  shares  authorized  without  nominal or par value.
      Total  shares  issued and  outstanding  are 300,000 common  shares  with a
      balance of $24,000 at December 31, 1995 and 1994.  CAB has 500,000  common
      shares  authorized  without nominal or par value.  Total shares issued and
      outstanding  are 300 and 400  common  shares  with a balance of $1,568 and
      $2,091 at December 31, 1995 and 1994, respectively. CAF has 500,000 common
      shares  authorized  without nominal or par value.  Total shares issued and
      outstanding  are 300 and 400 common shares with a balance of $128 and $171
      at December 31, 1995 and 1994, respectively.

H.    Cash Equivalents
      ----------------
      For  purposes  of the  statements  of cash flows,  the  Company  considers
      interest bearing investments due on demand to be cash equivalents.

Note 2 - Equipment and Leasehold Improvements
- ---------------------------------------------
The major categories of assets and the related accumulated  depreciation for the
years ending December 31, 1995 and 1994 are as follows:

                                                  1994           1995
                                                  ----           ----   
Office equipment, furniture & fixtures        $   411,300      $  412,801
Leasehold improvements                            162,603         173,163
Equipment                                       3,993,592       4,992,175
Vehicles                                           62,020          67,911
                                              -----------      ----------
                                                4,629,515       5,646,050
Less: accumulated depreciation                 (3,181,678)     (3,799,282)

                                              $ 1,447,837     $ 1,846,768
                                              ===========     =========== 

                                      F-24
<PAGE>

CALL AMERICA BUSINESS COMMUNICATIONS CORPORATION
AND AFFILIATES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
PAGE 3


Note 2 - Equipment and Leasehold Improvements (continued)
- ---------------------------------------------------------

Included in equipment  and  leasehold  improvements  are assets  acquired  under
capital lease totaling  $1,986,039 and $1,236,110 with accumulated  depreciation
of  $1,036,292  and  $731,493  at  December  31,  1995 and  1994,  respectively.
Depreciation  expense for assets  acquired under capital lease totaled  $304,799
and $265,658 at December 31, 1995 and 1994, respectively.

Note 3 - Investment
- -------------------

In  October  1994,  the  Company   purchased  230,000  shares  of  a  California
corporation, which provides a broad range of wide area electronic mail services.
The cost of the shares was $23,000, subject to a repurchase option.

The Company has a service  agreement with the corporation  whereby,  the Company
agrees to provide discounted  telecommunications services, Internet connectivity
and customer  billing  administration,  in consideration  for integrated  E-mail
services and the related E-mail services the corporation offers to its customers
for use  and  resale.  The  service  agreement  will  continue  in  force  until
terminated by either party upon a six month written notice.  If the agreement is
terminated  within the first three  years,  the  corporation  can  repurchase  a
portion of the shares at the original purchase price.

Note 4 - Related Party Transactions
- -----------------------------------

During 1994 and 1995, much of the communications traffic generated by CA and its
affiliates  was  centralized  by  routing  through  CA in San  Luis  Obispo.  In
addition,  customers billing and many accounting and administrative  duties were
moved to CA. As a result,  certain  costs  incurred by CA were  allocated to the
affiliates.

At December 31, 1994,  the Company had notes  receivable  from  stockholders  of
$416,803.  During the year ended December 31, 1995, $140,767 were written off as
uncollectible.  The balance of notes  receivable from  stockholders' at December
31, 1995, was $532,954. The notes bear interest at 7% per year.

During the year ended  December 31,  1995,  the Company  advanced  $205,285 to a
corporation, whose shareholders include those of the Company's.

Included in notes  payable at December  31, 1995 and 1994,  were notes  totaling
$1,255,862 and $525,383,  respectively,  that are due to one of the stockholders
of the Company. (See Note 6)

                                      F-25
<PAGE>
CALL AMERICA BUSINESS COMMUNICATIONS CORPORATION
AND AFFILIATES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
PAGE 4


Note 5 - Line of Credit
- -----------------------

The Company has a line of credit with a bank that allows for maximum  borrowings
of  $400,000.  The line  carries a variable  interest  rate,  which was 10.5% at
December  31, 1995 and 1994.  The  outstanding  balance at December 31, 1995 and
1994, was $100,000 and $273,413, respectively.

