<PAGE>
 
    
 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 11, 1996     
                                                   
                                                REGISTRATION NO. 333-10875     
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
                      SECURITIES AND EXCHANGE COMMISSION
 
                            WASHINGTON, D.C. 20549
 
                              ------------------
                                
                             AMENDMENT NO. 1     
                                       
                                    TO     
                                   FORM S-1
                            REGISTRATION STATEMENT
                                     UNDER
                          THE SECURITIES ACT OF 1933
 
                              ------------------
 
                 PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
        DELAWARE                     4813                    54-1708481
     (STATE OR OTHER           (PRIMARY STANDARD          (I.R.S. EMPLOYER
     JURISDICTION OF              INDUSTRIAL             IDENTIFICATION NO.)
    INCORPORATION OR          CLASSIFICATION CODE
      ORGANIZATION)                 NUMBER)
                     
                              8180 GREENSBORO DRIVE
                                  SUITE 1100
                            MCLEAN, VIRGINIA 22102
                                (703) 848-4625
  (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
                   REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
                               ------------------
                                  K. PAUL SINGH
                     CHAIRMAN AND CHIEF EXECUTIVE OFFICER
                             8180 GREENSBORO DRIVE
                                  SUITE 1100
                            MCLEAN, VIRGINIA 22102
                                (703) 848-4625
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
                             OF AGENT FOR SERVICE)
                               ------------------
                                   COPIES TO:
        JAMES D. EPSTEIN, ESQ.                DAVID J. BEVERIDGE, ESQ.
      PEPPER, HAMILTON & SCHEETZ                 SHEARMAN & STERLING
         3000 TWO LOGAN SQUARE                  599 LEXINGTON AVENUE
      PHILADELPHIA, PA 19103-2799                NEW YORK, NY 10022
            (215) 981-4000                         (212) 848-4000
                               ------------------
   APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
                              ------------------
  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. [_]
  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     
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

<TABLE>   
<CAPTION>
                                                        PROPOSED
                                          PROPOSED      MAXIMUM
 TITLE OF EACH CLASS OF     AMOUNT        MAXIMUM      AGGREGATE    AMOUNT OF
    SECURITIES TO BE         TO BE     OFFERING PRICE   OFFERING   REGISTRATION
       REGISTERED        REGISTERED(1)   PER SHARE      PRICE(2)       FEE
- -------------------------------------------------------------------------------
<S>                      <C>           <C>            <C>          <C>
Common Stock, $.01 par
 value.................    6,900,000       $16.00     $110,400,000  $37,060(3)
</TABLE>
    
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
   
(1) Includes 900,000 shares of Common Stock that the Underwriters have the
    option to purchase to cover over-allotments, if any.     
   
(2) Estimated solely for purposes of determining the registration fee in
    accordance with Rule 457(a).     
   
(3) Including $29,742 of which was paid in connection with the initial filing
    of the Registration Statement.     
 
  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 THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

<PAGE>
 
                               EXPLANATORY NOTE
   
  This registration statement contains a prospectus relating to a public
offering in the United States (the "U.S. Offering") of an aggregate of
4,800,000 common shares, par value $0.01 per share (the "Common Shares"), of
Primus Telecommunications Group, Incorporated, together with separate
prospectus pages relating to a concurrent offering outside the United States
(the "International Offering") of an aggregate of 1,200,000 Common Shares. The
complete prospectus for the U.S. Offering follows immediately after this
Explanatory Note. After such prospectus are the following alternate pages for
the International Offering: a front cover page and a back cover page. All
other pages of the prospectus for the U.S. Offering are to be used for both
the U.S. Offering and the International Offering. Ten copies of the complete
prospectus for each of the U.S. and International Offerings in the exact forms
in which they are to be used after effectiveness will be filed with the
Securities and Exchange Commission pursuant to Rule 424(b).     

<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.                                                               +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
                  
               Subject to Completion, dated October 11, 1996     
 
PROSPECTUS
                                
                             6,000,000 SHARES     
                            
                                
                            [INSERT LOGO HERE]     
                                  COMMON STOCK
 
                                 -------------
   
  All of the shares of Common Stock, par value $0.01 per share (the "Common
Stock"), of Primus Telecommunications Group, Incorporated ("Primus" or the
"Company") offered hereby are being offered by the Company. Of the 6,000,000
shares of Common Stock being offered, 4,800,000 shares are being offered
initially in the United States and Canada (the "U.S. Offering") by the U.S.
Underwriters (as defined in "Underwriting") and 1,200,000 shares are being
concurrently offered outside the United States and Canada (the "International
Offering") by the International Managers (as defined in "Underwriting" and,
together with the U.S. Underwriters, the "Underwriters"). The U.S. Offering and
the International Offering are collectively referred to as the "Offering."     
   
  Prior to this offering, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering
price for the Common Stock will be between $14.00 and $16.00 per share. See
"Underwriting" for a discussion of the factors considered in determining the
initial public offering price. Application has been made to have the Common
Stock approved for quotation on the Nasdaq National Market under the symbol
"PRTL."     
 
                                 -------------
 
    THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
                    SEE "RISK FACTORS" BEGINNING ON PAGE 9.
 
                                 -------------
 
 THESE SECURITIES HAVE NOT BEEN APPROVED  OR DISAPPROVED BY THE SECURITIES AND
  EXCHANGE  COMMISSION  OR  ANY  STATE  SECURITIES  COMMISSION  NOR  HAS  THE
   SECURITIES  AND EXCHANGE  COMMISSION OR  ANY STATE SECURITIES  COMMISSION
    PASSED   UPON  THE  ACCURACY  OR  ADEQUACY  OF  THIS   PROSPECTUS.  ANY
      REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                       Underwriting
                                             Price to Discounts and  Proceeds to
                                              Public  Commissions(1) Company(2)
- --------------------------------------------------------------------------------
<S>                                          <C>      <C>            <C>
Per Share..................................    $           $             $
- --------------------------------------------------------------------------------
Total(3)...................................   $           $            $
</TABLE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) The Company has agreed to indemnify the Underwriters against certain
    liabilities, including liabilities under the Securities Act of 1933, as
    amended. See "Underwriting."
   
(2) Before deducting estimated expenses of $1,200,000 payable by the Company.
           
(3) The Company has granted the Underwriters a 30-day option to purchase up to
    900,000 additional shares of Common Stock on the same terms and conditions
    set forth herein, solely to cover over-allotments, if any. If such option
    is exercised in full, the total Price to Public, Underwriting Discounts and
    Commissions and Proceeds to Company will be $   , $    and $   ,
    respectively. See "Underwriting."     
 
                                 -------------
   
  The shares of Common Stock offered by this Prospectus are offered by the U.S.
Underwriters subject to prior sale, withdrawal, cancellation or modification of
the offer without notice, to delivery to and acceptance by the U.S.
Underwriters and to certain further conditions. It is expected that delivery of
certificates representing the shares of Common Stock will be made at the
offices of Lehman Brothers Inc., New York, New York on or about    , 1996.     
 
                                 -------------
 
LEHMAN BROTHERS                                     DONALDSON, LUFKIN & JENRETTE
                                                       SECURITIES CORPORATION
 
            , 1996.

<PAGE>
 
[MAP OF WORLD SHOWING PRIMUS' NETWORK, INCLUDING SWITCH LOCATIONS (OPERATIONAL,
    UNDER CONSTRUCTION AND PLANNED) AND FIBER LINKS BETWEEN SWITCH LOCATIONS
                            (EXISTING AND PLANNED)]

<PAGE>
 
   
  All references herein to "U.S. dollars," "dollars" or "US$" are to United
States dollars. All references to "A$" are to Australian dollars, the official
currency of Australia. All references to "(Pounds)" are to British pounds, the
official currency of the United Kingdom. All references to "Pesos" are to
Mexican pesos, the official currency of Mexico. The exchange rate of
Australian dollars was A$1.27 to US$1.00, of British pounds was (Pounds)0.64
to US$1.00 and of Mexican Pesos was P$7.61 to US$1.00 at October 10, 1996,
based on the noon buying rate in New York City for cable transfers in such
currencies as certified for customs purposes by the Federal Reserve Bank of
New York.     
 
  The Consolidated Financial Statements of the Company are presented in
accordance with United States generally accepted accounting principles, and
amounts originally measured in foreign currencies for all periods presented
have been translated into U.S. dollars in accordance with the methodology set
forth in Note 2 to the Consolidated Financial Statements of the Company.
 
                            ADDITIONAL INFORMATION
 
  The Company is not currently subject to the information requirements of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"). As a
result of the Offering, the Company will be required to file reports and other
information with the Securities and Exchange Commission (the "Commission")
pursuant to the informational requirements of the Exchange Act.
 
  The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the securities offered hereby. As permitted by the rules and
regulations of the Commission, this Prospectus, which is part of the
Registration Statement, omits certain information, exhibits, schedules and
undertakings set forth in the Registration Statement. For further information
pertaining to the Company and the securities offered hereby, reference is made
to such Registration Statement and the exhibits and schedules thereto.
Statements contained in this Prospectus as to the contents or provisions of
any documents referred to herein are not necessarily complete, and in each
instance, reference is made to the copy of the document filed as an exhibit to
the Registration Statement. The Company will issue annual and quarterly
reports. Annual reports will include audited financial statements prepared in
accordance with accounting principles generally accepted in the United States
and a report of its independent auditors with respect to the examination of
such financial statements. In addition, the Company will issue to its
securityholders such other unaudited quarterly or other interim reports as it
deems appropriate.
 
  The Registration Statement may be inspected without charge at the office of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of
the Registration Statement may be obtained from the Commission at prescribed
rates from the Public Reference Section of the Commission at such address, and
at the Commission's regional offices located at 7 World Trade Center, 13th
Floor, New York, New York 10048, and at Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. In addition, registration
statements and certain other filings made with the Commission through its
Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system are
publicly available through the Commission's site on the Internet's World Wide
Web, located at http://www.sec.gov. The Registration Statement, including all
exhibits thereto and amendments thereof, has been filed with the Commission
through EDGAR.
 
  IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
 
                                       3

<PAGE>
 

                                    SUMMARY
   
  The following summary is qualified in its entirety by the more detailed
information and the financial statements and notes thereto appearing elsewhere
in this Prospectus. As used in this Prospectus, except where the context
otherwise requires, the terms "Primus" and the "Company" refer to Primus
Telecommunications Group, Incorporated and all of its subsidiaries. Investors
should carefully consider the information set forth under the heading "Risk
Factors." Unless otherwise noted, all information in this Prospectus assumes
that the Underwriters' over-allotment option has not been exercised and has
been adjusted to give effect to a 3.381-for-1 stock split (the "Stock Split")
and the conversion of all outstanding shares of Series A Convertible Preferred
Stock ("Series A Stock") of the Company into shares of Common Stock (the
"Preferred Stock Conversion"). This Prospectus contains certain statements of a
forward-looking nature relating to future events or the future financial
performance of the Company. Prospective investors are cautioned that such
statements are only predictions and that actual events or results may differ
materially. In evaluating such statements, prospective investors should
specifically consider the various factors identified in this Prospectus,
including the matters set forth under the caption "Risk Factors" that could
cause actual results to differ materially from those indicated by such forward-
looking statements.     
 

                                  THE COMPANY
   
  Primus is a multinational telecommunications company that focuses on the
provision of international and domestic long distance services. The Company
seeks to capitalize on the increasing business and consumer demand for
international telecommunications services generated by the globalization of
world economies and the worldwide trend toward deregulation of the
telecommunications sector. The Company has targeted North America, Asia-Pacific
and Europe as its primary service regions (the "Targeted Regions"). The Company
currently provides services in the United States, Australia and the United
Kingdom (the "Operating Hubs"), which are the most deregulated countries within
the Targeted Regions and which serve as regional hubs for expansion into
additional markets within the Targeted Regions. As part of the execution of
this strategy, the Company has commenced operations in Mexico and has installed
a switch in Canada. The Company expects to expand into additional markets as
deregulation occurs and the Company is permitted to offer a full range of
switched public telephone services in such markets.     
   
  For the year ended December 31, 1995 and the six months ended June 30, 1996,
the Company had pro forma net revenue of approximately $126 million and $92
million, respectively, after giving effect to the Company's March 1996
acquisition of Axicorp Pty., Ltd. ("Axicorp"), the fourth largest
telecommunications provider in Australia. For the three months ended June 30,
1996, the Company had net revenue of approximately $48 million, of which
approximately $44 million, or 91%, was generated by the Company's Australian
operations. As of July 31, 1996, the Company had 221 full-time employees and
approximately 24,000 customers.     
 
  The Company targets, on a retail basis, small- and medium-sized businesses
with significant international long distance traffic and ethnic residential
consumers and, on a wholesale basis, other telecommunications carriers and
resellers with international traffic. The Company provides a broad array of
competitively priced telecommunications services, including international long
distance to over 200 countries, domestic long distance, and international and
domestic private networks, as well as local switched and cellular services in
Australia, prepaid and calling cards in the United States and the United
Kingdom and toll-free services in the United States. The Company markets its
services through a variety of sales channels, including direct sales,
independent agents, direct marketing and associations.
 
                                       4

<PAGE>
 
   
  The Company is implementing its international telecommunications network (the
"Network") to reduce and control costs, improve service reliability and
increase flexibility to introduce new products and services. The Network
currently consists of an international gateway switch in Washington, D.C.,
points-of-presence in New York and London, and leased transmission capacity
connecting to the networks of other international and domestic carriers. The
Company also has correspondent agreements with the government-owned Postal,
Telephone and Telegraph Companies ("PTTs") in India, Iran and Honduras. The
Company has installed three additional international gateway switches in
Sydney, Melbourne and Toronto, a switch in Brisbane, and has acquired two
international gateway switches for installation in New York and Los Angeles and
two other switches for installation in Adelaide and Perth, all eight of which
are expected to be operational by the end of the first quarter of 1997. The
Company expects to acquire an additional switch for installation in London and
additional switches and points-of-presence for installation in other major
metropolitan areas of the Targeted Regions. The Company expects to connect its
gateway switches between Sydney and Los Angeles with a trans-Pacific fiber-
optic cable link by the end of the first quarter of 1997. The Company also
intends to purchase additional switches and ownership in international fiber-
optic cables, install international gateway satellite earth station facilities,
lease additional transmission capacity and, where necessary, obtain additional
correspondent agreements.     
 
  The Company's objective is to become a leading provider of international and
domestic long distance voice, data and value-added services to its target
customers. The Company's strategy to achieve this objective is to focus on
providing a full range of competitively priced, high-quality services in the
Targeted Regions. Key elements in the Company's strategy include:
 
  .   Focus on Customers with Significant International Long
      Distance Usage. The Company's primary focus is providing
      telecommunications services to small- and medium-sized
      businesses with significant international long distance
      traffic and to ethnic residential consumers and, on a
      wholesale basis, to other telecommunications carriers and
      resellers with international traffic. The Company believes
      that the international long distance market offers an
      attractive business opportunity given its size and, as
      compared to the domestic long distance market, its higher
      revenue per minute, gross margin and expected growth rate.
      Although the Company expects to obtain a significant
      percentage of its revenues from offering international long
      distance services, the Company currently generates, and
      expects to continue to generate over the near term, a greater
      percentage of net revenue from domestic long distance
      services in an effort to build network traffic more quickly.
 
  .   Pursue Early Entry into Selected Deregulating Markets. Primus
      seeks to be an early entrant into selected overseas
      deregulating telecommunications markets where it believes
      there is significant demand for international long distance
      services, substantial growth and profit potential, and the
      opportunity to establish a customer base and achieve name
      recognition. The Company intends to use each Operating Hub as
      a base to expand into deregulating markets within the
      Targeted Regions and will focus its expansion efforts on
      major metropolitan areas with a high concentration of target
      customers with international traffic. The Company believes
      that management's international telecommunications experience
      will assist it in successfully identifying and launching
      operations in deregulating markets.
 
  .   Implement Intelligent International Network. The Company
      expects that the strategic development of the Network will
      lead to reduced transmission and other operating costs as a
      percentage of net revenue, reduced reliance on other carriers
      and more efficient network utilization. The Network will
      consist of (i) a global backbone network connecting
      intelligent gateway switches in the Targeted Regions, (ii) a
      domestic long distance network presence in each of the
      Operating Hubs and certain additional countries within the
      Targeted Regions and (iii) a combination of leased
      facilities, resale arrangements and correspondent agreements.
 
 
                                       5

<PAGE>
 
   
  .   Deliver Quality Services at Competitive Prices. The Company
      believes that it delivers high-quality services at
      competitive prices and provides a high level of customer
      service. The Company intends to maintain a low-cost structure
      in order to offer its customers international and domestic
      long distance services priced below that of its major
      competitors. In addition, the Company intends to maintain
      strong customer relationships through the use of trained and
      experienced service representatives and the provision of
      customized billing services.     
 
  .   Provide a Comprehensive Package of Services. The Company
      seeks to provide a comprehensive package of services to
      create "one-stop shopping" for its targeted customers'
      telecommunications needs, particularly for small- and medium-
      sized businesses and ethnic residential consumers that prefer
      a full service telecommunications provider. The Company
      believes this approach strengthens its marketing efforts and
      increases customer retention.
   
  The Company acquired Axicorp, the fourth largest telecommunications provider
in Australia, in March 1996. Axicorp provides the Company early entry into the
deregulating Australian telecommunications market and will serve as the
Company's gateway to the Asia-Pacific region. Prior to the acquisition, Axicorp
was a switchless reseller of long distance, local switched and cellular
services. Since the acquisition, the Company has acquired five switches for use
in Australia, which are expected to be operational by the end of the first
quarter of 1997, and has focused on increasing the number of higher-margin,
higher-volume business customers with significant international long distance
traffic. As part of its increasing focus on business customers, the Company is
increasing Axicorp's direct sales force and reducing its reliance on marketing
through associations. The ongoing transformation of Axicorp's strategy and
operations to those of a facilities-based carrier focused on the provision of
international and domestic long distance services is an example of the
execution of the Company's business model. For the twelve months ended March
31, 1996, Axicorp generated net revenue of approximately $144 million. The
Company acquired Axicorp for $5.7 million in cash, including transaction costs,
455,000 shares of Series A Stock (convertible into 1,538,355 shares of Common
Stock on the date of the Offering) and seller financing consisting of two notes
aggregating $8.1 million. The cash portion of the purchase price was financed
through private placements of Common Stock.     
   
  Primus was co-founded in 1994 by K. Paul Singh, its Chairman and Chief
Executive Officer, who formerly served as Vice President of Marketing for MCI.
Mr. Singh previously founded two other telecommunications companies, Overseas
Telecommunications, Inc. ("OTI") and the Cygnus Satellite Corporation
("Cygnus"), both of which focused on international telecommunications. OTI and
Cygnus were acquired by MCI and PanAmSat, respectively. The executive officers
of the Company and several of the other members of its management team have
substantial experience in the telecommunications and other related industries,
and have served in management positions with companies such as MCI, OTI, IBM
and M/A Com (subsequently acquired by Hughes Network Systems, Inc.). See
"Management--Executive Officers, Directors and Key Employees."     
   
  On July 31, 1996, the Soros/Chatterjee Group (as defined in "Certain
Transactions") purchased an equity interest in the Company for an aggregate
purchase price of approximately $16.0 million (the "Private Equity Sale") and,
after giving effect to the Offering, will collectively beneficially own 7.3% of
the Common Stock. Additionally, on January 12, 1996, Teleglobe USA, Inc.
("Teleglobe"), invested approximately $1.46 million in the Company and, after
giving effect to the Offering, will beneficially own 2.3% of the Common Stock.
The net proceeds from the Private Equity Sale are being used to fund operating
losses, for working capital, for expansion of the Company's Network and for
other general corporate purposes, and the proceeds from the Teleglobe
investment were used to partially fund the acquisition of Axicorp. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Certain Transactions."     
   
  The Company was incorporated in Delaware in February 1994. The executive
offices of the Company are located at 8180 Greensboro Drive, Suite 1100,
McLean, Virginia 22102 and its telephone number is (703) 848-4625.     
 
                                       6

<PAGE>
 
                                  THE OFFERING
 

<TABLE>   
<S>                           <C>
Common Stock Offered by the
 Company
  U.S. Offering.............. 4,800,000 shares
  International Offering..... 1,200,000 shares
                              ------------------
    Total.................... 6,000,000 shares
Common Stock Outstanding af-
 ter the Offering............ 18,028,746 shares (1)
Use of Proceeds.............. Up to $70 million of the net proceeds will be
                              used to expand the Network, including purchasing
                              transmission equipment facilities and support
                              systems, international fiber capacity and
                              satellite earth station facilities for new and
                              existing routes. The remaining net proceeds will
                              be used to fund operating losses and for working
                              capital and other general corporate purposes.
                              The net proceeds also may be used for
                              investments in potential joint ventures,
                              strategic alliances or acquisitions, although
                              the Company is not currently party to any
                              agreement or understanding relating to any such
                              transaction. See "Use of Proceeds."
Proposed Nasdaq National
 Market System Symbol........ PRTL
</TABLE>
    
- --------
   
(1)  Excludes 1,635,559 shares of Common Stock which may be issued upon
     exercise of outstanding options granted pursuant to the Company's employee
     stock option plan (the "Employee Plan") and the Company's director stock
     option plan (the "Director Plan," together with the Employee Plan, the
     "Plans"), and an additional 393,041 shares of Common Stock reserved for
     issuance pursuant to the Plans. The weighted average exercise price of all
     outstanding options is $3.04 per share. Also excludes up to 1,294,566
     shares of Common Stock which may be issued upon exercise of certain
     warrants held by the Soros/Chatterjee Group (the "Soros/Chatterjee
     Warrants"), assuming such warrants were to be exercised at an assumed
     offering price of $15. The actual number of shares of Common Stock
     issuable upon exercise of these warrants will be up to 627,899 shares of
     Common Stock plus an indeterminate number of shares having a fair market
     value of $10 million as of the date of exercise. See "Management--Stock
     Option Plans," "Certain Transactions--Private Equity Sale," "Description
     of Capital Stock--Warrants" and Notes 8 and 13 to the Consolidated
     Financial Statements of the Company.     
 

                                  RISK FACTORS
 
  See "Risk Factors" beginning on page 9 for a discussion of certain
information that should be considered by prospective investors.
 
                                       7

<PAGE>
 
            SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
 
  The following table presents summary unaudited pro forma consolidated
financial data and certain actual balance sheet data which has been derived
from, and should be read in conjunction with, the Company's Unaudited Pro Forma
Consolidated Statements of Operations and related notes thereto, the Company's
Consolidated Balance Sheets and related notes thereto and with "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere herein.
 
PRO FORMA STATEMENT OF OPERATIONS DATA:
 

<TABLE>   
<CAPTION>
                                      YEAR ENDED           SIX MONTHS
                                     DECEMBER 31,        ENDED JUNE 30,
                                     ------------ ----------------------------
                                         1995         1995           1996
                                     ------------ ------------- --------------
                                        (IN THOUSANDS, EXCEPT SHARE AND PER
                                                      SHARE)
<S>                                  <C>          <C>           <C>
Net revenue.........................  $  125,628   $   47,930     $   91,783
Cost of revenue.....................     114,639       43,141         83,918
                                      ----------   ----------     ----------
  Gross margin......................      10,989        4,789          7,865
Operating expenses:
  Selling, general and
   administrative...................      12,955        5,376          8,791
  Depreciation and amortization.....       1,842          879          1,098
                                      ----------   ----------     ----------
    Total operating expenses........      14,797        6,255          9,889
                                      ----------   ----------     ----------
Income (loss) from operations.......      (3,808)      (1,466)        (2,024)
Interest expense....................        (885)        (446)          (473)
Interest income.....................         132           30            209
Other income (expense)..............         --           --            (268)
                                      ----------   ----------     ----------
Income (loss) before income taxes...      (4,561)      (1,882)        (2,556)
Income taxes........................         124           68            743
                                      ----------   ----------     ----------
Net income (loss)...................  $   (4,685)  $   (1,950)    $   (3,299)
                                      ==========   ==========     ==========
Net earnings (loss) per common and
 common share equivalent............  $    (0.35)  $    (0.14)    $    (0.23)
                                      ==========   ==========     ==========
Weighted average number of common
 and common share equivalents
 outstanding........................  12,338,313   12,170,846     13,497,468
                                      ==========   ==========     ==========
<CAPTION>
                                                AS OF JUNE 30, 1996
                                     -----------------------------------------
                                                                  PRO FORMA
                                        ACTUAL    PRO FORMA (1) AS ADJUSTED(2)
                                     ------------ ------------- --------------
                                                  (IN THOUSANDS)
<S>                                  <C>          <C>           <C>
BALANCE SHEET DATA:
Cash and cash equivalents...........  $    4,398   $   20,198     $  102,698
Total assets........................      62,297       78,097        160,597
Total long-term obligations.........      16,929       16,929         16,929
Stockholders' equity (deficit)......      11,800       27,600        110,100
</TABLE>
    
- --------
(1) After giving effect to the Private Equity Sale.
   
(2) After giving effect to the Private Equity Sale and the sale of 6,000,000
    shares of Common Stock offered in the Offering (assuming an initial public
    offering price of $15 per share), less underwriting discounts, commissions,
    and estimated expenses of the Offering payable by the Company.     
 
                                       8

<PAGE>
 

                                 RISK FACTORS
 
  In addition to the other information contained in this Prospectus, the
following risk factors should be considered carefully in evaluating the
Company and its business before purchasing the shares of the Common Stock
offered hereby.
 
LIMITED OPERATING HISTORY; ENTRY INTO DEVELOPING MARKETS
 
  The Company was founded in February 1994 and began generating operating
revenues in March 1995. Axicorp, the Company's principal operating subsidiary,
was acquired in March 1996. The Company has generated only limited net revenue
and has limited experience in operating its business. In addition, the Company
intends to enter markets where it has limited or no operating experience.
Furthermore, in many of the Company's target markets, the Company intends to
offer services that have previously been provided only by the local PTT.
Accordingly, there can be no assurance that the Company's future operations
will generate operating or net income, and the Company's prospects must
therefore be considered in light of the risks, expenses, problems and delays
inherent in establishing a new business in a rapidly changing industry. See
"Selected Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
 
MANAGING RAPID GROWTH
   
  The Company's strategy of continuing its growth and expansion has placed,
and is expected to continue to place, a significant strain on the Company's
management, operational and financial resources and increased demands on its
systems and controls. The Company plans to develop the Network by adding
switches, cable and satellite facilities, expand its operations within the
United States, Australia and the United Kingdom, and expand into selected
additional markets within the Targeted Regions when business and regulatory
conditions warrant. In order to manage its growth effectively, the Company
must continue to implement and improve its operational and financial systems
and controls, purchase and utilize other transmission facilities, and expand,
train and manage its employee base. Inaccuracies in the Company's forecasts of
traffic could result in insufficient or excessive transmission facilities and
disproportionate fixed expenses. There can be no assurance that the Company
will be able to develop a facilities-based network or expand within its target
markets at the rate presently planned by the Company, or that the existing
regulatory barriers to such expansion will be reduced or eliminated. As the
Company proceeds with its development, there will be additional demands on the
Company's customer support, sales and marketing and administrative resources
and network infrastructure. There can be no assurance that the Company's
operating and financial control systems and infrastructure will be adequate to
maintain and effectively manage future growth. The failure to continue to
upgrade the administrative, operating and financial control systems or the
emergence of unexpected expansion difficulties could materially adversely
affect the Company's business, results of operations and financial condition.
See "--Dependence on Effective Information Systems."     
 
HISTORICAL AND FUTURE NET LOSSES
 
  The Company incurred net losses in 1994 and 1995 and had an accumulated
deficit of approximately $6.2 million as of June 30, 1996. Although the
Company has experienced net revenue growth in each of its last six quarters,
such growth should not be considered to be indicative of future net revenue
growth, if any. The Company expects its net losses to increase as the Company
uses the proceeds of the Offering to accelerate the expansion of its
operations and build-out of the Network. There can be no assurance that the
Company's revenue will grow or be sustained in future periods or that the
Company will be able to achieve profitability in any future period. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
 
NEED FOR ADDITIONAL FINANCING
   
  The Company believes that the net proceeds from the Offering, together with
the net proceeds from the Private Equity Sale, borrowing capacity under an
expected line of credit and available capital lease financing will be
sufficient to fund the Company's operating losses, capital expenditures and
other cash needs for the next     
 
                                       9

<PAGE>
 
18 months. The Company, however, will need to raise additional capital from
public or private equity or debt sources in order to finance its future growth,
including financing the further construction of the Network and expanding
service within existing markets and to new markets, which can be capital
intensive, as well as its unanticipated working capital needs and capital
expenditure requirements. Furthermore, the Company may need to raise additional
funds in order to take advantage of unanticipated opportunities, including more
rapid international expansion or acquisitions of, investments in or strategic
alliances with, companies that are complementary to the Company's current
operations, or to develop new products or otherwise respond to unanticipated
competitive pressures. There can be no assurance that the Company will be able
to raise such capital on satisfactory terms or at all. If the Company decides
to raise additional funds through the incurrence of debt, it would likely
become subject to restrictive financial covenants. In the event that the
Company is unable to obtain such additional capital or is unable to obtain such
additional capital on acceptable terms, the Company may be required to reduce
the scope of its expansion, which could adversely affect the Company's
business, results of operations and financial condition and its ability to
compete. Additionally, if additional funds are raised through the issuance of
equity securities, the percentage ownership of the Company's then current
stockholders would be reduced and, if such equity securities take the form of
preferred stock, the holders of such preferred stock may have rights,
preferences or privileges senior to those of holders of Common Stock. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Description of
Capital Stock--Preferred Stock."
 
INTENSE DOMESTIC AND INTERNATIONAL COMPETITION
 
  The long distance telecommunications industry is intensely competitive and is
significantly influenced by the marketing and pricing decisions of the larger
industry participants. In most countries, the industry has relatively limited
barriers to entry with numerous entities competing for the same customers.
Customers frequently change long distance providers in response to the offering
of lower rates or promotional incentives by competitors. Generally, the
Company's customers can switch carriers at any time. The Company believes that
competition in all of its markets is likely to increase and that competition in
non-United States markets is likely to become more similar to competition in
the United States market over time as such non-United States markets continue
to experience deregulatory influences. In each of its Targeted Regions, the
Company competes primarily on the basis of price (particularly with respect to
its sales to other carriers), and also on the basis of customer service and its
ability to provide a variety of telecommunications products and services. There
can be no assurance that the Company will be able to compete successfully in
the future.
   
  Many of the Company's competitors are significantly larger, have
substantially greater financial, technical and marketing resources and larger
networks than the Company and a broader portfolio of services, control
transmission lines and have strong name recognition and loyalty, as well as
long-standing relationships with the Company's target customers. In addition,
many of the Company's competitors enjoy economies of scale that can result in a
lower cost structure for transmission and related costs, which could cause
significant pricing pressures within the industry. Several long distance
carriers in the United States have recently introduced pricing strategies that
provide for fixed, low rates for calls within the United States. Such a
strategy, if widely adopted, could have an adverse effect on the Company's
results of operations and financial condition if increases in
telecommunications usage do not result or are insufficient to offset the
effects of such price decreases. The Company's competitors include, among
others, AT&T, MCI, Sprint, WorldCom, Frontier and LCI in the United States;
Telstra, Optus and AAPT in Australia; and British Telecom, Mercury, AT&T,
WorldCom, Sprint and ACC in the United Kingdom. The Company also competes with
numerous other long distance providers, some of which focus their efforts on
the same customers targeted by the Company. In addition to these competitors,
recent and pending deregulation in various countries may encourage new
entrants. For example, as a result of the recently enacted Telecommunications
Act of 1996 (the "1996 Telecommunications Act") in the United States, once
certain conditions are met, Regional Bell Operating Companies ("RBOCs") will be
allowed to enter the domestic long distance market, AT&T, MCI and other long
distance carriers will be allowed to enter the local telephone services market,
and any entity (including cable television companies and utilities) will be
allowed to enter both the local service and long distance telecommunications
markets. Increased competition in     
 
                                       10

<PAGE>
 
the United States as a result of the foregoing, and other competitive
developments, including entry by Internet service providers into the long-
distance market, could have an adverse effect on the Company's business,
results of operations and financial condition. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Business--
Competition" and "Business--Government Regulation."
 
DEPENDENCE ON TRANSMISSION FACILITIES-BASED CARRIERS
 
  Telephone calls made by the Company's customers are connected through
transmission lines that the Company leases under a variety of arrangements with
transmission facilities-based long distance carriers, many of which are, or may
become, competitors of the Company. The Company's ability to maintain and
expand its business is dependent upon whether the Company continues to maintain
favorable relationships with the transmission facilities-based carriers from
which the Company leases transmission lines. Although the Company believes that
its relationships with carriers generally are satisfactory, the deterioration
or termination of the Company's relationships with one or more of those
carriers could have a material adverse effect upon the Company's cost
structure, service quality, Network diversity, results of operations and
financial condition.
   
  Presently, most transmission lines used by the Company are obtained on a per-
call (or usage) basis, subjecting the Company to the possibility of
unanticipated price increases and service cancellations. Currently, usage rates
generally are less than the rates the Company charges its customers for
connecting calls through these lines. To the extent these variable costs
increase, the Company may experience reduced or, in certain circumstances,
negative margins for some services. As its traffic volume increases between
particular international markets, the Company expects to cease using variable
usage arrangements and enter into fixed monthly or longer-term leasing
arrangements, subject to obtaining any requisite authority. To the extent the
Company does so, and incorrectly projects traffic volume in a particular
geographic area, the Company would experience higher fixed costs without the
increased revenue. Moreover, certain of the vendors from whom the Company
leases transmission lines, including RBOCs and other Local Exchange Carriers
("LECs") in the United States, currently are subject to tariff controls and
other price constraints which in the future may be changed. Regulatory
proposals are pending that may affect the prices charged by the RBOCs and other
LECs to the Company, which could have a material adverse effect on the
Company's margins, business, financial condition and results of operations. See
"--Potential Adverse Effects of Regulation" and "Business--Government
Regulation."     
 
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
 
  A key component of the Company's strategy is its planned expansion in
international markets. In many international markets, the existing carrier will
control access to the local networks, enjoy better brand recognition and brand
and customer loyalty, and have significant operational economies, including a
larger backbone network and correspondent agreements with PTTs. Moreover, the
incumbent may take many months to allow competitors, including the Company, to
interconnect to its switches within the target market. Pursuit of international
growth opportunities may require significant investments for an extended period
before returns, if any, on such investments are realized. In addition, there
can be no assurance that the Company will be able to obtain the permits and
operating licenses required for it to operate, obtain access to local
transmission facilities or to market, sell and deliver competitive services in
these markets.
 
  In addition to the uncertainty as to the Company's ability to expand its
international presence, there are certain risks inherent in doing business on
an international level, such as unexpected changes in regulatory requirements,
tariffs, customs, duties and other trade barriers, difficulties in staffing and
managing foreign operations, problems in collecting accounts receivable,
political risks, fluctuations in currency exchange rates, foreign exchange
controls which restrict or prohibit repatriation of funds, technology export
and import restrictions or prohibitions, delays from customs brokers or
government agencies, seasonal reductions in business activity during the summer
months in Europe and certain other parts of the world, and potentially adverse
tax consequences resulting from operating in multiple jurisdictions with
different tax laws, which could materially adversely impact the Company's
international operations. A significant portion of the Company's net revenue
and expenses is denominated, and is expected to continue to be denominated, in
currencies other than U.S.
 
                                       11

<PAGE>
 
   
dollars, and changes in exchange rates may have a significant effect on the
Company's results of operations. In addition, the Company's business could be
adversely affected by a reversal in the current trend toward deregulation of
telecommunications carriers. In Mexico, and in certain other countries into
which the Company may choose to expand in the future, the Company may need to
enter into a joint venture or other strategic relationship with one or more
third parties in order to successfully conduct its operations (often with the
PTT or other dominant carrier in a developing country). There can be no
assurance that such factors will not have a material adverse effect on the
Company's future operations and, consequently, on the Company's business,
results of operations and financial condition, or that the Company will not
have to modify its current business practices.     
 
DEPENDENCE ON EFFECTIVE INFORMATION SYSTEMS
 
  To complete its billing, the Company must record and process massive amounts
of data quickly and accurately. While the Company believes its management
information system is currently adequate, it will have to grow as the Company's
business expands and to change as new technological developments occur. The
Company expects to upgrade many of its accounting systems within the upcoming
12-month period. The Company believes that the successful implementation and
integration of new information systems and backroom support will be important
to its continued growth, its ability to monitor and control costs, to bill
customers accurately and in a timely fashion and to achieve operating
efficiencies. There can be no assurance that the Company will not encounter
delays or cost-overruns or suffer adverse consequences in implementing these
systems. See "Business--Management Information and Billing Systems." Any such
delay or other malfunction of the Company's management information systems
could have a material adverse effect on the Company's business, financial
condition and results of operations.
 
RISKS OF INDUSTRY CHANGES AFFECTING COMPETITIVENESS AND FINANCIAL RESULTS
 
  The international telecommunications industry is changing rapidly due to
deregulation, privatization of PTTs, technological improvements, expansion of
telecommunications infrastructure and the globalization of the world's
economies. There can be no assurance that one or more of these factors will not
vary in a manner that could have a material adverse effect on the Company. In
addition, deregulation in any particular market may cause such market to shift
unpredictably. There can be no assurance that the Company will be able to
compete effectively or adjust its contemplated plan of development to meet
changing market conditions.
   
  The telecommunications industry generally is in a period of rapid
technological evolution, marked by the introduction of new product and service
offerings and increasing satellite transmission capacity for services similar
to those provided by the Company. Potential developments that could adversely
affect the Company if not anticipated or appropriately responded to include
improvements in transmission equipment, development of switching technology
allowing voice/data/video multimedia transmission simultaneously and commercial
availability of Internet-based domestic and international switched
voice/data/video services at prices lower than comparable services offered by
the Company. The Company's profitability will depend on its ability to
anticipate, access and adapt to rapid technological changes and its ability to
offer, on a timely and cost-effective basis, services that meet evolving
industry standards. There can be no assurance that the Company will be able to
access or adapt to such technological changes at a competitive price, maintain
competitive services or obtain new technologies on a timely basis or on
satisfactory terms. See "--Intense Domestic and International Competition."
    
DEVELOPMENT OF THE NETWORK
 
  The Company has only recently begun operating the Network. The long-term
success of the Company is dependent upon its ability to design, implement,
operate, manage and maintain the Network, activities in which the Company has
limited experience. In expanding the Network, the Company will incur
substantial indebtedness and additional fixed operating costs. There can be no
assurance that the Network can be completed in a timely manner or operated
efficiently. See "Business--Network." Any failure by the Company to properly
design, implement, operate, manage or maintain the Network could have a
material adverse effect on the Company's
 
                                       12

<PAGE>
 
business, results of operations and financial condition. See "Management's
Discussion and Analysis of Financial Conditions and Results of Operations" and
"Business."
 