Note 6 - Long-Term Notes Payable
- --------------------------------
<TABLE>
<CAPTION>

Long-term notes payable consisted of the following as of December 31:
                                                                                               1994                  1995
                                                                                               ----                  ----

<S>                                                                                         <C>                   <C>
Notes payable, issued for repurchase of common stock (see Note 9), with an interest
rate of 10%, payable in monthly installments totaling of $18,060, due April, 2000.          $                     $  759,582

Note payable, unsecured, with an interest rate of 11%, payable in monthly
installments of $2,489, due April, 1995.                                                       9,850

Note payable, secured by equipment and guaranteed by stockholders, with an interest
rate of 9.26%, payable in monthly installments of $6,132, due May, 1995.                      24,061

Note payable, secured by an automobile, with an interest rate of 10.50%, payable in
monthly installments of $238, due November, 1995.                                              2,844

Note payable to a stockholder, unsecured, with an interest rate of 10%, payable in
monthly installments of $8,605, due August, 1999.                                            333,519                 281,886

Note payable to a stockholder, unsecured, with an interest rate of 15%, payable in
monthly installments of $9,648, due July, 1997.                                              191,864                 133,976

Note payable,  secured by equipment  and  guaranteed  by  stockholders,  with an
interest rate of 8.22%,  payable in monthly installments of $2,283, due January,
1999.
                                                                                              94,745                  78,017

Note payable,  secured by equipment and fixtures and guaranteed by stockholders,
with an interest rate of 8.22%, payable in monthly installments of $2,650, due
February, 1999.                                                                              111,857                  92,772

Note payable,  secured by equipment and fixtures and guaranteed by stockholders,
with an interest rate of 9.43%,  payable in monthly  installments  of $262,  due
June,
1998.                                                                                          9,340                   7,112

Note payable,  secured by equipment and fixtures and guaranteed by stockholders,
with an interest rate of 10.50%, payable in monthly installments of $5,881, due
October, 1999.                                                                               269,420                 227,373
</TABLE>

                                      F-26
<PAGE>

CALL AMERICA BUSINESS COMMUNICATIONS CORPORATION
AND AFFILIATES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
PAGE 5


<TABLE>
<CAPTION>

Note 6 - Long-Term Notes Payable (Continued)
- --------------------------------------------

<S>                                                                                        <C>                    <C>      
Note payable, secured by equipment, with a variable interest rate of 10.25%,
payable in monthly installments of $2,333, due March, 1997.                                $                      $   32,662

Note payable to a stockholder, unsecured, interest only payable in monthly
installments at 11%, due February 15, 1998.                                                                          840,000

Note payable, secured by automobiles, with an interest rate of 8.25%, payable in
monthly installments of $510, due August, 2000.                                                                       23,633

Note payable, secured by equipment, with an interest rate of 7%, payable in 
monthly installments of $5,000, due May, 1997.
                                                                                             200,000                 167,484
                                                                                           ---------              ----------

                                                                                           1,247,500               2,644,497

Less:  current portion                                                                      (342,363)               (450,368)
                                                                                           ---------              ----------

                                                                                          $  905,137              $2,194,129
                                                                                           =========              ==========

Maturities of notes payable are as follows:
                      1996                                                                                        $  450,368
                      1997                                                                                           540,671
                      1998                                                                                         1,234,704
                      1999                                                                                           349,567
                      2000                                                                                            69,187
                                                                                                                 -----------

                                                                                                                  $2,644,497
</TABLE>

Note 7 - Lease Obligations
- --------------------------
Capital Leases
- --------------
The Company leases certain  switching,  operator  service and billing  equipment
under long-term, noncancelable leases as described below:
<TABLE>
<CAPTION>

                                                                                                 1994                   1995
                                                                                                 ----                   ----
<S>                                                                                           <C>                 <C>      
Capital lease, with an interest rate of 13%, payable in
monthly installments of $16,088, due March, 1995.                                             $  31,694           $

Capital lease, with an interest rate of 7.42%, payable in
monthly installments of $535, due January, 1999.                                                 22,573                17,658

Capital lease, with an interest rate of 9.50%, payable in
monthly installments of $351, due June, 1998.                                                    12,249                 9,616
</TABLE>
                                      F-27
<PAGE>

CALL AMERICA BUSINESS COMMUNICATIONS CORPORATION
AND AFFILIATES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
PAGE 6

<TABLE>
<CAPTION>

Note 7 - Lease Obligations (Continued)
- --------------------------------------

Capital Leases (Continued)
- --------------------------

<S>                                                                   <C>                           <C>          
Capital lease, with an interest rate of 8.74%, payable in
monthly installments of $1,883, due January, 1998.                    $      56,529                 $      39,742