DEPENDENCE ON KEY PERSONNEL
   
  The Company is dependent on the efforts of its management team and its key
technical, marketing and sales personnel, particularly those of K. Paul Singh,
its Chairman and Chief Executive Officer. The loss of services of one or more
of these key individuals, particularly Mr. Singh, could materially and
adversely affect the business of the Company and its future prospects. The
Company has entered into an employment agreement with Mr. Singh, which expires
on May 30, 1999. The Company maintains and is the beneficiary under $10 million
of key person life insurance on Mr. Singh, but not on the lives of any other
officer or director. The Company's future success will also depend on its
ability to attract and retain additional key management, technical and sales
personnel required in connection with the growth and development of its
business. Competition for qualified employees and personnel in the
telecommunications industry is intense, particularly in non-U.S. markets and,
from time to time, there are a limited number of persons with knowledge of and
experience in particular sectors of the telecommunications industry. There can
be no assurance that the Company will be successful in attracting and retaining
such executives and personnel. The loss of the services of key personnel, or
the inability to attract additional qualified personnel, could have a material
adverse effect on the Company's results of operations, development efforts and
ability to expand. See "Management."     
 
POTENTIAL ADVERSE EFFECTS OF REGULATION
 
  As a multinational telecommunications company, Primus is subject to varying
degrees of regulation in each of the jurisdictions in which it provides its
services. Local laws and regulations, and the interpretation of such laws and
regulations, differ significantly among the jurisdictions in which the Company
operates. There can be no assurance that future regulatory, judicial and
legislative changes will not have a material adverse effect on the Company,
that domestic or international regulators or third parties will not raise
material issues with regard to the Company's compliance or noncompliance with
applicable regulations or that regulatory activities will not have a material
adverse effect on the Company. Certain risks regarding the regulatory framework
in the principal jurisdictions in which the Company provides its services are
briefly described below.
          
  United States. In the United States, the provision of the Company's services
is subject to the provisions of the Communications Act of 1934, as amended (the
"Communications Act"), the 1996 Telecommunications Act and the Federal
Communications Commission (the "FCC") regulations thereunder, as well as the
applicable laws and regulations of the various states administered by the
relevant state public service commission ("PSC"). The recent trend in the
United States, for both federal and state regulation of telecommunications
service providers, has been in the direction of reduced regulation. Although
this trend facilitates market entry and competition by multiple providers, it
has also given AT&T, the largest international and domestic long distance
carrier in the United States, increased pricing and market entry flexibility
that has permitted it to compete more effectively with smaller carriers, such
as the Company. In addition, the recently enacted 1996 Telecommunications Act
has opened the Company's U.S. market to increased competition. There can be no
assurance that future regulatory, judicial and legislative changes in the
United States will not have a material adverse effect on the Company.     
   
  Despite recent trends toward deregulation, the FCC and relevant state PSCs
continue to exercise extensive authority to regulate ownership of transmission
facilities, provision of services and the terms and conditions under which the
Company's services are provided. In addition, the Company is required by
federal and state law and regulations to file the tariffs listing the rates,
terms and conditions of the services it provides. Any failure to maintain
proper federal and state tariffs or certification or any finding by the federal
or state agencies that the Company is not operating under permissible terms and
conditions may result in an enforcement action or investigation, either of
which could have a material adverse effect on the Company.     
   
  To originate and terminate calls in connection with providing their services,
long distance carriers such as the Company must purchase "access" from the LECs
or Competitive Local Exchange Carriers ("CLECs").     
 
                                       13

<PAGE>
 
   
Access charges represent a significant portion of the Company's cost of
revenue and, generally, such access charges are regulated by the FCC. The FCC
has informally announced that it intends, in the near future, to undertake a
comprehensive review of its regulation of LEC access charges to better account
for increasing levels of local competition. Under alternative access charge
rate structures being considered by the FCC, LECs would be permitted to allow
volume discounts in the pricing of access charges. While the outcome of these
proceedings is uncertain, if these rate structures are adopted, many long
distance carriers, including the Company, could be placed at a significant
cost disadvantage to larger competitors.     
   
  The FCC and certain state agencies also impose prior approval requirements
on transfers of control, including pro forma transfers of control resulting
from corporate reorganizations, and assignments of regulatory authorizations.
The FCC also regulates the nature and extent of foreign ownership and foreign
carrier affiliations of the Company. Such requirements may delay, prevent or
deter a change in control of the Company.     
   
  Regulatory requirements pertinent to the Company's operations have recently
changed and will continue to change as a result of federal legislation, court
decisions, and new and revised policies of the FCC and state public service
commissions. Among other things, such changes may alter the ability of the
Company to compete with other service providers, to continue providing the
same services, or introduce services currently planned for the future. The
impact on the Company's operations of any changes in applicable regulatory
requirements cannot be predicted.     
 
  Australia. In Australia, the provision of the Company's services is subject
to federal regulation pursuant to the Telecommunications Act 1991 of Australia
(the "Telecom Act") and federal regulation of anticompetitive practices
pursuant to the Trade Practices Act 1974. In addition, other federal
legislation, various regulations pursuant to delegated authority and
legislation, ministerial declarations, codes, directions, licenses, statements
of Commonwealth Government policy and court decisions affecting
telecommunications carriers also apply to the Company. There can be no
assurance that future declarations, codes, directions, licenses, regulations,
and judicial and legislative changes will not have a material adverse effect
on the Company.
   
  The Australian telecommunications industry continues to undergo
deregulation, and it is currently expected that the Australian Government will
license additional carriers, including the Company, to own transmission
facilities in July 1997. Both Telstra and Optus have requested that the
Australian Government defer such date, and there can be no assurance that the
deregulatory process will proceed in accordance with the Government's
announced timetable. Any delay in such deregulatory process or in the granting
of licenses to other entities interested in developing their own transmission
facilities in Australia could delay potential price reductions anticipated in
a more competitive market place, thereby delaying the Company's access to
potentially less expensive transmission and access facilities.     
 
  The Australian Telecommunications Authority ("AUSTEL"), as the federal
telecommunications regulatory authority, currently has control over a broad
range of issues affecting the operation of the Australian telecommunications
industry including the licensing of carriers, the promotion of competition,
consumer protection and technical matters. As a reseller of domestic, local
and long distance service, cellular service, and international service, the
Company must comply with the terms of the class license that applies to all
service providers until July 1997 or later, if the deregulatory process in
Australia is delayed. The Company currently plans to become a licensed general
carrier as soon as it is practicable to do so. As a general licensed carrier,
the Company will be required to comply with the terms of its own license and
would be subject to greater regulatory controls such as in areas of regulation
of connectivity, provision of access to service providers, land access and
contributions to the net cost of universal service throughout Australia (to
provide telecommunications services at reasonable prices to remote sections of
that country) applicable to licensed facilities-based carriers.
 
  There can be no assurance that a change in government, in government policy
in relation to telecommunications or competition, in AUSTEL's enforcement of
the Telecom Act, in government policy for the restructuring of the various
regulatory authorities that is expected to occur as part of the July 1997
changes,
 
                                      14

<PAGE>
 
or a deferral of the implementation of the Australian Government's
deregulation policy (particularly due to current requests for a deferral by
Telstra and Optus), will not have a material adverse effect on the Company's
business, results of operations or financial condition.
          
  United Kingdom. In the United Kingdom, the provision of the Company's
services is subject to and affected by regulations introduced by the U.K.
telecommunications regulatory authority, the Office of Telecommunications
("Oftel") under the Telecommunications Act of 1984 (the "U.K.
Telecommunications Act"). Since the break up of the U.K. telecommunications
duopoly consisting of British Telecom and Mercury in 1991, it has been the
stated goal of Oftel to create a competitive marketplace from which detailed
regulation could eventually be withdrawn. The regulatory regime currently
being introduced by Oftel has a direct and material effect on the ability of
the Company to conduct its business. Oftel has imposed mandatory rate
reductions on British Telecom in the past, which reductions are expected to
continue for the foreseeable future, and this has had, and may continue to
have, the effect of reducing the prices the Company can charge its customers.
The Company currently holds a license to provide international simple resale
("ISR") services to all international points from the United Kingdom. In
addition, the Company (along with approximately 45 other applicants including
AT&T, WorldCom, and ACC) has recently made application to the U.K. Secretary
for Trade and Industry for a license to provide international facilities-based
voice services. Although the Company currently expects such license to be
granted by the end of the first quarter of 1997, there can be no assurance
that the Company will be granted the license by such time, or at all. Failure
to obtain such license would prevent the Company from providing facilities-
based services in the United Kingdom and would have an adverse effect on the
Company's ability to expand its operations. In addition, there can be no
assurance that future changes in regulation and government will not have a
material adverse effect on the Company's business, results of operations and
financial condition.     
 
  Other Jurisdictions. The Company currently provides limited services in
Mexico and Canada, and intends to expand its operations into other
jurisdictions as such markets deregulate and the Company is able to offer a
full range of switched public telephone services to its customers. In
addition, in countries which enact legislation intended to deregulate the
telecommunications sector, there may be significant delays in the adoption of
implementing regulations and uncertainties as to the implementation of the
deregulatory programs which could delay or make more expensive the Company's
entry into such additional markets. The ability of the Company to enter a
particular market and provide telecommunications services, particularly in
Mexico and other developing countries, is dependent upon the extent to which
the regulations in a particular market permit new entrants. In some countries,
regulators may make subjective judgments in awarding licenses and permits,
without any legal recourse for unsuccessful applicants. In the event the
Company is able to gain entry to such a market, no assurances can be given
that the Company will be able to provide a full range of services in such
market, that it will not have to significantly modify its operations to comply
with changes in the regulatory environment in such market, or that any such
changes will not have a material adverse effect on the Company's business,
results of operations or financial condition.
 
CONTROL OF THE COMPANY
   
  After completion of this Offering, the executive officers and directors of
the Company will continue to beneficially own 5,118,757 shares of Common
Stock, representing 27.8% of the Common Stock, including options to purchase
391,063 shares of Common Stock exercisable on or prior to December 11, 1996.
The executive officers and directors have also been granted options to
purchase an additional 885,603 shares of Common Stock which vest after
December 11, 1996. Of these amounts, Mr. K. Paul Singh, the Company's Chairman
and Chief Executive Officer beneficially owns 4,365,030 shares of Common Stock
and options to purchase an additional 338,100 shares, none of which vest or
are exercisable before December 11, 1996. In addition, the Soros/Chatterjee
Group beneficially owns 1,304,099 shares (including warrants to purchase
338,100 shares of Common Stock exercisable on or prior to December 11, 1996)
and has the right to acquire an additional 956,466 shares (assuming they
exercise their rights to acquire these shares at the time of the consummation
of the Offering). As a result, if they act as a group, the executive officers,
directors and the Soros/Chatterjee Group will exercise significant influence
over such matters as the election of the directors of the Company, amendments
    
                                      15

<PAGE>
 
to the Company's charter, other fundamental corporate transactions such as
mergers, asset sales, and the sale of the Company, and otherwise the direction
of the Company's business and affairs. See "Principal Stockholders" and
"Description of Capital Stock."
   
HOLDING COMPANY STRUCTURE; RELIANCE ON SUBSIDIARIES FOR DIVIDENDS; OWNERSHIP OF
AXICORP     
   
  Primus is a holding company, the principal assets of which are its operating
subsidiaries in the United States, Australia, the United Kingdom and Mexico. As
a holding company, the Company's internal sources of funds to meet its cash
needs, including payment of expenses, are dividends and other permitted
payments from its direct and indirect subsidiaries, as well as its own credit
arrangements. The ability of the Company's operating subsidiaries to pay
dividends or make other payments to Primus may be restricted by the terms of
various credit arrangements entered into by such operating subsidiaries, as
well as statutory and other legal restrictions, and such payments may have
adverse tax consequences. The failure to pay any such dividends or make any
such other payments would restrict Primus's ability to utilize cash flow from
one subsidiary to cover shortfalls in working capital at another subsidiary and
could otherwise have a material adverse effect upon the Company's business,
financial condition and results of operations.     
   
  Although the Company is the beneficial owner of 100% of the capital stock of
Axicorp, 157,333 shares, or approximately 27%, of such capital stock are
registered in the names of certain of the previous shareholders and are pledged
in favor of the Company pursuant to a share mortgage. These shares will be
released to the Company upon repayment of approximately $8.1 million, on a
discounted basis, in notes issued by the Company as part of the purchase price
for Axicorp. Under the terms of the share mortgage, the previous shareholders
have no right to vote, participate in the governance of Axicorp, receive
dividends or transfer the shares subject to the share mortgage. Although the
Company intends to repay the notes at their maturity, any failure by the
Company to repay the notes, or any failure by the previous shareholders to
deliver the pledged shares upon repayment of the notes, could affect the
Company's ownership interest in Axicorp and have an adverse effect on the
Company's ability to receive dividends and other distributions from Axicorp.
See "Use of Proceeds" and Note 12 to the Consolidated Financial Statements of
the Company.     
 
ABSENCE OF PRIOR PUBLIC MARKET; DETERMINATION OF PUBLIC OFFERING PRICE;
POSSIBLE VOLATILITY OF STOCK PRICE
 
  Prior to this Offering, there has been no public market for the Common Stock,
and there can be no assurance that following this Offering, an active trading
market will develop or, if developed, will be maintained. The initial public
offering price of the Common Stock offered hereby was determined by
negotiations between the Company and the Representatives (as herein defined) of
the Underwriters and may bear no relationship to the price at which the Common
Stock will trade after completion of this Offering. For factors considered in
determining the initial public offering price, see "Underwriting."
Historically, the market prices for securities of emerging companies in the
telecommunications industry have been highly volatile. After completion of this
Offering, the market price of the Common Stock could be subject to significant
fluctuations in response to various factors and events, including the liquidity
of the market for the Common Stock, variations in the Company's quarterly
operating results, regulatory or other changes (both domestic and
international) affecting the telecommunications industry generally,
announcements of business developments by the Company or its competitors, the
addition of customers in connection with acquisitions, changes in the cost of
long distance service or other operating costs and changes in general market
conditions.
 
ANTI-TAKEOVER PROVISIONS
 
  Prior to the completion of this Offering, the Company's Amended and Restated
Certificate of Incorporation (the "Certificate of Incorporation") and Amended
and Restated By-Laws (the "By-Laws") will be amended to include certain
provisions which may have the effect of delaying, deterring or preventing a
future takeover or change in control of the Company unless such takeover or
change in control is approved by the Company's
 
                                       16

<PAGE>
 
   
Board of Directors. Such provisions may also render the removal of directors
and management more difficult. Specifically, the Company's Certificate of
Incorporation or By-Laws will be amended to provide for a classified Board of
Directors serving staggered three-year terms, restrictions on who may call a
special meeting of stockholders and a prohibition on stockholder action by
written consent. In addition, the Company's Board of Directors has the
authority to issue up to 2,000,000 additional shares of preferred stock (the
"Preferred Stock") and to determine the price, rights, preferences, and
privileges of those shares without any further vote or actions by the
stockholders. The rights of the holders of Common Stock will be subject to,
and may be adversely affected by, the rights of the holders of any Preferred
Stock that may be issued in the future. The issuance of such additional shares
of Preferred Stock, while potentially providing desirable flexibility in
connection with possible acquisitions and serving other corporate purposes,
could have the effect of making it more difficult for a third party to
acquire, or may discourage a third party from attempting to acquire, a
majority of the outstanding voting stock of the Company. The Company has no
present intention to issue such additional shares of Preferred Stock. In
addition, the Company is subject to the anti-takeover provisions of Section
203 of the Delaware General Corporation Law (the "DGCL"), which will prohibit
the Company from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder unless the business
combination is approved in a prescribed manner. The application of Section 203
also could have the effect of delaying or preventing a change of control of
the Company. Furthermore, certain provisions of the Company's By-Laws,
including provisions that provide that the exact number of directors shall be
determined by a majority of the Board of Directors, that vacancies on the
Board of Directors may be filled by a majority vote of the directors then in
office, though less than a quorum, and that limit the ability of new majority
stockholders to remove directors, all of which may have the effect of delaying
or preventing changes in control or management of the Company, and which could
adversely affect the market price of the Company's Common Stock. Additionally,
certain Federal regulations require prior approval of certain transfers of
control which could also have the effect of delaying, deferring or preventing
a change of control. See "Business--Government Regulations." See "Management--
Classified Board of Directors," "Description of Capital Stock" and "Business--
Government Regulation."     
 
SHARES ELIGIBLE FOR FUTURE SALE
   
  Sales of a substantial number of shares of Common Stock in the public market
after this Offering could adversely affect the market price of the shares of
Common Stock. In addition to the 6,000,000 shares of Common Stock offered
hereby which will be freely tradeable, an additional 5,071,500 shares will
become eligible for public sale beginning 180 days after the effective date of
the Registration Statement of which this Prospectus forms a part (the
"Effective Date"), subject to the provisions of Rule 144 promulgated under the
Securities Act. The volume limitations of Rule 144 will apply to the sale of
all of such shares held by affiliates of the Company. Following this Offering,
sales of substantial amounts of shares of Common Stock in the public market,
or even the potential for such sales, could adversely affect the prevailing
market price of the Common Stock and impair the Company's ability to raise
capital through the sale of equity securities. See "Principal Stockholders"
and "Shares Eligible for Future Sale."     
 
DILUTION
   
  Purchasers of Common Stock in this Offering will experience immediate and
substantial dilution in pro forma net tangible book value of $10.13 per share
(assuming an initial public offering price of $15 per share). See "Dilution."
       
BENEFITS OF THE OFFERING TO CURRENT STOCKHOLDERS     
   
  Upon completion of the Offering, certain benefits will accrue to the current
stockholders of the Company, including the creation of a public market for
their shares of Common Stock, an increase of $4.43 in the net tangible book
value per share of Common Stock (assuming an initial public offering price of
$15 per share), and ownership of Common Stock in a Company having a
substantially lower debt-to-equity ratio than existed prior to completion of
the Offering. See "--Dilution."     
 
                                      17

<PAGE>
 

                                USE OF PROCEEDS
   
  The net proceeds from the Offering will be approximately $82.5 million
($95.1 million if the Underwriter's over-allotment option is exercised in
full), based on an assumed public offering price of $15 per share, less
underwriting discounts and commissions and estimated expenses payable by the
Company. Up to $70 million of the net proceeds will be used to expand the
Network, including purchasing transmission equipment facilities and support
systems, international fiber capacity and satellite earth station facilities
for new and existing routes. The remaining net proceeds will be used to fund
operating losses and for working capital and other general corporate purposes.
The net proceeds also may be used for investments in potential joint ventures,
strategic alliances or acquisitions, although the Company is not currently
party to any agreement or understanding relating to any such transaction.     
   
  The Company also may use a portion of the net proceeds to repay certain
existing indebtedness as it matures, including A$9.0 million of indebtedness
incurred as a portion of the purchase price for Axicorp, which is non-interest
bearing and matures on February 17, 1997, subject to extension at the
Company's option for an additional year at the prime rate plus one percent.
       
  The Company believes that the net proceeds from the Offering, together with
the net proceeds from the Private Equity Sale, borrowing capacity under an
expected line of credit and available capital lease financing, will be
sufficient to fund the Company's operating losses, capital expenditures and
other cash needs for the next 18 months. The Company is currently in
discussions to obtain a line of credit to provide it with additional
liquidity, although no assurance can be given that such a line of credit can
be obtained on satisfactory terms, if at all. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."     
 
  Pending use of the net proceeds for the above purposes, the Company intends
to invest such funds in short-term investment grade securities or shares of
investment companies investing primarily in such securities.
 
                                      18

<PAGE>
 
                                   DILUTION
   
  The pro forma net tangible book value of the Company at June 30, 1996 was
$5.3 million, or $0.44 per share of Common Stock. "Net tangible book value"
per share represents the amount of total tangible assets of the Company
reduced by the amount of its total liabilities and divided by the total number
of shares of Common Stock outstanding. The pro forma net tangible book value
per share as of June 30, 1996 gives effect to the Private Equity Sale,
Preferred Stock Conversion and Stock Split. Without taking into account any
other change in such pro forma net tangible book value after June 30, 1996,
other than to give effect to the sale by the Company of 6,000,000 shares of
Common Stock offered hereby at an assumed public offering price of $15 per
share and the receipt of the estimated net proceeds therefrom, the pro forma
as adjusted net tangible book value of the Company at June 30, 1996 would have
been approximately $87.8 million, or $4.87 per share of Common Stock. This
represents an immediate increase in such pro forma net tangible book value of
$4.43 per share of Common Stock to existing stockholders and an immediate
dilution of $10.13 per share of Common Stock to persons purchasing shares at
the public offering price ("New Investors").     
 
 
  The following table illustrates this per share dilution:
 

<TABLE>     
   <S>                                                             <C>   <C>
   Assumed initial public offering price.........................        $15.00
     Pro forma net tangible book value per share at June 30,
      1996.......................................................  $0.44
     Increase attributable to New Investors......................   4.43
                                                                   -----
   Pro forma as adjusted net tangible book value per share after
    this Offering................................................          4.87
                                                                         ------
   Dilution in pro forma net tangible book value per share to New
    Investors....................................................        $10.13
                                                                         ======
</TABLE>
    
 
  The following table summarizes, on a pro forma as adjusted basis as of June
30, 1996, the differences between the existing holders of Common Stock,
including as a result of the Private Equity Sale and the Preferred Stock
Conversion, and the New Investors with respect to the number of shares of
Common Stock purchased from the Company, the total consideration to the
Company and the average price per share paid:
 

<TABLE>   
<CAPTION>
                                SHARES PURCHASED  TOTAL CONSIDERATION   AVERAGE
                               ------------------ -------------------- PRICE PER
                                 NUMBER   PERCENT    AMOUNT    PERCENT   SHARE
                               ---------- ------- ------------ ------- ---------
<S>                            <C>        <C>     <C>          <C>     <C>
Existing Stockholders......... 12,028,746  66.7%  $ 29,241,328  24.5%   $ 2.43
New Investors.................  6,000,000  33.3     90,000,000  75.5    $15.00
                               ----------  ----   ------------  ----
  Total....................... 18,028,746   100%  $119,241,328   100%
                               ==========  ====   ============  ====
</TABLE>
    
   
  The above computations assume no exercise of any outstanding options or
warrants. At June 30, 1996, there were outstanding options to purchase
1,635,559 shares of Common Stock at a weighted average exercise price of $3.04
per share. Additionally, on July 31, 1996, the Company issued the
Soros/Chatterjee Warrants, which may be exercised for up to 1,294,566 shares
of Common Stock, assuming such warrants were exercised on the date of the
Offering at an assumed offering price of $15. The actual number of shares of
Common Stock issuable upon exercise of the Soros/Chatterjee Warrants will be
up to 627,899 shares plus an indeterminate number of shares having a fair
market value of $10 million as of the date of exercise. To the extent
outstanding options or the Soros/Chatterjee Warrants are exercised, there will
be further dilution to new investors. See "Certain Transactions--Private
Equity Sale," "Management--Stock Option Plans" and Notes 8 and 13 to the
Consolidated Financial Statements of the Company.     

                                DIVIDEND POLICY
   
  To date, the Company has not paid any dividends on its capital stock. The
Company currently intends to retain any future earnings to fund operations and
the continued development of its business and, therefore, does not anticipate
paying any cash dividends on its Common Stock in the foreseeable future.
Future cash dividends, if any, will be determined by the Board of Directors,
and will be based upon the Company's earnings, capital requirements, financial
condition and other factors deemed relevant by the Board of Directors. The
Company is currently in discussions to obtain a $25 million line of credit,
the agreements relating to which can be expected to include limitations on or
prohibitions against the Company's ability to pay dividends.     
 
                                      19

<PAGE>
 

                                CAPITALIZATION
   
  The following table sets forth as of June 30, 1996: (i) the actual
capitalization of the Company; (ii) the pro forma capitalization of the
Company after giving effect to the Stock Split, the Private Equity Sale and
the Preferred Stock Conversion; and (iii) the pro forma as adjusted
capitalization of the Company after giving effect to the Stock Split, Private
Equity Sale, the Preferred Stock Conversion, and the sale of 6,000,000 shares
of Common Stock offered by the Company hereby (assuming an initial public
offering price of $15 per share), less underwriting discounts, commissions,
and estimated expenses of the Offering payable by the Company, and the
application of the estimated net proceeds therefrom. This table should be read
in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
of the Company and notes thereto included elsewhere in this Prospectus.     
 

<TABLE>   
<CAPTION>
                                                         JUNE 30, 1996
                                                 -------------------------------
                                                                    PRO FORMA AS
                                                 ACTUAL   PRO FORMA   ADJUSTED
                                                 -------  --------- ------------
                                                         (IN THOUSANDS)
<S>                                              <C>      <C>       <C>
Cash and cash equivalents......................  $ 4,398   $20,198    $102,698
                                                 =======   =======    ========
Long-term obligations due within one year......  $10,627   $10,627    $ 10,627
Long-term obligations..........................    6,302     6,302       6,302
Stockholders' Equity:
Preferred Stock, $.01 par value--2,455,000
 shares authorized:
 Series A Convertible Preferred Stock--455,000
 shares
 authorized, issued and outstanding; none
 issued and outstanding pro forma and pro forma
 as adjusted...................................        5       --          --
Common Stock, $.01 par value--35,348,355 shares
 authorized;
 9,524,392, 12,028,746, and 18,028,746 shares
 actual, pro forma and pro
 forma as adjusted, respectively, issued and
 outstanding(1)................................       95       120         180
Additional paid-in capital.....................   17,985    33,765     116,205
Accumulated deficit............................   (6,235)   (6,235)     (6,235)
Cumulative translation adjustment..............      (50)      (50)        (50)
                                                 -------   -------    --------
  Total stockholders' equity...................   11,800    27,600     110,100
                                                 -------   -------    --------
   Total capitalization........................  $28,729   $44,529    $127,029
                                                 =======   =======    ========
</TABLE>
    
- --------
   
(1)  Excludes 1,690,500 and 338,100 shares reserved for issuance under the
     Employee Plan and Director Plan, respectively, of which options to
     purchase 1,432,699 and 202,860 shares, respectively, have been granted
     and are outstanding as of June 30, 1996. Also excludes 1,294,566 shares
     which may be issued under the Soros/Chatterjee Warrants assuming such
     warrants were exercised on the date of the Offering at an assumed
     offering price of $15. The actual number of shares of Common Stock
     issuable upon exercise of the Soros/Chatterjee Warrants will be up to
     627,899 shares plus an indeterminate number of shares having a fair
     market value of $10 million as of the date of exercise. See "Management--
     Stock Option Plans" and "Description of Capital Stock--Warrants."     
 
                                      20

<PAGE>
 
                            SELECTED FINANCIAL DATA
   
  The following selected financial data should be read in conjunction with the
financial statements and the notes thereto contained elsewhere herein and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The statements of operations data for the Company for the period
from the Company's inception on February 4, 1994 to December 31, 1994 and the
year ended December 31, 1995, and the balance sheet data as of December 31,
1994 and 1995 have been derived from the financial statements of the Company,
which have been audited by Deloitte & Touche LLP, independent auditors. The
historical financial data for the Company for the six month periods ended June
30, 1995 and 1996 have been derived from the Company's unaudited financial
statements which, in the opinion of management, include all significant normal
and recurring adjustments necessary for a fair presentation of the financial
position and results of operations for such unaudited period. The historical
data for the Company for the six month period ended June 30, 1996 include the
historical results of Axicorp from March 1, 1996 (the date of acquisition).
The statements of operations data for Axicorp for the nine month period ended
March 31, 1995 and the twelve months ended March 31, 1996 have been derived
from the financial statements of Axicorp, which have been audited by Price
Waterhouse, independent chartered accountants. The historical financial data
for Axicorp for the period from Axicorp's inception on September 17, 1993 to
June 30, 1994 has been derived from Axicorp's unaudited financial statements
which, in the opinion of management, include all significant normal and
recurring adjustments necessary for a fair presentation of the financial
position and results of operations for such unaudited period.     
 

<TABLE>   
<CAPTION>
                                                        AXICORP (THE PREDECESSOR)          THE COMPANY
                                                    --------------------------------- -------------------------
                                                    PERIOD FROM              TWELVE   PERIOD FROM              
                                                     INCEPTION  NINE MONTHS  MONTHS    INCEPTION               
                                                      THROUGH      ENDED      ENDED     THROUGH     YEAR ENDED 
                                                     JUNE 30,    MARCH 31,  MARCH 31, DECEMBER 31, DECEMBER 31,
                                                       1994        1995       1996        1994         1995    
                                                    ----------- ----------- --------- ------------ ------------
                                                         (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)       
<S>                                                 <C>         <C>         <C>       <C>          <C>         
STATEMENT OF OPERATIONS DATA:                                                                                  
Net revenue...........................                $12,587     $44,797   $144,345   $      --    $    1,167 
Cost of revenue.......................                 11,366      40,405    131,712          --         1,384 
                                                      -------     -------   --------   ----------   ---------- 
 Gross margin (deficit)...............                  1,221       4,392     12,633          --          (217)
Operating expenses:                                                                                            
 Selling, general and                                                                                          
  administrative......................                  1,313       4,277     11,558          557        2,024 
 Depreciation and amortization........                      5          43        235           12          160 
                                                      -------     -------   --------   ----------   ---------- 
  Total operating expenses............                  1,318       4,320     11,793          569        2,184 
                                                      -------     -------   --------   ----------   ---------- 
Income (loss) from operations.........                    (97)         72        840         (569)      (2,401)
Interest expense......................                    --          --         --           (13)         (59)
Interest income.......................                    --           30        219            5           35 
Other income (expense)................                    --          --         --           --           --  
                                                      -------     -------   --------   ----------   ---------- 
Income (loss) before income taxes.....                    (97)        102      1,059         (577)      (2,425)
Income taxes..........................                    --            4        492          --           --  
                                                      -------     -------   --------   ----------   ---------- 
Net income (loss).....................                $   (97)    $    98   $    567   $     (577)  $   (2,425)
                                                      =======     =======   ========   ==========   ========== 
Net loss per common and common share                                                                           
 equivalents..........................                                                 $     (.04)  $     (.18)
                                                                                       ==========   ========== 
Weighted average number of common and                                                                          
 common share equivalents                                                                                      
 outstanding..........................                                                 10,014,032   12,338,313  
                                                                                       ==========   ========== 


                                                         THE COMPANY
                                                    --------------------
                                                         SIX MONTHS
                                                            ENDED
                                                          JUNE 30,
                                                    --------------------
                                                       1995        1996
                                                    ----------  --------
                                                    
<S>                                                 <C>         <C>
STATEMENT OF OPERATIONS DATA:                       
Net revenue...........................              $      221  $   65,415
Cost of revenue.......................                     203      60,162
                                                    ----------  ----------
 Gross margin (deficit)...............                      18       5,253
Operating expenses:                                 
 Selling, general and                               
  administrative......................                     714       6,707
 Depreciation and amortization........                      65         798
                                                    ----------  ----------
  Total operating expenses............                     779       7,505
                                                    ----------  ----------
Income (loss) from operations.........                    (761)     (2,252)
Interest expense......................                     (33)       (335)
Interest income.......................                       1          85
Other income (expense)................                     --         (268)
                                                    ----------  ----------
Income (loss) before income taxes.....                    (793)     (2,770)
Income taxes..........................                     --          462
                                                    ----------  ----------
Net income (loss).....................              $     (793) $   (3,232)
                                                    ==========  ==========
Net loss per common and common share                
 equivalents..........................              $     (.06) $     (.23)
                                                    ==========  ==========
Weighted average number of common and
 common share equivalents
 outstanding..........................              12,170,846  13,497,468
                                                    ==========  ==========  
</TABLE>
    
 

<TABLE>
<CAPTION>

                                                              THE COMPANY
                                                         -----------------------
                                                         DECEMBER 31,
                                                         -------------- JUNE 30,
                                                         1994    1995     1996
                                                         ------ ------- --------
                                                             (IN THOUSANDS)
<S>                                                      <C>    <C>     <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................... $ 221  $ 2,296 $ 4,398
Total assets............................................   487    5,042  62,297
Total long-term obligations.............................    13      528  16,929
Stockholders' equity (deficit)..........................   (71)   2,562  11,800
</TABLE>

 
                                      21

<PAGE>
 
           UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
 
  The following unaudited pro forma consolidated statements of operations data
give effect to the March 1, 1996 acquisition of Axicorp in each case as if it
occurred on January 1, 1995. The unaudited pro forma consolidated statement of
operations data for the six months ended June 30, 1996 includes the operations
of the Company for the six months ended June 30, 1996, which includes the
results of operations of Axicorp since March 1, 1996 (the date of acquisition)
and the operations of Axicorp for the months of January and February 1996. The
unaudited pro forma consolidated statement of operations data for the six
months ended June 30, 1995 includes the results of operations of the Company
and of Axicorp for six months ended June 30, 1995. The unaudited consolidated
pro forma statement of operations data for the year ended December 31, 1995
includes the results of operations data of the Company and Axicorp for the
year ended December 31, 1995.
 
  The unaudited pro forma consolidated statements of operations are presented
for informational purposes only and are not necessarily indicative of the
results of operations that would have been achieved had the acquisition of
Axicorp been completed as of the beginning of the periods presented, nor are
they necessarily indicative of the Company's future results of operations. The
unaudited pro forma consolidated statements of operations should be read in
conjunction with the historical financial statements of the Company and
Axicorp, including the related notes thereto.
 
                                      22

<PAGE>
 
                       PRIMUS TELECOMMUNICATIONS GROUP,
                         INCORPORATED AND SUBSIDIARIES
 
           UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
                    FOR THE SIX MONTHS ENDED JUNE 30, 1996
 

<TABLE>   
<CAPTION>
                                                       PRO FORMA
                                                      ADJUSTMENTS
                                 THE                   RELATED TO
                              COMPANY(1)  AXICORP(2) ACQUISITION(3) AS ADJUSTED
                              ----------  ---------- -------------- -----------
                              (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S>                           <C>         <C>        <C>            <C>
Net revenue.................. $   65,415   $26,368       $ --       $   91,783
Cost of revenue..............     60,162    23,756         --           83,918
                              ----------   -------       -----      ----------
  Gross margin...............      5,253     2,612         --            7,865
Operating expenses:
  Selling, general and admin-
   istrative.................      6,707     2,084         --            8,791
  Depreciation and amortiza-
   tion......................        798        48         252           1,098
                              ----------   -------       -----      ----------
    Total operating ex-
     penses..................      7,505     2,132         252           9,889
                              ----------   -------       -----      ----------
Income (loss) from opera-
 tions.......................     (2,252)      480        (252)         (2,024)
Interest expense.............       (335)      --         (138)           (473)
Interest income..............         85       124         --              209
Other income (expense).......       (268)      --          --             (268)
                              ----------   -------       -----      ----------
Income (loss) before income
 taxes.......................     (2,770)      604        (390)         (2,556)
Income taxes.................        462       281         --              743
                              ----------   -------       -----      ----------
Net income (loss)............ $   (3,232)  $   323       $(390)     $   (3,299)
                              ==========   =======       =====      ==========
Net loss per common and com-
 mon share equivalents....... $     (.23)                           $     (.23)
                              ==========                            ==========
Weighted average number of
 common and common share
 equivalents outstanding..... 13,497,468                            13,497,468
                              ==========                            ==========
</TABLE>
    
- --------
(1) Reflects the historical results of operations of the Company for the six
    months ended June 30, 1996, including Axicorp's operations from March 1,
    1996 (acquisition date) to June 30, 1996, as set forth in the Consolidated
    Financial Statements of the Company appearing elsewhere in this
    Prospectus.
(2) Reflects the historical results of operations of Axicorp for the months of
    January and February 1996.
(3) The pro forma adjustments to depreciation and amortization reflect the
    following:
 

<TABLE>
   <S>                                                                     <C>
     Increase in amortization of the excess of cost over fair value of
     net assets acquired related to the purchase of Axicorp (computed us-
     ing the straight line method over thirty years--represents two
     months)                                                               $100
     Increase in amortization of the value associated with the customer
     list acquired related to the purchase of Axicorp (computed using the
     estimated run-off of the customer base (approximately five years)--
     represents two months)                                                 152
                                                                           ----
                                                                           $252
                                                                           ====
   The pro forma adjustment to increase interest expense relates to the
   issuance of notes payable of $8,110 related to the acquisition of
   Axicorp--represents two months                                          $138
                                                                           ====
   The pro forma adjustment to the income tax provision is zero as a val-
   uation reserve was applied in full to the tax benefit associated with
   the pro forma net loss before income taxes.
</TABLE>

 
                                      23

<PAGE>
 
                       PRIMUS TELECOMMUNICATIONS GROUP,
                         INCORPORATED AND SUBSIDIARIES
 
           UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
                    FOR THE SIX MONTHS ENDED JUNE 30, 1995
 

<TABLE>   
<CAPTION>
                                                       PRO FORMA
                                                      ADJUSTMENTS
                                 THE                   RELATED TO
                              COMPANY(1)  AXICORP(2) ACQUISITION(3) AS ADJUSTED
                              ----------  ---------- -------------- -----------
                              (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S>                           <C>         <C>        <C>            <C>
Net revenue.................. $      221   $47,709      $   --      $   47,930
Cost of revenue..............        203    42,938          --          43,141
                              ----------   -------      -------     ----------
  Gross margin...............         18     4,771          --           4,789
Operating expenses:
  Selling, general and admin-
   istrative.................        714     4,662          --           5,376
  Depreciation and amortiza-
   tion......................         65        58          756            879
                              ----------   -------      -------     ----------
    Total operating ex-
     penses..................        779     4,720          756          6,255
                              ----------   -------      -------     ----------
Income (loss) from opera-
 tions.......................       (761)       51         (756)        (1,466)
Interest expense.............        (33)      --          (413)          (446)
Interest income..............          1        29          --              30
Other income (expense).......        --        --           --             --
                              ----------   -------      -------     ----------
Income (loss) before income
 taxes.......................       (793)       80       (1,169)        (1,882)
Income taxes.................        --         68          --              68
                              ----------   -------      -------     ----------
Net income (loss)............ $     (793)  $    12      $(1,169)    $   (1,950)
                              ==========   =======      =======     ==========
Net loss per common and com-
 mon share equivalents....... $     (.06)                           $     (.14)
                              ==========                            ==========
Weighted average number of
 common and common share
 equivalents outstanding..... 12,170,846                            12,170,846
                              ==========                            ==========
</TABLE>
    
- --------
(1) Reflects the historical results of operations of the Company for the six
    months ended June 30, 1995, as set forth in the Consolidated Financial
    Statements of the Company appearing elsewhere in this Prospectus.
(2) Reflects the historical results of operations of Axicorp for the six
    months ended June 30, 1995.
(3) The pro forma adjustments to depreciation and amortization reflect the
    following:
 

<TABLE>
   <S>                                                                     <C>
     Increase in amortization of the excess of cost over fair value of
     net assets acquired related to the purchase of Axicorp (computed us-
     ing the straight line method over thirty years--represents six
     months)                                                               $300
     Increase in amortization of the value associated with the customer
     list acquired related to the purchase of Axicorp (computed using the
     estimated run-off of the customer base (approximately five years)--
     represents six months)                                                 456
                                                                           ----
                                                                           $756
                                                                           ====
   The pro forma adjustment to increase interest expense relates to the
   issuance of notes payable of $8,110 related to the acquisition of
   Axicorp--represents six months                                          $413
                                                                           ====
   The pro forma adjustment to income tax provision is zero as a valua-
   tion reserve was applied in full to the tax benefit associated with
   the pro forma net loss before income taxes.
</TABLE>

 
                                      24

<PAGE>
 
                        PRIMUS TELECOMMUNICATIONS GROUP,
                         INCORPORATED AND SUBSIDIARIES
 
           UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
                          YEAR ENDED DECEMBER 31, 1995
 

<TABLE>   
<CAPTION>
                                                       PRO FORMA
                                                      ADJUSTMENTS
                                 THE                   RELATED TO
                              COMPANY(1)  AXICORP(2) ACQUISITION(3) AS ADJUSTED
                              ----------  ---------- -------------- -----------
                              (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S>                           <C>         <C>        <C>            <C>
Net revenue.................. $    1,167   $124,461     $   --      $  125,628
Cost of revenue..............      1,384    113,255         --         114,639
                              ----------   --------     -------     ----------
  Gross margin (deficit).....       (217)    11,206         --          10,989
Operating expenses:
  Selling, general and admin-
   istrative.................      2,024     10,931         --          12,955
  Depreciation and amortiza-
   tion......................        160        169       1,513          1,842
                              ----------   --------     -------     ----------
    Total operating ex-
     penses..................      2,184     11,100       1,513         14,797
                              ----------   --------     -------     ----------
Income (loss) from opera-
 tions.......................     (2,401)       106      (1,513)        (3,808)
Interest expense.............        (59)       --         (826)          (885)
Interest income..............         35         97         --             132
Other income (expense).......        --         --          --             --
                              ----------   --------     -------     ----------
Income (loss) before income
 taxes.......................     (2,425)       203      (2,339)        (4,561)
Income taxes.................        --         124         --             124
                              ----------   --------     -------     ----------
Net income (loss)............ $   (2,425)  $     79     $(2,339)    $   (4,685)
                              ==========   ========     =======     ==========
Net loss per common and com-
 mon share equivalents....... $     (.18)                           $     (.35)
                              ==========                            ==========
Weighted average number of
 common and common share
 equivalents outstanding..... 12,338,313                            12,338,313
                              ==========                            ==========
</TABLE>
    
- --------
(1) Reflects the historical results of operations of the Company for the year
    ended December 31, 1995 as set forth in the Consolidated Financial
    Statements of the Company appearing elsewhere in this Prospectus.
(2) Reflects the historical results of operations of Axicorp for the year ended
    December 31, 1995.
(3) The pro forma adjustments to depreciation and amortization reflect the
    following:
 

<TABLE>
   <S>                                                                   <C>
     Increase in amortization of the excess of cost over fair value of
     net assets acquired related to the purchase of Axicorp (computed
     using the straight line method over thirty years--represents
     twelve months).                                                     $  600
     Increase in amortization of the value associated with the customer
     list acquired related to the purchase of Axicorp (computed using
     the estimated run-off of the customer base (approximately five
     years)--represents twelve months)                                      913
                                                                         ------
                                                                         $1,513
                                                                         ======
   The pro forma adjustment to interest expense relates to the issuance
   of notes payable of $8,110 related to the acquisition of Axicorp--
   represents twelve months                                              $  826
                                                                         ======
   The pro forma adjustment to the income tax provision is zero as a
   valuation reserve was applied in full to the tax benefit associated
   with the pro forma net loss before income taxes.
</TABLE>

 
                                       25

<PAGE>
 

                     MANAGEMENT'S DISCUSSION AND ANALYSIS
               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
  The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto contained elsewhere in this Prospectus.
 
OVERVIEW
   
  Primus is a multinational telecommunications company that focuses on the
provision of international and domestic long distance services. The Company
seeks to capitalize on the increasing business and consumer demand for
international telecommunications services generated by the globalization of
the world's economies and the worldwide trend toward deregulation of the
telecommunications sector. The Company has targeted North America, Asia-
Pacific and Europe as its primary service regions. The Company currently
provides services in the United States, Australia and the United Kingdom,
which are the most deregulated countries within the Targeted Regions and which
serve as regional hubs for expansion into additional markets within the
Targeted Regions. As part of the execution of this strategy, the Company has
commenced operations in Mexico and has installed a switch in Canada. The
Company expects to expand into additional markets as deregulation occurs and
the Company is permitted to offer a full range of switched public telephone
services in such markets.     
   
  The Company was founded in February 1994 and through the first half of 1995
was a development stage enterprise involved in various start-up activities
including raising capital, obtaining licenses, acquiring equipment, leasing
space, developing markets and recruiting and training personnel. The Company
began generating revenue during March 1995. On March 1, 1996 the Company
acquired Axicorp, the fourth largest telecommunications provider in Australia.
The acquisition of Axicorp has had a material effect on the Company's results
of operations for the six months ended June 30, 1996. The Company's Australian
operations generated approximately $44.0 million, or 91%, of the Company's net
revenue for the three months ended June 30, 1996. The acquisition of Axicorp
furthers the Company's objectives by providing a substantial customer base and
significant hub location in the Asia-Pacific market.     
   
  The Company is investing substantial resources to transform Axicorp's
strategy and operations to those of a facilities-based carrier focused on the
provision of international and domestic long distance services. Prior to the
acquisition, Axicorp was a switchless reseller of long distance, local and
cellular service. Since the acquisition, the Company has acquired five
switches for use in Australia, all of which are expected to be operational by
the end of the first quarter of 1997, and has focused on increasing the number
of higher-margin, higher-volume business customers with significant
international long-distance traffic. Since the acquisition of Axicorp, the
Company has spent approximately $4 million to implement its Network in
Australia, including the purchase of switches, and anticipates that, of the up
to $70 million of net proceeds currently anticipated to be spent for building
the Network over the next 18 months, approximately 30% will be spent in
Australia. As part of its increasing focus on business customers, the Company
is increasing the direct sales force of Axicorp and lessening its reliance on
marketing through associations. The Company has experienced and expects to
continue to experience lower gross margin as a percentage of net revenue for
Axicorp's local switched and cellular services, as compared to long distance
services.     
   
  Net revenue is derived from the number of minutes billed by the Company and
is recorded upon completion of calls. The Company generally prices its
services at a savings compared to the major carriers operating in the Targeted
Regions, which allows the Company to offer competitive pricing to its
customers. In Australia, net revenue is currently derived approximately
equally from the provision of long distance and from the provision of local
and cellular services, primarily to a broad mix of small- and medium-sized
businesses. The Company's net revenue in the United States is derived from
carrying a mix of business, consumer and wholesale carrier long distance
traffic. In the United Kingdom, net revenue is derived from the provision of
long distance services, primarily to ethnic residential consumers, as well as
to small- and medium-sized businesses. The Company intends to generate net
revenue from internal growth through focused sales and marketing efforts on a
retail basis     
 
                                      26

<PAGE>
 
   
toward small- and medium-sized businesses with significant international long
distance traffic and ethnic residential consumers and, on a wholesale basis,
to other telecommunications carriers and resellers with international traffic
in the Targeted Regions.     
   
  Prices in the long distance industry in the United States and the United
Kingdom have declined in recent years and as competition continues to
increase, the Company believes that prices are likely to continue to decrease.
Additionally, the Company believes that because deregulatory influences only
recently have begun to affect non-U.S. and non-U.K. telecommunications
markets, the deregulatory trend in such markets is expected to result in
greater competition which could adversely affect net revenue per minute and
gross margin as a percentage of net revenue. The Company believes, however,
that such decreases in prices will be at least partially offset by increased
telecommunications usage and decreased costs.     
 
  Cost of revenue is primarily comprised of costs incurred from other domestic
and foreign telecommunications carriers to access, transport and terminate
calls. The majority of the Company's cost of revenue is variable, based upon
the number of minutes of use, with transmission and termination costs being
the Company's most significant expense. As the Company increases the portion
of traffic transmitted over its own facilities, cost of revenue increasingly
will reflect lease, ownership and maintenance costs of the Network. In order
to manage such costs, the Company pursues a flexible approach with respect to
Network expansion. The Company initially obtains transmission capacity on a
variable-cost, per-minute leased basis, next acquires additional capacity on a
fixed-cost basis when traffic volume makes such a commitment cost-effective,
and ultimately purchases and operates its own facilities only when traffic
levels justify such investment. The Company also seeks to lower its cost of
revenue through (a) optimizing the routing of calls over the least cost
routing, (b) increasing volumes on its fixed cost leased lines, thereby
spreading the allocation of fixed costs over a larger number of minutes, (c)
negotiating lower variable usage based costs with domestic and foreign service
providers and negotiating additional and lower cost correspondent agreements
with foreign PTTs, and (d) continuing to expand the Network when traffic
volumes justify such investment. See "Risk Factors--Managing Rapid Growth" and
"Business--Network."
   
  Typical of the long distance telecommunications industry, the Company
generally realizes a higher gross margin as a percentage of net revenue on its
international compared to its domestic long distance services and expects to
realize a higher gross margin as a percentage of net revenue on its retail
services compared to those realized on its wholesale services. In addition,
the Company generally realizes a higher gross margin as a percentage of net
revenue on its long distance services as compared to those realized on local
switched and cellular services. Although, after giving effect to the
acquisition of Axicorp, the Company's wholesale services represent only a
small percentage of its net revenue, the Company expects such services to
represent a significantly larger percentage of net revenue over time. While
wholesale services generate a lower gross margin as a percentage of net
revenue than retail services, the additional traffic volume of such wholesale
customers improves the utilization of the Network and allows the Company to
obtain greater volume discounts from its suppliers than it otherwise would
realize. The Company's overall gross margin as a percentage of net revenue may
fluctuate in the future based on its relative volumes of international versus
domestic long distance services and wholesale versus retail long distance
services.     
 
  Selling, general and administrative expenses are comprised primarily of
salaries and benefits, commissions, occupancy costs, sales and marketing
expenses, advertising and administrative costs. These expenses have been
increasing over the past year, which is consistent with the development stage
nature of the Company, expansion of the United States and United Kingdom
operations, and the transformation of Axicorp's operations. The Company
expects this trend to continue and believes that additional selling, general
and administrative expenses will be necessary to support the expansion of
sales and marketing efforts and operations.
 
  Since its inception, the Company has made, and expects to continue to make,
significant investments in the development of its operations in its Targeted
Regions and the development and expansion of the Network. The costs of
developing its operations and expanding the Network, including the purchase
and installation of switches, sales and marketing expenses and other
organizational costs, are significant. In addition, increased
 
                                      27

<PAGE>
 
   
capital investment activity in the future can be expected to affect the
Company's operating results in the near term due to increased depreciation
charges and interest expense in connection with borrowings to fund such
expenditures, which costs will be incurred in advance of the realization of the
expected improvements in operating results from such investments. Such costs
and investment activity have resulted in negative cash flows and operating
losses for the Company on an historical basis, which are expected to continue
to increase in the near future as the Company uses the proceeds of the Offering
to accelerate the expansion of its business and the build-out of the Network.
The Company currently anticipates spending approximately $70 million on the
improvement and expansion of the Network during the next 18 months. See "--
Liquidity and Capital Resources" and "Use of Proceeds."     
   
  Although the Company's functional currency is the U.S. dollar, the majority
of the Company's net revenue is derived from its sales and operations outside
the United States. On a pro forma basis, approximately 94% and 99% of the
Company's net revenue was earned, and approximately 91% and 97% of the
Company's operating costs was incurred, in currencies other than the U.S.
dollar for the six months ended June 30, 1996 and the year ended December 31,
1995, respectively. In the future, the Company expects to continue to derive
the majority of its net revenue and incur the majority of its operating costs
outside the United States and changes in exchange rates may have a significant
effect on the Company's results of operations. The Company historically has not
engaged, and does not currently contemplate engaging, in hedging transactions
to mitigate foreign exchange risks. See "Risk Factors--Risks Associated with
International Operations."     
 
RESULTS OF OPERATIONS
   
  As a result of the Company's acquisition of Axicorp on March 1, 1996 and the
development stage nature of the Company in the first quarter of 1995, the
Company believes that a comparison of the historical results of operations for
the six-month periods ended June 30, 1995 and 1996 is not meaningful and that
such results are not necessarily indicative of results for any future period.
Accordingly, the historical results of operations are supplemented with a more
extensive discussion of the pro forma results of operations for the six months
ended June 30, 1995 and 1996 and the pro forma quarterly results of operations
for each of the six quarters in the period ended June 30, 1996, which results
give effect to the acquisition of Axicorp as if it had occurred on January 1,
1995. A discussion of the Company's historical results of operations for the
six months ended June 30, 1995 and 1996, the period from inception (February 4,
1994) through December 31, 1994 and the year ended December 31, 1995, and a
discussion of Axicorp's historical results of operations for the years ended
March 31, 1995 and 1996 follow the discussion of the Company's pro forma
results of operations.     
 
                                       28

<PAGE>
 
PRO FORMA RESULTS
 
 Results of Operations for the Six Months Ended June 30, 1996 Compared to the
Six Months Ended June 30, 1995
 
  The following table presents certain items from the Company's Unaudited Pro
Forma Consolidated Statements of Operations:
 

<TABLE>
<CAPTION>
                                                 SIX MONTHS ENDED JUNE 30,
                              YEAR ENDED        -------------------------------
                          DECEMBER 31, 1995         1995             1996
                          --------------------  --------------   --------------
                              $          %         $       %        $       %
                          ----------  --------  -------  -----   -------  -----
                              (IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S>                       <C>         <C>       <C>      <C>     <C>      <C>
Net revenue.............  $  125,628    100.0%  $47,930  100.0%  $91,783  100.0%
Cost of revenue.........     114,639     91.3    43,141   90.0    83,918   91.4
                          ----------  -------   -------  -----   -------  -----
  Gross margin..........      10,989      8.7     4,789   10.0     7,865    8.6
Operating expenses:
 Selling, general and
  administrative........      12,955     10.3     5,376   11.2     8,791    9.6
 Depreciation and amor-
  tization..............       1,842      1.5       879    1.8     1,098    1.2
                          ----------  -------   -------  -----   -------  -----
  Total operating ex-
   penses...............      14,797     11.8     6,255   13.1     9,889   10.8
                          ----------  -------   -------  -----   -------  -----
Income (loss) from oper-
 ations.................      (3,808)    (3.0)   (1,466)  (3.1)   (2,024)  (2.2)
Interest expense........        (885)    (0.7)     (446)  (0.9)     (473)  (0.5)
Interest income.........         132      0.1        30    0.1       209    0.2
Other income (expense)..         --       --        --     --       (268)  (0.3)
                          ----------  -------   -------  -----   -------  -----
Income (loss) before in-
 come taxes.............      (4,561)    (3.6)   (1,882)  (3.9)   (2,556)  (2.8)
Income taxes............         124      0.1        68    0.1       743    0.8
                          ----------  -------   -------  -----   -------  -----
Net income (loss).......  $   (4,685)    (3.7)% $(1,950)  (4.1)% $(3,299)  (3.6)%
                          ==========  =======   =======  =====   =======  =====
</TABLE>

 
  Net revenue increased 92%, or $43.9 million, from $47.9 million for the six
months ended June 30, 1995 to $91.8 million for the six months ended June 30,
1996. The Australian net revenue increased 80%, or $37.9 million, from $47.7
million to $85.6 million. The increase was attributable to growth in minutes
of traffic primarily from business customers, as well as an increased number
of cellular customers. Non-Australian net revenue was $6.2 million for the six
months ended June 30, 1996 as compared to minimal revenue of $0.2 million for
the six months ended June 30, 1995. The increase was attributable to a greater
number of customers in all non-Australian geographical regions of the
Company's business and an increase in minutes of use to higher rate per minute
countries, including India, Iran, Japan and Argentina. As the Company
continues to build its sales and marketing staff, establish additional carrier
arrangements and expand the Network, the Company expects the minutes of
traffic and associated revenue to continue to increase.
 
  Cost of revenue increased 95%, or $40.8 million, from $43.1 million for the
six months ended June 30, 1995 to $83.9 million for the six months ended June
30, 1996. The increase was a direct reflection of the increased traffic the
Company carried for customers. The Australian cost of revenue increased 79%,
or $34.1 million, from $42.9 million for the six months ended June 30, 1995 to
$77.0 million for the six months ended June 30, 1996. The Australian cost of
revenue increase is primarily driven by increased traffic and, to a lesser
extent, lower tariff rate discounts implemented by Telstra in February 1996.
The Australian cost of revenue as a percentage of revenue remained constant at
90%. The non-Australian cost of revenue increased $6.8 million as a result of
increased traffic. Cost of revenue as a percentage of net revenue increased
from 90% to 91%. The non-Australian cost of revenue as a percentage of net
revenue increased as a result of the lack of return traffic associated with
newly initiated correspondent agreements, and traffic being carried on more
expensive carriers because of lack of adequate capacity with lower cost
carriers.
 
  Gross margin increased 64%, or $3.1 million, from $4.8 million for the six
months ended June 30, 1995 to $7.9 million for the six months ended June 30,
1996. The Australian gross margin percentage remained constant at 10%. The
non-Australian operations reported a gross deficit of $0.8 million.
 
                                      29

<PAGE>
 
  Selling, general and administrative expenses increased 64%, or $3.4 million,
from $5.4 million for the six months ended June 30, 1995 to $8.8 million for
the six months ended June 30, 1996. The Australian operations increased
selling, general and administrative expenses $1.4 million as a result of
increased salaries and benefits, commissions and administrative expenses to
support the continued growth in the business. The Australian selling, general
and administrative expenses as a percentage of net revenue decreased from 10%
to 7% for the six months ended June 30, 1995 and 1996, respectively, as a
result of fixed costs being spread over an increasing revenue base. The non-
Australian operations account for the remaining increase of $2.0 million due
to growth in sales and marketing staffing levels, network operations expenses,
and customer service costs.
 
  Depreciation and amortization increased 25%, or $0.2 million, from $0.9
million for the six months ended June 30, 1995 to $1.1 million for the six
months ended June 30, 1996. The increase was primarily attributable to
depreciation for $0.7 million for capital additions associated with the
development of the customer billing system in Australia and $0.9 million of
capital additions for network equipment in the non-Australian markets.
   
  Interest expense increased 6% as a result of additional capital leases to
finance network switching equipment in the United States, as well as the
incurrence of $2.0 million of debt to Teleglobe in February of 1996.     
 
  Interest income increased from a negligible amount in the six months ended
June 30, 1995 to $0.2 million in the six months ended June 30, 1996 as a
result of higher average cash balances invested overnight generated from the
private equity placements in December 1995 and February 1996.
 
  Other income (expense) is comprised of a foreign currency transaction loss
of $0.3 million for the six months ended June 30, 1996 associated with the
debt related to the acquisition of Axicorp, which is denominated in Australian
dollars. Fluctuations in the currency exchange rates between the Australian
and U.S. dollar will cause currency transaction gains or losses which will be
recognized in the current period results of operations.
 
  Income taxes is based on the income before taxes generated by Axicorp and
payable to the Australian federal government. There was no income tax
provision (benefit) reflected in either period for the non-Australian
operations as pre-tax losses were incurred in both periods and a full
valuation reserve was applied to the tax benefit.
 
                                      30

<PAGE>
 
 Quarterly Results of Operations
   
  The following table sets forth unaudited pro forma consolidated statement of
operations data for each of the six fiscal quarters in the period ended June
30, 1996 and has been prepared assuming the acquisition of Axicorp occurred as
of January 1, 1995. The pro forma quarterly information has been derived from,
and should be read in conjunction with, the Consolidated Financial Statements
of the Company, the Financial Statements of Axicorp and the notes thereto
included elsewhere in this Prospectus, and in management's opinion, reflects
all adjustments, consisting only of normal recurring adjustments, necessary
for a fair presentation of the information for the quarters presented. The
operating results for any quarter are not necessarily indicative of results
for any future period.     
 

<TABLE>
<CAPTION>
                                   CONSOLIDATED PREDECESSOR AND COMPANY            COMPANY
                          -------------------------------------------------------- --------
                                                   QUARTER ENDED:
                          -----------------------------------------------------------------
                          MARCH 31, JUNE 30,  SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
                            1995      1995        1995          1995       1996      1996
                          --------- --------  ------------- ------------ --------- --------
                                       (IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S>                       <C>       <C>       <C>           <C>          <C>       <C>
Net revenue:
  United States, United
   Kingdom and Mexico...   $    17  $   204      $   276      $   670     $ 1,931  $ 4,229
  Australia.............    20,701   27,008       37,193       39,559      41,574   44,049
                           -------  -------      -------      -------     -------  -------
    Total net revenue...    20,718   27,212       37,469       40,229      43,505   48,278
Cost of revenue.........    18,491   24,650       34,366       37,130      39,284   44,634
                           -------  -------      -------      -------     -------  -------
  Gross margin..........     2,227    2,562        3,103        3,099       4,221    3,644
Operating expenses:
  Selling, general and
   administrative.......     2,574    2,802        3,593        3,986       3,958    4,834
  Depreciation and amor-
   tization.............       419      460          473          490         525      571
                           -------  -------      -------      -------     -------  -------
    Total operating ex-
     penses.............     2,993    3,262        4,066        4,476       4,483    5,405
                           -------  -------      -------      -------     -------  -------
Loss from operations....      (766)    (700)        (963)      (1,377)       (262)  (1,761)
Interest expense........      (221)    (226)        (219)        (221)       (236)    (238)
Interest income.........        22        8           36           66         170       38
Other income (expense)..       --       --           --           --         (213)     (55)
                           -------  -------      -------      -------     -------  -------
Loss before income tax-
 es.....................      (965)    (918)      (1,146)      (1,532)       (541)  (2,016)
Income taxes............       --        68           59           (2)        648       96
                           -------  -------      -------      -------     -------  -------
Net loss................   $  (965) $  (986)     $(1,205)     $(1,530)    $(1,189) $(2,112)
                           =======  =======      =======      =======     =======  =======
Net revenue growth per-
 centage:
  United States, United
   Kingdom and Mexico...       --   1,100.0%        35.3%       142.8%      188.2%   119.0%
  Australia.............       --      30.5%        37.7%         6.4%        5.1%     6.0%
    Total...............       --      31.3%        37.7%         7.4%        8.1%    11.0%
Gross margin percent-
 age....................      10.7%     9.4%         8.3%         7.7%        9.7%     7.5%
Selling, general and
 administrative expenses
 as a percentage of net
 revenue................      12.4%    10.3%         9.6%         9.9%        9.1%    10.0%
</TABLE>

 
  Quarterly net revenue increased from $20.7 million in the quarter ended
March 31, 1995 to $48.3 million in the quarter ended June 30, 1996. The
Australian net revenue growth in each quarter was due to an increase in
traffic volume primarily as a result of an increase in the business customer
base. The lower rate of growth in Australian net revenue from the quarter
ended September 30, 1995 as compared to the subsequent two quarters is
primarily a result of management's shift in focus to the sale of Axicorp to
the Company and, in the quarter ended June 30, 1996, management's strategic
decision to focus on higher-margin, higher-volume business
 
                                      31

<PAGE>
 
customers and an increase in the level of competition. The lower rate of
growth in the Company's net revenue from the quarter ended September 30, 1995
as compared to the three subsequent quarters is primarily a result of
management's strategic decision to focus on higher-margin, higher-volume
business customers and an increase in the level of competition in Australia,
offset by an increase in the traffic volumes primarily associated with
increased carrier traffic in the United States and the introduction of service
in the United Kingdom.
   
  Quarterly gross margin percentages have trended downward during the six
quarters from 11% in the quarter ended March 31, 1995 to 8% in the quarter
ended June 30, 1996. The reduction in the quarterly gross margin percentage in
each of the quarters of 1995 was primarily a result of the lower tariff rate
discounts implemented by Telstra in the Australian market. In the next two
quarters, gross margin percentages were favorably affected by, in Australia,
lower cost per minute of cellular service due to volume discounts and, in the
last quarter for the Company as a whole, current management's focus on higher-
margin, higher-volume business customers, offset by negative gross margin due
to start-up of non-Australian operations.     
 
  The Company's quarterly selling, general and administrative expenses have
trended upward during the six month period from $2.6 million in the quarter
ended March 31, 1995 to $4.8 million in the quarter ended June 30, 1996. The
quarterly selling, general and administrative expense increase is reflective
of the worldwide growth in the Company's operations, including increased
personnel costs, network operations costs, sales and marketing expenses and
internal billing systems development costs. The selling, general and
administrative expenses in the fourth quarter of 1995 increased due to the
conversion costs associated with the Australian operations providing direct
billing and customer service to its customer base. In the quarter ended June
30, 1996, selling, general and administrative expenses increased as a
percentage of net revenue due to substantial expenditures incurred in the
commencement of non-Australian operations.
 
  Quarterly depreciation and amortization reflects an increasing trend as a
result of the Company's continued investment in property and equipment
primarily associated with the expansion of the Network. This trend is expected
to continue in the foreseeable future.
 
HISTORICAL RESULTS--PRIMUS
 
 Results of Operations for the Six Months Ended June 30, 1996 Compared to the
Six Months Ended June 30, 1995
 
  Net revenue increased $65.2 million, from $0.2 million for the six months
ended June 30, 1995 to $65.4 million for the six months ended June 30, 1996.
The growth was attributable to $59.3 million of net revenue associated with
Axicorp from the purchase date of March 1, 1996 through June 30, 1996. The
remaining $5.9 million of net revenue growth was associated primarily with the
commencement of the Company's United States and United Kingdom operations.
 
  Cost of revenue increased $60.0 million, from $0.2 million for the six
months ended June 30, 1995 to $60.2 million for the six months ended June 30,
1996 as a direct result of the increased net revenue. Axicorp's cost of
revenue for the four months ended June 30, 1996 was $53.2 million, or 90% of
Axicorp's net revenue during such period, while the non-Australian cost of
revenue for the full six months ended June 30, 1996 was $7.0 million or 113%
of non-Australian net revenue. The non-Australian cost of revenue reflects the
start-up nature of the Network and traffic being carried on more expensive
carriers until adequate capacity on lower cost carriers could be established.
In addition, the Company's cost of revenue as a percentage of net revenue was
effected by the lack of return traffic associated with newly-initiated
correspondent agreements.
 
  Selling, general and administrative expenses increased from $0.7 million to
$6.7 million for the six months ended June 30, 1995 to June 30, 1996.
Approximately $4.0 million of the increase was attributable to the four months
of activity associated with Axicorp and the remaining $2.0 million related to
the non-Australian operations as a result of increased staffing levels,
increased sales and marketing activity and network operation costs. The non-
Australian selling, general and administrative costs as a percentage of net
revenue for the six months ended June 30, 1996 was 44%, which is reflective of
the growth stage of such business. The Australian selling, general and
administrative expense as a percentage of net revenue was 7% for the four
months from acquisition to June 30, 1996.
 
                                      32

<PAGE>
 
  Depreciation and amortization increased $0.7 million, from $0.1 million for
the six months ended June 30, 1995 to $0.8 million for the six months ended
June 30, 1996. The majority of the increase was a result of the acquisition of
Axicorp and was comprised of amortization of goodwill and the customer lists
which totaled $0.5 million. The remaining increase is associated with
depreciation related to Axicorp's assets and increased depreciation expense
for the Company as a result of additional capital expenditures for switching
and network related equipment.
 
  Interest expense increased $0.3 million as a result of the additional debt
incurred by the Company in connection with the acquisition of Axicorp, which
totaled $8.4 million as of June 30, 1996, and was outstanding for the four-
month period from March 1, 1996 (the date of acquisition) to June 30, 1996.
Additionally, the Company incurred increased interest expense as a result of
the issuance of a $2.0 million note payable to a stockholder (Teleglobe) in
February 1996.
 
  Interest income of $0.1 million during the six months ended June 30, 1996
relates to the temporary investment of the funds received from the private
placements of equity made by the Company in 1995 and 1996.
 
  Other income (expense) of $0.3 million for the six months ended June 30,
1996 related to foreign currency transaction losses on the Australian dollar-
denominated debt incurred by the Company payable to the sellers for its
acquisition of Axicorp as a result in the appreciation of the Australian
dollar against the U.S. dollar during the period.
 
  Income taxes amount was fully attributable to the operations of Axicorp for
the four months from the date of purchase, and represented the amount of
expense for Australian federal government taxes.
 
 Results of Operations for the Year Ended December 31, 1995 Compared to the
Period from Inception (February 4, 1994) to December 31, 1994
 
  Net revenue and cost of revenue in 1995 were $1.2 million and $1.4 million,
respectively. During the period ended December 31, 1994, the Company did not
have net revenue or cost of revenue as it was in the development stage and
involved in various start-up activities including raising capital, obtaining
licenses, acquiring equipment, leasing space, developing markets, and
recruiting and training personnel. In March 1995, the Company began generating
net revenue and associated cost of revenue.
 
  Gross deficit for 1995 was $0.2 million. As the Company began generating
revenue in 1995, there were fixed network costs that were not offset by the
net revenue generated.
 
  Selling, general and administrative expenses increased from $0.6 million in
1994 to $2.0 million in 1995. The increase was primarily due to additional
costs incurred to support the formation of the Company's administrative,
management, sales and operations personnel.
 
  Depreciation and amortization increased to $0.2 million in 1995. The
increase in depreciation and amortization expense was directly related to the
purchase of Network equipment, including the Company's switch in Washington,
D.C.
 
HISTORICAL RESULTS--AXICORP
 
 Results of Operations for the Twelve Months Ended March 31, 1996 Compared to
the Twelve Months Ended March 31, 1995
 
  The audited financial statements of Axicorp included in this Prospectus
cover the twelve month period ended March 31, 1996 and the nine month period
ended March 31, 1995. In order to provide a more meaningful presentation of
the changes in the operations of Axicorp, the unaudited results of operations
for the three months ended June 30, 1994 have been combined with the audited
results for the nine-month period ended March 31, 1995 to arrive at a twelve-
month period ended March 31, 1995 ("fiscal 1995") for purposes of comparison
to the audited twelve-month period ended March 31, 1996 ("fiscal 1996").
 
                                      33

<PAGE>
 
  The following table presents certain items from Axicorp's Statement of
Operations:
 

<TABLE>
<CAPTION>
                            THREE     NINE
                            MONTHS   MONTHS
                            ENDED     ENDED    TWELVE MONTHS ENDED MARCH 31,
                           JUNE 30, MARCH 31, ----------------------------------
                             1994     1995         1995              1996
                           -------- --------- ---------------- -----------------
                                                 $       %         $       %
                                              -------- ------- --------- -------
                                 (IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S>                        <C>      <C>       <C>      <C>     <C>       <C>
Net revenue..............   $4,269   $44,797  $ 49,066  100.0% $ 144,345  100.0%
Cost of revenue..........    3,855    40,405    44,260   90.2    131,712   91.2
                            ------   -------  -------- ------  --------- ------
  Gross margin...........      414     4,392     4,806    9.8     12,633    8.8
Operating expenses:
  Selling, general and
   administrative........      480     4,277     4,757    9.7     11,558    8.0
  Depreciation and amor-
   tization..............        5        43        48    0.1        235    0.2
                            ------   -------  -------- ------  --------- ------
    Total operating ex-
     penses..............      485     4,320     4,805    9.8     11,793    8.2
                            ------   -------  -------- ------  --------- ------
Income (loss) from opera-
 tions...................      (71)       72         1    --         840    0.6
Interest expense.........      --        --        --     --         --     --
Interest income..........      --         30        30    0.1        219    0.2
Other income (expense)...      --        --        --     --         --     --
                            ------   -------  -------- ------  --------- ------
Income (loss) before in-
 come taxes..............      (71)      102        31    0.1      1,059    0.8
Income taxes.............      --          4         4    --         492    0.3
                            ------   -------  -------- ------  --------- ------
Net income (loss)........   $  (71)  $    98  $     27    0.1% $     567    0.4%
                            ======   =======  ======== ======  ========= ======
</TABLE>

 
  Net revenue increased 194%, or $95.2 million, from $49.1 million in fiscal
1995 to $144.3 million in fiscal 1996 primarily due to an increase in volume
of traffic as a result of an increased number of business customers. Net
revenue also increased as a result of an increase in the number of cellular
customers. The Company became one of four authorized resellers of Telstra's
analog and digital cellular service in May 1995.
   
  Cost of revenue increased 198%, or $87.4 million, from $44.3 million in
fiscal 1995 to $131.7 million in fiscal 1996. The increase was attributable to
increased minutes of use, a higher percentage of net revenue being
attributable to cellular services, which have lower margins than non-cellular
services, and lower tariff rate discounts to the Company implemented by
Telstra which were effective in February 1996. Cost of revenue is comprised of
those costs associated with the transmission and termination of traffic by
Telstra. As a percentage of net revenue, cost of revenue increased from 90% in
fiscal 1995 to 91% in fiscal 1996.     
 
  Gross margin increased 163%, or $7.8 million, from $4.8 million in fiscal
1995 to $12.6 million in fiscal 1996. As a percentage of revenue, gross margin
decreased from 10% in fiscal 1995 to 9% in fiscal 1996 as a result of higher
cost of revenue.
 
  Selling, general and administrative expenses increased 143%, or $6.8
million, from $4.8 million in fiscal 1995 to $11.6 million in fiscal 1996. The
increase consisted of personnel costs, network operations cost, sales and
marketing expenses and internal billing systems development costs which were
attributable to the overall growth in the business during this period. As a
percentage of net revenue, selling, general and administrative expenses
decreased from 10% in fiscal 1995 to 8% in fiscal 1996, primarily as a result
of fixed costs being spread over a higher revenue base.
 
  Depreciation and amortization increased to $0.2 million in fiscal 1996. The
entire increase was attributable to $0.7 million of fiscal 1996 asset
expenditures primarily related to the internal development of Axicorp's
billing system and fiscal 1995 asset purchases of $0.3 million having a full
year of depreciation and amortization.
 
                                      34

<PAGE>
 
   
  Interest income increased $0.2 million from fiscal 1995 to fiscal 1996 as a
result of higher average cash and cash equivalent balances primarily generated
from operations.     
 
  Income taxes represented the Australian federal statutory tax rate applied to
income before income taxes, net of permanently non-deductible items.
 
LIQUIDITY AND CAPITAL RESOURCES
   
  The Company's liquidity requirements arise from net cash used in operating
activities purchases of network equipment including switches, peripheral
equipment, and international fiber cable capacity and interest and principal
payments on outstanding indebtedness, including capital leases. From time to
time the Company evaluates acquisitions of businesses which complement the
business of the Company. Depending on the cash requirements of potential
transactions, the Company may finance such transactions with a portion of the
proceeds of the Offering or bank borrowings, or the Company may raise
additional funds through other financing vehicles. The Company, however,
presently has no understanding, commitment or agreement with respect to any
acquisition, and is not currently involved in negotiations. There can be no
assurance that if the Company were to pursue such an opportunity, any such
acquisition would occur or that the funds to finance any such acquisition would
be available on reasonable terms, if at all.     
   
  Historically, the Company's net cash used in operating activities ($0.5
million, $2.0 million and $4.2 million for the period from February 4, 1994 to
December 31, 1994, the year ended December 31, 1995, and the six months ended
June 30, 1996, respectively) and liquidity needs have been funded from the
private placement of equity securities and, to a lesser extent, through
stockholder loans and capital leases. As of June 30, 1996, the Company had a
working capital deficit of $13.5 million primarily attributable to the current
portion of long-term obligations of $10.6 million. On July 31, 1996, the
Company sold $15.8 million, net of transaction costs, of additional equity in
the Private Equity Sale which, on a pro forma basis as of June 30, 1996, would
result in working capital of $2.3 million.     
   
  The Company currently anticipates spending approximately $70 million on the
improvement and expansion of the Network during the next 18 months, including
$10 million of capital expenditures in the remainder of 1996, which includes
the purchase of switches and related peripheral equipment for the
implementation of international gateways in Los Angeles and New York. The
expected 1997 and 1998 capital expenditures include switches, network
equipment, international fiber cable capacity and other international
facilities.     
   
  The Company currently is in discussions to obtain a $25 million line of
credit to provide it with additional funding to meet its capital requirements
and will use capital lease financings as appropriate. There can be no assurance
that the Company will be able to obtain a line of credit or capital lease
financing on commercially reasonable terms, if at all. The Company believes
that the net proceeds from the Offering, together with the net proceeds from
the Private Equity Sale, borrowing capacity under an expected line of credit
and available vendor financing, will be sufficient to fund the Company's net
cash used in operating activities, capital expenditures and other cash needs
for the next 18 months. Additional funding through the incurrence of debt or
sale of additional equity will be required to meet the Company's growth plans
beyond the second quarter of 1998, although there can be no assurance that such
additional funds can be obtained on acceptable terms, if at all. If necessary
funds are not available, the Company's business and results of operations and
the future expansion of the business could be materially adversely affected.
    
                                       35

<PAGE>
 

 
                                  BUSINESS
 
GENERAL
   
  Primus is a multinational telecommunications company that focuses on the
provision of international and domestic long distance services. The Company
seeks to capitalize on the increasing business and consumer demand for
international telecommunications services generated by the globalization of
the world's economies and the worldwide trend toward deregulation of the
telecommunications sector. The Company has targeted North America, Asia-
Pacific and Europe as its primary service regions. The Company currently
provides services in the United States, Australia and the United Kingdom,
which are the most deregulated countries within the Targeted Regions and which
serve as regional hubs for expansion into additional markets within the
Targeted Regions. As part of the execution of this strategy, the Company has
commenced operations in Mexico and has installed a switch in Canada. The
Company expects to expand into additional markets as deregulation occurs and
the Company is permitted to offer a full range of switched public telephone
services in such markets.     
 
  For the year ended December 31, 1995 and the six months ended June 30, 1996,
the Company had pro forma net revenue of approximately $126 million and $92
million, respectively, after giving effect to the Company's March 1996
acquisition of Axicorp, the fourth largest telecommunications provider in
Australia. For the three months ended June 30, 1996, the Company had net
revenue of approximately $48 million. As of July 31, 1996, the Company had 221
full-time employees and approximately 24,000 customers.
 