Capital lease, with a variable interest rate of 11%, payable in
monthly installments of $15,986, due March, 1998.                           488,290                       373,697

Capital lease, with an interest rate of 18.64%, payable in
monthly installments of $620, due May, 1998.                                 18,693                        14,382

Capital lease, with an interest rate of 17.55%, payable in
monthly installments of $166, due June, 1996.                                 2,490                           797

Capital lease, with an interest rate of 15.39%, payable in
monthly installments of $224, due June, 1995.                                 1,702

Capital lease, with a variable interest rate of 13.90%, payable
in monthly installments of $11,581, due December, 2000.                                                   459,569

Capital lease, with an interest rate of 11.91%, payable in
monthly installments of $4,278, due March, 1999.                                                          143,980

Capital lease, with an interest rate of 17.05%, payable in
monthly installments of $428, due December, 1998.                            12,247                         9,246

Capital lease, with an interest rate of 13.67%, payable in
monthly installments of $428, due May, 1997.                                  9,912                         5,879

Capital lease, with an interest rate of 15.17%, payable in
monthly installments of $2,411, due May, 1998.                                                             59,889
                                                                        -----------                    ----------  
                                                                            656,379                     1,134,455

Less:  current portion                                                     (185,033)                     (309,911)
                                                                        -----------                    ----------  

                                                                        $   471,346                   $   824,544
                                                                        ===========                   ===========
</TABLE>

Future minimum lease  commitments at December 31, 1995, under capital leases are
as follows:

               1996                                       $   452,170
               1997                                           449,354
               1998                                           263,565
               1999                                           161,426
               2000                                            76,937
                                                          -----------
                                                            1,403,452
               Less interest portion                         (268,997)
                                                             --------
                                                           $1,134,455
                                                           ==========

                                      F-28
<PAGE>

CALL AMERICA BUSINESS COMMUNICATIONS CORPORATION
AND AFFILIATES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
PAGE 7



Operating Leases
- ----------------

The Company leases office space and equipment  under various  operating  leases.
Minimum payments under operating leases are as follows:

               1996                                $235,479
               1997                                 202,388
               1998                                 169,520
               1999                                 154,944
                                                   --------

                                                   $762,331
                                                   ========

Rent expense for the years ended  December  31, 1995 and 1994,  was $260,180 and
$244,979, respectively.

Note 8 - Income Taxes
- ---------------------

The  provision for federal and state income taxes at December 31, 1995 and 1994,
consisted of the following:

                                            1994                 1995
                                            ----                 ----
      Federal income tax current          $                   $ 74,627
      Federal income tax deferred           (5,000)             (6,000)

      State income tax current               3,200               7,073
      State income tax deferred            (22,380)             19,500
                                         ----------           --------
                                         $ (24,180)           $ 95,200
                                         ==========           ========

The deferred tax assets are  comprised of the following at December 31, 1995 and
1994:
<TABLE>
<CAPTION>


                                               1994                                             1995
                                    --------------------------------                -------------------------------
                                    Current                Long-Term                Current                Long-Term
                                    -------                ---------                -------                ---------
<S>                                 <C>                    <C>                      <C>                    <C> 
Deferred tax assets:
  Federal                           $ 113,500              $  36,000                $ 42,500               $ 42,500
  State                                33,500                  7,900                  12,500                  9,400   
                                       ------                  -----                 -------                -------   
                                      147,000                 43,900                  55,000                 51,900
Deferred tax assets valuation
  allowance                           (70,500)               (26,250)                                       (26,250)
                                     --------                -------                --------               --------

                                    $  76,500              $  17,650                $ 55,000               $ 25,650
                                    =========              =========                ========               ========
</TABLE>

                                      F-29
<PAGE>

CALL AMERICA BUSINESS COMMUNICATIONS CORPORATION
AND AFFILIATES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
PAGE 8


The above tax assets consist of the following at December 31, 1995 and 1994:

                                                  1994            1995
                                                  ----            ----

Accrued vacation                               $  36,000       $ 38,000
State taxes                                          500          1,000
Allowance for bad debts                           19,500         16,000
Net operating loss carryforward                  134,900         51,900
                                                 -------         ------
  Gross deferred tax asset                       190,900        106,900
          
Deferred tax asset valuation                     (96,750)       (26,250)
                                               ---------       --------
                                               $  94,150       $ 80,650
                                               =========       ========    

The provision for income tax differs from the amount of income tax determined by
applying  the  federal  statutory  rate of 35% due to state taxes net of federal
benefit, alternative minimum tax, the effect of graduated tax rates, and certain
nondeductible  expenses,  including  officers'  life  insurance,  penalties  and
political contributions.