  The Company targets, on a retail basis, small- and medium-sized businesses
with significant international long distance traffic and ethnic residential
consumers and, on a wholesale basis, other telecommunications carriers and
resellers with international traffic. The Company provides a broad array of
competitively priced telecommunications services, including international long
distance to over 200 countries, domestic long distance, international and
domestic private networks, prepaid and calling cards and toll-free services,
as well as local switched and cellular services in Australia. The Company
markets its services through a variety of channels, including direct sales,
independent agents, direct marketing and associations.
   
  The Company is implementing an international telecommunications Network to
reduce and control costs, improve service reliability and increase flexibility
to introduce new products and services. The Network currently consists of an
international gateway switch in Washington, D.C., points-of-presence in New
York and London, and leased transmission capacity connecting to the networks
of other international and domestic carriers. The Company also has
correspondent agreements with government-owned PTTs in India, Iran and
Honduras. The Company has installed three additional international gateway
switches in Sydney, Melbourne and Toronto, a switch in Brisbane, and has
acquired two international gateway switches for installation in New York and
Los Angeles and two other switches for installation in Adelaide and Perth, all
eight of which are expected to be operational by the first quarter of 1997.
The Company expects to acquire an additional switch for installation in London
and additional switches and points-of-presence for installation in other major
metropolitan areas of the Targeted Regions. The Company expects to connect its
gateway switches between Sydney and Los Angeles with a trans-Pacific fiber-
optic cable link by the end of the first quarter of 1997. The Company also
intends to purchase additional switches and ownership in international fiber-
optic cables, install international gateway satellite earth station
facilities, lease additional transmission capacity and, where necessary,
obtain additional correspondent agreements.     
 
INDUSTRY OVERVIEW
   
  General. The international long distance industry, which involves the
transmission of voice and data from the domestic telephone network of one
country to another, is undergoing a period of fundamental change that has
resulted, and is expected to continue to result, in significant growth in
usage of international telecommunications services. In 1994, the international
long distance industry accounted for $50 billion in revenues and 53 billion
minutes of use, up from $29 billion in revenues and 28 billion minutes of use
in 1989. Industry sources estimate that by the year 2000 this market will have
expanded to $93 billion in revenues and 111 billion minutes of use,
representing compound annual growth rates from 1994 of 11% and 13%,
respectively.     
 
                                      36

<PAGE>
 
   
  The Company believes the growth in international long distance services is
being driven by (i) increased demand for international telecommunications
services generated by the globalization of the world's economies and the
worldwide trend toward deregulation of the telecommunications sector, (ii)
declining prices and a wider choice of products and services driven by greater
competition resulting from privatization and deregulation, (iii) increased
telephone density and accessibility resulting from technological advances and
greater investment in telecommunications infrastructure, including deployment
of wireless networks, and (iv) increased international business and leisure
travel.     
   
  The competition spurred by privatization and deregulation, in addition to
resulting in a wider choice of products and services, has resulted in lower
prices. The Company believes, however, that the lower price environment
resulting from the increase in competition has been more than offset by cost
decreases, as well as an increase in telecommunications usage. For example,
based on FCC data for the period 1989 through 1994, per minute settlement
payments by U.S.-based carriers to PTTs fell 26%, from $0.70 per minute to
$0.52 per minute. Over this same period, however, per minute international
billed revenue fell only 5%, from $1.02 in 1989 to $0.97 in 1994. Therefore,
gross profit per international minute (before local access charges) grew from
$0.32 in 1989 to $0.45 in 1994, a 41% increase. Although there can be no
assurances, the Company believes that as settlement rates and costs for leased
capacity continue to decline, international long distance will continue to
provide high revenue and gross profit per minute. See "Risk Factors--Intense
Domestic and International Competition."     
 
  Classification of Service Providers. International long distance carriers
generally can be categorized according to ownership and use of transmission
facilities and switches. Although no carrier utilizes exclusively owned
facilities for the transmission of all of its long distance traffic, carriers
vary from being primarily facilities-based (i.e. they own and operate their
own land based or undersea cable and switches) to those that are purely
resellers of another carrier's transmission network. Generally, the first-tier
long distance companies (e.g., AT&T, MCI and Sprint in the United States;
British Telecom and Mercury in the United Kingdom; and Telstra and Optus in
Australia) are transmission facilities-based carriers that own and operate a
domestic fiber-based network. Second-tier long distance companies (e.g.,
Frontier and LCI in the United States; WorldCom and ACC in the United Kingdom;
and AAPT in Australia) own switching facilities but generally do not own cable
transmission facilities. The third-tier of the market consists of long
distance companies that are generally switchless resellers that rely on the
transmission facilities of other carriers.
 
  Regulatory and Competitive Environment. Prior to deregulation, the long
distance carriers in any particular country generally were government-owned
monopoly carriers, such as British Telecom in the United Kingdom, Telstra in
Australia and Telmex in Mexico. Deregulation of a particular
telecommunications market typically has begun with the introduction of a
second long distance carrier, followed by the authorization of multiple
carriers. In the United States, one of the first deregulated markets,
deregulation began in the 1960's with MCI's authorization to provide long
distance service and was followed in 1984 by AT&T's divestiture of the RBOCs
and, most recently, by the passage of the 1996 Telecommunications Act.
Deregulation has occurred elsewhere, such as in the United Kingdom, and is
being implemented in other countries, including Australia and Mexico.
 
  Call Dynamics. A long distance telephone call consists of three parts:
origination, transport and termination. Generally, a domestic long distance
call originates on a local exchange network and is transported to the network
of a long distance carrier. The call is then carried along the long distance
network to another local exchange network where the call is terminated. An
international long distance call is similar to a domestic long distance call,
but typically involves at least two long distance carriers: the first carrier
transports the call from the country of origination, and the second carrier
terminates the call in the country of termination. These long distance
telephone calls are classified as one of three types of traffic. A call made
from the United States to the United Kingdom is referred to as outbound
traffic for the United States carrier and inbound traffic for the United
Kingdom carrier. The third type of traffic, international transit traffic,
originates and terminates outside a particular country, but is transported
through that country on a carrier's network. Since most major international
fiber optic cable systems are connected to the United States, and
international long-distance prices are
 
                                      37

<PAGE>
 
substantially lower in the United States than in other countries, a large
volume of international transit traffic is routed through the United States.
 
  International calls are transported by land-based or undersea cable or by
microwave via satellites. A carrier can obtain voice circuits on cable systems
either through ownership or leases. Ownership in cables is acquired either
through Indefeasible Rights of Use ("IRUs") or Minimum Assignable Ownership
Units ("MAOUs"). The fundamental difference between an IRU holder and an owner
of MAOUs is that the IRU holder is not entitled to participate in management
decisions relating to the cable system. Between two countries, a carrier from
each country owns a "half-circuit" of a cable, essentially dividing the
ownership of the cable into two equal components. Additionally, any carrier
generally may lease circuits on a cable from another carrier. Unless a carrier
owns a satellite, satellite circuits also must be leased from one of several
existing satellite systems.
   
  Accounting Rate System. Under the accounting rate system (also known as the
settlement system), which is the traditional regulatory model, international
long distance traffic is exchanged under bilateral correspondent agreements
between carriers in two countries. Correspondent agreements generally are three
to five years in length and provide for the termination of traffic in, and
return traffic to, the carriers' respective countries at a negotiated
accounting rate, known as the Total Accounting Rate ("TAR"). In addition,
correspondent agreements provide for network coordination and accounting and
settlement procedures between the carriers. Both carriers are responsible for
their own costs and expenses related to operating their respective halves of
the end-to-end international connection.     
   
  Settlement costs, which typically equal one-half of the TAR, are the fees
owed to another international carrier for transporting traffic on its
facilities. Settlement costs are reciprocal between each party to a
correspondent agreement at a negotiated rate (which must be the same for all
United States-based carriers, unless the FCC approves an exception). For
example, if a foreign carrier charges a U.S. carrier $0.30 per minute to
terminate a call in the foreign country, the U.S. carrier would charge the
foreign carrier the same $0.30 per minute to terminate a call in the United
States. Additionally, the TAR is the same for all carriers transporting traffic
into a particular country, but varies from country to country. The term
"settlement costs" arises because carriers essentially pay each other on a net
basis determined by the difference between inbound and outbound traffic between
them. The following chart illustrates an international long distance call using
the settlement system:     
                                      
                                   LOGO     
   
  Correspondent agreements typically provide that a carrier will return
terminating traffic ("return traffic") in proportion to the traffic it
receives. Return traffic generally is more profitable than outgoing traffic
because the settlement     
 
                                       38

<PAGE>
 
rate per minute is substantially greater than the incremental cost of
terminating a call in the country due to the lack of marketing expense and
billing costs, as well as the lower cost structure associated with terminating
calls in the United States. Generally, there is a six-month lag between
outbound traffic and the allocation of the corresponding return traffic and, in
certain instances, a minimum volume commitment must be achieved before
qualifying for receipt of return traffic.
 
  Alternative Calling Procedures. As the international long distance market has
deregulated, long distance companies have devised alternative calling
procedures ("ACPs") in order to complete calls more economically than under the
accounting rate system. Some of the more significant ACPs include (i) transit,
(ii) refiling or "hubbing," (iii) international simple resale ("ISR") and (iv)
call-back. The most common method is transit, which allows traffic between two
countries to be carried through a third country on another carrier's network.
This procedure, which requires agreement among the particular long distance
companies and the countries involved, generally is used either for overflow
traffic during peak periods or where a direct circuit may not be available or
justified based on traffic volume. Refiling or "hubbing" of traffic, which
takes advantage of disparities in settlement rates between different countries,
allows traffic to a potential country to be treated as if it originated in
another country that enjoys lower settlement rates with the destination
country, thereby resulting in a lower overall costs on an end-to-end basis.
United States based carriers are beneficiaries of refiling on behalf of other
carriers because of low international rates. The difference between transit and
refiling is that, with respect to transit, the carrier in the destination
country has a direct relationship with the originating carrier, while with
refiling, the carrier in the destination country is likely not to even know the
identity of the originating carrier. The choice between transit and refiling is
determined primarily by cost. With ISR, a carrier may completely bypass the
settlement system by connecting an international leased line to the public
switch telephone network ("PSTN") of a foreign country or directly to a
customer premise. ISR currently is allowed by applicable regulatory authorities
between a limited number of international routes, including Canada-United
Kingdom, United States-United Kingdom, United States-Sweden and United Kingdom-
Australia and is currently increasing in use. Call-back avoids the high
international rates in a particular country of origin by providing dial tone in
a second country with a lower rate, typically the United States.
   
  Industry Strategies. Strategies to provide international long distance
services are driven by the emergence of ACPs and the increased demand for
seamless services on a global basis. First-tier service providers primarily
utilize correspondent agreements in order to provide international service.
Second-tier carriers and new entrants primarily are utilizing ACPs and are
developing networks to compete with the first-tier carriers and gain market
share. In response, first-tier carriers have formed alliances to provide
seamless services and one-stop shopping on a global basis. Examples include
Global One (an alliance among Sprint, Deutsche Telekom, France Telecom and
others), Concert (an alliance between British Telecom and MCI) and
WorldPartners (an alliance among AT&T, Unisource and others). Certain new
entrants, including the Company, are establishing their own operations in
multiple countries and, to the extent required to serve other selected markets,
alliances or other arrangements with other carriers.     
 
  Description of Operating Markets. The following is a summary of the size,
growth prospects and competitive and regulatory environments of the domestic
and international long distance industries in the Targeted Regions:
 
  UNITED STATES. The United States long distance market is highly deregulated
and is the largest in the world. According to the FCC, in 1994 long distance
telephone revenue was $71.8 billion, including $13.2 billion from international
services (representing 15.5% of the total market). AT&T has remained the
largest long distance carrier in the U.S. market, with market share of slightly
more than 55%, while MCI and Sprint have market shares of 17% and 10%,
respectively. AT&T, MCI and Sprint constitute what generally is regarded as the
first-tier in the United States long distance market. Other large long distance
companies with more limited ownership of transmission capacity, such as
WorldCom, Frontier and LCI, constitute the second-tier of the industry. The
remainder of the United States long distance market is comprised of several
hundred smaller companies, largely resellers, which are known as third-tier
carriers.
 
                                       39

<PAGE>
 
   
  AUSTRALIA. AUSTEL estimates that during 1994, the market for all
telecommunication services was A$15 billion and the Company believes that the
market for international and domestic long distance services in Australia
during 1994 accounted for approximately A$10 billion in revenues. Telstra and
Optus are classified as "carriers" because they can own and operate local,
national and international transmission networks. Telstra, which is owned by
the Australian government, is a traditional facilities-based carrier with a
market share of approximately 80%. In addition to the Company and Optus,
Telstra currently competes against switched-based resellers such as AAPT, and
several switchless resellers and call-back service providers, including
PacStar. Australia is planning to further deregulate its long distance market
in June 1997 by allowing service providers other than Telstra and Optus to own
transmission facilities.     
 
  UNITED KINGDOM. Oftel estimates that the market for international and
domestic long distance services in the United Kingdom accounted for
approximately (Pounds)1.3 billion and (Pounds)4.2 billion in revenues,
respectively, during fiscal 1994. In the United Kingdom, British Telecom
historically has dominated the telecommunications market and is the largest
carrier. Mercury, which owns and operates interchange transmission facilities,
is the second largest carrier. The remainder of the United Kingdom long
distance market is comprised of an emerging market of licensed
telecommunications service providers, such as Energis, and switch-based
resellers, such as AT&T, WorldCom, MFS, ACC and Esprit.
       
  MEXICO. The market for long distance voice and data telephone services in
Mexico accounted for approximately 22.6 billion Pesos in 1994. In Mexico,
Telmex is currently the monopoly provider of long distance and local services.
In late 1996, however, the long distance market is scheduled to be opened to
competition. As a result, several United States-based long distance carriers
(such as AT&T and MCI) have formed alliances with Mexican partners to construct
long distance networks. Primus, along with MCI, WorldCom and others, currently
provides United States-Mexico cross border private line services.
 
PRIMUS STRATEGY
 
  The Company's objective is to become a leading provider of international and
domestic long distance voice, data and value-added services to its target
customers. The Company's strategy to achieve this objective is to focus on
providing a full range of competitively priced, high-quality services in the
Targeted Regions. Key elements in the Company's strategy include:
 
  . Focus on Customers with Significant International Long Distance
    Usage. The Company's primary focus is providing telecommunications
    services to small- and medium-sized businesses with significant
    international long distance traffic and to ethnic residential
    consumers and, on a wholesale basis, to other telecommunications
    carriers and resellers with international traffic. The Company
    believes that the international long distance market offers an
    attractive business opportunity given its size and, as compared to
    the domestic long distance market, its higher revenue per minute,
    gross margin and expected growth rate. Although the Company expects
    to obtain a significant percentage of its revenue from offering
    international long distance services, the Company currently
    generates, and expects to continue to generate over the near term, a
    greater percentage of net revenue from domestic long distance
    services in an effort to build network traffic more quickly.
 
  . Pursue Early Entry into Selected Deregulating Markets. Primus seeks
    to be an early entrant into selected deregulating telecommunications
    markets where it believes there is significant demand for
    international long distance services, substantial growth and profit
    potential, and the opportunity to establish a customer base and
    achieve name recognition. The Company intends to use each Operating
    Hub as a base to expand into deregulating markets within the Targeted
    Regions and will focus its expansion efforts on major metropolitan
    areas with a high concentration of target customers with
    international traffic. The Company believes that management's
    international telecommunications experience will assist it in
    successfully identifying and launching operations in deregulating
    markets.
 
                                       40

<PAGE>
 
     
  . Implement Intelligent International Network. The Company expects that
    the strategic development of the Network will lead to reduced
    transmission and other operating costs as a percentage of net
    revenue, reduced reliance on other carriers and more efficient
    network utilization. The Network will consist of (i) a global
    backbone network connecting intelligent gateway switches in the
    Targeted Regions, (ii) a domestic long distance network presence in
    each of the Operating Hubs and certain additional countries within
    the Targeted Regions, (iii) a combination of leased facilities,
    resale arrangements, and correspondent agreements. In an effort to
    manage transmission costs, the Company pursues a flexible approach
    with respect to Network expansion. The Company initially obtains
    additional transmission capacity on a variable-cost, per-minute
    basis, next acquires additional capacity on a fixed-cost basis when
    traffic volume makes such a commitment cost-effective, and ultimately
    purchases and operates its own facilities only when traffic levels
    justify such investment.     
     
  . Deliver Quality Services at Competitive Prices. The Company believes
    that it delivers high-quality services at competitive prices and
    provides a high level of customer service. The Company intends to
    maintain a low-cost structure in order to offer its customers
    international and domestic long distance services priced below that
    of its major competitors. In addition, the Company intends to
    maintain strong customer relationships through the use of trained and
    experienced service representatives and the provision of customized
    billing services.     
 
  . Provide a Comprehensive Package of Services. The Company seeks to
    provide a comprehensive package of services to create "one-stop
    shopping" for its targeted customers' telecommunications needs,
    particularly for small- and medium-sized businesses and ethnic
    residential consumers that prefer a full service telecommunications
    provider. The Company believes this approach strengthens its
    marketing efforts and increases customer retention.
 
NETWORK
 
  Network Design. The Network will consist of (i) a global backbone network
connecting intelligent gateway switches in the Targeted Regions, (ii) a
domestic long distance network presence within each of the Operating Hubs and
certain additional countries within the Targeted Regions and (iii) a
combination of leased facilities, resale arrangements and correspondent
agreements.
   
  The Company has targeted North America, Asia-Pacific and Europe for the
development of the Network. Within each of these Targeted Regions, the Company
has selected the United States (North America), Australia (Asia-Pacific) and
the United Kingdom (Europe) as regional hubs for expansion into additional
markets within the Targeted Regions. These countries were selected based on
their market size, potential growth and favorable regulatory environments. The
Company has a domestic presence within each of these countries and plans to
construct its global backbone network by interconnecting these countries via
international gateway switches, and owned and leased transmission facilities.
The Company has an established customer base in Australia and is in the
process of building its customer base in major metropolitan areas in the
Targeted Regions, which will provide the Company with separate points of
originating traffic that experience peak network usage at different times of
the day, thereby allowing the Company to attain higher utilization of the
Network. The Company expects to expand into additional markets as deregulation
occurs and the Company is permitted to offer a full range of switched public
telephone services. For instance, the Company has used its United States
operations to initiate operations with and into Mexico. The Company intends to
use its United Kingdom operations to coordinate efforts to enter other major
metropolitan European markets in the European Union, including those in France
and Germany, in conjunction with the scheduled deregulation of the
telecommunication industry in certain European Union countries in 1998.     
 
                                      41

<PAGE>
 
   
  The following chart illustrates an international long distance call using the
Network from the United States to another market where the Company has an
international gateway switch:     
 
                [CHART OF INTERNATIONAL TRAFFIC APPEARS HERE] 
 
                                    
   
  Network Implementation. The Network currently consists of an international
gateway switch in Washington, D.C., points-of-presence in New York and London,
and leased transmission capacity connecting to the networks of other
international and domestic carriers. The Company also has correspondent
agreements with India, Iran and Honduras. The Company has installed three
additional international gateway switches in Sydney, Melbourne and Toronto, a
switch in Brisbane, and has acquired two international gateway switches for
installation in New York and Los Angeles and two other switches for
installation in Adelaide and Perth, all eight of which are expected to be
operational by the end of the first quarter of 1997. The Company expects to
acquire an additional switch for installation in London and install additional
points-of-presence and switches in other major metropolitan areas of the
Targeted Regions as the traffic usage warrants the expenditure.     
 
  Each of the international gateway switches will be connected to the domestic
and international networks of both the Company and other carriers in a
particular market, allowing the Company to (i) provide seamless service, (ii)
package and market the voice and data services purchased from other carriers
under the "Primus" brand name and (iii) divert a portion of that market's
United States-bound return traffic through the Company's switches in the United
States. In addition, until the Company's customer base grows and it penetrates
other deregulating telecommunications markets, the Company intends to transit a
significant portion of its traffic through the United States. After the
Company's customer base grows and it develops sufficient traffic, the Company
intends to develop its own leased or owned facilities to connect to its various
switches. Where traffic is light or moderate, the Company intends to obtain
capacity to transmit traffic on a per-minute variable cost basis. When traffic
volume increases and such commitments are cost effective, the Company intends
to either lease or purchase lines on a monthly or longer term basis at a fixed
cost and acquire economic interests in transmission capacity through IRUs to
international points.
   
  In countries with highly regulated markets and significant inbound traffic
from its customers and targeted customer segments, the Company intends to use
correspondent agreements when necessary. Assuming significant levels of inbound
and outbound traffic, correspondent agreements may allow the Company to offer
better value to customers calling these markets by improving the Company's
economics over these routes. The Company currently has correspondent agreements
with India, Iran and Honduras and is exploring the possibility of obtaining
additional correspondent agreements with PTTs in certain other countries which
are not expected to deregulate in the near future, although there can be no
assurance that the Company will enter into such agreements on favorable terms,
if at all.     
 
                                       42

<PAGE>
 
SERVICES
   
  Primus offers a broad array of telecommunications services through the
Network and through interconnection with the networks of other carriers. While
over time the Company intends to offer a broad range of bundled
telecommunication services, the availability of services within a particular
market will depend upon regulatory constraints and the availability of services
for resale. In order to create a global brand identity, the Company operates
under the name "Primus" in all of the Targeted Regions. In addition, the
Company operates under the name "Axicorp" in Australia.     
 
  The Company offers the following services in the United States, United
Kingdom and Australia:
 
  . International and Domestic Long Distance. The Company provides
    international long distance voice services to its customers to over
    200 countries and provides domestic long distance voice services
    within each of the Operating Hubs. On a market-by-market basis,
    access methods required to originate a call vary according to
    regulatory requirements and the existing domestic telecommunications
    infrastructure. In the United States, access methods available to the
    Company's customers include "1+", toll-free, dedicated (private line)
    and prefix code access. In the United Kingdom, dedicated and prefix
    code access are used to originate calls. In Australia, the Company
    currently is a reseller of services provided by Telstra. When the
    Company operates its own switches in Australia, its services will be
    accessed through the use of toll-free, dedicated and prefix code
    access.
 
  . Private Network Services. For business customers, the Company designs
    and implements international private network services that may be
    used for voice, data and video applications. These services are
    provided on a turnkey basis whereby the Company installs and operates
    equipment necessary to provide end-to-end services at the customer's
    premises. The Company's Mexican operations consist exclusively of the
    provision of private network services to selected multinational
    corporations.
 
  In addition, on a market-by-market basis, the Company provides on a stand
alone and/or bundled basis the following services which the Company expects to
introduce over time in all of its markets:
 
  . Prepaid and Calling Cards. The Company offers prepaid and calling
    cards that may be used by customers for domestic and international
    telephone calls within and from their home country. With the
    Company's prepaid card service, a customer purchases a card that
    entitles the customer to make phone calls on the card up to some
    monetary limit. The customer is provided an access number (local or
    toll free phone number) and personal identification number ("PIN").
    The customer dials the access number that accesses the Company's
    switch and an attached voice response unit. The unit confirms the
    authority of the user to use the account by requiring the PIN to be
    entered and confirms that a balance is available on the card. With
    the Company's calling card service, the customer selects a PIN. The
    account is then billed by Primus on a monthly basis as calls are made
    using the card. The Company's prepaid cards are offered in the United
    States and calling cards are offered in the United Kingdom. The
    Company expects to introduce global prepaid and calling cards in 1997
    that will enable customers to make telephone calls in most major
    countries while they are outside their home country.
 
  . Cellular Services. The Company is one of four national dealers
    selling Telstra analog and digital cellular services in Australia.
    The Company intends to provide cellular services on a resale basis in
    the United States and the United Kingdom by the end of 1997.
 
  . Local Switched Service. The Company intends to provide local service
    on a resale basis as part of its "one-stop shopping" marketing
    approach, subject to commercial feasibility and regulatory
    limitations. The Company currently provides local switched service in
    Australia.
 
  . Toll-free Services. The Company currently provides domestic and
    international toll-free services in the United States and intends to
    offer such services in the United Kingdom and Australia when its
    switches become operational in such countries.
 
                                       43

<PAGE>
 
  New services the Company seeks to introduce in selected markets in 1997
include:
 
  . Internet Services. The Company intends to offer switched and
    dedicated access to the Internet for use by commercial and
    residential customers. These services may be offered on a direct
    connection to the Internet or on a resale basis. Once connected to
    the Internet, customers will be able to access services provided by
    others such as World Wide Web browsing, electronic mail, news feeds
    and bulletin boards.
 
  . Data Services. The Company intends to offer packet-switched and frame
    relay data services in selected markets, a transmission standard
    which utilizes statistical multiplexing technology. Frame relay
    enables multiple users to share communication bandwidth for enhanced
    data transmission.
 
  . Value-Added Services. The Company intends to offer enhanced facsimile
    services, audio and video conferencing, and voice-mail.
 
  There can be no assurance that the Company will be able to launch such
services or that, if launched, such services will be successful.
 
  The Company strives to provide personalized customer service and believes
that the quality of its customer service is one of its competitive advantages.
The Company's larger customers are actively covered by dedicated account and
service representatives who seek to identify, prevent and solve problems. The
Company provides toll-free, 24-hour a day customer service in the United
States, the United Kingdom and Australia. As of July 31, 1996, the Company
employed 44 full-time and 10 part-time customer service representatives.
 
CUSTOMERS
 
  The Company's primary focus is providing telecommunications services, on a
retail basis, to small- and medium-sized businesses with significant
international long distance traffic and ethnic residential consumers and, on a
wholesale basis, other carriers and resellers with international traffic.
During the Company's initial growth phase in each service market, however, the
Company expects that it will build revenue from a variety of customers with
either local or long distance (domestic or international) service needs. As of
July 31, 1996, the Company had 95 sales and marketing personnel operating from
10 offices.
   
  Businesses. The Company's business sales and marketing efforts target small-
and medium-sized businesses with significant international long distance
traffic. The Company believes that these users are attracted to Primus
primarily due to its significant price savings compared to first-tier carriers
and, secondarily, its personalized approach to customer service and support,
including customized billing and bundled service offerings. The Company also
sells its services to large multinational corporations on an opportunistic
basis. As of July 31, 1996, the Company employed 60 full-time direct sales
representatives focused on the business market.     
 
  Residential Consumers. The Company's residential sales and marketing strategy
targets ethnic residential consumers who generate high international traffic
volumes. The Company believes that these consumers will be attracted to Primus
because of its significant price savings as compared to first-tier carriers,
simplified pricing structure, multilingual customer service and support and
bundled service offerings. As of July 31, 1996, the Company employed 17 full-
time direct sales representatives focused on the ethnic residential consumers.
 
  Telecommunications Carriers and Resellers. The Company competes for the
business of other telecommunications carriers and resellers primarily on the
basis of price and, to a lesser extent, service quality. The Company believes
that long distance services, when sold to telecommunications carriers and other
resellers, are, generally, a commodity product and therefore do not benefit
from special sales or promotional efforts. Sales to these other carriers and
resellers, however, help the Company maximize the use of the Network and
thereby minimize fixed costs per minute of use. As of July 31, 1996, the
Company employed two direct sales professionals focused on telecommunications
carriers and resellers.
 
                                       44

<PAGE>
 
SALES AND MARKETING
   
  The Company markets its services through a variety of sales channels as
summarized below. The Company's use of these channels may vary from market to
market.     
 

<TABLE>
<CAPTION>
                                  AGENTS AND                               MEDIA
                         DIRECT   INDEPENDENT                               AND
                         SALES       SALES                                 DIRECT
                         FORCE  REPRESENTATIVES TELEMARKETING ASSOCIATIONS  MAIL
                         ------ --------------- ------------- ------------ ------
<S>                      <C>    <C>             <C>           <C>          <C>
Small/Medium Business-
 es.....................    *           *              *            *         *
Consumers...............    *           *              *            *         *
Telecommunications
 Carriers/Resellers.....    *
Multinational Business-
 es.....................    *
</TABLE>

   
  Direct Sales Force. The Company's direct sales force is comprised of 60 full-
time employees who focus on small- to medium-sized business customers with
substantial international telecommunications traffic or traffic potential. The
Company also employs 17 full-time direct sales representatives focused on
ethnic residential consumers and two direct sales representatives who
exclusively sell wholesale services to other long distance carriers and
resellers. Direct sales personnel are compensated with a base salary plus sales
commissions.     
   
  The Company's direct sales efforts are organized around regional hubs
supported by sales offices. The Company currently has offices in Washington,
D.C., Tampa, Toronto, Mexico City, London, Melbourne, Sydney, Adelaide,
Brisbane and Perth. The Company intends to open additional offices in Los
Angeles and New York City by the end of 1996 and other major United States
metropolitan areas thereafter. These targeted metropolitan areas have a large
number of small- and medium-sized businesses and significant ethnic
populations.     
 
  Agents and Independent Sales Representatives. The Company supplements its
direct sales efforts with a network of agents and independent sales
representatives. These agents and representatives, who typically focus on
small- and medium-sized businesses, as well as ethnic residential consumers,
are paid commissions based on long distance revenue generated. Within major
metropolitan regions, the Company usually grants only nonexclusive sales
rights, requires its agents and representatives to maintain minimum quotas and
prohibits them from selling competitors' products.
 
  Telemarketing. The Company employs 16 full-time telemarketing sales persons
to supplement sales efforts to ethnic residential consumers and small- and
medium-sized business customers. From time to time, the Company also engages
outside telemarketing agents to supplement its internal telemarketing efforts.
 
  Associations. Axicorp successfully markets telecommunications services in
Australia to members of trade and professional associations. Axicorp develops
tailored marketing materials jointly with each association, attends meetings
and trade shows, sponsors events and advertises in newsletters. These
associations receive a fee based on revenue generated by sales to its members.
The Company intends to employ similar marketing programs in the United Kingdom,
the United States and in other markets as appropriate.
 
  Media and Direct Mail. The Company uses a variety of print, television and
radio to increase name recognition in new markets. The Company uses targeted
media and direct mail primarily to reach specific small business or consumer
groups. For example, the Company reaches ethnic residential consumers by print,
media advertising campaigns in ethnic newspapers, and on ethnic radio and
television programs.
 
MANAGEMENT INFORMATION AND BILLING SYSTEMS
 
  The Company uses various management information, network, and customer
billing systems in its different operating subsidiaries to support the
functions of network and traffic management, customer service, customer
billing, and financial reporting. Management believes that its systems are
adequate to meet the Company's needs in the near term, but as the Company
continues to grow, it will invest additional capital to purchase hardware and
software, license more specialized software, increase capacity and link its
systems among different countries.
 
                                       45

<PAGE>
 
  United States. In the United States, the Company operates systems for billing
and financial reporting. The Company uses a customer billing system developed
by Electronic Data Systems Inc. ("EDS"). Under an agreement with EDS through
the year 2000, EDS supplies, operates and maintains this system and is
responsible for providing back-up facilities and disaster recovery. The EDS
system is widely used in the telecommunications industry and has been
customized to meet the Company's specific needs. The Company direct bills its
business, reseller, and the majority of its residential customers. The Company
also has capabilities established through suppliers to bill certain residential
customers through their respective LECs, which charge for the Company's service
in a monthly, all inclusive invoice. In addition, the Company has developed a
proprietary, local area network-based customer service and support information
system which is on-line with the EDS platform. The Company believes that using
an EDS billing platform ensures access to one of the most technologically
advanced and feature rich multifunctional platforms in the industry. In
addition to the billing capabilities, the platform includes on-line customer
service, fraud control and the ability to generate a variety of reports. For
financial reporting, the Company uses a combination of the EDS system and a PC-
based accounting system package.
 
  Australia. In Australia, prior to its acquisition by the Company, Axicorp had
developed an in-house proprietary system for customer billing and customer
service and support. The Axicorp billing system is technologically advanced and
possesses features that allow Axicorp to provide its customers with a single
integrated invoice for long distance, local, and cellular services. All
customers are billed directly by Axicorp. Axicorp uses a purchased accounting
system package for financial reporting.
   
  United Kingdom. In the United Kingdom, the Company direct bills its customers
through a billing system provided by Telia, which is the Company's main network
provider. Customer service is supported by in-house systems and financial
reporting is done through a PC-based accounting system package. The Company is
evaluating alternative billing systems for use when the Company installs its
own switch in the United Kingdom.     
 
COMPETITION
 
  The international telecommunications industry is highly competitive and
significantly affected by regulatory changes, marketing and pricing decisions
of the larger industry participants and the introduction of new services made
possible by technological advances. The Company believes that long distance
service providers compete on the basis of price, customer service, product
quality and breadth of services offered. The Company's Operating Hubs have
numerous competitors and there are limited barriers to entry in these markets.
The Company believes that as international telecommunications markets continue
to deregulate, competition in these markets will increase, similar to the
competitive environment that has developed in the United States following the
AT&T divestiture in 1984.
   
  Many of the competitors are significantly larger, have substantially greater
financial, technical and marketing resources and larger networks than the
Company. These competitors include, among others, AT&T, MCI, Sprint, WorldCom,
Frontier and LCI in the United States; Telstra and Optus in Australia; and
British Telecom, Mercury, WorldCom and ACC in the United Kingdom. Additionally,
many larger competitors have formed global alliances, including WorldPartners
(AT&T and others), Concert (MCI and British Telecom) and Global One (Sprint,
France Telecom, Deutsche Telekom and others), in an attempt to capture market
share on a global basis.     
 
  Privatization and deregulation have had, and are expected to continue to
have, significant effects on competition in the industry. For example, as a
result of legislation recently enacted in the United States, RBOCs will be
allowed to enter the long distance market, AT&T, MCI and other long distance
carriers will be allowed to enter the local telephone services market, and
cable television companies and utilities will be allowed to enter both the
local and long distance telecommunications markets. In addition, competition
has begun to increase in the European Union telecommunications markets in
anticipation of the scheduled 1998 deregulation of the telecommunications
industry in most European Union countries.
 
                                       46

<PAGE>
 
  The following is a brief summary of the competitive environment in each of
the three Operating Hubs:
   
  United States. In the United States, which is the most competitive and among
the most deregulated long distance markets in the world, competition is based
upon pricing, customer service, network quality, and the ability to provide
value-added services. AT&T is the largest supplier of long distance services,
with MCI and Sprint being the next largest providers. In the future, under
provisions of recently enacted federal legislation, the Company anticipates
that it will also compete with RBOCs, LECs and Internet providers in providing
domestic and international long-distance services.     
 
  Australia. Australia is one of the most deregulated and competitive
telecommunications markets in the Asia-Pacific region. The Company's principal
competitors in Australia are Telstra, the dominant carrier, Optus, Vodafone,
AAPT and WXL, three other switched-based carriers and a number of switchless
resellers, including PacStar and CorpTel. See "--Network." The Company believes
that when certain carrier-status regulations are modified, currently expected
to occur in June 1997, competition in Australia will increase. The Company
competes in Australia by offering a comprehensive menu of competitively-priced
products and services, including value-added services, and by providing
superior customer service and support.
 
  United Kingdom. The Company's principal competitors in the United Kingdom are
British Telecom, the dominant supplier of telecommunications services in the
United Kingdom, and Mercury, a subsidiary of Cable & Wireless. The Company also
faces competition from licensed public telephone operators (which are
constructing their own facilities-based networks) such as Energis, Colt and
MFS, from cable companies such as Telewest and SBC CableComms, and from switch-
based resellers such as WorldCom, ACC and Esprit. Other United States-based
carriers also may enter the United Kingdom market. The Company competes in the
United Kingdom by offering competitively-priced bundled and stand-alone
services, personalized customer service and value-added services.
 
GOVERNMENT REGULATION
 
  As a multinational telecommunications company, Primus is subject to varying
degrees of regulation in each of the jurisdictions in which it provides its
services. Local laws and regulations, and the interpretation of such laws and
regulations, differ significantly among the jurisdictions in which the Company
operates. There can be no assurance that future regulatory, judicial and
legislative changes will not have a material adverse effect on the Company,
that domestic or international regulators or third parties will not raise
material issues with regard to the Company's compliance or noncompliance with
applicable regulations or that regulatory activities will not have a material
adverse effect on the Company. See "Risk Factors--Potential Adverse Effects of
Regulation." The regulatory framework in certain jurisdictions in which the
Company provides its services is briefly described below.
 
  United States. In the United States, the provision of the Company's services
is subject to the provisions of the Communications Act, the 1996
Telecommunications Act and the FCC regulations thereunder, as well as the
applicable laws and regulations of the various states. The FCC exercises
jurisdiction over all facilities of, and services offered by,
telecommunications common carriers to the extent such services involve
jurisdictionally interstate communications, while state regulatory authorities
retain jurisdiction over jurisdictionally intrastate communications.
       
  As a carrier offering services to the public, the Company must comply with
the requirements of common carriage under the Communications Act, including the
offering of service on a non-discriminatory basis at just and reasonable rates,
and obtaining FCC approval prior to any assignment of authorizations or any
transfer of de jure or de facto control of the Company. The Company is
classified as a non-dominant common carrier for domestic service and is not
required to obtain specific prior FCC approval to initiate or expand domestic
interstate services. The FCC requires domestic carriers, including the Company,
to maintain tariffs on file at the Commission. Although the interstate tariffs
of non-dominant carriers are subject to FCC review, they are presumed lawful
and are seldom contested. As a domestic non-dominant carrier, the Company is
permitted to
 
                                       47

<PAGE>
 
make tariff filings on a single day's notice and without cost support to
justify specific rates. The FCC is currently considering whether to exempt non-
dominant domestic carriers from federal tariffing requirements, pursuant to
authority granted to the Commission in the 1996 Telecommunications Act,
although there can be no assurance that the FCC will adopt this policy.
       