CA and its subsidiary  did not file a consolidated  tax return prior to the year
ending December 31, 1995. Its subsidiary has net operating  losses that can only
be used to offset future subsidiary  revenue.  Those net operating losses expire
as follows:

                                  Federal                State
                                  -------                -----
December 31:

        1998                      $                    $21,000
        2002                                            29,000

 December 31:
                                  64,000                  
        2007                      41,000                  
        2008                      55,000                  
        2010                      ------               -------
                                $160,000               $50,000
                                ========               =======

Note 9 - Sale of Stock
- ----------------------

During the year ended December 31, 1995, CA's subisdiary purchased 25% of its
outstanding stock by issuing a note payable for $640,410. This transaction made
CA the 100% owner of its subsidiary. This transaction was accounted for using
the purchase method for business combinations and resulted in goodwill of
$640,410, which the Company is amortizing over 40 years using the straight line
method.

                                      F-30
<PAGE>
CALL AMERICA BUSINESS COMMUNICATIONS CORPORATION
AND AFFILIATES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
PAGE 9


Note 9 - Sale of Stock (Continued)
- ---------------------------------

In addition, CAF and CAB each purchased 25% of their outstanding shares of
common stock by each issuing a note payable for $104,795.

Note 10 - Litigation Gains and Losses
- -------------------------------------

During the year ended  December 31, 1995 and 1994, the Company was involved in a
lawsuit with a software  vendor for a product that did not perform.  At December
31,  1994,  the outcome  was not known and the Company had accrued  $45,000 as a
possible loss contingency.  At December 31, 1995 the Company  determined that no
loss contingency was necessary and the accrual was reversed.  Subsequent to year
end, the Company received a favorable settlement of $132,639.

Note 11 - Contingent Liability
- ------------------------------

The Company has a provision in the  employment  contract for one of its officers
in which it agrees to pay the officer  his current  salary for life in the event
he should become disabled.

Note 12 - Subsequent Event
- --------------------------

Subsequent to December 31, 1995, the Company entered into  negotiations with GST
Telecom, Inc. (GST Net), for a corporate combination.  As of the report date, no
formal agreement had been reached.



                                      F-31
<PAGE>
                                     PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14.          OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

         The expenses in connection  with the issuance and  distribution  of the
securities being registered, all of which will be paid by the Registrant, are as
follows:

SEC Registration Fee...............................              $15,453.15
Accounting Fees and Expenses.......................                7,500.00
Legal Fees and Expenses............................               10,000.00
Blue Sky Fees and Expenses.........................                  550.00
Miscellaneous Expenses.............................                  496.85
                                                              -------------
Total..............................................             $ 34,000.00
                                                              =============

ITEM 15.          INDEMNIFICATION OF DIRECTORS AND OFFICERS

                  Except as hereinafter set forth, there is no statute,  charter
provision,  by-law,  contract or other  arrangement  under which any controlling
person,  director  or officer of the  Company is insured or  indemnified  in any
manner against liability which he may incur in his capacity as such.

                  The  Company's   authority  to  indemnify  its  directors  and
officers  is governed by the  provisions  of Section 124 of the Canada  Business
Corporations Act, as follows:

                  (1)  INDEMNIFICATION.  Except in respect of an action by or on
behalf of the  corporation or body corporate to procure a judgment in its favor,
a corporation may indemnify a director or officer of the  corporation,  a former
director  or  officer  of the  corporation  or a person who acts or acted at the
corporation's  request as a director or officer of a body corporate of which the
corporation  is or was a  shareholder  or  creditor,  and his  heirs  and  legal
representatives,  against all costs,  charges and expenses,  including an amount
paid to settle an action or satisfy a  judgment,  reasonably  incurred by him in
respect of any civil,  criminal or administrative  action or proceeding to which
he is made a party by reason of being or having  been a  director  or officer of
such corporation or body corporate, if

                  (a)      he acted  honestly  and in good  faith with a view to
                           the best interests of the corporation; and

                  (b)      in the case of a criminal or administrative action or
                           proceeding that is enforced by a monetary penalty, he
                           had reasonable grounds for believing that his conduct
                           was lawful.

                  (2)  INDEMNIFICATION IN DERIVATIVE  ACTIONS. A corporation may
with the approval of a court indemnify a person referred to in subsection (1) in
respect of an action by or on behalf of the  corporation  or body  corporate  to
procure a judgment in its favor,  to which he is made a party by reason of being
or having been a director or an officer of the  corporation  or body  corporate,
against all costs, charges and expenses reasonably incurred by him in connection
with such action if he fulfills the conditions set out in paragraphs  (1)(a) and
(b).

                  (3)  INDEMNITY AS OF RIGHT.  Notwithstanding  anything in this
section,  a person  referred to in subsection  (1) is entitled to indemnity from
the  corporation  in respect  of all  costs,  charges  and  expenses  reasonably
incurred  by him in  connection  with the  defense  of any  civil,  criminal  or
administrative  action  or  proceeding  to which he is made a party by reason of
being or having


                                      II-1
<PAGE>
been a director or officer of the corporation or body corporate, if the person
seeking indemnity

                  (a)      was  substantially  successful  on the  merits in his
                           defense of the action or proceeding, and

                  (b)      fulfills the conditions set out in paragraphs  (1)(a)
                           and (b).

                  (4)  DIRECTORS'  AND OFFICERS'  INSURANCE.  A corporation  may
purchase  and  maintain  insurance  for the  benefit of any person  referred  to
subsection (1) against any liability incurred by him

                  (a)      in his  capacity  as a  director  or  officer  of the
                           corporation,  except where the  liability  relates to
                           his failure to act  honestly and in good faith with a
                           view to the best interests of the corporation; or

                  (b)      in his  capacity  as a director or officer of another
                           body  corporate  where  he  acts  or  acted  in  that
                           capacity at the corporation's  request,  except where
                           the liability  relates to his failure to act honestly
                           and in good faith  with a view to the best  interests
                           of the body corporate.

                  (5)  APPLICATION TO COURT. A corporation or a person  referred
to in  subsection  (1) may apply to a court for an order  approving an indemnity
under  this  section  and the court may so order and make any  further  order it
thinks fit.

                  (6) NOTICE TO DIRECTOR.  An  applicant  under  subsection  (5)
shall give the Director  notice of the  application and the Director is entitled
to appear and be heard in person or by counsel.

                  (7) OTHER NOTICE.  On an application under subsection (5), the
court may order notice to be given to any  interested  person and such person is
entitled to appear and be heard in person or by counsel.

                  The Company's  by-laws provide that every director and officer
of the Company and his heirs, executors, administrators and other legal personal
representatives  shall be indemnified and held harmless from and against (a) any
liability  and all costs,  charges and  expenses  that he sanctions or incurs in
respect of any action,  suit or proceeding that is proposed or commenced against
him for or in respect of  anything  done or  permitted  by him in respect of the
execution  of the  duties of his  office and (b) all other  costs,  charges  and
expenses that he sustains or incurs in respect of the affairs of the Company.

                  The Company  maintains a  $5,000,000  directors  and  officers
liability insurance policy.

ITEM 16.          EXHIBITS.

                  EXHIBIT INDEX

EXHIBIT

         5        Opinion of Olshan Grundman Frome & Rosenzweig LLP with respect
                  to the securities registered hereunder.

      23(a)       Consent of KPMG Peat Marwick LLP.

      23(b)       Consent of KPMG Peat Marwick Thorne.

      23(c)       Consent of KPMG Peat Marwick LLP.


                                      II-2
<PAGE>
      23(d)       Consent of KPMG Peat Marwick Thorne.

      23(e)       Consent of Glenn, Burdette, Phillips & Bryson.

      23(f)       Consent  of  Olshan Grundman  Frome & Rosenzweig LLP (included
                  within Exhibit 5).

      24(a)       Powers of Attorney (included on Page II-4).

ITEM 17.          UNDERTAKINGS

                  The undersigned registrant hereby undertakes:

                           a.       To file,  during any period in which  offers
                                    or sales are being  made,  a  post-effective
                                    amendment to this registration  statement to
                                    include  any   material   information   with
                                    respect  to the  plan  of  distribution  not
                                    previously  disclosed  in  the  registration
                                    statement  or any  material  change  to such
                                    information in the registration statement.