   DOMESTIC SERVICE REGULATION. The 1996 Telecommunications Act, enacted in
February 1996, is intended to increase competition in the United States
telecommunications markets. The legislation opens the local services markets by
requiring LECs to permit interconnection to their networks and by establishing
LEC obligations with respect to unbundled access, resale, number portability,
dialing parity, access to rights-of-way, mutual compensation and other matters.
In addition, the legislation codifies the LECs' equal access and
nondiscrimination obligations and preempts inconsistent state regulation. The
legislation also contains special provisions that eliminate the restrictions on
the RBOCs and the GTE Operating Companies (the "GTOCs") from providing long
distance services. These new provisions permit an RBOC to enter the "out-of-
region" long distance market immediately upon the receipt of any state and/or
federal regulatory approvals otherwise applicable to the provision of long
distance service. These new provisions also permit an RBOC to enter the "in-
region" long distance market if it satisfies procedural and substantive
requirements, including obtaining FCC approval upon a showing that in certain
situations facilities-based competition is present in its market, and that it
has entered into interconnection agreements which satisfy a 14-point
"checklist" of competitive requirements. The GTOCs are permitted to enter the
long distance market as of the date of enactment of the 1996 Telecommunications
Act, without regard to limitations by region, although necessary regulatory
approvals to provide long distance services must be obtained, and the GTOCs are
subject to the provisions of the 1996 Telecommunications Act that impose
interconnection and other requirements on LECs. The 1996 Telecommunications Act
also addresses a wide range of other telecommunications issues that may
potentially impact the Company's operations. It is unknown at this time
precisely the nature and extent of the impact that the legislation will have on
the Company. As required by the legislation, the FCC will be conducting a large
number of proceedings over the next year to adopt rules and regulations to
implement the new statutory provisions and requirements. On August 1, 1996, the
FCC adopted an Interconnection Order implementing the requirements that
incumbent LECs make available to new entrants interconnection and unbundled
network elements, and offer retail services for resale at wholesale rates.
 
   STATE REGULATION. The Company's intrastate long distance operations are
subject to various state laws and regulations including, in most jurisdictions,
certification and tariff filing requirements. The vast majority of the states
require the Company to apply for certification to provide intrastate
telecommunications services, or at least to register or to be found exempt from
regulation, before commencing intrastate service. Certificates of authority can
generally be conditioned, modified, canceled, terminated, or revoked by state
regulatory authorities for failure to comply with state law and/or the rules,
regulations, and policies of the state regulatory authorities. Fines and other
penalties also may be imposed for such violations.
 
  The Company has received the necessary certificate and tariff approvals to
provide intrastate long distance service in 37 states. Applications for
certification are pending or will be filed in 11 other states. Although the
Company intends and expects to obtain operating authority in each jurisdiction
in which operating authority is required, there can be no assurance that one or
more of these jurisdictions will not deny the Company's request for operating
authority. The Company monitors regulatory developments in all 50 states to
ensure regulatory compliance. The Company provides interstate service
nationwide under FCC interstate tariffs. To the extent that any incidental
intrastate service is provided in any state where the Company has not yet
obtained any required certification, the state commissions in that state may
impose penalties for any such unauthorized provision of service.
 
  PSCs also regulate access charges and other pricing for telecommunications
services within each state. The RBOCs and other local exchange carriers have
been seeking reduction of state regulatory requirements, including greater
pricing flexibility. This could adversely affect the Company in several ways.
If regulations are changed to allow variable pricing of access charges based on
volume, the Company could be placed at a competitive
 
                                       48

<PAGE>
 
disadvantage over larger long distance carriers. The Company also could face
increased price competition from the RBOCs and other local exchange carriers
for intra-LATA and inter-LATA long distance services, which competition may be
increased by the removal of former restrictions on long distance service
offerings by the RBOCs as a result of the 1996 Telecommunications Act.
 
   INTERNATIONAL SERVICE REGULATION. International common carriers, such as the
Company, are required to obtain authority under Section 214 of the
Communications Act and file a tariff containing the rates, terms, and
conditions applicable to their services prior to initiating their international
telecommunications services. The Company has obtained all required
authorizations from the FCC to use, on a facilities and resale basis, various
transmission media for the provision of international switched services and
international private line services.
 
  Under new tariff rules applicable to international carriers, nondominant
international carriers such as the Company must file their international
tariffs and any revisions thereto with one day's notice in lieu of the 14-day
notice previously required. The Company has filed international tariffs for
switched and private line services with the FCC. Additionally, international
telecommunications service providers are required to file copies of their
contracts with other carriers, including correspondent agreements, with the FCC
within 30 days of execution. The Company has filed each of its correspondent
agreements with the FCC. The FCC's rules also require the Company to file
periodically a variety of reports regarding its international traffic flows and
use of international facilities. The FCC has recently proposed to reduce
certain reporting requirements of common carriers, although the Company is
unable to predict the outcome of this proposal.
 
  In addition to the general common carrier principles, the Company must
conduct its international business in compliance with the FCC's international
settlements policy ("ISP"). The ISP establishes the permissible boundaries for
U.S.-based carriers and their foreign correspondents to settle the cost of
terminating each other's traffic over their respective networks. The amount of
payments (the "settlement rate") is determined by the negotiated accounting
rate specified in the correspondent agreement. Under the ISP, unless prior
approval is obtained, the settlement rate generally must be one-half of the
accounting rate. Carriers must obtain waivers of the FCC's rules if they wish
to use an accounting rate that differs from the prevailing rate or vary the
settlement rate from one-half of the accounting rate. As a result of the FCC's
pro-competition policies, the recent trend has been to reduce accounting rates.
 
  As a U.S.-based international carrier, the Company is also subject to the
FCC's "uniform settlements policy" designed to eliminate foreign carriers'
incentives and opportunities to discriminate in their correspondent agreements
among different U.S.-based carriers through "whipsawing." Whipsawing refers to
the practice of a foreign carrier to vary the accounting and/or settlement rate
offered to different U.S.-based carriers for the benefit of the foreign
carrier, which could secure various incentives by favoring one U.S-based
carrier over another. Under the uniform settlements policy, U.S.-based carriers
can only enter into correspondent agreements that contain the same accounting
rate offered to all U.S.-based carriers. When a U.S.-based carrier negotiates
an accounting rate with a foreign correspondent that is lower than the
accounting rate offered to another U.S.-based carrier for the same service, the
U.S.-based carrier with the lower rate must file a notification letter with the
FCC. If a U.S.-based carrier varies the terms and conditions of its
correspondent agreement in addition to lowering the accounting rate, then the
U.S.-based carrier must request a waiver of the FCC's rules. Both the
notification and the waiver requests are designed to ensure that all U.S.-based
carriers have an opportunity to compete for foreign correspondent return
traffic.
 
  Among other efforts to prevent the practice of whipsawing and inequitable
treatment of similarly situated U.S.-based carriers, the FCC adopted the
principle of proportionate return to ensure that competing U.S.-based carriers
have roughly equitable opportunities to receive the return traffic that reduces
the marginal cost of providing international service. Consistent with its pro-
competition policies, the FCC prohibits U.S.-based carriers from bargaining for
special concessions from foreign partners.
 
                                       49

<PAGE>
 
   FOREIGN OWNERSHIP LIMITATIONS. The Communications Act limits the ownership
of an entity holding a common carrier radio license by non-U.S. citizens,
foreign corporations and foreign governments. The Company does not currently
hold any radio licenses. These ownership restrictions currently do not apply to
non-radio facilities, such as fiber optic cable. There can be no assurance,
however, that foreign ownership restrictions will not be imposed on the
operation of non-radio facilities used for the provision of international
services. The FCC recently adopted new rules relating to the entry and
participation of foreign entities in the U.S. telecommunications market. Under
those rules, the FCC will scrutinize an ownership interest greater than 25%, or
a controlling interest at any level in a U.S. carrier by a dominant foreign
carrier, to determine whether the destination market of the foreign carrier
offers "effective, competitive opportunities" ("ECO"). The Commission imposes
the same ECO test and affiliation standard on U.S.-based carriers that invest
in dominant foreign carriers. The FCC may impose restrictions on affiliated
carriers not meeting the ECO test. The new rules also require international
carriers to notify the FCC 60 days in advance of an acquisition of a 10% or
greater interest by a foreign carrier in that U.S. carrier. The FCC has
discretion to determine that unique factors require application of the ECO test
or a change in regulatory status of the U.S. carrier even though the foreign
carrier's interest is less than 25%. These rules also reduce international
tariff notice requirements for dominant, foreign-affiliated carriers from 45
days' notice to 14 days' notice. Such reduced tariff notice requirements may
make it easier for dominant, foreign-affiliated carriers to compete with the
Company. The 1996 Telecommunications Act partially amends existing restrictions
on foreign ownership of radio licenses by allowing corporations with non-U.S.
citizen officers or directors to hold radio licenses. Other non-U.S. ownership
restrictions, however, remain unchanged. The effect on the Company of the 1996
Telecommunications Act or other new legislation or regulations which may become
applicable to the Company cannot be determined.
 
   CHANGING U.S. REGULATIONS. Regulation of the telecommunications industry is
changing rapidly. The FCC is considering a number of international service
issues in the context of several policy rulemaking proceedings and in response
to specific petitions and applications filed by other international carriers.
The FCC's resolution of some of these issues in other proceedings may adversely
affect the Company's international business (by, for example, permitting larger
carriers to take advantage of accounting rate discounts for high traffic
volumes). The Company is unable to predict how the FCC will resolve the pending
international policy issues or how such resolution will affect its
international business. There can be no assurance that future regulatory
changes will not have a material adverse impact on the Company.
   
  Australia. In Australia, the provision of the Company's services is subject
to federal regulation pursuant to the Telecom Act and federal regulation of
anti-competitive practices pursuant to the Trade Practices Act 1974. In
addition, other federal legislation, various regulations pursuant to delegated
authority and legislation, ministerial declarations, codes, directions,
licenses, statements of the Commonwealth Government policy and court decisions
affecting telecommunications carriers also apply to the Company.     
   
  The Australian market is undergoing deregulation in two phases. The first
phase of the deregulation process commenced in 1991 and continued in 1992 with
(1) the enactment of the Telecom Act, (2) the corporatization of the local PTT,
Telecom Australia, into the corporation now known as Telstra, (3) the creation
and licensing of a second general carrier, Optus, (4) an agreement by the
Australian Government with Optus not to grant another general carrier license
before July 1, 1997, (5) the creation of a system to enable service providers
to compete with the carriers in the provision of telecommunications services
from 1992, (6) the licensing of Vodafone as a third digital mobile carrier, and
(7) a declared Government policy of achieving full competition by July 1, 1997,
subject to regulation by the Australian Government and the telecommunications
regulatory authority (at the present time, AUSTEL), and also by the competition
regulatory authority (the Australian Competition and Consumer Commission or
"ACCC"), which is expected to be given new jurisdiction over competition
aspects of the Australian telecommunications industry. These regulatory
authorities will have responsibility for economic and technical regulation of
the telecommunications industry as well as promoting competition and protecting
consumers.     
 
                                       50

<PAGE>
 
   
  The Australian telecommunications industry continues to undergo
deregulation, and it is currently expected that the Australian Government will
license additional carriers, including the Company, to own transmission
facilities in July 1997. The possible introduction of a new Telecommunications
Act or, alternatively, amendments to the Telecom Act and possibly to
Australia's competition law, the Trade Practices Act, are expected to be made
prior to July 1, 1997 in order to change some aspects of, and to clarify, the
regulatory framework for this second phase of deregulation. Both Telstra and
Optus have requested that the Australian Government defer such date, and there
can be no assurance that the deregulatory process will proceed in accordance
with the Australian Government's announced timetable. Any delay in such
deregulatory process or the granting of licenses to other entities interested
in developing their own transmission facilities in Australia could delay
potential price reductions to resellers anticipated in a more competitive
marketplace.     
   
  In the Australian context, a distinction is drawn between carriers licensed
under the Telecom Act and all other providers of telecommunications services.
Telstra, Optus and Vodafone are the only licensed facilities-based carriers
currently operating in Australia with exclusive rights to the transmission
facilities that constitute their networks. Both Telstra and Optus are licensed
by the Australian Government as general carriers and mobile carriers. Telstra
has been designated by AUSTEL as a dominant carrier for international
services. However, Telstra is currently challenging AUSTEL's finding of
dominance in the Australian federal courts.     
   
  Until July 1997, other operators may provide service on a resale basis
pursuant to a class license established by Part 10 of the Telecom Act. These
resellers operate in a switched-based or switchless environment and rely on
one or more of the licensed carriers. There are currently three types of class
licenses--service providers license, international service providers license,
and the public access cordless telecommunications services license. The class
licenses set forth the regulatory requirements applicable to all operators
providing services governed by such license. As a reseller of domestic, local
and long distance service, cellular service and international service, the
Company must comply with the terms of the class license that applies to all
service providers until July 1997, or later if the deregulatory process in
Australia is delayed.     
   
  A service provider does not need to apply or register for a class license.
However, a registration system does exist, providing some advantages of
certainty to the service provider by ensuring that particular service is
provided under the relevant class license. The system has the commercial
disadvantage of disclosing certain information about a provider's activities.
In addition, a system of forced enrollment exists for AUSTEL to monitor
certain activities. This requirement for enrollment has been applied to
eligible international services.     
   
  The remainder of the telecommunications services in Australia, including
value-added services, are open to competition. From July 1997, operators other
than Telstra, Optus and Vodafone may become general licensed carriers assuming
deregulation continues on its current timetable. Axicorp currently plans to
become a licensed general carrier after July 1997. As a general licensed
carrier, Axicorp will be required to comply with the terms of its own license
and will be subject to the greater regulatory controls applicable to licensed
facilities-based carriers.     
 
  United Kingdom. In the United Kingdom, the provision of the Company's
services is subject to the provisions of the U.K. Telecommunications Act. The
Secretary of State for Trade and Industry, acting on the advice of the U.K.
Department of Trade and Industry (the "DTI") is responsible for granting UK
telecommunications licenses, while the Director General of Telecommunications
(the "Director General") and Oftel are responsible for enforcing the terms of
such licenses. Oftel attempts to promote effective competition both in
networks and in services to redress anticompetitive behavior. The Company is
also subject to general European Union law.
 
  Until 1981, British Telecom was virtually the sole provider of public
telecommunications services throughout the United Kingdom. This virtual
monopoly ended when, in 1981, the British government granted Mercury a license
to run its own telecommunications system under the British Telecommunications
Act 1981. Both British Telecom and Mercury are licensed under the subsequent
U.K. Telecommunications Act to run
 
                                      51

<PAGE>
 
transmission facilities-based telecommunications systems and provide
telecommunications services. In 1991, the British government established a
"multi-operator" policy to replace the duopoly that had existed between British
Telecom and Mercury. Under the multi-operator policy, the DTI will recommend
the grant of a license to operate a telecommunications network to any applicant
that the DTI believes has a reasonable business plan and where there are no
other overriding considerations not to grant such license. All public
telecommunications operators and international simple resellers operate under
individual licenses granted by the Secretary of State for Trade and Industry
pursuant to the U.K. Telecommunications Act. Any telecommunications system with
compatible equipment that is authorized to be run under an individual license
is permitted to interconnect to British Telecom's network. Under the terms of
British Telecom's license, it is required to allow any such licensed operator
to interconnect its system to British Telecom's system, unless it is not
reasonably practicable to do so (e.g., due to incompatible equipment).
 
  The Company's subsidiary, Primus Telecommunications, Inc., holds an ISR
license that authorizes it to provide switched voice services over leased
private lines to all international points. In addition, the Company (along with
approximately 45 other applicants, including AT&T, WorldCom and ACC) has
recently made application to the U.K. Secretary for Trade and Industry for a
license to provide international facilities-based voice services. Although the
Company currently expects such license to be granted by the end of the first
quarter of 1997, there can be no assurance that the Company will be granted the
license by such time, or at all. Failure to obtain such license would prevent
the Company from providing facilities-based services in the United Kingdom and
would have an adverse effect on the Company's ability to expand its operations.
 
    TARIFFS. Telecommunications tariffs on operators in the United Kingdom
(excluding British Telecom) are generally not subject to prior review or
approval by regulatory authorities, although Oftel has historically imposed
price caps on British Telecom. The current price caps on British Telecom expire
at the end of July 1997. Oftel is considering whether it will be able to police
anti-competitive behavior effectively and is currently conducting a price
control review of the U.K. telecommunications industry. Key elements of Oftel's
final proposals in connection with this review include terminating price
controls on British Telecom in 2001, limiting increases in telecommunications
services charges for residential customers to the rate of inflation, and
continued regulation of access charges by British Telecom to its competing
telecommunications service providers. With respect to the creation of a
detailed effective regulatory regime for the future, Oftel has published its
proposals in July 1995 in a document entitled "Effective Competition: Framework
for Action." Key elements of Oftel's plans included (1) moving to an
incremental cost basis for interconnection charges from 1997, (2) withdrawing
from detailed setting of some interconnection charges, (3) providing for
industry-wide contribution to the cost of maintaining "universal service," (4)
eliminating access deficit charges, (5) moving towards pricing based on
capacity charging for interconnection services and (6) developing an
interconnection regime for service providers. There can be no assurances that
such proposals will be implemented, in whole or in part, in the time frame
specified.
 
   FAIR TRADING PRACTICES. Oftel is the principal regulator of the competitive
aspects of the U.K. telecommunications industry. Oftel's limited authority in
this area is derived from the powers given to Oftel under the U.K.
Telecommunications Act and from the terms of the licenses granted under the
U.K. Telecommunications Act. Any dispute between Oftel and a telecommunications
service provider may be referred on appeal to the U.K. Monopolies and Mergers
Commission, which may conduct a detailed and lengthy review of the facts
surrounding such dispute. Furthermore, Oftel has no authority to impose fines
for a breach of the terms of a license issued under the U.K. Telecommunications
Act, and third parties have no right to damages for a past breach. Oftel has
expressed its view that the current regulatory regime is both obscure and
uncertain. Although Oftel is currently seeking more power to police the
competitive aspects of the U.K. telecommunications industry, no assurances can
be given that it will be successful in its efforts or that it will be able to
prohibit anti-competitive conduct harmful to the Company. The Company is also
subject to general European law, which, among other things, prohibits certain
anti-competitive agreements and abuses of dominant market positions through
Articles 85 and 86 of the Treaty of Rome. The European Commission is entrusted
with the principal
 
                                       52

<PAGE>
 
enforcement powers under European Union competition law. It has the power to
impose fines of up to 10% of a group's annual revenue in respect of breaches of
Articles 85 and 86. In most cases notification of potentially infringing
agreements to the Commission under Article 85 with a request for an exemption
protects against the risk of fines from the date of notification.
 
  In March 1996, Oftel published an interim report on incremental costs
detailing steps to develop a methodology to calculate such costs. The report
has identified two models: "top-down" developed by British Telecom, and "bottom
up" favored by the industry. Incremental costs play a key role in Oftel's
proposals for the control of British Telecom's interconnection charges as of
August 1997. There is a risk that if agreement to costing methodologies to be
used by British Telecom is delayed or does not occur, the matter will be
referred to the MMC which could mean that the implementation of proper
transparency and allocation of costs when operators are seeking interconnection
with British Telecom will be seriously delayed.
 
  Mexico. In Mexico, the provision of the Company's services is subject to the
provisions of the 1940 General Communications Law, 1995 Federal
Telecommunications Law and 1990 Telecommunications Regulations, which provide
the general legal framework for the regulation of telecommunications services
in Mexico. Since the enactment of the 1995 Federal Telecommunications Law, the
Mexican government has adopted several implementing rules regarding
interconnection, long distance services, numbering and signaling, and other
rules are pending.
 
  Pursuant to the 1995 Federal Telecommunications Law, the Mexican government
recently created an independent telecommunications commission that will
regulate and oversee the telecommunications sector in Mexico. The Federal
Telecommunications Commission will take over many of the functions and
responsibilities of the Secretariat of Communications and Transportation
("SCT"). In particular, the Commission's powers and attributions include (i)
the administration of the radioelectric spectrum, (ii) the administration of
the Telecommunications Registry, (iii) to promote and oversee the efficient
interconnection between the public telecommunications networks, (iv) to resolve
interconnection disputes between the concessionaires, (v) to impose specific
obligations on concessionaires that have substantial market power in the
relevant market and (vi) to opine regarding the granting, extension, assignment
or revocation of concessions and permits.
 
  The 1995 Federal Telecommunications Law classifies telecommunications
networks into public or private depending on the use of the network. Public
telecommunications networks are those networks that are used to provide
commercial telecommunications services to the public. Private
telecommunications networks are those that are used to satisfy the specific
telecommunications needs of persons and that do not offer telecommunications
services to the public.
 
  Operators of private networks do not require any authority from the
government unless they use the radio frequency spectrum. Public
telecommunications network operators require specific authority from the
government, which will vary depending on whether a carrier intends to resell or
operate as a facilities-based carrier. "Concessionaires" of public
telecommunications networks are those facilities-based carriers that require a
concession from the federal government to use the radio spectrum, satellite
links or any form of terrestrial cables to provide public telecommunications
services. "Resellers" (or "vendors") of telecommunication services are those
carriers that provide telecommunications services to the public through the use
of capacity acquired from concessionaires of public telecommunications
networks. Resellers only require a permit. No specific authority from the SCT
is required to provide value-added services. However, parties that wish to
provide value-added services must register in the SCT's Telecommunications
Registry. The Company obtained registration to provide such services in August
1996, and currently plans to provide value-added services including Internet
access, enhanced facsimile, voice mail retrieve functionalities, electronic
mail and call store and forward.
 
  The Company, through its subsidiary Primus Telecommunicaciones de Mexico,
S.A. de C.V., is currently providing private network management services to
companies that already have leased a private network to serve
 
                                       53

<PAGE>
 
their internal corporate needs. Private network management services qualify as
unregulated services in Mexico and do not require any type of authorization
from any government authority.
 
  In July 1994, the SCT issued the rules for the interconnection of competing
long distance carriers with Telmex's network. The rules provide that Telmex is
required to make 60 of its switches available to its competitors by January 1,
1997, and gradually increase the number of switches until all of its switches
are available to competitors after January 1, 2001. In addition, the rules
provide that as of January 1, 1997, competing carriers may, at their own cost,
interconnect to other switches in Mexico even if they are not included in the
list of 60 switches that Telmex has to make available by 1997.
 
  In this regard, in April 1996, the SCT established the structure of the
principal rates that Telmex will charge new long distance carriers for
interconnection with its network and set the rates for 1997 and 1998. On June
21, 1996, the SCT issued rules governing long distance services, as well as the
Basic Technical Plans for Numbering and for Signaling, which address a number
of technical issues relating to the commencement of competition in long
distance services. The new long distance rules establish the framework and
schedule for the provision of competitive long distance services including
rules regarding presubscription, numbering access codes, allocation of service
related liability, billing and collection and certain consultation and
information sharing mechanisms among service providers and the SCT. The rules,
however, do not address the transmission of international long distance
traffic.
 
AXICORP
 
  The Company acquired Axicorp, the fourth largest telecommunications provider
in Australia, in March 1996. Axicorp provides the Company early entry into the
deregulating Australian telecommunications market and will serve as the
Company's gateway to the Asia-Pacific region. The Company believes that the
ongoing transformation of Axicorp's strategy and operations to a facilities-
based carrier focused on the provision of international and domestic long
distance services is an example of the execution of the Company's business
model. For the twelve months ended March 31, 1996, Axicorp generated net
revenue of approximately $144 million.
 
  Axicorp began operations in September 1993 in order to capitalize on the
opportunities arising from the advent of the deregulation of the
telecommunications industry in Australia. Prior to the acquisition, Axicorp
pursued a strategy of reselling long distance, local switched and cellular
services at a discount to the prices charged by Telstra, the former monopoly
telecommunications provider in Australia. Axicorp originally marketed and sold
its services through sales agents to professional and trade associations. All
of Axicorp's billing and collection functions were conducted by Telstra.
 
  Since acquiring Axicorp in March 1996, Primus has been investing substantial
resources to transform Axicorp's strategy and operations to those of a
facilities-based carrier focused on the provision of international and domestic
long distance services. The Company has acquired five switches for use in
Australia, which are expected to be operational by the end of the first quarter
of 1997, and has focused on increasing the number of higher-margin, higher-
volume business customers with significant international long distance traffic.
As part of its increasing focus on business customers, the Company is
increasing Axicorp's direct sales force and reducing its reliance on marketing
through associations. In addition, Axicorp's switch network will be integrated
into the Network and the Company intends to offer additional services in
Australia, including prepaid and calling cards, audio-conferencing and toll-
free services.
   
  The Company believes that the integration of Axicorp into the Company's
operations and strategy will be enhanced by certain Australian regulatory
changes expected to become effective in July 1997. Under current regulations,
only Telstra and Optus are licensed as full service facilities-based carriers.
The Australian government, however, has indicated plans to deregulate the
Australian telecommunications market in July 1997, which would permit Axicorp
and others to own transmission facilities. Although both Telstra and Optus have
requested that the government delay the July 1997 implementation of
deregulation, the Company believes that     
 
                                       54

<PAGE>
 
   
any such delay would not affect the Company's ability to own and operate the
network it is deploying within Australia. See "--Government Regulation."     
   
  The Company acquired Axicorp for $5.7 million in cash, including transaction
costs, 455,000 shares of Series A Stock (convertible into 1,538,355 shares of
Common Stock on the date of the Offering) and seller financing consisting of
two notes recorded on a discounted basis (the "Seller Notes"), one for $4.1
million payable to Fujitsu Australia Limited, and the other for $4.0 million
payable to the individual shareholder sellers. The sellers are holding as
security approximately 27% of their shares in Axicorp under a share mortgage
for the Seller Notes. These shares will be delivered to the Company when the
notes are paid in full. In turn, the Company is holding 248,334 shares of the
Series A Stock issued to the sellers as collateral for the Axicorp shares
withheld. These shares of Series A Stock will be released to the sellers once
the remaining Axicorp shares are received. Pursuant to its terms, the Series A
Stock will be converted into Common Stock upon the completion of the Offering.
    
EMPLOYEES
 
  The following table summarizes the number of full-time employees of the
Company, by region and classification:
 

<TABLE>
<CAPTION>
                                                  UNITED KINGDOM/  ASIA-
                                    NORTH AMERICA     EUROPE      PACIFIC TOTAL
                                    ------------- --------------- ------- -----
<S>                                 <C>           <C>             <C>     <C>
Management and Administrative......        7              6          22     35
Sales and Marketing................       29             15          51     95
Customer Service and Support.......       11              7          26     44
Technical..........................        8              6          33     47
                                         ---            ---         ---    ---
  Total............................       55             34         132    221
                                         ===            ===         ===    ===
</TABLE>

 
  The Company never has experienced a work stoppage, and none of its employees
is represented by a labor union or covered by a collective bargaining
agreement. The Company considers its employee relations to be good.
 

PROPERTIES
   
  The Company's headquarters in McLean, Virginia consist of approximately
4,585 square feet of office space under a lease that expires in October 1999
and provides for a monthly rental of $8,000. The Company also intends to lease
additional space in the same building. In addition the Company leases a sales
office in Tampa, Florida consisting of 2,859 square feet, which lease expires
in April 1998 and provides for a monthly rental of $2,000. The Company also
leases for $5,900 per month a 2,575 square foot facility which houses the
Company's Washington, D.C. switch through May 1997, and leases for $13,000 per
month a 5,350 square foot facility in Los Angeles, California at which it
intends to locate an international gateway switch.     
   
  The Axicorp facilities consist of administrative offices and other
facilities aggregating approximately 30,000 square feet for total monthly
rental of $41,000. Axicorp's leases expire at varying times from January 1997
to August 1999. In the United Kingdom, the Company leases approximately 3,250
square feet of office space which expires in April 1999 and provides for a
monthly rental of $18,000. In Mexico, the Company leases approximately 83
square feet of office space in Mexico City for $1,650 per month and for a term
expiring in October 1997. In Toronto, the Company leases approximately 420
square feet under a lease providing for a monthly rental of $900 and expiring
July 2001.     
 
  Management believes that the Company's present office facilities, together
with additional space currently under discussion with its Virginia landlord,
are adequate for its anticipated operations, and that similar space can
readily be obtained as needed. As its network of owned digital switches grows,
the Company will have to lease additional locations to house these facilities.
 
                                      55

<PAGE>
 
LEGAL PROCEEDINGS
 
  The Company is from time to time involved in litigation incidental to the
conduct of its business. There is no pending legal proceeding to which the
Company is a party which the Company believes is likely to have a material
adverse effect on the Company's business, financial condition or results of
operations.
 
                                       56

<PAGE>
 

                                  MANAGEMENT
 
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
 
  The executive officers, directors and key employees of the Company are as
follows:
 

<TABLE>   
<CAPTION>
                                                                    YEAR OF EXPIRATION
  NAME                   AGE                POSITION                OF TERM AS DIRECTOR
  ----                   ---                --------                -------------------
<S>                      <C> <C>                                    <C>
K. Paul Singh(1)........  45 Chairman of the Board of Directors,           1999
                              President, and Chief Executive
                              Officer
Neil L. Hazard..........  44 Executive Vice President and Chief             N/A
                              Financial Officer
John F. DePodesta.......  51 Executive Vice President, Law and             1999
                              Regulatory Affairs, and Director
George E. Mattos........  46 Vice President of Operations                   N/A
John Melick.............  37 Vice President of Sales and Marketing          N/A
Thomas R. Kloster.......  36 Corporate Controller                           N/A
Ravi Bhatia.............  48 Chief Operating Officer, Axicorp               N/A
Peter Slaney............  56 General Manager, Primus                        N/A
                              Telecommunications International,
                              Inc.
Paul Keenan.............  38 General Manager of Mobile Services,            N/A
                             Axicorp
Sim Thiam Soon..........  43 General Manager of Operations, Axicorp         N/A
Herman Fialkov(2).......  74 Director                                      1997
David E. Hershberg(2)...  59 Director                                      1997
John Puente(1)(3).......  66 Director                                      1998
</TABLE>
    
- --------
(1) Member of Nominating Committee
(2) Member of Compensation Committee
(3) Member of Audit Committee
 
  K. Paul Singh co-founded the Company in 1994 with Mr. DePodesta and serves
as its Chairman, President and Chief Executive Officer. From 1991 until he co-
founded the Company, he served as the Vice President of Global Product
marketing for MCI. Prior to joining MCI, Mr. Singh was the Chairman and Chief
Executive Officer of OTI, a provider of private digital communications in over
26 countries which he founded in 1984 and was purchased by MCI in 1991. See
"Certain Transactions."
 
  Neil L. Hazard joined the Company in 1996 as its Executive Vice President
and Chief Financial Officer. Prior to joining the Company, Mr. Hazard was
employed by MCI in several executive positions, most recently as its Director
of Corporate Accounting and Financial Reporting, responsible for consolidation
of MCI's financial results, external reporting to stockholders and SEC
reporting. Mr. Hazard served as acting Controller of MCI for six months and as
Director of Global Product Marketing. Prior to joining MCI in 1991, Mr. Hazard
served as the Chief Financial Officer of OTI.
   
  John F. DePodesta co-founded the Company in 1994 with Mr. Singh, and serves
as a director and its Executive Vice President Law and Regulatory Affairs. In
addition to his position with the Company, Mr. DePodesta also currently serves
as the Senior Vice President, Law and Public Policy for Genesis Health
Ventures, Inc. and the Chairman of the Board of Iron Road Railways
Incorporated, which he co-founded in 1994. Additionally, since 1994 he has
been "of counsel" to the law firm of Pepper, Hamilton & Scheetz, where he was
previously a partner since 1979. Before joining Pepper, Hamilton & Scheetz,
Mr. DePodesta served as the General Counsel of Consolidated Rail Corporation.
See "Certain Transactions."     
 
                                      57

<PAGE>
 
   
  George E. Mattos joined the Company in 1994 as its Vice-President of
Operations. Prior to joining the Company, Mr. Mattos held several positions
with MCI for over 10 years, most recently as a Senior Manager responsible for
the development of a software monitoring system for customer service,
installation, operation and maintenance of MCI's international
telecommunications network. Mr. Mattos previously was part of MCI's switching
and network intelligence facilities where he was responsible for commencing
switched voice service to various countries.     
 
  John Melick joined the Company in 1994 as its Vice President of Sales and
Marketing. Prior to joining the Company, he was a Senior Manager with MCI
responsible for the day-to-day management of its global product portfolio in
Latin American and the Caribbean region. He joined MCI in 1991 at the time of
the acquisition of OTI where he managed the development of OTI's service
expansion into Mexico and Latin America.
   
  Thomas R. Kloster joined the Company in 1996 as its Corporate Controller.
Prior to joining the Company, Mr. Kloster was employed by MCI as Senior
Manager of Corporate Accounting and Reporting, responsible for various facets
of MCI's consolidation of financial results, external and internal reporting,
and accounting for ventures and emerging businesses. Prior to joining MCI in
1994, Mr. Kloster had been employed by Price Waterhouse LLP since 1988, most
recently serving as a Senior Manager.     
 
  Ravi Bhatia joined the Company in October 1995 as the Managing Director of
Primus Telecommunications Pty., Ltd. (Australia) and in March 1996 became the
Chief Operating Officer of Axicorp and as such is responsible for implementing
the Company's business strategy in Australia. Mr. Bhatia has over 26 years of
international experience in the telecommunications industry, which includes 9
years of employment with MCI in various sales and marketing positions. Most
recently, he served as the Director of Sales and Marketing for MCI in the
South Pacific Region, based in Sydney.
 
  Peter Slaney joined the Company in 1996 as the Managing Director of Axicorp.
Mr. Slaney was previously a co-founder and served as Managing Director of
Axicorp since its inception in 1993. Prior to forming Axicorp, Mr. Slaney
served as General Manager of the Telecommunications Group of Paxus Australia,
a group that provided professional services and consulting to Telstra. The
majority of Mr. Slaney's career was spent at IBM Corporation where he worked
for 20 years in various capacities, including as an Account Executive Manager
in the personal computer market.
   
  Paul Keenan joined the Company in 1996 as General Manager of Axicorp's
cellular business unit. Mr. Keenan co-founded Axicorp in 1993 and served as
its General Manager, Finance and Administration until he joined the Company.
Prior to co-founding Axicorp, Mr. Keenan had been a Senior Consultant with
Paxus Australia since 1990.     
   
  Sim Thiam Soon joined the Company in 1996 as General Manager of Operations
of Axicorp. Mr. Sim co-founded Axicorp in 1993 and served as its General
Manager of Operations until joining the Company. Prior to co-founding Axicorp,
Mr. Sim had been a Manager with Paxus Australia since 1990.     
 
  Herman Fialkov became a director of the Company in 1995. He is currently the
General Partner of PolyVentures Associates, L.P., a venture capital firm and
has been associated with various venture capital firms since 1968. Previously,
he was an officer and director of General Instrument Corporation which he
joined in 1960 as a result of its acquisition of General Transistor
Corporation, a company Mr. Fialkov founded.
 
  David E. Hershberg became a director of the Company in 1995. Mr. Hershberg
is the founder, President and CEO of WorldComm Systems, Inc., a system
integrator of satellite earth stations. From 1976 to 1994, Mr. Hershberg was
the President and Chief Executive Officer of Satellite Transmission Systems,
Inc., a global provider of satellite telecommunications equipment, and became
a Group President of California Microwave, Inc., a company that acquired
Satellite Transmission Systems, Inc.
 
                                      58

<PAGE>
 
  John Puente became a director of the Company in 1995. From 1987 to 1995, he
was Chairman of the Board and CEO of Orion Network Systems, a satellite
telecommunications company. Mr. Puente is currently Chairman of the Board of
Telogy Networks, Inc., a privately-held company. Prior to joining Orion, Mr.
Puente was Vice Chairman of M/A-Com Inc., now known as Hughes Network Systems,
Inc., a diversified telecommunications and manufacturing company, which he
joined in 1978 when M/A-Com acquired Digital Communications Corporation, a
satellite terminal and packet switching manufacturer of which Mr. Puente was a
founder and Chief Executive Officer.
 
CLASSIFIED BOARD OF DIRECTORS
 
  Pursuant to the Company's By-Laws, the Board of Directors is divided into
three classes of directors each containing, as nearly as possible, an equal
number of directors. Directors within each class are elected to serve three-
year terms and approximately one-third of the directors sit for election at
each annual meeting of the Company's stockholders. A classified board of
directors may have the effect of deterring or delaying any attempt by any
group to obtain control of the Company by a proxy contest since such third
party would be required to have its nominees elected at two separate annual
meetings of the Board of Directors in order to elect a majority of the members
of the Board of Directors. Directors who are elected to fill a vacancy
(including vacancies created by an increase in the number of directors) must
be confirmed by the stockholders at the next annual meeting of stockholders
whether or not such director's term expires at such annual meeting. See
"Description of Capital Stock--Takeover Protection."
 
DIRECTOR COMPENSATION
   
  The Company pays cash compensation to outside board members who are not
otherwise consultants to the Company. Each such board member is entitled to
receive $500 for each meeting of the Board of Directors, or any committee
thereof, attended by such board member in person or by telephone. The Company
also has adopted a Director Plan under which options for up to a total of
338,100 shares of Common Stock will be issued to those directors of the
Company that are not also employees of the Company. Under the Director Plan,
each of the current non-employee directors has received options with respect
to a total of 50,715 shares at an exercise price of $2.96 per share.     
 
COMMITTEES OF THE BOARD
 
  The Company's Board of Directors has appointed an Audit Committee,
Nominating Committee and a Compensation Committee.
   
  Audit Committee. The Audit Committee, which will consist of Mr. Puente and
an independent director to be appointed after consummation of the Offering,
has the authority and responsibility to hire one or more independent public
accountants to audit the Company's books, records and financial statements and
to review the Company's systems of accounting (including its systems of
internal control); to discuss with such independent public accountants the
results of such audit and review; to conduct periodic independent reviews of
the systems of accounting (including systems of internal control); and to make
reports periodically to the Board of Directors with respect to its findings.
    
  Nominating Committee. The Nominating Committee, which currently consists of
Messrs. Puente (Chairman) and Singh, is responsible for selecting those
persons to be nominated to the Company's Board of Directors.
 
                                      59

<PAGE>
 
  Compensation Committee. The Compensation Committee, which currently consists
of Messrs. Fialkov (Chairman) and Hershberg, is responsible for fixing the
compensation of the Chief Executive Officer and the other executive officers,
as well as making recommendations to the Board of Directors with respect to
other compensation matters such as those relating to the operation of the
Plans and approving certain aspects of the Company's management bonus plan.
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
  None of the members of the Compensation Committee has any interlocking or
other relationship with the Company that would call into question his
independence with respect to his duties.
 

EXECUTIVE COMPENSATION
 
  The following table sets forth the compensation paid by the Company for
services rendered in all capacities during 1995 to the Company's chief
executive officer. No other executive officer of the Company received total
annual salary and bonus in excess of $100,000 during 1995.
 
                          SUMMARY COMPENSATION TABLE
 

<TABLE>
<CAPTION>
                                                                  LONG-TERM
                                                                 COMPENSATION
                                   ANNUAL COMPENSATION              AWARDS
                             ----------------------------------- ------------
                                                    OTHER ANNUAL  SECURITIES
                                                    COMPENSATION  UNDERLYING   ALL OTHER
NAME AND PRINCIPAL POSITION  YEAR  SALARY     BONUS     ($)      OPTIONS ($)  COMPENSATION
- ---------------------------  ---- --------    ----- ------------ ------------ ------------
<S>                          <C>  <C>         <C>   <C>          <C>          <C>
K. Paul Singh,
 Chairman and Chief
 Executive Officer.....      1995 $185,000(1)  --       --           --           --
</TABLE>

- --------
(1) Of this amount, the payment of $77,200 was deferred and subsequently paid
    on July 31, 1996. See""--Employment Contract."
 
STOCK OPTION PLANS
   
  Employee Stock Option Plan. The Company established the Employee Plan for
its employees on January 2, 1995 which provides for the grant to selected
employees of the Company and its Subsidiaries who contribute to the
development and success of the Company and its Subsidiaries of both "incentive
stock options" within the meaning of Section 422 of the Code ("ISOs") and
options that are non-qualified for federal income tax purposes ("NQSOs"). The
total number of shares of Common Stock for which options may be granted
pursuant to the Employee Plan is 1,690,500, subject to certain adjustments
reflecting changes in the Company's capitalization. The Employee Plan is
currently administered by the Board of Directors, although it provides for its
administration by a Committee of the Board. The Board of Directors determines,
among other things, which employees will receive options under the Employee
Plan; the time when options will be granted; the type of option (ISO or NQSO,
or both) to be granted, the number of shares subject to each option, the time
or times when the options will become exercisable and expire, and, subject to
certain conditions discussed below, the option price and duration of the
option. Board members administering the Employee Plan may vote on any matters
affecting the administration of the Plan, except that no member may act upon
the granting of an option to himself or herself.     
 
  The exercise price of the options granted under the Employee Plan is
determined by the Board of Directors, but may not be less than the fair market
value per share of the Common Stock on the date the option is granted. If,
however, an ISO is granted to any person who, at the time of the grant, owns
capital stock possessing more than 10% of the total combined voting power of
all classes of the Company's capital stock, then the exercise price for such
ISO may not be less than 110% of the fair market value per share of the Common
Stock on the date the option is granted. The Board of Directors also
determines the method of payment for the exercise of options under the
Employee Plan, and may consist entirely of cash, check, promissory notes or
Common Stock having a fair market value on the date of surrender equal to the
aggregate exercise price.
 
                                      60

<PAGE>
 
  Options are not assignable or transferrable other than by will or the laws
of descent and distribution. If an employee's employment with the Company is
terminated for any reason, such employee's options exercisable on the date of
termination are exercisable for three months following the date of
termination. If the Board of Directors makes a determination that a terminated
employee engaged in disloyalty to the Company, disclosed proprietary
information, is convicted of a felony, or breached the terms of a written
confidentiality agreement or non-competition agreement, all unexercised
options held by such employee terminate upon the earlier of the date of such
determination or the date of termination. If an employee becomes disabled or
deceased while an employee of the Company, such employee's options that are
exercisable on the date of disability or death will remain exercisable for
twelve months following the date of disability or death; provided, however,
that if a disabled employee commences employment with a competitor of the
Company during that twelve-month period, all options held by the employee
terminate immediately.
 
  Options issued pursuant to the Employee Plan outstanding on the date of a
"change in control" of the Company become immediately exercisable on such
date. A change in control for purposes of the Employee Plan includes the
acquisition by any person or entity of the beneficial ownership of 50% or more
of the voting power of the Company's stock, the approval by the Company's
shareholders of a merger, reorganization or consolidation of the Company in
which the Company's shareholders do not own 50% or more of the voting power of
the stock of the entity surviving such a transaction, the approval of the
Company's shareholders of an agreement of sale of all or substantially all of
the Company's assets, and the acceptance by the Company's shareholders of a
share exchange in which the Company's shareholders do not own 50% or more of
the voting power of the stock of the entity surviving such exchange.
 
  There are no federal income tax consequences to the Company on the grant or
exercise of an ISO. If an employee disposes of stock acquired through the
exercise of an ISO within one year after the date such stock is acquired or
within two years after the grant of the ISO (a "Disqualifying Disposition"),
the Company will be entitled to a deduction in an amount equal to the
difference between the fair market value of such stock on the date it is
acquired and the exercise price of the ISO. There are no tax consequences to
the Company if an ISO lapses before exercise or is forfeited. The grant of a
NQSO has no immediate tax consequences to the Company. Upon the exercise of a
NQSO by an employee, the Company is entitled to a deduction in an amount equal
to the difference between the fair market value of the share acquired through
exercise of the NQSO and the exercise price of the NQSO. There are no tax
consequences to the Company if a NQSO lapses before exercise or is forfeited.
 
  An employee who receives an ISO is not subject to federal income tax on the
grant or exercise of the ISO; however, the difference between the option price
and the fair market value of the Common Stock received on the exercise of the
ISO ("ISO Stock") is an adjustment for purposes of the alternative minimum
tax. Upon the exercise of an ISO, an employee will have a basis in the ISO
Stock received equal to the amount paid. An employee will be subject to
capital gain or loss upon the sale of ISO Stock, unless such sale constitutes
a Disqualifying Disposition, equal to the difference between the amount
received for the stock and the employee's basis in such. The gain or loss will
be long- or short-term, depending on the length of time the ISO Stock was held
prior to disposition. There are no tax consequences to an employee if an ISO
lapses before exercise or is forfeited.
 
  In the event of a Disqualifying Disposition, an employee will be required to
recognize (1) taxable ordinary income in an amount equal to the difference
between the fair market value of the ISO Stock on the date of exercise of the
ISO and the exercise price; and (2) capital gain or loss (long- or short-term,
as the case may be) in an amount equal to the difference between (a) the
amount realized by the employee upon the Disqualifying Disposition and (b) the
exercise price paid by the employee for the stock, increased by the amount of
ordinary income recognized by the employee, if any. If the disposition
generates an allowable loss (e.g., a sale to an unrelated party not within 30
days of purchase of Common Stock), then the amount required to be recognized
by the employee as ordinary income will be limited to the excess, if any, of
the amount realized on the sale over the basis of the stock.
 
                                      61

<PAGE>
 
  The Employee Plan allows an employee to pay an exercise price in cash or
shares of the Company's Common Stock. If the employee pays with shares of the
Company's Common Stock that are already owned, the basis of the newly acquired
ISO Stock will depend on the tax character and number of shares of the
previously owned stock used as payment. If an employee pays with shares
acquired upon other than the exercise of an ISO ("non-ISO Stock"), the
transaction will be tax-free to the extent that the number of shares received
does not exceed the number of shares of non-ISO Stock paid. The basis of the
number of shares of newly acquired ISO Stock which does not exceed the number
of shares of non-ISO Stock paid will be equal to the basis of the shares paid.
The employee's holding period with respect to such shares will include the
holding period of the shares of non-ISO Stock paid. To the extent that the
employee receives more new shares than shares surrendered, the "excess" shares
of ISO Stock will take a zero basis. If an employee exercises an ISO by using
stock that is previously acquired ISO Stock, however, certain special rules
apply. If the employee has not held the previously acquired ISO Stock for at
least two years from the date of grant of the related ISO and one year from
the date the employee acquired the previously acquired ISO Stock, the use of
such ISO Stock to pay the exercise price will constitute a Disqualifying
Disposition and subject the employee to income tax with respect to the ISO
Stock as described above. In such circumstances, the basis of the newly
acquired ISO Stock will be equal to the fair market value of the previously
acquired ISO Stock used as payment.
 
  The grant of a NQSO has no immediate tax consequences to an employee. The
exercise of a NQSO requires an employee to include in gross income the amount
by which the fair market value of the acquired shares exceeds the exercise
price on the exercise date. The Company is required to withhold income and
employment taxes from the employee's wages on account of this income. The
employee's basis in the acquired shares will be their fair market value on the
date of exercise. Upon a subsequent sale of such shares, the employee will
recognize capital gain or loss equal to the difference between the sales price
and the basis in the stock. The capital gain or loss will be long- or short-
term, depending on the length of time that the employee held the shares. There
are no tax consequences to an employee if a NQSO lapses before exercise or is
forfeited. If an employee uses previously owned Common Stock as payment for
the exercise price of a NQSO, to the extent the employee surrenders the same
number of shares received, the exchange is tax-free and the new shares will
have a basis equal to that of the shares surrendered. The holding period for
the new shares, moreover, will include the period the employee held the
surrendered shares. To the extent the employee receives more new shares than
shares surrendered, the "excess" shares are treated as having been acquired
for no consideration and the fair market value of such "excess" shares is
includible in the employee's income as compensation. The basis of the "excess"
shares is their fair market value at the time of receipt. If the previously
owned shares consist of ISO Stock for which the holding requirements were not
met such that their use as payment of the exercise price constituted a
Disqualifying Disposition, the employee will have the income tax consequences
described above.
 
  The Board of Directors has authority to suspend, terminate or discontinue
the Employee Plan or revise or amend it in any manner with respect to options
granted after the date of revision. No such revision, however, can change the
aggregate number of shares subject to the Employee Plan, change the
designation of employees eligible thereunder, or decrease the price at which
options may be granted. The Board may not grant any options under the Employee
Plan after January 2, 2005.
 
  Mr. Singh did not receive a grant or exercise any stock option or stock
appreciation right prior to or during the last fiscal year.
   
  Director Stock Option Plan. The Company also established a Director Plan on
July 27, 1995. The purpose of the Director Plan is to encourage ownership in
the Company by outside directors (present or future incumbent directors who
are not employees of the Company or any subsidiary) whose services are
considered essential to the Company's continued progress. Options granted
under the Director Plan are NQSOs. The Director Plan is administered by a
committee of the Board of Directors consisting of those directors who are not
eligible to receive grants thereunder. The total number of shares of Common
Stock for which options may be granted pursuant to the Director Plan is
338,100. On the effective date of the Director Plan or the first date
thereafter that any director becomes eligible to receive an award under the
Director Plan, each eligible director will     
 
                                      62

<PAGE>
 
   
automatically receive an option to purchase 50,715 shares of Common Stock,
exercisable for 16,905 shares immediately, and 16,905 on each of the next two
anniversary dates of the grant date. All options become immediately
exercisable, however, upon the retirement of a director in accordance with any
mandatory retirement policy of the Board, upon the death or permanent
disability of a director, or if the Company merges with another Company and is
not the surviving corporation, the Company enters into an agreement to sell or
otherwise dispose of all or substantially all of its assets, or any person or
group acquires more than 20% of the Company's outstanding voting stock.     
 
  The option price is the fair market value at the date on which an option is
granted. Payment for the exercise of options may consist of cash or Common
Stock. Options issued under the Director Plan are not transferrable other than
by will or the laws of descent and distribution. Options expire upon the
earlier of five years from the date they were granted or three years following
either the retirement or resignation of the director, the failure of the
director to be re-elected, or the permanent disability or death of the
director. No options may be granted under the Director Plan after December 31,
2005.
 
  The grant of a NQSO has no immediate tax consequences to the Company. Upon
the exercise of a NQSO by a director, the Company is entitled to a deduction
in an amount equal to the difference between the fair market value of the
share acquired through exercise of the NQSO and the exercise price of the
NQSO. There are no tax consequences to the Company if a NQSO lapses before
exercise or is forfeited.
 
  The tax consequences to a director upon the grant and exercise of a NQSO,
and the sale of Common Stock acquired upon exercise thereof, are identical to
those described for NQSOs under "--Employee Stock Option Plan" above, except
that the Company has no withholding obligations upon the exercise of a NQSO by
a director.
 
EMPLOYMENT CONTRACT
 
  The Company has entered into an employment agreement with Mr. Singh (the
"Singh Agreement"). The Singh Agreement is a five-year contract, with a term
beginning on June 1, 1994 and continuing until May 30, 1999, and from year to
year thereafter unless terminated. Under the terms of the Singh Agreement, Mr.
Singh is required to devote his full time efforts to the Company as Chairman
of the Board, President and CEO. The Company is required to compensate Mr.
Singh at an annual rate of $185,000 (which amount is reviewed annually by the
Board of Directors and is subject to increase at their discretion). Mr. Singh,
however, agreed to defer payment of his base salary from June 1, 1994 through
May 31, 1995, which was subsequently paid to him on July 31, 1996. The Company
is also obligated to (i) allow Mr. Singh to participate in any bonus or
incentive compensation plan approved for senior management of the Company,
(ii) provide life insurance in an amount equal to three times Mr. Singh's base
salary and disability insurance which provides monthly payments in an amount
equal to one-twelfth of his then applicable base salary, (iii) provide medical
insurance and (iv) pay up to $2,500 annually for Mr. Singh's personal tax and
financial planning services.
 
  The Company may terminate the Singh Agreement at any time in the event of
his disability or for cause, each as defined in the Singh Agreement. Mr. Singh
may resign from the Company at any time without penalty (other than the non-
competition obligations discussed below). If the Company terminates the Singh
Agreement for disability or cause, the Company will have no further
obligations to Mr. Singh. If, however, the Company terminates the Singh
Agreement other than for disability or cause, the Company will have the
following obligations: (i) if the termination is after May 30, 1999, the
Company must pay Mr. Singh one-twelfth of his then applicable base salary as
severance pay; and (ii) if the termination is before June 1, 1999, the Company
must pay to Mr. Singh, as they become due, all amounts otherwise payable if he
had remained employed by the Company until June 1, 1999. If Mr. Singh resigns,
he may not directly or indirectly compete with the Company's business until
six months after his resignation. If the Company terminates Mr. Singh's
employment for any reason, Mr. Singh may not directly or indirectly compete
with the Company's business until six months after the final payment of any
amounts owed to him under the Singh Agreement become due.
 
                                      63

<PAGE>
 
PRIVATE EQUITY SALE          CERTAIN TRANSACTIONS
   
  In July 1996, Primus completed the sale of 965,999 shares of Common Stock to
the (i) Quantum Industrial Partners LDC, the principal operating subsidiary of
Quantum Industrial Holdings Ltd., an investment fund advised by Soros Fund
Management, a private investment firm owned by Mr. George Soros, (ii) Winston
Partners II LDC, the principal operating subsidiary of Winston Partners II
Offshore Ltd., an investment fund advised by Chatterjee Management Company, a
private entity owned by Dr. Purnendu Chatterjee, (iii) Winston Partners II
LLC, an investment fund advised by Chatterjee Management Company and (iv) S-C
Phoenix Holdings, L.L.C., an investment vehicle owned by affiliates of Mr.
Soros and Dr. Chatterjee (collectively, the "Soros/Chatterjee Group"), for an
aggregate purchase price of approximately $8.0 million. The Soros/Chatterjee
Group also purchased, for an additional $8.0 million, the Soros/Chatterjee
Warrants which afford the Soros/Chatterjee Group the right to receive, upon
exercise, an indeterminate number of shares of Common Stock with a fair market
value of $10.0 million as of the date of exercise, plus up to 627,899
additional shares of Common Stock. Except for 338,100 shares which are
currently exercisable, the Soros/Chatterjee Warrants are exercisable on or
after July 31, 1997 and until July 31, 1999. The Soros/Chatterjee Warrants are
entitled to certain customary antidilution protection in the event of stock
splits, stock dividends, reorganizations and other similar events.     
 
  The Soros/Chatterjee Group was granted registration rights pursuant to a
registration rights agreement with the Company (the "Registration Rights
Agreement"). Under the Registration Rights Agreement, the Soros/Chatterjee
Group is entitled to demand registration of its shares after July 31, 1998, a
maximum of three times, the third demand being available only if the
Soros/Chatterjee Group has not registered 80% of its shares of Common Stock
after the first demand registration. The Company is not required to effect any
demand registration within 180 days after the effective date of a previous
demand registration and may postpone, on one occasion in any 365-day period
the filing or effectiveness of a registration statement for a demand
registration for up to 120 days under certain circumstances, including pending
material transactions or the filing by the Company of a registration statement
relating to the sale of shares for its own account. The Soros/Chatterjee Group
is also entitled to unlimited piggyback registrations. Such rights with
respect to this Offering have been waived. All such registrations would be at
the Company's expense, exclusive of underwriting discounts and commissions,
and legal fees (up to $25,000 for each such offering) incurred by the holders
of the registrable securities. The Company and the Soros/Chatterjee Group have
entered into customary indemnification and contribution provisions.
   
  The Soros/Chatterjee Group also entered into a securityholders agreement
with the Company and K. Paul Singh (the "Securityholders Agreement") under
which the Soros/Chatterjee Group has the right until consummation of this
Offering to appoint a nominee for a position as a member of the Board of
Directors of the Company, which the Soros/Chatterjee Group has advised the
Company that it will not exercise prior to consummation of this Offering (and
Mr. Singh has agreed to vote shares over which he has voting control for such
nominee). Pursuant to this agreement, members of the Soros/Chatterjee Group
were granted preemptive rights in connection with most future issuances of
capital stock, including public offerings. Such rights were waived with
respect to this Offering. Additionally, members of the Soros/Chatterjee Group
are entitled to tag-along rights to participate with Mr. Singh and members of
his family in sales of capital stock on the same terms and conditions as Mr.
Singh and members of his family. See "Description of Capital Stock--
Registration Rights." The Soros/Chatterjee Group shares are also subject to
drag along rights in the event holders of a majority of the Common Stock
decide to sell 80% or more of the outstanding capital stock of the Company.
The Securityholders Agreement provides that members of the Soros/Chatterjee
Group will not transfer shares of Common Stock to a company, or any affiliate,
that competes with the Company to a material extent in the provision of
telecommunications services in the United States, Australia, the United
Kingdom, France, Germany, Mexico, Canada, Italy or Hong Kong.     
TELEGLOBE
   
  The Company entered into an agreement on January 12, 1996 with Teleglobe,
pursuant to which Teleglobe purchased 410,808 shares of Common Stock for a
total of $1,458,060. The equity investment was consummated     
 
                                      64

<PAGE>
 
   
in February 1996 as was a loan by Teleglobe of $2.0 million to the Company.
The loan, which bears interest at 6.9% per annum (payable quarterly) and
matures on February 9, 1998, is secured by all the assets of the Company,
comprised principally of the stock of the subsidiaries (65% of the stock of
foreign subsidiaries was pledged). Related to the Teleglobe investments, the
Company and a number of its subsidiaries have entered into trading agreements
with Teleglobe with respect to their respective service offerings. The parties
have also agreed to cooperate in an effort to maximize efficiencies with
respect to network facilities.     
 
  As part of the transaction, Teleglobe, the Company and Mr. Singh are party
to a shareholders' agreement (the "Teleglobe Agreement") providing Teleglobe
the same consent, preemptive and registration rights as may be granted in the
future to other shareholders of an equal or lesser percentage ownership in the
Company, and participation and tag-along rights whereby Teleglobe is entitled
to sell its shares of Common Stock when certain other shareholders sell or
when the Company issues equity securities that would result in a change of
control of the Company. The Teleglobe Agreement also obligates Teleglobe to
sell its shares if certain other shareholders sell and specified conditions
are met, and grants the Company a right of first refusal upon a sale of the
Teleglobe-owned Common Stock to any competitor of the Company. Teleglobe
waived any preemptive rights and registration rights that arose as a result of
the Private Equity Sale. See "--Teleglobe".
 
NSI PRIVATE PLACEMENTS
   
  In 1995 and 1996, the Company engaged Northeast Securities, Inc. ("NSI") to
serve as the placement agent for two private placements of the Company's
Common Stock. Mr. Andrew B. Krieger, a former director of Primus, served as a
broker-dealer in the private placements through an affiliation with NSI. In
connection with these offerings, the Company paid Mr. Krieger cash commissions
aggregating approximately $1,007,000. The Company also retained Krieger
Associates, of which Mr. Krieger is the President and Chief Executive Officer,
to perform certain financial and other consulting services and paid a total of
approximately $77,000 for the performance of such services during 1995 and
1996 (to date). In addition, in connection with these private placements, the
Company issued a total of 193,718 shares of Common Stock to Krieger Associates
and Mr. Krieger, and at the direction of Mr. Krieger issued a total of 74,003
shares of Common Stock to other individuals associated with the transaction.
The Company also issued, in connection with these private placements, a total
of 245,555 shares of Common Stock to NSI and certain of its employees
associated with the transactions. See "Management" and "Principal
Stockholders."     
 
LOAN FROM CHAIRMAN AND CHIEF EXECUTIVE OFFICER
   
  In connection with the initial organization of the Company, K. Paul Singh,
the Company's Chairman of the Board and Chief Executive Officer, loaned the
Company approximately $320,000, accruing interest at a variable rate tied to
the prime rate. On March 31, 1995, the Company and Mr. Singh converted all
then outstanding principal and interest due ($350,000) into 555,559 shares of
Common Stock, at a price per share of $0.63, which shares were issued on such
date.     
 
MANAGEMENT FEES
 
  Prior to the Company's acquisition of Axicorp, Axicorp paid a management fee
based on a percentage of revenue to a company owned primarily by certain
current officers of the Company, including Paul Keenan, Sim Thiam Soon and
Peter Slaney. Total management fees for the nine month period ended March 31,
1995, and the twelve month period ended March 31, 1996 were $616,000 and
$426,000, respectively.
 
LEGAL SERVICES
 
  From time to time, the Company has retained the law firm of Pepper, Hamilton
& Scheetz, of which John F. DePodesta, a director and an Executive Vice
President of the Company, is "of counsel," to perform legal services for it
and has paid such firm fees totaling $151,807 in 1996 (to date). See "Legal
Matters."
 
                                      65

<PAGE>
 
                            PRINCIPAL STOCKHOLDERS
   
  The following table sets forth information as of September 30, 1996
concerning each person or group known to the Company to be the beneficial
owner of more than 5% of Common Stock, and concerning the beneficial ownership
of Common Stock by the Company's directors, K. Paul Singh and all executive
officers and directors of the Company as a group. Except as otherwise noted
and subject to community property laws, where applicable, each beneficial
owner of the Common Stock listed below has sole investment and voting power.
    

<TABLE>   
<CAPTION>
                                           SHARES BENEFICIALLY OWNED(1)
                                      ---------------------------------------
                                                        PERCENT OF CLASS
                                                    -------------------------
                                         NUMBER        BEFORE       AFTER
NAME AND ADDRESS(2)                    OF SHARES    OFFERING(13) OFFERING(14)
- -------------------                   ------------  ------------ ------------
<S>                                   <C>           <C>          <C>
K. Paul Singh........................ 4,365,030(3)      36.3%        24.2%
Quantum Industrial Partners LDC......   652,050(4)       5.3%         3.6%
 c/o Curacao Corporation Company N.V.
 Kaya Flamboyan 9
 Willemstad, Curacao
 Netherlands Antilles
Winston Partners II LLC..............    81,505(5)         *            *
 c/o Chatterjee Advisors L.L.C.
 c/o The Chatterjee Group
 888 Seventh Avenue
 New York, New York 10106
S-C Phoenix Holdings, L.L.C. ........   391,229(6)       3.2%         2.2%
 c/o The Chatterjee Group
 888 Seventh Avenue
 New York, New York 10106
Winston Partners II LDC..............   179,315(7)       1.5%         1.0%
 c/o Curacao Corporation Company N.V.
 Kaya Flamboyan 9
 Willemstad, Curacao
 Netherlands Antilles
John F. DePodesta....................   319,690(8)       2.6%         1.8%
Herman Fialkov.......................    50,715(9)         *            *
David E. Hershberg...................    42,263(10)        *            *
John Puente..........................   152,855(11)      1.3%           *
All executive officers and directors
 as a group (14 people).............. 5,118,757(12)     41.2%        27.8%
</TABLE>
    
- --------
  * Less than 1%
   
 (1) Beneficial ownership is determined in accordance with the rules of the
     Commission, and includes voting or investment power with respect to the
     shares beneficially owned. Shares of Common Stock subject to options or
     warrants currently exercisable or exercisable on or prior to December 11,
     1996 are deemed outstanding for computing the percentage ownership of the
     person holding such options or warrants, but are not deemed outstanding
     for computing the percentage ownership of any other person.     
 (2) Unless otherwise noted in the chart, the address of all persons listed is
     c/o Primus Telecommunications Group, Incorporated, 8180 Greensboro Drive,
     Suite 1100, McLean, Virginia 22102.
   
 (3) Includes, 377,786 shares of Common Stock owned by Mr. Singh's spouse and
     children. Also includes 396,828 shares of Common Stock held of record by
     a series of revocable trusts of which Mr. Singh is the trustee and
     pursuant to which Mr. Singh has sole voting power and shared dispositive
     power.     
   
 (4) Quantum Industrial Partners LDC ("Quantum Industrial") has vested
     investment discretion with respect to its portfolio investments,
     including the Common Stock, in an entity over which Mr. George Soros may
     be deemed to have sole and ultimate control. Mr. Soros and Dr. Purnendu
     Chatterjee, as a sub-advisor to Quantum Industrial, may be deemed to have
     shared beneficial ownership of Common Stock held by Quantum Industrial.
     Includes 169,050 shares of Common Stock issuable upon exercise of
     warrants granted to Quantum Industrial and exercisable on or prior to
     December 11, 1996.     
 
                                      66

<PAGE>
 
   
 (5) Winston Partners II LLC has vested investment discretion in its portfolio
     investments, including the Common Stock, in Chatterjee Management
     Company, an entity over which Dr. Chatterjee may be deemed to have sole
     and ultimate control. Dr. Chatterjee may be deemed to have beneficial
     ownership of Common Stock held by Winston Partners II LLC. Includes
     21,130 shares of Common Stock issuable upon exercise of warrants granted
     to Winston Partners II LLC and exercisable on or prior to December 11,
     1996.     
   
 (6) Mr. Soros and Dr. Chatterjee may be deemed to have shared beneficial
     ownership of Common Stock held by S-C Phoenix Holdings, L.L.C. Includes
     101,430 shares of Common Stock issuable upon exercise of warrants granted
     to S-C Phoenix Holdings, L.L.C. and exercisable on or prior to December
     11, 1996.     
   
 (7) Winston Partners II LDC has vested investment discretion in its portfolio
     investments, including the Common Stock, in Chatterjee Management
     Company, an entity over which Dr. Chatterjee may be deemed to have sole
     and ultimate control. Dr. Chatterjee may be deemed to have beneficial
     ownership of Common Stock held by Winston Partners II LDC. Includes
     46,489 shares of Common Stock issuable upon exercise of warrants granted
     to Winston Partners II LDC and exercisable on or prior to December 11,
     1996.     
   
 (8) Includes 101,430 shares of Common Stock issuable upon the exercise of
     options granted to Mr. DePodesta and exercisable on or prior to December
     11, 1996.     
   
 (9) Includes 33,810 shares of Common Stock issuable upon the exercise of
     options granted to Mr. Fialkov and exercisable on or prior to December
     11, 1996.     
   
(10) Includes 33,810 shares of Common Stock issuable upon the exercise of
     options granted to Mr. Hershberg and exercisable on or prior to December
     11, 1996 and 8,453 shares of Common Stock owned by a partnership of which
     Mr. Hershberg is a general partner.     
          
(11) Includes 33,810 shares of Common Stock issuable upon the exercise of
     options granted to Mr. Puente and exercisable on or prior to December 11,
     1996.     
   
(12) Includes 391,063 shares of Common Stock issuable upon the exercise of
     options granted to directors and executive officers and exercisable on or
     prior to December 11, 1996.     
   
(13) Applicable percentage of ownership as of September 30, 1996 is based upon
     12,028,746 shares of Common Stock outstanding and after giving effect to
     the conversion of preferred stock into 1,538,355 shares of Common Stock.
            
(14) Applicable percentage ownership after this Offering is based upon
     18,028,746 shares of Common Stock outstanding as of September 30, 1996
     after giving effect to the issuance of the 6,000,000 shares of Common
     Stock offered hereby and after giving effect to the conversion of
     preferred stock into 1,538,355 shares of Common Stock.     
 
                                      67

<PAGE>
 

                         DESCRIPTION OF CAPITAL STOCK
 
COMMON STOCK
   
  The Company is authorized to issue up to 40,000,000 shares of Common Stock,
par value $0.01 per share. As of September 30, 1996, the Company had
10,490,391 shares outstanding, 1,635,559 shares of Common Stock reserved for
issuance upon exercise of options granted pursuant to the Plans. An additional
1,294,566 shares of Common Stock may be issued pursuant to the
Soros/Chatterjee Warrants assuming such warrants were exercised on the date of
the Offering at an assumed offering price of $15. The actual number of shares
of Common Stock issuable under the Soros/Chatterjee Warrants will be up to
627,899 shares plus an indeterminate number of shares having a fair market
value of $10 million as of the date of exercise. Holders of shares of Common
Stock are entitled to one vote per share on all matters to be voted upon by
the stockholders. Subject to such preferential rights of the issued and
outstanding Series A Stock more particularly described below, and such
preferential rights as the Company's Board of Directors may grant in
connection with future issuances of Preferred Stock, holders of shares of
Common Stock are entitled to receive such dividends as the Board of Directors
may declare in its discretion out of funds legally available therefor. In the
event of a liquidation, dissolution or winding up of the Company, after
payment of liabilities and any liquidation preference on any shares of
Preferred Stock then outstanding, the holders of shares of Common Stock are
entitled to a distribution of any remaining assets of the Company. Holders of
shares of Common Stock have no cumulative voting or preemptive rights. All
outstanding shares of Common Stock are, and the shares of Common Stock offered
hereby, when issued and paid for, will be, fully paid and nonassessable.     
 
PREFERRED STOCK
   
  The Company is authorized to issue up to 2,455,000 shares of Preferred
Stock, par value $0.01 per share, of which 455,000 shares are designated
Series A Stock. All shares of the Series A Stock were issued to the sellers in
the Axicorp transaction, 206,666 shares of which were delivered at closing and
the balance of which are being held by the Company to secure certain post-
closing obligations of the sellers. As a consequence of the consummation of
the Offering, all of the Series A Stock will convert into Common Stock on a
3.381 to one basis.     
 
  Dividends are paid on Series A Stock when, as and in the same amount as paid
from time to time on the Common Stock. Holders of Series A Stock are not
entitled to vote on matters related to the Company other than certain matters
related to the capital structure of the Company or matters for which the law
provides for such vote. If the Company grants preemptive rights in connection
with certain issuances, sales or exchanges of Common Stock of the Company or
of securities convertible into Common Stock of the Company, holders of Series
A Stock are also granted such preemptive rights. A holder of Series A Stock
has the right at any time after March 1, 1998 to convert its Series A Stock,
share for share, into Common Stock of the Company. Upon the occurrence of
certain events, including the elimination of certain foreign ownership
restrictions on the Company, the occurrence of certain transfers of the
Company's stock or assets, or the public offering of more than 20% of the
Company's Common Stock, shares of Series A Stock automatically convert into
shares of Common Stock of the Company. Any particular conversion of shares of
Series A Stock held by certain foreign owners into shares of Common Stock of
the Company may be limited by foreign ownership restrictions applicable to the
Company.
   
  In addition to the Series A Stock, the Company, without further action by
the Stockholders, is also authorized to issue up to 2,000,000 shares of other
Preferred Stock, par value $0.01 per share ("Other Preferred Stock"). The
Company's Board of Directors may determine the timing, series, designation and
number of shares of Other Preferred Stock to be issued, as well as the rights,
preferences and limitations of such shares, including those related to voting
power, redemption, conversion, dividend rights and liquidation preferences.
The issuance of Other Preferred Stock could adversely affect the voting power
of the holders of Common Stock of the Company or have the effect of deterring
or delaying any attempt by a person, entity or group to obtain control of the
Company. See "--Takeover Protection."     
 
                                      68

<PAGE>
 
WARRANTS
   
  As of September 30, 1996, there were outstanding Soros/Chatterjee Warrants
granting the Soros/Chatterjee Group the right to receive, upon exercise, up to
627,899 shares of Common Stock plus an indeterminate number of shares the fair
market value of which is $10.0 million on the date of exercise. Of the
Soros/Chatterjee Warrants, warrants to purchase 338,100 shares of Common Stock
are currently exercisable, with the remainder being exercisable on or after
July 31, 1997 and until July 31, 1999. The Soros/Chatterjee Warrants are
entitled to certain customary antidilution protection in the event of stock
splits, stock dividends, reorganizations and other similar events. The shares
of Common Stock issued pursuant to the Soros/Chatterjee Warrants as entitled
to certain registration rights described below. See "Certain Transactions--
Private Equity Sale."     
 
REGISTRATION RIGHTS
   
  Soros/Chatterjee Group. Pursuant to a registration rights agreement dated
July 31, 1996, the Soros/Chatterjee Group is entitled to demand registration
of its shares of Common Stock after July 31, 1998, up to three times, the
third demand being available only if the first two did not result in the
Soros/Chatterjee Group having registered 80% of its shares of Common Stock.
The Company is not required to effect any demand registration within 180 days
after the effective date of a previous demand registration and may postpone,
on one occasion in any 365-day period the filing or effectiveness of a
registration statement for a demand registration for up to 120 days under
certain circumstances, including pending material transactions or the filing
by the Company of a registration statement relating to the sale of shares for
its own account. The Soros/Chatterjee Group is also entitled to unlimited
piggyback registrations. Such rights with respect to this Offering have been
waived. All such registrations would be at the Company's expense, exclusive of
underwriting discounts and commissions, and legal fees (up to $25,000 for each
such offering) incurred by the holders of registrable securities. The Company
and the Soros/Chatterjee Group have entered into customary indemnification and
contribution provisions.     
 
  Teleglobe. Under a shareholders' agreement between the Company, Mr. Singh
and Teleglobe, Teleglobe has the same consent, preemptive and registration
rights as may be granted in the future to other shareholders of an equal or
lesser percentage ownership in the Company. No such rights have been granted
to other shareholders other than in one instance in which Teleglobe waived its
rights. The shareholders' agreement also provides Teleglobe participation and
tag-along rights whereby Teleglobe is entitled to sell its shares of Common
Stock when certain other shareholders sell or when the Company issues equity
securities that would result in a change of control of the Company. The
agreement also obligates Teleglobe to sell its shares if certain other
shareholders sell and specified conditions are met, and grants the Company a
right of first refusal upon a sale of the Teleglobe-owned Common Stock to any
competitor of the Company.
   
  Other Registration Rights. Pursuant to the terms of the private placements
of Common Stock through NSI as placement agent, purchasers of such shares in
each such private placement (an aggregate of 4,042,084 shares) are entitled to
demand registration of such shares on one occasion (or a total of two demand
registrations) and to piggyback registration rights. The underwriter in any
such registrations may restrict the ability of such holders to include such
shares in a registered offering.     
 
TAKEOVER PROTECTION
 
  The Company is subject to Section 203 of the DGCL which, subject to certain
exceptions, prohibits a Delaware corporation, the voting stock of which is
generally publicly traded (i.e., listed on a national securities exchange or
authorized for quotation on an inter-dealer quotation system of a registered
national securities association) or held of record by more than 2,000
stockholders, from engaging in any "business combination" (as defined below)
with any "interested stockholder" (as defined below) for a period of three
years following the date that such stockholder became an interested
stockholder, unless: (i) prior to such date, the board of directors of the
corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder; (ii) upon
consummation of the transaction which resulted in the
 
                                      69

<PAGE>
 
stockholder becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding for purposes of determining the
number of shares outstanding those shares owned (x) by persons who are
directors and also officers, and (y) by employee stock plans in which employee
participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer; or
(iii) on or subsequent to such date, the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder. Section 203 of the DGCL defines "business combination" to include:
(i) any merger or consolidation involving the corporation and the interested
stockholder; (ii) any sale, transfer, pledge or other disposition involving the
interested stockholder of 10% or more of the assets of the corporation; (iii)
subject to certain exceptions, any transaction which results in the issuance or
transfer by the corporation of any stock of the corporation to the interested
stockholder; (iv) any transaction involving the corporation which has the
effect of increasing the proportionate share of the stock of any class or
series of the corporation beneficially owned by the interested stockholder, or
(v) the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation. In general, Section 203 defines an "interested
stockholder" as any person who, together with any affiliates or associates of
such person, beneficially owns, directly or indirectly, 15% or more of the
outstanding voting stock of a Delaware corporation.
 
  Pursuant to the Company's Certificate of Incorporation, the Company's Board
of Directors is divided into three classes of directors each containing, as
nearly as possible, an equal number of directors. Directors within each class
are elected to serve three-year terms and approximately one-third of the
directors sit for election at each annual meeting of the Company's
stockholders. A classified board of directors may have the effect of deterring
or delaying any attempt by any group to obtain control of the Company by a
proxy contest since such third party would be required to have its nominees
elected at two separate annual meetings of the Board of Directors in order to
elect a majority of the members of the Board of Directors. Directors who are
elected to fill a vacancy (including vacancies created by an increase in the
number of directors) must be confirmed by the stockholders at the next annual
meeting of stockholders whether or not such director's term expires at such
annual meeting.
 
  The Company's By-Laws allow the Board of Directors to increase the number of
directors from time to time (though a decrease in the number of directors may
not have the effect of shortening the term of any incumbent director) and to
fill any vacancies on the Board of Directors, including vacancies resulting
from an increase in the number of directors. This provision is designed to
provide the Board of Directors with flexibility to deal with an attempted
hostile takeover by a stockholder who may acquire a majority voting interest in
the Company without paying a premium therefor. This provision allows the Board
of Directors to increase its size and prevent a "squeeze-out" of any remaining
minority interest soon after a new majority stockholder gains control over the
Company. Further, the By-Laws limit the new majority stockholder's power to
remove a current or all current directors before the annual meeting in the
absence of "cause." Cause for removal of a director is limited to (i) a
judicial determination that a director is of unsound mind, (ii) a conviction of
a director of an offense punishable by imprisonment for a term of more than one
year, (iii) a breach or failure by a director to perform the statutory duties
of said director's office if the breach or failure constitutes self-dealing,
willful misconduct or recklessness, or (iv) a failure of a director, within 60
days after notice of his or her election, to accept such office either in
writing or by attending a meeting of the Board of Directors and fulfilling such
other requirements of qualification as the By-Laws or Certificate of
Incorporation may provide.
 
  Options under the Employee Plan outstanding on the date of a "change in
control" of the Company become immediately exercisable on such date. A change
in control for purposes of this exercise right includes the acquisition by any
person or entity of the beneficial ownership of 50% or more of the voting power
of the Company's stock, the approval by the Company's shareholders of a merger,
reorganization or consolidation of the Company in which the Company's
shareholders do not own 50% or more of the voting power of the stock of the
entity surviving such a transaction, the approval of the Company's shareholders
of an agreement of sale of
 
                                       70

<PAGE>
 
all or substantially all of the Company's assets, and the acceptance by the
Company's shareholders of a share exchange in which the Company's shareholders
do not own 50% or more of the voting power of the stock of the entity surviving
such exchange.
   
DIRECTOR LIABILITY     
   
  As permitted by Section 102(b)(7) of the DGCL, Article 11 of the Company's
Amended and Restated Certificate of Incorporation provides that no director of
the Company shall be liable to the Company for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Company or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for the unlawful payment of dividends on or
redemption of the Company's capital stock, or (iv) for any transaction from
which the director derived an improper personal benefit.     
 