                           b.       That,  for the  purpose of  determining  any
                                    liability  under the Securities Act of 1933,
                                    each such post-effective  amendment shall be
                                    deemed  to be a new  registration  statement
                                    relating to the securities  offered therein,
                                    and the offering of such  securities at that
                                    time shall be deemed to be the initial  bona
                                    fide offering thereof.

                           c.       To remove  from  registration  by means of a
                                    post-effective    amendment   any   of   the
                                    securities  being  registered  which  remain
                                    unsold at the termination of the offering.

                  The  undersigned   registrant   hereby  undertakes  that,  for
purposes of determining  any liability  under the  Securities Act of 1933,  each
filing of the  registrant's  annual report pursuant to Section 13(a) or 15(d) of
the Securities  Exchange Act of 1934 (and, where  applicable,  each filing of an
employee  benefit  plan's  annual  report  pursuant  to  Section  15(d)  of  the
Securities  Exchange  act of 1934)  that is  incorporated  by  reference  in the
registration  statement  shall  be  deemed  to be a new  registration  statement
relating to the securities offered therein,  and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

                  Insofar as indemnification  for liabilities  arising under the
Securities Act of 1933 may be permitted to directors,  officers and  controlling
persons of the registrant  pursuant to the foregoing  provisions,  or otherwise,
the  registrant  has been  advised  that in the  opinion of the  Securities  and
Exchange  Commission such  indemnification is against public policy as expressed
in the Act and is,  therefore,  unenforceable.  In the  event  that a claim  for
indemnification  against  each such  liabilities  (other than the payment by the
registrant of expenses  incurred or paid by a director,  officer or  controlling
person of the  registrant  in the  successful  defense  of any  action,  suit or
proceeding)  is  asserted by such  director,  officer or  controlling  person in
connection with the securities being registered,  the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit  to a  court  of  appropriate  jurisdiction  the  question  whether  such
indemnification  by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.


                                      II-3
<PAGE>
                                   SIGNATURES

Pursuant to the  requirements  of the  Securities  Act of 1933,  the  registrant
certifies  that it has  reasonable  grounds to believe  that it meets all of the
requirements  for  filing  on Form S-3 and has  duly  caused  this  registration
statement  to be  signed  on its  behalf  by  the  undersigned,  thereunto  duly
authorized in the City of Vancouver,  Province of British  Columbia,  Country of
Canada on this 6th day of November, 1996.

                                GST TELECOMMUNICATIONS, INC.
                                ---------------------------------------------
                                        (Registrant)

                                By:   /S/ W. GORDON BLANKSTEIN
                                   ------------------------------------------
                                      W. Gordon Blankstein, Chairman
                                      of the Board

                       POWERS OF ATTORNEY AND SIGNATORIES

Pursuant to the  requirements  of the Securities  Act of 1933, as amended,  this
Registration  Statement  has  been  signed  by  the  following  persons  in  the
capacities  and on the date  indicated.  Each of the  undersigned  officers  and
directors of GST  Telecommunications,  Inc.  hereby  constitutes and appoints W.
Gordon  Blankstein,  John Warta,  Stephen Irwin and Robert H. Hanson and each of
them singly, as true and lawful  attorneys-in-fact and agents with full power of
substitution and resubstitution,  for him in his name in any and all capacities,
to sign any and all  amendments  (including  post-effective  amendments) to this
Registration  Statement  and to file the same,  with all exhibits  thereto,  and
other  documents  in  connection  therewith,  with the  Securities  and Exchange
Commission and to prepare any and all exhibits  thereto,  and other documents in
connection  therewith,  and to make any applicable  state securities law or blue
sky filings,  granting unto said  attorneys-in-fact  and agents,  full power and
authority to do and perform each and every act and thing  requisite or necessary
to be done to enable GST Telecommunications,  Inc. to comply with the provisions
of the  Securities  Act  of  1933,  as  amended,  and  all  requirements  of the
Securities and Exchange  Commission,  as fully to all intents and purposes as he
might or could do in  person,  hereby  ratifying  and  confirming  all that said
attorneys-in-fact  and agents, or their substitute or substitutes,  may lawfully
do or cause to be done by virtue hereof.