TRANSFER AGENT AND REGISTRAR
 
  The transfer agent and registrar for the Common Stock is StockTrans, Inc.
 
                                       71

<PAGE>
 
                        SHARES ELIGIBLE FOR FUTURE SALE
   
  Upon completion of this Offering, the Company will have 18,028,746 shares of
Common Stock outstanding. Of these shares, the 6,000,000 shares of Common
Stock offered hereby (plus up to 900,000 additional shares if the Underwriters
exercise in full their over-allotment option), will be freely tradeable
without restriction or further registration, except for shares purchased by
"affiliates" or "underwriters" of the Company, as these terms are defined
under the Securities Act, subject to the resale limitations of Rule 144 under
the Securities Act and the regulations promulgated thereunder. The remaining
12,028,746 shares of Common Stock are restricted securities (the "Restricted
Shares") and may not be sold unless they are registered under the Securities
Act or are sold pursuant to an exemption from registration, such as the
exemption provided by Rule 144 under the Securities Act. Of these 12,028,746
Restricted Shares, 11,098,315 shares will be subject to 180-day "lock-up"
agreements with Lehman Brothers more particularly described below. Upon
expiration of such lock-up agreements, 5,071,500 of the Restricted Shares will
become eligible for sale, subject to compliance with Rule 144. The remaining
6,957,246 Restricted Shares will become eligible for sale at various times
over a period of less than two years. In addition, the shares underlying
certain warrants and options will become eligible for sale subject to
applicable lock-up agreements and compliance with Rule 144.     
   
  In general, Rule 144 allows a person who has beneficially owned Restricted
Shares for at least two years, including persons who may be deemed affiliates
of the Company, to sell, within any three-month period, up to the number of
Restricted Shares that does not exceed the greater of (i) one percent of the
then outstanding shares of Common Stock, and (ii) the average weekly trading
volume during the four calendar weeks preceding the date on which notice of
the sale is filed with the Commission. A person who is not deemed to have been
an affiliate of the Company at any time during the 90 days preceding a sale
and who has beneficially owned his or her Restricted Shares for at least three
years would be entitled to sell such Restricted Shares without regard to the
volume limitations described above and certain other conditions of Rule 144.
The Commission has proposed certain amendments to Rule 144 that would reduce
by one year the holding periods required for shares subject to Rule 144 and
144(k) to become eligible for resale in the public market. This proposal, if
adopted, would increase the number of shares of Common Stock eligible for
immediate resale following the expiration of the lock-up agreements described
below. No assurance can be given concerning whether or when the proposal will
be adopted by the Commission.     
 
  Under Rule 701, any employee, officer or director or consultant to the
Company who purchased shares pursuant to a written compensatory plan or
contract, including the Employee Plan and the Director Plan, who is not an
affiliate of the Company, is entitled to sell such shares without having to
comply with the public information, holding period, volume limitation or
notice provisions of Rule 144 and permits affiliates to sell such shares
without having to comply with the Rule 144 period restrictions, in each case
commencing 90 days after the Effective Date.
 
  The Company intends to file one or more registration statements under the
Securities Act to register Common Stock to be issued pursuant to the exercise
of options, including options granted or to be granted under the Employee Plan
and the Director Plan.
   
  The holders of approximately 5,418,891 shares of Common Stock upon the
closing of this Offering, and the holders of the Soros/Chatterjee Warrants and
their permitted transferees, are entitled to certain demand and piggy-back
registration rights in respect of their shares. See "Description of Capital
Stock--Registration Rights."     
 
  Prior to this Offering, there has been no public market for the securities
of the Company. No predictions can be made of the effect, if any, that the
sale or availability for sale of shares of additional Common Stock will have
on the market price of the Common Stock. Nevertheless, sales of a substantial
number of such shares by existing stockholders or by stockholders purchasing
in this Offering could have a negative impact on the market price of the
Common Stock.
 
                                      72

<PAGE>
 
     
  CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCESTO NON-UNITED STATES HOLDERS
                                            
  The following is a general discussion of certain United States federal tax
consequences of the ownership and disposition of Common Stock by a holder
that, for United States federal income tax purposes, is not a "United States
person" (a "Non-United States Holder"). For purposes of this discussion, a
"United States person" means a citizen or resident alien individual of the
United States, a corporation, partnership or other entity created or organized
in the United States or under the laws of the United States or of any state,
or an estate or trust the income of which may be included in gross income for
United States federal income tax purposes regardless of its source. Resident
alien individuals will be subject to United States federal income tax with
respect to the Common Stock as if they were United States citizens.     
   
  The Company has not obtained an opinion of counsel with respect to the tax
consequences discussed below, and nothing contained herein should be construed
as constituting such an opinion. Moreover, this discussion does not consider
any specific facts or circumstances that may apply to a particular Non-United
States Holder. Accordingly, prospective investors are urged to consult their
own tax advisors regarding the United States federal tax consequences of
owning and disposing of Common Stock (including such an investor's status as a
United States person or Non-United States Holder), as well as any tax
consequences that may arise under the laws of any state, municipality or other
taxing jurisdiction, including any foreign taxing jurisdiction.     
   
DIVIDENDS     
   
  Dividends paid by the Company to a Non-United States Holder will generally
be subject to withholding of United States federal income tax at the rate of
30% unless the dividend is effectively connected with the conduct of a trade
or business within the United States by the Non-United States Holder, in which
case the dividend will be subject to the same United States federal income tax
on net income that applies to United States persons (and, with respect to
corporate holders and under certain circumstances, the branch profits tax).
Non-United States Holders should consult any applicable United States income
tax treaties, which may provide for reduced withholding or other rules
different from those described above. A Non-United States Holder may be
required to satisfy certain certification requirements in order to claim
treaty benefits or to otherwise claim a reduction of or exemption from
withholding under the foregoing rules, including in the case of dividends
effectively connected with a U.S. trade or business conducted by a Non-United
States Holder.     
   
GAIN ON DISPOSITION     
   
  Except under special rules for individuals described below, a Non-United
States Holder generally will not be subject to United States federal income
tax on gain resulting from a sale or other disposition of Common Stock unless
the gain is (i) effectively connected with the conduct of a United States
trade or business by the Non-United States Holder or (ii) treated as
effectively connected with such a trade or business because the Company is or
has been a "United States real property holding corporation" and certain other
conditions are satisfied as discussed below. Any gain from disposition of
Common Stock that is (or is treated as) effectively connected with a United
States trade or business will be subject to substantially the same United
States federal income tax treatment that applies to United States persons
(and, in the case of corporate Non-United States Holders, may be subject to
the branch profits tax), except as otherwise provided by an applicable United
States income tax treaty.     
   
  A corporation is generally a "United States real property holding
corporation" for United States federal income tax purposes if the fair market
value of its United States real property interests equals or exceeds 50% of
the sum of the fair market value of its worldwide real property interests plus
its other assets used or held for use in a trade or business both within and
outside of the United States. The Company does not believe that it is a United
States real property holding corporation; however, there can be no assurance
that the Company will not become, or be determined to be, such a corporation.
Even if the Company becomes a United States real property holding corporation,
such status will not cause gain from the disposition of Common Stock to be
treated as effectively connected with a United States trade or business so
long as (i) the Common Stock is regularly traded     

                                      73

<PAGE>
 
   
on an established securities market (as defined in Treasury Regulations) and
(ii) the Non-United States Holder has not held, directly or indirectly, more
than 5% of the Common Stock at any time during the five-year period ending on
the date of disposition.     
   
  Special rules apply to individual Non-United States Holders. An individual
Non-United States Holder who recognizes gain from the disposition of Common
Stock held as a capital asset and is present in the United States for a period
or periods aggregating 183 days or more during the taxable year of
disposition, generally will be taxed at a rate of 30% on any such gain (less
certain capital losses, if any, from United States sources), if the Non-United
States Holder either (i) has a "tax home" in the United States (as defined in
Treasury Regulations) or (ii) maintains an office or other fixed place of
business in the United States to which such gain is attributable. In addition,
certain individual Non-United States Holders who once were United States
citizens may be subject to special rules applicable to United States
expatriates.     
   
  In 1990, 1992 and 1995, legislation was introduced that, if enacted, would
under certain circumstances have imposed federal income tax on gain realized
from dispositions of Common Stock by certain Non-United States Holders who
owned, at or prior to, the time of disposition 10% or more of the Common
Stock. There can be no assurance that similar legislation will not be proposed
and, if proposed, enacted in the future.     
   
FEDERAL ESTATE TAXES     
   
  Common Stock owned or treated as owned by an individual who is not a citizen
or resident (as specially defined for United States federal estate tax
purposes) of the United States at the date of death will be included in such
individual's estate for United States federal estate tax purposes and thus
will be subject to United States federal estate tax, unless an applicable
estate tax treaty provides otherwise.     
   
INFORMATION REPORTING AND BACKUP WITHHOLDING     
   
  The Company must report annually to the IRS and to each Non-United States
Holder the amount of dividends paid to, and the tax withheld with respect to,
such holder, regardless of whether any tax was actually withheld because, for
example, the withholding requirement was eliminated under an applicable United
States income tax treaty. That information may also be made available to the
tax authorities of the country in which the Non-United States Holder resides.
       
  United States federal withholding (which generally is imposed at the rate of
31% on certain payments to persons not otherwise exempt who fail to furnish
certain identifying information to the IRS) will generally not apply to
dividends paid to a Non-United States Holder that are subject to withholding
at the 30% rate (or would be so subject but for a reduced rate under an
applicable income tax treaty). In addition, the payer of dividends may rely on
the payee's foreign address in determining that the payee is exempt from
backup withholding, unless the payor has knowledge that the payee is in fact a
United States person.     
   
  These backup withholding and information reporting requirements also apply
to the gross proceeds paid to a Non-United States Holder upon the disposition
of Common Stock by or through a United States office of a United States or
foreign broker, unless the holder certifies to the broker under penalties of
perjury as to its name and address and the holder either is a Non-United
States Holder or otherwise establishes an exemption from the requirements.
Information reporting requirements (but not backup withholding) will apply to
a payment of the proceeds of a disposition of Common Stock by or through a
foreign office of (i) a United States broker, (ii) a foreign broker 50% or
more of whose gross income for certain periods is effectively connected with
the conduct of a trade or business in the United States, or (iii) a foreign
broker that is a "controlled foreign corporation" for United States federal
income tax purposes, unless the broker has documentary evidence in its records
that the holder is a Non-United States Holder and certain other conditions are
met, or the holder otherwise established an exemption from the requirements.
Neither backup withholding nor information reporting will generally apply to a
payment of the proceeds of a disposition of Common Stock by or through a
foreign office of a foreign broker not described in the preceding sentence.
    
                                      74

<PAGE>
 
   
  Any amounts withheld under the backup withholding rules will be refunded or
credited against the Non-United States Holder's United States federal income
tax liability, provided that required information is furnished to the IRS.
       
  The U.S. tax rules relating to the 30% withholding on dividends, backup
withholding and information reporting are currently under review by the
Treasury Department and their application to the Common Stock is subject to
change. Specifically, proposed regulations would, if enacted, amend the
ability of the payor to rely on the address of the recipient to determine the
correct withholding of tax. In general, under the proposed regulations a
recipient may be required to provide certain information and documentation to
the payor in order to preclude or reduce otherwise applicable withholdings.
Other changes to the rules described above have also been proposed.     
 
                                      75

<PAGE>
 

                                 UNDERWRITING
   
  Under the terms of and subject to the conditions contained in the U.S.
Underwriting Agreement, the form of which is filed as an exhibit to the
Registration Statement of which the Prospectus forms a part, the underwriters
(the "U.S. Underwriters"), for whom Lehman Brothers Inc. and Donaldson, Lufkin
& Jenrette Securities Corporation are acting as representatives (the
"Representatives"), have severally agreed to purchase from the Company, and
the Company has agreed to sell to each U.S. Underwriter, the aggregate number
of shares of Common Stock set forth opposite the name of such U.S. Underwriter
below:     
 

<TABLE>
<CAPTION>
                                                                       NUMBER OF
           UNDERWRITERS                                                 SHARES
           ------------                                                ---------
   <S>                                                                 <C>
   Lehman Brothers Inc................................................
   Donaldson, Lufkin & Jenrette Securities Corporation................
                                                                          ---
       Total..........................................................
                                                                          ===
</TABLE>

   
  Under the terms of and subject to the conditions contained in the
International Underwriting Agreement, the form of which is filed as an exhibit
to the Registration Statement of which this Prospectus forms a part, the
international managers (the "International Managers"), for whom Lehman
Brothers International (Europe) and Donaldson, Lufkin & Jenrette Securities
Corporation are acting as lead managers (the "Lead Managers"), have severally
agreed to purchase from the Company, and the Company has agreed to sell to
each International Manager, the aggregate number of shares of Common Stock set
forth opposite the name of such Manager below:     
 

<TABLE>     
<CAPTION>
                                                                       NUMBER OF
         INTERNATIONAL MANAGERS                                         SHARES
         ----------------------                                        ---------
   <S>                                                                 <C>
   Lehman Brothers International (Europe).............................
   Donaldson, Lufkin & Jenrette Securities Corporation................
                                                                          ---
       Total..........................................................
                                                                          ===
</TABLE>
    
   
  The U.S. Underwriting Agreement and the International Underwriting Agreement
(collectively, the "Underwriting Agreements") provide that the obligations of
the U.S. Underwriters and the International Managers, respectively, to
purchase shares of Common Stock are subject to the approval of certain legal
matters by counsel and to certain other conditions and that, if any of the
shares of Common Stock are purchased by the U.S. Underwriters pursuant to the
U.S. Underwriting Agreement or by the International Managers pursuant to the
International Underwriting Agreement, all the shares of Common Stock agreed to
be purchased by the U.S. Underwriters or the International Managers, as the
case may be, pursuant to their respective Underwriting Agreements must be so
purchased. The initial public offering price and underwriting discounts and
commissions for each of the U.S. Offering and the International Offering are
identical. The closing of each of the U.S. Offering and the International
Offering is conditioned upon the closing of the other.     
   
  The Company has been advised by the Representatives and the Lead Managers
that the U.S. Underwriters and the International Managers propose to offer the
shares of Common Stock to the public at the public offering price set forth on
the cover page hereof, and to certain dealers at such public offering price
less a selling     
 
                                      76

<PAGE>
 
   
concession not in excess of $    per share. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of $    per share to
certain other Underwriters or to certain other brokers or dealers. After the
initial offering to the public, the offering price and other selling terms may
be changed by the Representatives and the Lead Managers.     
          
  The Company has granted to the U.S. Underwriters and the International
Managers an option to purchase up to an additional 720,000 shares and 180,000
shares of Common Stock, respectively, exercisable solely to cover over-
allotments, at the initial offering price to the public, less the underwriting
discounts and commissions, shown on the cover page of this Prospectus. Any or
all of such options may be exercised at any time until 30 days after the date
of the U.S. Underwriting Agreement and the International Underwriting
Agreement, as the case may be. To the extent that an option is exercised, each
U.S. Underwriter or International Manager, as the case may be, will be
committed, subject to certain conditions, to purchase a number of the
additional shares of Common Stock proportionate to such Underwriter's initial
commitment as indicated in the preceding tables.     
   
  The U.S. Underwriters and the International Managers have entered into an
Agreement Between U.S. Underwriters and International Managers (the "Agreement
Between") pursuant to which each U.S. Underwriter has agreed that, as part of
the distribution of the shares of Common Stock offered in the United States
and Canada, (a) it is not purchasing any of such shares for the account of
anyone other than a U.S. or Canadian Person (as defined below) and (b) it has
not offered or sold, and will not offer, sell, resell or deliver, directly or
indirectly, any of such shares or distribute any prospectus relating to such
shares to anyone other than a U.S. or Canadian Person. In addition, pursuant
to the Agreement Between, each International Manager has agreed that, as part
of the distribution of the shares of Common Stock offered outside the United
States and Canada, (a) it is not purchasing any of such shares for the account
of any U.S. or Canadian Person and (b) it has not offered or sold, and will
not offer, sell, resell or deliver, directly or indirectly, any of such shares
or distribute any prospectus relating to such shares to any U.S. or Canadian
Person.     
   
  The foregoing limitations do not apply to stabilization transactions or to
certain other transactions specified in the Underwriting Agreements and the
Agreement Between, including (i) certain purchases and sales between the U.S.
Underwriters and the International Managers; (ii) certain offers, sales,
resales, deliveries or distributions to or through investment advisors or
other persons exercising investment discretion; (iii) purchases, offers or
sales by a U.S. Underwriter who is also acting as an International Manager for
the account of a Person other than a U.S. or Canadian Person and by an
International Manager who is also acting as a U.S. Underwriter for the account
of a U.S. or Canadian Person; and (iv) other transactions specifically
approved by the U.S. Underwriters and International Managers. As used herein,
"U.S. or Canadian Person" means any resident or citizen of the United States
or Canada, any corporation, partnership or other entity created or organized
in or under the laws of the United States or Canada or any political
subdivision thereof or any estate or trust the income of which is subject to
United States federal income taxation or Canadian income taxation regardless
of the source (other than the foreign branch of any U.S. or Canadian Person),
and includes any United States or Canadian branch of a person other than a
U.S. or Canadian Person. The term "United States" means the United States of
America (including the states thereof and the District of Columbia) and its
territories, its possessions and other areas subject to its jurisdiction and
the term "Canada" means Canada, its provinces, territories, possessions and
other areas subject to its jurisdiction.     
   
  Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Managers of such number of shares of Common
Stock as may be mutually agreed. The price of any shares so sold shall be the
public offering price as then in effect for Common Stock being sold by the
U.S. Underwriters and International Managers, less an amount not greater than
the selling concession unless otherwise determined by mutual agreement. To the
extent that there are sales pursuant to the Agreement Between, the number of
shares initially available for sale by the U.S. Underwriters or by the
International Managers may be more or less than the amount specified on the
cover page of this Prospectus.     
   
  The Representatives and the Lead Managers have informed the Company that the
Underwriters do not intend to confirm sales to accounts over which they
exercise discretionary authority.     
 
                                      77

<PAGE>
 
   
  The Prospectus is not, and under no circumstances is to be construed as, an
advertisement or a public offering of Common Stock in Canada or any province
or territory thereof. Any offer or sale of the shares of Common Stock in
Canada may only be made pursuant to an exemption from the requirement to file
a prospectus in the province or territory of Canada in which such offer or
sale is made.     
   
  Each International Manager has represented and agreed that (i) it has not
offered or sold and prior to the date six months after the date of issue of
the shares of Common Stock will not offer or sell any shares of Common Stock
to persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 (the "1986 Act") with
respect to anything done by it in relation to the shares of Common Stock in,
from or otherwise involving the United Kingdom; and (iii) it has only issued
or passed on, and will only issue and pass on to any person in the United
Kingdom, any investment advertisement (within the meaning of the 1986 Act)
relating to the shares of Common Stock if that person falls within Article
11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1995.     
   
  No action has been taken or will be taken in any jurisdiction by the Company
or the International Managers that would permit a public offering of the
shares offered pursuant to the Offering in any jurisdiction where action for
that purpose is required, other than the United States. Persons into whose
possession this Prospectus comes are required by the Company and the
International Managers to inform themselves about, and to observe any
restrictions as to, the offering of the shares offered pursuant to the
Offerings and the distribution of this Prospectus.     
   
  Purchasers of the shares of Common Stock offered hereby may be required to
pay stamp taxes and other charges in accordance with the laws and practices of
the country of purchase in addition to the offering price set forth on the
cover page hereof.     
   
  The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act. The Company has
agreed to reimburse certain expenses of the Underwriters.     
       
          
  The Company and its stockholders, including all directors and officers,
subject to certain exceptions, have agreed not to, directly or indirectly,
offer for sale, sell or otherwise dispose of or announce the Offering of, any
shares of Common Stock for a period of 180 days after the date of this
Prospectus, without the prior written consent of Lehman Brothers Inc.     
          
  Application has been made to have the Common Stock approved for quotation on
the Nasdaq National Market under the symbol "PRTL."     
   
DETERMINATION OF THE OFFERING PRICE     
   
  Prior to the Offering, there has been no public market for the Common Stock.
The initial public offering price for the Common Stock will be determined by
negotiations among the Company, the Representatives and the Lead Managers.
Among the factors to be considered in such negotiations will be prevailing
market conditions, the market values of publicly traded companies that the
Underwriters believed to be somewhat comparable to the Company, the demand for
the Common Stock and for similar securities of companies comparable to the
Company, the current state of the Company's development and other factors
deemed relevant. There can, however, be no assurance that the prices at which
the Common Stock will sell in the public market after the Offering will not be
lower than the price at which it will be sold in the Offering.     
 
                                      78

<PAGE>
 

                                 LEGAL MATTERS
   
  The validity of the shares of Common Stock offered hereby is being passed
upon for the Company by Pepper, Hamilton & Scheetz, Philadelphia, Pennsylvania
and for the Underwriters by Shearman & Sterling, New York, New York. Mr. John
DePodesta, "of counsel" to Pepper, Hamilton & Scheetz, is a director and an
Executive Vice President of the Company, and the beneficial owner of 319,690
shares of Common Stock.     
 

                                    EXPERTS
 
  The Consolidated Financial Statements of the Company as of December 31, 1994
and 1995, and for the period from inception (February 4, 1994) to December 31,
1994 and the year ended December 31, 1995 included in this Prospectus, have
been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report appearing herein. Such Consolidated Financial Statements have
been included herein in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
 
  The Financial Statements of Axicorp, as of March 31, 1995 and 1996, and for
the nine months ended March 31, 1995 and the twelve months ended March 31,
1996 included in this Prospectus and in the Registration Statement have been
audited by Price Waterhouse, independent chartered accountants, as indicated
in their report with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in accounting and auditing.
 
                                      79

<PAGE>
 

                         INDEX TO FINANCIAL STATEMENTS
 

<TABLE>
<CAPTION>
                                                                           PAGE
                                                                           ----
<S>                                                                        <C>
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED:
  Independent Auditors' Report............................................  F-2
  Consolidated Balance Sheets as of December 31, 1994 and 1995 and June
   30, 1996 (unaudited)...................................................  F-3
  Consolidated Statements of Operations for the period from February 4,
   1994 (inception) to December 31, 1994, the year ended December 31, 1995
   and the six months ended June 30, 1995 (unaudited) and 1996
   (unaudited)............................................................  F-4
  Consolidated Statements of Stockholders' Equity (Deficit) for the period
   from February 4, 1994 (inception) to December 31, 1994, the year ended
   December 31, 1995 and the six months ended June 30, 1996 (unaudited)...  F-5
  Consolidated Statements of Cash Flows for the period from February 4,
   1994 (inception) to December 31, 1994, the year ended December 31, 1995
   and the six months ended June 30, 1995 (unaudited) and 1996
   (unaudited)............................................................  F-6
  Notes to Consolidated Financial Statements..............................  F-7
AXICORP PTY., LTD.:
  Report of Independent Accountants....................................... F-16
  Balance Sheets as of March 31, 1995 and 1996............................ F-17
  Statements of Operations for the nine months ended March 31, 1995 and
   for the twelve months ended March 31, 1996............................. F-18
  Statements of Stockholders' Equity for the nine months ended March 31,
   1995 and for the twelve months ended March 31, 1996.................... F-19
  Statements of Cash Flows for the nine months ended March 31, 1995 and
   for the twelve months ended March 31, 1996............................. F-20
  Notes to Financial Statements........................................... F-21

</TABLE>

 
                                      F-1

<PAGE>
 

                         INDEPENDENT AUDITORS' REPORT
 
To the Board of Directors of 
  Primus Telecommunications Group, Incorporated:
 
  We have audited the accompanying consolidated balance sheets of Primus
Telecommunications Group, Incorporated and subsidiaries as of December 31,
1994 and 1995, and the related consolidated statements of operations,
stockholders' equity (deficit), and cash flows for the period from February 4,
1994 (date of incorporation) to December 31, 1994 and for the year ended
December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on the
financial statements based on our audits.
 
  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
  In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Primus Telecommunications
Group, Incorporated and subsidiaries as of December 31, 1994 and 1995, and the
results of their operations and their cash flows for the period from February
4, 1994 (date of incorporation) to December 31, 1994 and the year ended
December 31, 1995, in conformity with generally accepted accounting
principles.
 
DELOITTE & TOUCHE LLP
Washington, D.C.
   
April 23, 1996, except for Note 13

 and Note 14, as to which the dates
 are July 31, 1996, and the
 effective date of the Registration
 Statement, respectively     
 
                              ------------------
   
  The foregoing report is in the form that will be signed upon the completion
of the restatement of capital accounts to effect the split of all shares of
common stock at a ratio of 3.381 to 1 and to reflect conversion of all
outstanding shares of preferred stock into shares of common stock.     
 
Washington, D.C.
April 23, 1996
 
                                      F-2

<PAGE>
 
         PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
 

<TABLE>   
<CAPTION>
                                              DECEMBER 31,
                                          ----------------------    JUNE 30,
                                            1994        1995          1996
                                          ---------  -----------  ------------
                                                                  (UNAUDITED)
<S>                                       <C>        <C>          <C>
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents.............. $ 220,904  $ 2,295,843  $  4,397,604
  Accounts receivable (net of allowance
   of $132,353 at December 31, 1995 and
   $1,605,570 (unaudited) at June 30,
   1996).................................       --       664,697    24,848,696
  Prepaid expenses and other current as-
   sets..................................    42,743      388,263       557,103
                                          ---------  -----------  ------------
    Total current assets.................   263,647    3,348,803    29,803,403
PROPERTY AND EQUIPMENT--Net..............   116,919      948,876     5,570,230
INTANGIBLES--Net.........................       --           --     22,002,091
DEFERRED INCOME TAXES....................       --           --      4,211,808
OTHER ASSETS.............................   106,250      743,932       709,278
                                          ---------  -----------  ------------
TOTAL ASSETS............................. $ 486,816  $ 5,041,611  $ 62,296,810
                                          =========  ===========  ============
LIABILITIES AND STOCKHOLDERS' EQUITY
 (DEFICIT)
CURRENT LIABILITIES:
  Accounts payable....................... $  92,273  $ 1,284,341  $ 25,329,431
  Accrued expenses and other current lia-
   bilities..............................   122,300      667,748     3,501,252
  Due to related party...................   330,850          --            --
  Deferred income taxes..................       --           --      4,737,298
  Current portion of long-term obliga-
   tions.................................    12,882      101,804    10,626,541
                                          ---------  -----------  ------------
    Total current liabilities............   558,305    2,053,893    44,194,522
LONG-TERM OBLIGATIONS....................       --       425,866     6,302,152
                                          ---------  -----------  ------------
    Total liabilities....................   558,305    2,479,759    50,496,674
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
  Preferred stock, $.01 par value--
   2,455,000 shares authorized; issued
   and outstanding, 455,000 shares of
   Series A Convertible (unaudited) at
   June 30, 1996.........................       --           --          4,550
  Common stock, $.01 par value--
   authorized 16,905,000 shares in 1994
   and 1995; 35,348,355 shares
   (unaudited) June 30, 1996; issued and
   outstanding, 4,039,737 shares in 1994;
   7,063,491 shares in 1995; 9,524,392
   shares (unaudited) at June 30, 1996...    40,397       70,635        95,244
  Additional paid-in capital.............   465,394    5,496,216    17,985,238
  Accumulated deficit....................  (577,280)  (3,002,518)   (6,234,944)
  Cumulative translation adjustment......       --        (2,481)      (49,952)
                                          ---------  -----------  ------------
    Total stockholders' equity (defi-
     cit)................................   (71,489)   2,561,852    11,800,136
                                          ---------  -----------  ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
 EQUITY (DEFICIT)........................ $ 486,816  $ 5,041,611  $ 62,296,810
                                          =========  ===========  ============
</TABLE>
    
 
                See notes to consolidated financial statements.
 
                                      F-3

<PAGE>
 
         PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 

<TABLE>   
<CAPTION>
                             PERIOD FROM
                             FEBRUARY 4,                   SIX MONTHS ENDED
                               1994 TO     YEAR ENDED          JUNE 30,
                             DECEMBER 31, DECEMBER 31,  -----------------------
                                 1994         1995         1995        1996
                             ------------ ------------  ----------  -----------
                                                             (UNAUDITED)
<S>                          <C>          <C>           <C>         <C>
NET REVENUE.................  $      --   $ 1,167,058   $  221,441  $65,414,924
COST OF REVENUE.............         --     1,383,763      203,284   60,162,429
                              ----------  -----------   ----------  -----------
GROSS MARGIN (DEFICIT)......         --      (216,705)      18,157    5,252,495
OPERATING EXPENSES:
  Selling, general, and ad-
   ministrative.............     556,545    2,024,383      714,710    6,707,373
  Depreciation and amortiza-
   tion.....................      12,474      160,024       64,764      797,421
                              ----------  -----------   ----------  -----------
    Total operating ex-
     penses.................     569,019    2,184,407      779,474    7,504,794
                              ----------  -----------   ----------  -----------
LOSS FROM OPERATIONS........    (569,019)  (2,401,112)    (761,317)  (2,252,299)
INTEREST EXPENSE............     (13,028)     (58,732)     (33,168)    (334,775)
INTEREST INCOME.............       4,767       34,606        1,405       85,191
OTHER INCOME (EXPENSE)......         --           --           --      (268,120)
                              ----------  -----------   ----------  -----------
LOSS BEFORE INCOME TAXES....    (577,280)  (2,425,238)    (793,080)  (2,770,003)
INCOME TAXES................         --           --           --      (462,423)
                              ----------  -----------   ----------  -----------
NET LOSS....................  $ (577,280) $(2,425,238)  $ (793,080) $(3,232,426)
                              ==========  ===========   ==========  ===========
NET LOSS PER COMMON AND
 COMMON SHARE EQUIVALENTS...  $     (.04) $      (.18)  $     (.06) $      (.23)
                              ==========  ===========   ==========  ===========
WEIGHTED AVERAGE NUMBER OF
 COMMON AND COMMON SHARE
 EQUIVALENTS OUTSTANDING....  10,014,032   12,338,313   12,170,846   13,497,468
                              ==========  ===========   ==========  ===========
</TABLE>
    
 
 
                See notes to consolidated financial statements.
 
                                      F-4

<PAGE>
 
         PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED AND SUBSIDIARIES
 
           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
 

<TABLE>   
<CAPTION>
                         PREFERRED STOCK    COMMON STOCK     ADDITIONAL                 CUMULATIVE  STOCKHOLDERS'
                         --------------- ------------------   PAID-IN     ACCUMULATED   TRANSLATION    EQUITY
                         SHARES  AMOUNT   SHARES    AMOUNT    CAPITAL       DEFICIT     ADJUSTMENT    (DEFICIT)
                         ------- ------- --------- -------- ------------  ------------  ----------- -------------
<S>                      <C>     <C>     <C>       <C>      <C>           <C>           <C>         <C>
BALANCE, FEBRUARY 4,
 1994 (DATE OF
 INCORPORATION).........     --  $   --        --  $    --  $        --   $        --    $     --   $        --
 Issuance of "founder's
  stock" to the
  Company's
  incorporator..........     --      --    178,574    1,786       (1,258)          --          --            528
 Investment made by
  Chairman and Chief
  Executive Officer.....     --      --  3,392,905   33,929      216,071           --          --        250,000
 Common shares issued
  for services
  performed.............     --      --     71,430      714        4,549           --          --          5,263
 Shares purchased by
  outside investors in
  the form of a trust...     --      --    396,828    3,968      246,032           --          --        250,000
 Net loss...............     --      --        --       --           --       (577,280)        --       (577,280)
                         ------- ------- --------- -------- ------------  ------------   ---------  ------------
BALANCE, DECEMBER 31,
 1994...................     --      --  4,039,737   40,397      465,394      (577,280)        --        (71,489)
 Common shares sold
  through private
  placement, net of
  transaction costs.....     --      --  2,233,817   22,338    3,995,497           --          --      4,017,835
 Conversion of related
  party debt to common
  stock.................     --      --    555,559    5,556      344,444           --          --        350,000
 Common shares issued
  for services
  performed.............     --      --    234,378    2,344      690,881           --          --        693,225
 Foreign currency
  translation
  adjustment............     --      --        --       --           --            --       (2,481)       (2,481)
 Net loss...............     --      --        --       --           --     (2,425,238)        --     (2,425,238)
                         ------- ------- --------- -------- ------------  ------------   ---------  ------------
BALANCE, DECEMBER 31,
 1995...................     --      --  7,063,491   70,635    5,496,216    (3,002,518)     (2,481)    2,561,852
 Common shares sold
  through private
  placement, net of
  transaction costs
  (unaudited)...........     --      --  1,771,194   17,712    4,665,645           --          --      4,683,357
 Common shares sold, net
  of transaction costs
  (unaudited)...........     --      --    410,808    4,108    1,380,836           --          --      1,384,944
 Common shares issued
  for services performed
  (unaudited)...........     --      --    278,899    2,789      987,091           --          --        989,880
 Preferred shares issued
  for Axicorp
  acquisition
  (unaudited)........... 455,000   4,550       --       --     5,455,450           --          --      5,460,000
 Foreign currency
  translation adjustment
  (unaudited)...........     --      --        --       --           --            --      (47,471)      (47,471)
 Net loss (unaudited)...     --      --        --       --           --     (3,232,426)        --     (3,232,426)
                         ------- ------- --------- -------- ------------  ------------   ---------  ------------
BALANCE, JUNE 30, 1996
 (UNAUDITED)............ 455,000 $ 4,550 9,524,392 $ 95,244 $ 17,985,238  $ (6,234,944)  $ (49,952) $ 11,800,136
                         ======= ======= ========= ======== ============  ============   =========  ============
</TABLE>
    
 
                See notes to consolidated financial statements.
 
                                      F-5

<PAGE>
 
         PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 

<TABLE>
<CAPTION>
                             PERIOD FROM
                             FEBRUARY 4,                  SIX MONTHS ENDED
                               1994 TO     YEAR ENDED         JUNE 30,
                             DECEMBER 31, DECEMBER 31,  ----------------------
                                 1994         1995        1995        1996
                             ------------ ------------  ---------  -----------
                                                             (UNAUDITED)
<S>                          <C>          <C>           <C>        <C>
CASH FLOWS FROM OPERATING
 ACTIVITIES:
  Net loss..................  $(577,280)  $(2,425,238)  $(793,080) $(3,232,426)
  Adjustments to reconcile
   net loss to net cash used
   in operating activities:
    Depreciation and
     amortization...........     12,474       160,024      64,763      790,420
    Sales allowances........        --        132,353         --       614,738
    Foreign currency
     transaction loss.......        --            --          --       268,120
    Deferred income taxes...        --            --          --       299,962
    Changes in assets and
     liabilities:
      (Increase) decrease in
       accounts receivable..        --       (797,050)   (199,200)  (8,040,516)
      (Increase) decrease in
       prepaid expenses and
       other current
       assets...............    (42,743)      (26,925)    (46,703)     (53,862)
      (Increase) decrease in
       deferred costs.......    (25,000)      (35,234)        --           --
      (Increase) decrease in
       other assets.........    (81,453)     (532,530)    (98,250)    (213,920)
      Increase (decrease) in
       accounts payable.....     92,273     1,194,991     209,442    4,717,673
      Increase (decrease) in
       accrued expenses and
       other liabilities....    135,656       321,697     246,069      614,686
                              ---------   -----------   ---------  -----------
        Net cash used in
         operating
         activities.........   (486,073)   (2,007,912)   (616,959)  (4,235,125)
                              ---------   -----------   ---------  -----------
CASH FLOWS FROM INVESTING
 ACTIVITIES:
  Purchase of property and
   equipment................   (105,547)     (396,281)    (88,116)  (1,452,340)
  Cash used in business
   acquisition, net of cash
   acquired.................        --            --          --    (1,700,674)
                              ---------   -----------   ---------  -----------
        Net cash used in
         investing
         activities.........   (105,547)     (396,281)    (88,116)  (3,153,014)
                              ---------   -----------   ---------  -----------
CASH FLOWS FROM FINANCING
 ACTIVITIES:
  Principal payments on
   capital lease............     (2,230)      (63,595)    (31,948)     (35,486)
  Principal borrowed from
   Chairman and Chief
   Executive Officer........    314,754           --          --           --
  Sale of common stock......    500,000     4,542,727     964,591    7,376,776
  Proceeds from notes
   payable--related party...        --            --          --     2,000,000
                              ---------   -----------   ---------  -----------
        Net cash provided by
         financing
         activities.........    812,524     4,479,132     932,643    9,341,290
                              ---------   -----------   ---------  -----------
EFFECT OF EXCHANGE RATE
 CHANGES ON CASH AND CASH
 EQUIVALENTS................        --            --          --       148,610
                              ---------   -----------   ---------  -----------
NET INCREASE IN CASH........    220,904     2,074,939     227,568    2,101,761
CASH AND CASH EQUIVALENTS,
 BEGINNING OF PERIOD........        --        220,904     220,904    2,295,843
                              ---------   -----------   ---------  -----------
CASH AND CASH EQUIVALENTS,
 END OF PERIOD..............  $ 220,904   $ 2,295,843   $ 448,472  $ 4,397,604
                              =========   ===========   =========  ===========
SUPPLEMENTAL CASH FLOW
 INFORMATION:
  Cash paid for interest....  $     --    $    36,249   $  14,397  $    39,354
                              ---------   -----------   ---------  -----------
  Non-cash investing and
   financing activities:
    Common stock issued for
     services...............  $   5,263   $   693,225   $     --   $   989,880
                              ---------   -----------   ---------  -----------
    Conversion of related
     party debt to common
     stock..................  $     --    $   350,000   $ 350,000  $       --
                              ---------   -----------   ---------  -----------
    Increase in capital
     lease liability for
     acquisition of property
     and equipment..........  $  15,112   $   578,381   $ 543,689  $   168,302
                              ---------   -----------   ---------  -----------
    Increase in notes
     payable for acquisition
     of switch equipment....  $     --    $       --    $     --   $ 2,362,500
                              ---------   -----------   ---------  -----------
</TABLE>

 
                See notes to consolidated financial statements.
 
                                      F-6

<PAGE>
 
        PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED AND SUBSIDIARIES
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
1. ORGANIZATION AND BUSINESS
 
  Primus Telecommunications Group, Incorporated (the "Company"), formerly
Global Telecommunications, Inc., was incorporated in Delaware in February
1994. The Company was formed to capitalize on the increase in business and
consumer demand for international telecommunication services. The Company
operates as a holding company and currently has wholly-owned subsidiaries in
the United States, United Kingdom, Australia, and Mexico. Subsequent to
December 31, 1995, the Company purchased all of the outstanding capital stock
of Axicorp, Pty., Ltd. ("Axicorp"), an Australian telecommunications company
(see Note 12).
 