<TABLE>
<CAPTION>
               SIGNATURE                              TITLE                                 DATE
               ---------                              -----                                 ----
<S>                                        <C>                                         <C>
/S/ W. GORDON BLANKSTEIN                   Chairman of the Board
- ----------------------------------------
         (W. Gordon Blankstein)                                                        November 6, 1996

/S/ JOHN WARTA                             President, Chief Executive Officer
- ----------------------------------------   (Principal Executive Officer) and           
              (John Warta)                 Director                                    November 6, 1996
                                        

/S/ ROBERT H. HANSON                       Senior Vice President - Corporate
- ----------------------------------------   Development, Chief Financial         
           (Robert H. Hanson)              Officer (Principal Financial                November 6, 1996
                                           Officer) and Director                
                                        

/S/ CLIFFORD V. SANDER                     Senior Vice President, Treasurer            November 6, 1996
- ----------------------------------------   and Chief Accounting Officer        
          (Clifford V. Sander)             (Principal Accounting Officer)      
                                        

/S/ STEPHEN IRWIN                          Vice Chairman of the Board,
- ----------------------------------------   Secretary and Director     
       (Stephen Irwin)                                                                 November 6, 1996
                                        
/S/ IAN WATSON                             Director
- ----------------------------------------
       (Ian Watson)                                                                    November 6, 1996

/S/ PETER E. LEGAULT                       Director
- ----------------------------------------
           (Peter E. Legault)                                                          November 6, 1996

/S/ JACK G. ARMSTRONG                      Director
- ----------------------------------------
           (Jack G. Armstrong)                                                         November 6, 1996

/S/ TAKASHI YOSHIDA                        Director
- ----------------------------------------
            (Takashi Yoshida)                                                          November 6, 1996
</TABLE>


                                      II-4
<PAGE>
<TABLE>
<CAPTION>
               SIGNATURE                              TITLE                                 DATE
               ---------                              -----                                 ----
<S>                                        <C>                                         <C>
/S/ THOMAS E. SAWYER                       Director
- ----------------------------------------
           (Thomas E. Sawyer)                                                          November 6, 1996

The Company's Authorized Representative
in the United States

/S/ ROBERT H. HANSON
- ----------------------------------------
Robert H. Hanson                                                                       November 6, 1996
</TABLE>


                                      II-5

                     OLSHAN GRUNDMAN FROME & ROSENZWEIG LLP
                   505 PARK AVENUE, NEW YORK, NEW YORK 10022
                                 (212) 753-7200


                                                    November 6, 1996


Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza

Washington, D.C.  20549

                  Re:      GST Telecommunications, Inc. -
                           REGISTRATION STATEMENT ON FORM S-3

Gentlemen:

                  Reference  is made to the  Registration  Statement on Form S-3
dated the date hereof (the "Registration Statement"),  filed with the Securities
and Exchange Commission by GST  Telecommunications,  Inc., a federally chartered
Canadian corporation (the "Company").  The Registration Statement relates to the
issuance of  5,164,089  Common  Shares,  without par value,  of the Company (the
"Shares") to be issued by the Company in connection  with the  conversion of the
Company's 13-7/8% Convertible Senior  Subordinated  Discount Notes due 2005 (the
"Convertible Notes").

                  We  advise  you  that we have  examined  originals  or  copies
certified  or  otherwise  identified  to our  satisfaction  of the  Articles  of
Incorporation  and By-laws of the  Company,  minutes of meetings of the Board of
Directors and shareholders of the Company and such other documents,  instruments
and  certificates  of  officers  and  representatives  of the Company and public
officials,  and we  have  made  such  examination  of  law,  as we  have  deemed
appropriate as the basis for the opinion hereinafter  expressed.  In making such
examination, we have assumed the genuineness of all signatures, the authenticity
of all documents  submitted to us as originals,  and the  conformity to original
documents of documents submitted to us as certified or photostatic copies.

                  Based  upon  the  foregoing,  we are of the  opinion  that the
Common Shares, when issued in accordance with the terms of the

<PAGE>
Securities and Exchange Commission
November 6, 1996
Page -2-

indenture  relating to the Convertible  Notes,  will be duly and validly issued,
fully paid and non-assessable.

                  We are members of the Bar of the State of New York and, except
as stated below, we express no opinion as to the laws of any jurisdiction  other
than the State of New York and the federal laws of the United States of America.
With respect to the opinion set forth above, we have relied exclusively upon the
opinion of O'Neill & Company,  an association of independent  law  corporations,
Vancouver, British Columbia.

                  We advise you that  Stephen  Irwin,  the Vice  Chairman of the
Board and Secretary of the Company,  is of counsel to this firm.  Mr. Irwin owns
61,345  Common  Shares of the Company and holds options and warrants to purchase
an aggregate of 615,000 Shares.  In addition,  other attorneys of this firm hold
options to purchase Common Shares.

                  We consent  to the  reference  to this firm under the  caption
"Legal Matters" in the Prospectus.

                                      Very truly yours,

                                      /S/ OLSHAN GRUNDMAN FROME & ROSENZWEIG LLP
                                      ------------------------------------------
                                      OLSHAN GRUNDMAN FROME & ROSENZWEIG LLP

                                                                   EXHIBIT 23(a)


               CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS




The Board of Directors
GST Telecommunications, Inc.:


We consent to the use of our report  dated  November  17,  1995  except for note
12(b)  and (c)  which  are as of  December  19,  1995  and  November  20,  1995,
respectively,  incorporated by reference herein in the Registration Statement on
Form  S-3,  dated  November 6,  1996,  of GST  Telecommunications,  Inc.  and to
the references to our firm under the "Experts" heading in the prospectus.


                                                       KPMG PEAT MARWICK LLP


Portland, Oregon
November 6, 1996





                                                  EXHIBIT 23(b)

KPMG PEAT MARWICK THORNE                          Telephone No. (604) 691-3000
CHARTERED ACCOUNTANTS                             (604) 691-3031
BOX 10426
777 DUNSMUIR STREET
VANCOUVER, BC V7Y 1K3
CANADA

ACCOUNTANTS' CONSENT


To the Directors of
GST Telecommunications, Inc.
(formerly Greenstar Telecommunications Inc.)


We consent to incorporation by reference in the registration  statement filed on
November 6, 1996 on Form S-3 of GST Telecommunications, Inc. (formerly Greenstar
Telecommunications  Inc.) of our report dated December 8, 1994,  relating to the
consolidated balance sheets of GST Telecommunications,  Inc. as of September 30,
1994 and the related consolidated  statements of operations and deficit and cash
flows for the thirteen  months ended  September  30, 1994 and for the year ended
August 31, 1993, which report appears in the September 30, 1995 Annual Report on
Form 20-F of GST  Telecommunications,  Inc., and to the reference to our firm as
experts in the registration statement.


KPMG

Chartered Accountants
Vancouver, Canada
November 6, 1996

Member Firm of
Klynveld Peat Marwick Goerdeler





                                                    EXHIBIT 23(c)


               CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


The Board of Directors
GST Telecommunications, Inc.:

We  consent  to  the  use  of  our  report  over  the  financial  statements  of
International Telemanagement Group, Inc. included herein, dated July 21, 1995 in
the  Registration  Statement  on  Form  S-3,  dated  November  6,  1996,  of GST
Telecommunications,  Inc. and to the  references to our firm under the "Experts"
heading in the prospectus.


                                             KPMG PEAT MARWICK LLP



Detroit Michigan
November 6, 1996




                                                               EXHIBIT 23(d)

KPMG PEAT MARWICK THORNE                      Telephone No. (604) 691-3000
CHARTERED ACCOUNTANTS                                       (604) 691-3031
BOX 10426
777 DUNSMUIR STREET
VANCOUVER, BC V7Y 1K3
CANADA



                          INDEPENDENT AUDITORS' CONSENT


The Board of Directors
GST Telecommunications, Inc.


We consent to the use of our  reports  dated  November  11, 1994 and January 12,
1994 except for note 4 which is as of January 21, 1994,  relating to the balance
sheets of  IntelCom-Greenstar  Joint  Venture as of September 30, 1994 and 1993,
respectively and the related statements of operations and participants'  equity,
and  financial  position  for the  years  ended  September  30,  1994  and  1993
respectively  included in Form 20-F,  incorporated  herein by  reference  in the
Registration   Statement  of  Form  S-3,   dated   November  6,  1996,   of  GST
Telecommunications,  Inc. and to the  references to our firm under the "Experts"
heading in the prospectus.


KPMG



Chartered Accountants

Edmonton, Canada
November 6, 1996



                                                   EXHIBIT 23(e)


               CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


The Board of Directors
GST Telecommunications, Inc.:

We  consent  to the use of our  report  over the  financial  statements  of Call
America  Business  Communications  Corporation and Affiliates  included  herein,
dated November 6, 1996 in the Registration Statement on Form S-3, dated November
6, 1996 of GST Telecommunications,  Inc. and to the references to our firm under
the "Experts" heading in the prospectus.


                                         GLENN, BURDETTE PHILLIPS & BRYSON



San Luis Obispo, California
 November 6, 1996



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