  In 1994, the Company, as a development stage enterprise, was involved in
various start-up activities including raising capital, obtaining licenses,
acquiring equipment, leasing space, developing markets, and recruiting and
training personnel. During 1995, the Company began revenue generating
operations and is no longer in the development stage.
 
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Principles of Consolidation--The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries. All
intercompany accounts and transactions have been eliminated.
 
  Revenue Recognition--Revenues from long distance telecommunications services
are recognized when the services are provided.
 
  Cost of Revenue--Cost of revenue includes network costs which consist of
access, transport, and termination costs. Such costs are recognized when
incurred in connection with the provision of telecommunications services.
 
  Foreign Currency Translation--The assets and liabilities of the Company's
foreign subsidiaries are translated at the exchange rates in effect on the
reporting date, and income and expenses are translated at the average exchange
rate during the period. The net effect of such translation gains and losses
are accumulated as a separate component of stockholders' equity. Foreign
currency transaction gains and losses are included in Other Income (Expense)
in the consolidated statements of operations.
 
  Cash and Cash Equivalents--The Company considers cash on hand, deposits in
banks, certificates of deposit, and overnight repurchase agreements with
original maturities of three months or less as cash and cash equivalents.
 
  Property and Equipment--Property and equipment, which consists of furniture,
leasehold improvements, and telecommunications equipment, is stated at cost
less accumulated depreciation and amortization. Expenditures for maintenance
and repairs that do not materially extend the useful lives of the assets are
charged to expense. Depreciation and amortization are computed using the
straight-line method over estimated useful lives of the assets, less their net
salvage value, which range from three to eight years, or for leasehold
improvements and leased equipment, over the terms of the leases, whichever is
shorter.
 
  Intangible Assets--At June 30, 1996, intangible assets consist of goodwill
of $17,733,000 (unaudited) and customer lists of $4,269,000 (unaudited).
Goodwill is being amortized over 30 years on a straight-line basis and
customer lists over the estimated run-off of the customer base not to exceed
five years. Accumulated amortization at June 30, 1996, was $199,248
(unaudited) and $304,920 (unaudited) related to the goodwill and customer
lists, respectively.
 
 
                                      F-7

<PAGE>
 
        PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  New Accounting Pronouncements--As of January 1, 1996, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.
The adoption had no effect on the financial position or results of operations
of the Company. SFAS No. 123, Accounting for Stock Based Compensation, becomes
effective and will be adopted by the Company as of December 31, 1996. The
Company does not plan to adopt the recognition and measurement provisions of
SFAS No. 123.
 
  Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of net revenue
and expenses during the reporting period. Actual results could differ from
those estimates.
 
  Concentration of Credit Risk--Financial instruments that potentially subject
the Company to concentration of credit risk principally consists of trade
accounts receivable. The Company's six largest customers account for
approximately 52% of gross accounts receivable as of December 31, 1995. At
June 30, 1996, no customer accounted for more than 10% (unaudited) of accounts
receivable. The Company performs ongoing credit evaluations of its customers
but generally does not require collateral to support customer receivables.
Losses on uncollectible accounts have consistently been within management's
expectations.
 
  Income Taxes--The Company recognizes income tax expense for book purposes
following the asset and liability approach for computing deferred income
taxes. Under this method, the deferred tax asset and liability are determined
based on the difference between financial reporting and tax basis of assets
and liabilities. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some
portion or all of the deferred tax assets will not be realized.
 
  Deferred Costs--Legal, investment banking, and other incremental costs
associated with raising capital are recorded as deferred costs and are
included in Other Assets on the consolidated balance sheet. Such costs are
subsequently netted against the proceeds of the stock offerings to which they
relate. In the event that the offering is not successful, such costs would be
written off to operations in the period in which the related offering is
abandoned. Such amounts total $30,263 and $60,125 at December 31, 1994 and
1995, respectively. Subsequent to December 31, 1995, these costs have been
netted against the respective transactions. The Company has also capitalized
$92,609 related to the Axicorp acquisition at December 31, 1995 (see Note 12).
Such amounts were included in the purchase price accounting at acquisition.
There are no deferred costs included in the consolidated balance sheet at June
30, 1996 (unaudited).
   
  Net Loss Per Share--Net loss per common and common share equivalents at the
effective date of the Registration Statement will be computed based upon the
weighted average number of common and common share equivalents, outstanding
during each period. Common share equivalents consist of stock options and
warrants calculated using the modified treasury stock method. Retroactive
restatement has been made to share and per share amounts for the 3.381 to one
stock split and conversion of Series A Convertible Preferred Stock
contemplated by the Company as part of its initial public offering. Primary
and fully diluted loss per share are the same. Pursuant to Securities and
Exchange Commission Staff Accounting Bulletin No. 83, common stock and options
to purchase common stock issued subsequent to August 27, 1995 at prices below
the assumed initial public offering price will be included as outstanding for
all periods presented, using the modified treasury stock method at the assumed
initial public offering price of $15 per share even though the effect is to
reduce the net loss per share.     
 
 
  Interim Financial Information--The interim financial data as of June 30,
1996 and for the six-month periods ended June 30, 1995 and 1996, is unaudited.
The information reflects all adjustments, consisting only of normal recurring
adjustments that, in the opinion of management, are necessary to present
fairly the financial position and results of operations of the Company for the
periods indicated. Results of operations for the interim periods are not
necessarily indicative of the results of operations for the full year.
 
                                      F-8

<PAGE>
 
        PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
3. PROPERTY AND EQUIPMENT
 
  Property and equipment consist of the following:
 

<TABLE>
<CAPTION>
                                                DECEMBER 31,
                                             --------------------   JUNE 30,
                                               1994       1995        1996
                                             --------  ----------  -----------
                                                                   (UNAUDITED)
   <S>                                       <C>       <C>         <C>
   Network equipment........................ $    --   $  849,062  $5,237,817
   Furniture and equipment..................   55,625     161,071     417,701
   Billing system software..................      --          --      153,398
   Leasehold improvements...................   68,302      88,457     174,182
                                             --------  ----------  ----------
                                              123,927   1,098,590   5,983,098
   Less: Accumulated depreciation and amor-
    tization................................   (7,008)   (149,714)   (412,868)
                                             --------  ----------  ----------
                                             $116,919  $  948,876  $5,570,230
                                             ========  ==========  ==========
</TABLE>

 
  Equipment under capital leases totaled $578,382 and $746,685 (unaudited)
with accumulated depreciation of $75,501 and $130,956 (unaudited) at December
31, 1995 and June 30, 1996, respectively.
 
4. LONG-TERM OBLIGATIONS
 
  Long-term obligations consist of the following:
 

<TABLE>
<CAPTION>
                                                DECEMBER 31,
                                             -------------------    JUNE 30,
                                               1994      1995         1996
                                             --------  ---------  ------------
                                                                  (UNAUDITED)
   <S>                                       <C>       <C>        <C>
   Obligations under capital leases........  $ 12,882  $ 527,670  $    643,682
   Equipment financing.....................       --         --      2,362,500
   Note payable--related party.............       --         --      2,000,000
   Notes payable relating to Axicorp acqui-
    sition.................................       --         --      8,378,761
   Settlement obligation...................       --         --      3,543,750
                                             --------  ---------  ------------
     Subtotal..............................    12,882    527,670    16,928,693
   Less: Current portion of long-term obli-
    gations................................   (12,882)  (101,804)  (10,626,541)
                                             --------  ---------  ------------
                                             $    --   $ 425,866  $  6,302,152
                                             ========  =========  ============
</TABLE>

 
    At June 30, 1996, the following describes the components of long-term
obligations (unaudited):
     
    Equipment financing represents the purchase of network switching
  equipment for use in its Australian network financed by the vendor.
  Beginning in January 1997, 16 monthly payments of approximately $100,000
  are due to the vendor. In addition, a payment of approximately $788,000
  plus accrued interest is due in May 1998. Interest will accrue at the
  Corporate Overdraft Reference Rate plus 1%. At June 30, 1996, the Corporate
  Overdraft Reference Rate was 10.75%. The debt is secured by all of the
  assets of the Company's Australian subsidiary.     
     
    In connection with an investment agreement, in February 1996 the Company
  issued a $2,000,000 note payable to Teleglobe, due February 9, 1998 which
  bears interest at 6.9% per annum payable quarterly. The debt is secured by
  all the assets of the Company.     
     
    In connection with the acquisition of Axicorp on March 1, 1996, the
  Company issued two notes to the sellers for a total of $8.4 million which
  have been recorded on a discounted basis at a rate of 10.18% (see Note 12).
         
    In addition, in conjunction with the Axicorp acquisition, the Company
  accrued approximately $3.5 million to settle a pre-acquisition contingency
  between Axicorp and one of its competitors. This amount is expected to be
  paid during the next year.     
 
                                      F-9

<PAGE>
 
        PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
5. INCOME TAXES
 
  The tax expense (deferred) recorded for the six-month period ended June 30,
1996 results from foreign taxes on earnings at the Company's Australian
subsidiary.
 
  The differences between the tax provision (benefit) calculated at the
statutory federal income tax rate and the actual tax provision (benefit) for
each period is shown in the table below.
 

<TABLE>
<CAPTION>
                                   PERIOD ENDED          SIX MONTHS ENDED
                                   DECEMBER 31,              JUNE 30,
                               ----------------------  ----------------------
                                  1994        1995        1995        1996
                               ----------  ----------  ----------  ----------
                                                            (UNAUDITED)
<S>                            <C>         <C>         <C>         <C>
Tax benefit at federal statu-
 tory rate.................... $ (196,275) $ (824,581) $ (268,967) $ (941,801)
State income tax, net of fed-
 eral benefit.................    (22,860)    (91,069)    (30,852)   (108,030)
Foreign taxes.................        --          --          --      462,423
Unrecognized benefit of net
 operating loss...............    218,659     911,036     297,566   1,040,502
Other.........................        476       4,614       2,253       9,329
                               ----------  ----------  ----------  ----------
Income taxes.................. $      --   $      --   $      --   $  462,423
                               ==========  ==========  ==========  ==========
</TABLE>

 
 
  The significant components of the Company's deferred tax asset and liability
are as follows:
 

<TABLE>
<CAPTION>
                                              DECEMBER 31,
                                          ----------------------   JUNE 30,
                                            1994        1995         1996
                                          ---------  -----------  -----------
                                                                  (UNAUDITED)
   <S>                                    <C>        <C>          <C>
   Deferred tax asset (non-current):
     Cash to accrual basis adjustments
      (U.S.)............................. $  93,012  $   366,783  $       --
     Accrued expenses....................       --           --       824,006
     Net operating loss carryforward.....   126,435      720,452    5,370,862
     Valuation allowance.................  (219,447)  (1,087,235)  (1,983,060)
                                          ---------  -----------  -----------
                                          $     --   $       --   $ 4,211,808
                                          =========  ===========  ===========
   Deferred tax liability (current):
     Accrued income...................... $     --   $       --   $ 4,158,040
     Cash to accrual basis adjustments
      (U.S.).............................       --           --       454,677
     Depreciation........................       --           --       124,581
                                          ---------  -----------  -----------
                                          $     --   $       --   $ 4,737,298
                                          =========  ===========  ===========
</TABLE>

 
  At December 31, 1995, the Company had a U.S. Federal net operating loss
carryforward of approximately $2,000,000, ($6,000,000 (unaudited) at June 30,
1996) that may be applied against future U.S. taxable income until it expires
between the years 2009 and 2010. The Company also has an Australian Federal
net operating loss carryforward of approximately $8.5 million (unaudited) at
June 30, 1996.
 
  Due to the "ownership change" of the Company in early 1996, pursuant to
Section 382 of the Internal Revenue Code, the utilization of the net operating
loss carryforward will be limited to approximately $1.3 million per year
during the carryforward period. A further "ownership change" resulting from
the Company's planned initial public offering (see Note 13) could cause
further limitations.
 
                                     F-10

<PAGE>
 
        PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
 
  The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
 
    Cash and Cash Equivalents--The carrying amount reported in the balance
  sheets for cash and cash equivalents approximates fair value.
 
    Accounts Receivable and Accounts Payable--The carrying amounts reported
  in the balance sheets for accounts receivable and accounts payable
  approximate fair value.
 
    Guarantee Required Under Telecommunications Agreement--The carrying
  amount reported in the balance sheets for the deposit held in the form of a
  certificate of deposit (see Note 7) approximates fair value plus accrued
  interest.
 
7. COMMITMENTS AND CONTINGENCIES
 
  The Company has entered into an employment contract with its Chairman and
Chief Executive Officer through May 30, 1999. Minimum payments over the
remaining period approximate $632,000 as of December 31, 1995 and $540,000
(unaudited) as of June 30, 1996.
 
  Future minimum lease payments under capital lease obligations and operating
leases as of December 31, 1995, are as follows:
 

<TABLE>
<CAPTION>
                                                            CAPITAL   OPERATING
                  YEAR ENDING DECEMBER 31,                  LEASES     LEASES
                  ------------------------                 ---------  ---------
   <S>                                                     <C>        <C>
   1996................................................... $ 158,113  $ 246,089
   1997...................................................   158,113    124,121
   1998...................................................   158,113        --
   1999...................................................   158,113        --
   2000...................................................    39,533        --
                                                           ---------  ---------
   Total minimum lease payments...........................   671,985  $ 370,210
                                                                      =========
   Less: Amount representing interest.....................  (144,315)
                                                           ---------
                                                           $ 527,670
                                                           =========
</TABLE>

 
  Rent expense under operating leases was $37,709, $214,508, $72,111
(unaudited) and $223,347 (unaudited) for the periods ended December 31, 1994,
December 31, 1995, June 30, 1995, and June 30, 1996, respectively.
 
  The Company began sending outbound traffic to India during 1995 and, in
connection with its international telecommunication services agreement with
Videsh Sanchar Nigan Limited of India, was required to provide a bank
guarantee of $400,000 in the form of a certificate of deposit that is included
in Other Assets at December 31, 1995.
 
8. STOCKHOLDERS' EQUITY
   
  The Company was incorporated in February 1994 through the issuance of
178,574 shares of common stock issued to the founder of the Company.     
   
  In January 1995, the Company established an Employee Stock Option Plan (the
"Employee Plan"). The total number of shares of common stock authorized to be
issued under the Employee Plan was 845,250. Under the Employee Plan, awards
may be granted to key employees of the Company and its subsidiaries in the
form of Incentive Stock Options or Nonqualified Stock Options. The Employee
Plan allows the granting of options at an     
 
                                     F-11

<PAGE>
 
        PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
   
exercise price of no less than 100% (110% in the case of Incentive Stock
Options granted to employees holding more than ten percent of the voting stock
of the Company at the date of grant) of the stock's fair value at the date of
grant. The options vest over a period of up to three years, and no option will
be exercisable more than ten years from the date it is granted. There were
326,097 shares of common stock that remain eligible for future issuance under
the Employee Plan at December 31, 1995. Subsequent to year end, an additional
845,250 shares of common stock were authorized to be issued under the Employee
Plan.     
   
  Effective March 13, 1995, the Company's Amended and Restated Certificate of
Incorporation (the "Certificate") was amended to increase the number of
authorized shares of the Company's common stock from 1,000,000 shares to
5,000,000 shares and to split each share of common stock outstanding on March
13, 1995, into 2.1126709 shares of common stock. The Company also intends to
split all common shares at a ratio of 3.381 to one as of the effective date of
its planned initial public offering (see Note 14). All share amounts have been
restated to give effect to the stock splits.     
   
  In December 1995, $358,500 was committed to the Company in exchange for
121,209 shares of the Company's common stock in conjunction with a private
placement. The shares were sold in December 1995 and the physical certificates
were issued in January 1996. This amount, net of transaction costs, is
recorded in Prepaid Expenses and Other Current Assets at December 31, 1995.
       
  During 1995, the Board of Directors authorized the Director Stock Option
Plan (the "Director Plan") for nonemployee directors. Under the Director Plan,
an option is automatically granted to each nonemployee director to purchase
50,715 shares of common stock, which vests over a two-year period. The option
price per share is the fair market value of a share of common stock on the
date the option is granted. No option will be exercisable more than ten years
from the date of grant. An aggregate of 338,100 shares of common stock were
reserved for issuance under the Director Plan.     
 
  A summary of stock option activity during the year ended December 31, 1995,
and the six months ended June 30, 1996, is as follows:
 

<TABLE>   
<CAPTION>
                                        EMPLOYEE PLAN         DIRECTOR PLAN
                                    --------------------- ---------------------
                                    NUMBER OF  EXERCISE   NUMBER OF  EXERCISE
                                     SHARES   PRICE RANGE  SHARES   PRICE RANGE
                                    --------- ----------- --------- -----------
<S>                                 <C>       <C>         <C>       <C>
Outstanding, January 1, 1995......        --  $      --        --      $ --
Granted during 1995...............    519,153  0.67-2.96   202,860      2.96
                                    --------- ----------   -------     -----
Outstanding, December 31, 1995....    519,153  0.67-2.96   202,860      2.96
Granted during the six-months
 ended June 30, 1996 (unaudited)..    913,546  2.96-3.55       --        --
                                    --------- ----------   -------     -----
Outstanding, June 30, 1996
 (unaudited)......................  1,432,699 $0.67-3.55   202,860     $2.96
                                    ========= ==========   =======     =====
Exercisable options at December
 31, 1995.........................    152,145 $     2.96    67,620     $2.96
                                    ========= ==========   =======     =====
Exercisable options at June 30,
 1996 (unaudited).................    185,955 $0.67-2.96    67,620     $2.96
                                    ========= ==========   =======     =====
</TABLE>
    
   
  No shares have been exercised as of December 31, 1995.     
 
9. EMPLOYEE BENEFIT PLAN
 
  The Company has a 401(k) employee benefit plan (the "401(k) Plan") that
covers substantially all employees. The 401(k) Plan provides that employees
may contribute amounts not to exceed statutory limitations. No employer
contributions were made during 1995 or for the six months ended June 30, 1996
(unaudited).
 
                                     F-12

<PAGE>
 
        PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
10. RELATED PARTIES
   
  In connection with capital raised by the Company, a former director of the
Company received 71,430 shares of common stock during 1994 for services
rendered. During 1995, the former director received commissions of 110,944
shares of common stock and was paid $541,921 in connection with the Company's
first private placement. Commissions due to the former director under the
first private placement equal $40,510 at December 31, 1995. Consulting fees
earned under this placement equal to $169,000 are due to the former director,
of which $145,000 was owed at December 31, 1995. During early 1996, the same
director received 82,774 shares of common stock and fees equal to $424,543
which relate to the second private placement (see Note 12). Consulting fees
earned in connection with this second placement equal $157,160. The stock and
cash commissions and consulting fees relate to services provided in
conjunction with the private placements and, as such, have been netted against
the proceeds of the respective placements.     
   
  Debt owed to the Company's Chairman and Chief Executive Officer of $330,850
at December 31, 1994 was converted into 555,559 shares of the Company's common
stock at $0.63 per share in March 1995, for a balance due at the time of
conversion of $350,000.     
 
  At December 31, 1994 and 1995, deferred salary owed to the Company's
Chairman and Chief Executive Officer was $112,598 and $201,341, respectively.
 
  Deferred salary of $40,000 owed to an officer of the Company for services
performed during 1995 were accrued at December 31, 1995. This balance was paid
in early 1996.
 
  During 1995, the Company purchased consulting services and certain computer
network equipment from a firm whose president is a brother of the Company's
Chairman and Chief Executive Officer for approximately $40,000.
 
11. VALUATION AND QUALIFYING ACCOUNTS
 
  Activity in the Company's allowance for doubtful accounts for the year ended
December 31, 1995 was as follows:
 

<TABLE>
<CAPTION>
          BALANCE AT              CHARGED TO                         BALANCE AT
      BEGINNING OF PERIOD     COSTS AND EXPENSES     DEDUCTIONS     END OF PERIOD
      -------------------     ------------------     ----------     -------------
      <S>                     <C>                    <C>            <C>
             $ --                  $132,353            $ --           $132,353
</TABLE>

 
12. SUBSEQUENT EVENTS
   
  Capital Stock--In February 1996, the Company's Certificate was amended to
authorize 2,455,000 shares of Preferred Stock (nonvoting) with a par value of
$0.01 per share and to increase the number of shares of Common Stock
authorized to 35,348,355 shares with a par value of $0.01 per share. On March
1, 1996, 455,000 shares of Series A Convertible Preferred Stock were issued in
connection with the purchase of Axicorp; and are convertible into common
shares at the option of the Company and under certain defined events.     
   
  Private Placement--In early 1996, the Company raised approximately
$4,700,000, net of transaction costs, in a private placement. This placement
included the sale of 1,771,194 shares of common stock to numerous investors.
The Company also issued 278,899 shares of common stock for services rendered
in conjunction with this offering.     
   
  Investment Agreement--In January 1996, the Company entered into an agreement
with Teleglobe, sold 410,808 shares of Common Stock for approximately
$1,400,000 and borrowed $2,000,000 (see Note 4).     
 
                                     F-13

<PAGE>
 
        PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
   
  Acquisition of Axicorp--On March 1, 1996, the Company completed the
acquisition of the outstanding capital stock of Axicorp, the fourth largest
telecommunications carrier in Australia. The purchase price consisted of cash,
Company stock, and seller financing. The Company paid $5.7 million cash,
including transaction costs, and issued 455,000 shares of its Series A
Convertible Preferred Stock. The Company also issued two notes to the sellers.
One note is for $4.1 million payable to Fujitsu Australia Limited which is due
in February 1997, and the other note is for a total of $4.0 million payable to
the individual shareholder sellers, which are due in two equal installments in
February 1997, and February 1998. These notes have been recorded at their
discounted value at the date of acquisition at an interest rate of 10.18%. The
portion of the shareholder note due in February 1997 can be extended for an
additional year at the Company's option. If the option is exercised the note
will accrue interest at the prime rate plus 1%.     
   
  The sellers are holding as security approximately 27% of their shares in
Axicorp under a share mortgage for the unpaid notes. These shares will be
delivered to the Company when the notes are paid in full. In turn, the Company
is holding 248,334 shares of the Series A Convertible Preferred Stock issued
to the sellers as collateral for the Axicorp shares withheld. These shares
will be released to the sellers once the remaining Axicorp shares are
received.     
 
  For accounting purposes, the Company has treated the acquisition as a
purchase. Accordingly, the results of Axicorp's operations are included in the
consolidated results of operations of the Company beginning March 1, 1996.
 
  Pro forma operating results for the year ended December 31, 1995, and the
six months ended June 30, 1996, as if Axicorp had been acquired as of January
1, 1995, are as follows (unaudited):
 

<TABLE>     
<CAPTION>
                                                     YEAR ENDED     SIX MONTHS
                                                    DECEMBER 31,  ENDED JUNE 30,
                                                        1995           1996
                                                    ------------  --------------
   <S>                                              <C>           <C>
   Net revenue..................................... $125,628,000   $ 91,783,000
   Net loss........................................ $ (4,685,000)  $ (3,299,000)
   Loss per share.................................. $       (.35)  $       (.23)
</TABLE>
    
 
  The pro forma financial information is presented for informational purposes
only and is not necessarily indicative of the operating results that would
have occurred had the acquisition been consummated as of the above dates, nor
are they necessarily indicative of future operations.
 
  The following summarizes the allocation of the purchase price to the major
categories of assets acquired and liabilities assumed:
 

<TABLE>
   <S>                                                             <C>
   Current assets................................................. $ 20,136,000
   Customer lists.................................................    4,574,000
   Goodwill.......................................................   17,932,000
   Other assets...................................................    1,506,000
                                                                   ------------
                                                                     44,148,000
   Liabilities assumed............................................  (24,863,000)
   Notes payable..................................................   (8,110,000)
                                                                   ------------
   Cash paid and preferred shares issued.......................... $ 11,175,000
                                                                   ============
</TABLE>

 
                                     F-14

<PAGE>
 
        PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
13. SUBSEQUENT EVENTS--OTHER
   
  Capital Stock--On July 24, 1996 the Company amended the Certificate to
increase the authorized Common Stock to 40,000,000 shares.     
   
  Private Equity Placement--On July 31, 1996 four affiliated institutional
investors purchased 965,999 shares of the Company's common stock for $8
million, and for an additional $8 million received warrants to purchase an
additional $10 million of common stock (measured on the basis of fair market
value of the common stock on the date of exercise) and up to another 627,899
shares of Common Stock.     
   
14. COMMON STOCK SPLIT AND CONVERSION OF PREFERRED STOCK     
   
  In connection with the Company's planned initial public offering, the
Company intends to split all shares of Common Stock at a ratio of 3.381 to one
as of the effective date of the Registration Statement. All share amounts have
been restated to give effect to this contemplated stock split. Additionally,
the Company intends to convert all outstanding shares of Preferred Stock into
shares of Common Stock on a 3.381 to one basis on the effective date of the
Registration Statement.     
 
                                     F-15

<PAGE>
 
 
                      REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Board of Directors and
Stockholders of Axicorp Pty., Ltd.
 
  In our opinion, the accompanying balance sheets and the related statements
of operations, of cash flows and of stockholders' equity present fairly, in
all material respects, the financial position of Axicorp Pty., Ltd. at
March 31, 1995 and 1996, and the results of its operations and its cash flows
for the period from July 1, 1994 to March 31, 1995 and for the year ended
March 31, 1996, all expressed in United States Dollars, in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
 
 
PRICE WATERHOUSE
Melbourne, Australia
July 31, 1996

 
                                     F-16

<PAGE>
 
                               AXICORP PTY., LTD.
 
                                 BALANCE SHEETS
                   (IN US DOLLARS, EXCEPT SHARE INFORMATION)
 

<TABLE>   
<CAPTION>
                                                              MARCH 31,
                                                       ------------------------
                                                          1995         1996
                                                       -----------  -----------
<S>                                                    <C>          <C>
                        ASSETS
Current assets:
  Cash and cash equivalents........................... $ 1,435,723  $ 3,218,079
  Accounts receivable--trade, net of allowances of
   $1,171 and $377,699, respectively..................   7,893,146   23,715,321
  Other current assets................................     299,126      300,928
                                                       -----------  -----------
    Total current assets..............................   9,627,995   27,234,328
Plant, equipment and computer software, net...........     365,532      844,337
Deferred tax assets...................................     320,774    2,997,919
Other non-current assets..............................       7,275        7,785
                                                       -----------  -----------
    Total assets...................................... $10,321,576  $31,084,369
                                                       ===========  ===========
         LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable--trade creditors................... $ 8,633,069  $23,616,272
  Accrued expenses and other liabilities..............     677,156    1,229,173
  Deferred tax liabilities............................     324,380    3,517,062
  Note payable to related party.......................     261,879    1,677,668
                                                       -----------  -----------
    Total current liabilities.........................   9,896,484   30,040,175
                                                       -----------  -----------
    Total liabilities.................................   9,896,484   30,040,175
                                                       -----------  -----------
Commitments and Contingencies (Note 7)
Stockholders' equity:
  Ordinary Shares, AUS$1 par value; 10,000,000 shares
   authorized; 590,000 shares issued and outstanding
   at March 31,1995, and
   March 31, 1996.....................................     427,514      427,514
  Special Cumulative Redeemable Preference Shares,
   AUS$1 par value; 100,000 shares authorized; 1,180
   shares issued at March 31, 1995 and March 31,
   1996...............................................         --           855
Retained (loss) earnings..............................      (5,931)     560,751
Cumulative translation adjustment.....................       3,509       55,074
                                                       -----------  -----------
    Total stockholders' equity........................     425,092    1,044,194
                                                       -----------  -----------
    Total liabilities and stockholders' equity........ $10,321,576  $31,084,369
                                                       ===========  ===========
</TABLE>
    
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-17

<PAGE>
 
                               AXICORP PTY., LTD.
 
                            STATEMENTS OF OPERATIONS
                                (IN US DOLLARS)
 

<TABLE>
<CAPTION>
                                                       NINE MONTHS TWELVE MONTHS
                                                          ENDED        ENDED
                                                        MARCH 31,    MARCH 31,
                                                          1995         1996
                                                       ----------- -------------
<S>                                                    <C>         <C>
Net Revenue........................................... $44,796,839 $144,344,739
Cost of Revenue.......................................  40,404,651  131,712,076
                                                       ----------- ------------
Gross Margin..........................................   4,392,188   12,632,663
                                                       ----------- ------------
Operating Expenses
  Selling, General and Administrative.................   4,276,902   11,558,216
  Depreciation and Amortization.......................      42,955      234,610
                                                       ----------- ------------
Total Operating Expenses..............................   4,319,857   11,792,826
                                                       ----------- ------------
Income from Operations................................      72,331      839,837
Interest Income.......................................      29,654      219,300
                                                       ----------- ------------
Income before Income Taxes............................     101,985    1,059,137
Income Tax Provision..................................       3,753      492,455
                                                       ----------- ------------
Net Income............................................ $    98,232 $    566,682
                                                       =========== ============
</TABLE>

 
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-18

<PAGE>
 
                               AXICORP PTY,. LTD.
 
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                   (IN US DOLLARS, EXCEPT SHARE INFORMATION)
 

<TABLE>
<CAPTION>
                                           REDEEMABLE   SUBSCRIPTION
                         ORDINARY SHARES   PREFERENCE    RECEIVABLE  RETAINED   CUMULATIVE      TOTAL
                         ---------------- SHARE CAPITAL     FROM     EARNINGS   TRANSLATION STOCKHOLDERS'
                         SHARES   AMOUNT     AMOUNT     STOCKHOLDERS (DEFICIT)  ADJUSTMENT     EQUITY
                         ------- -------- ------------- ------------ ---------  ----------- -------------
<S>                      <C>     <C>      <C>           <C>          <C>        <C>         <C>
BALANCE AT JULY 1,
 1994................... 590,000 $427,514     $ --         $ --      $(104,163)   $   --     $  323,351
Issuance of Shares......     --       --        855         (855)          --         --            --
Foreign currency
 translation
 adjustment.............     --       --        --           --            --       3,509         3,509
Net income..............     --       --        --           --         98,232        --         98,232
                         ------- --------     -----        -----     ---------    -------    ----------
BALANCE AT MARCH 31,
 1995................... 590,000  427,514       855         (855)       (5,931)     3,509       425,092
Issuance of shares......     --       --        --           855           --         --            855
Foreign currency
 translation
 adjustment.............     --       --        --           --            --      51,565        51,565
Net income..............     --       --        --           --        566,682        --        566,682
                         ------- --------     -----        -----     ---------    -------    ----------
BALANCE AT MARCH 31,
 1996................... 590,000 $427,514     $ 855        $ --      $ 560,751    $55,074    $1,044,194
                         ======= ========     =====        =====     =========    =======    ==========
</TABLE>

 
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-19

<PAGE>
 
                               AXICORP PTY., LTD.
 
                            STATEMENTS OF CASH FLOWS
                                (IN US DOLLARS)
 

<TABLE>
<CAPTION>
                                                      NINE MONTHS  TWELVE MONTHS
                                                         ENDED         ENDED
                                                       MARCH 31,     MARCH 31,
                                                         1995          1996
                                                      -----------  -------------
<S>                                                   <C>          <C>
Cash flows from operating activities:
  Net income......................................... $   98,232    $   566,682
  Adjustments to reconcile net income to net cash
   provided by operating activities:
  Depreciation.......................................     42,955        234,610
  Allowance for bad and doubtful accounts............      1,201        359,569
  Deferred tax expense...............................      3,729        492,746
  Changes in assets and liabilities:
    Accounts receivable.............................. (7,688,030)   (15,822,175)
    Other current assets.............................    (99,137)        36,895
    Accounts payable.................................  9,066,970     14,983,203
                                                      ----------    -----------
  Net cash provided by operating activities..........  1,425,920        851,530
                                                      ----------    -----------
Cash flows from investing activities:
  Purchase of plant, equipment and software..........   (342,030)      (667,526)
  Purchase of investments............................   (161,325)           --
  Proceeds from investments..........................        --         150,355
                                                      ----------    -----------
  Net cash used in investing activities..............   (503,355)      (517,171)
                                                      ----------    -----------
Cash flows from financing activities:
  Proceeds from issuance of shares...................     22,374            877
  Proceeds from notes payable--due to related party..    268,429      1,637,800
  Payments on short-term debt--due to related party..        --        (267,637)
                                                      ----------    -----------
  Net cash provided by financing activities..........    290,803      1,371,040
                                                      ----------    -----------
Effect of exchange rate changes on cash..............    (26,687)        76,957
Increase in cash.....................................  1,213,368      1,705,399
  Cash at the beginning of the period................    249,042      1,435,723
                                                      ----------    -----------
Cash at the end of the period........................ $1,435,723    $ 3,218,079
                                                      ==========    ===========
Supplemental disclosures:
  Cash paid for interest............................. $    2,008    $       --
  Cash paid for income taxes.........................        --         139,726
</TABLE>

 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-20

<PAGE>
 
      
                              AXICORP PTY., LTD.
 

                         NOTES TO FINANCIAL STATEMENTS
 
NOTE 1--THE COMPANY
 

 The Company
 
  Axicorp Pty., Ltd. ("Axicorp") was incorporated in Victoria, Australia in
1993. Axicorp's principal line of business is the provision of
telecommunication services.
 
  On March 1, 1996 Primus Telecommunications International, Inc. ("PTII"), a
wholly owned subsidiary of Primus Telecommunications Group Incorporated
("Primus"), a United States based long-distance telephone company, acquired
beneficial ownership of all of the outstanding capital stock in Axicorp in
issue at that date.
 
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
 
 Basis of Presentation
 
  These financial statements have been prepared in accordance with generally
accepted accounting principles in the United States.
 
 Revenue recognition
 
  Axicorp's revenues are derived primarily from long-distance, mobile, local
and data telecommunication charges and are recognized when such services are
provided. Axicorp also derives revenue from sale of mobile equipment and sale
of valued added services. Revenue from such services are recognized when
delivered and provided.
 
 Cost of revenue
 
  Cost of revenue comprises telecommunications network usage charges and other
direct costs incurred in providing telecommunication services to customers,
and are recognized as services are provided.
 
 Use of estimates
 
  The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
 
 Plant, Equipment and Computer Software
 
  Plant, equipment and computer software are stated at cost less accumulated
depreciation and amortization. Depreciation and amortization is computed using
the straight line basis over the estimated useful lives of the assets.
 
  Axicorp has capitalized external software costs in relation to the
development of certain computer software, including a billing system, used by
Axicorp in its operations. As of March 31, 1995 and 1996 the accumulated
amortization for computer software is $20,145 and $137,404, respectively.
 
  Plant, equipment and computer software classes and their respective useful
lives are as follows:
 

<TABLE>
<CAPTION>
                                                                          YEARS
                                                                          ------
      <S>                                                                 <C>
      . Computer equipment...............................................   3
      . Furniture, leasehold improvements and equipment.................. 5 to 7
      . Computer software................................................ 2 to 3
</TABLE>

 
 
 The accompanying notes are an integral part of these statements. 

                                     F-21

<PAGE>
 
                              AXICORP PTY., LTD.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
 
Foreign currency translation
 
  To date, Axicorp has conducted most of its business in Australian dollars.
The financial statements have been presented herein in U.S. dollars because
Primus's reporting currency is the U.S. dollar. All assets and liabilities are
translated into the U.S. dollar at the rate effective at the reporting date
and elements of the income statement are translated at average exchange rates
for the period. Translation differences are included in the foreign currency
translation adjustment (a component of stockholders' equity).
 
 Income Taxes
 
  Income taxes are computed using the asset and liability method. Under the
asset and liability method, deferred tax assets and liabilities are determined
based on the differences between the financial reporting and tax bases of
assets and liabilities and are measured using the currently enacted tax rates
and laws.
 
 Concentration of credit risk
 
  Financial instruments that potentially subject Axicorp to credit risk
consist principally of trade receivables from its customers in Australia.
Axicorp generally requires no collateral from its customers. However, Axicorp
maintains an allowance for bad and doubtful accounts receivable based on the
expected collectibility of all accounts receivable. At March 31, 1995 and 1996
no customer accounted for more than 10% of accounts receivable.
 
 Accounting for impairment of long-lived assets
 
  In March 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of." SFAS 121 requires impairment losses to be recorded for
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the asset's carrying amount. SFAS 121 also addresses the accounting
for impairment losses associated with long-lived assets to be disposed of.
Axicorp adopted SFAS 121 in the first quarter of fiscal 1996. Adoption of SFAS
121 did not have a material impact on Axicorp's results of operations.
 
 Dividends
 
  Any dividend payments made by Axicorp would, under Australian Corporation
Law, be limited to Axicorp's retained earnings, which aggregated $560,751 at
March 31, 1996.
 
 Cash Equivalents
 
  Axicorp considers all liquid investments with a maturity of three months or
less to be cash equivalents.
 
NOTE 3--PLANT, EQUIPMENT AND COMPUTER SOFTWARE
 

<TABLE>
<CAPTION>
                                                           MARCH 31,  MARCH 31,
                                                             1995       1996
                                                           ---------  ---------
   <S>                                                     <C>        <C>
   Plant, equipment and computer software:
     Computer software.................................... $157,028   $ 479,414
     Computer hardware....................................  143,372     429,057
     Furniture, leasehold improvement and equipment.......  112,224     232,929
                                                           --------   ---------
                                                            412,624   1,141,400
   Less: accumulated depreciation and amortization........  (47,092)   (297,063)
                                                           --------   ---------
   Net plant and equipment................................ $365,532   $ 844,337
                                                           ========   =========
</TABLE>

 
       The accompanying notes are an integral part of these statements. 

                                     F-22

<PAGE>
 
                              AXICORP PTY., LTD.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 4--INCOME TAXES
 
  The provision for income taxes is attributable to:
 

<TABLE>
<CAPTION>
                                                       NINE MONTHS TWELVE MONTHS
                                                          ENDED        ENDED
                                                        MARCH 31,    MARCH 31,
                                                          1995         1996
                                                       ----------- -------------
   <S>                                                 <C>         <C>
   Current............................................   $  --       $    --
   Deferred...........................................    3,753       492,455
                                                         ------      --------
                                                         $3,753      $492,455
                                                         ======      ========
</TABLE>

 
  The provision for income taxes differs from the amount computed by applying
the Australian statutory federal income tax rate to income before provision
for income taxes. The sources and tax effect of the differences are as
follows:
 

<TABLE>
<CAPTION>
                                                      NINE MONTHS TWELVE MONTHS
                                                         ENDED        ENDED
                                                       MARCH 31,    MARCH 31,
                                                         1995         1996
                                                      ----------- -------------
   <S>                                                <C>         <C>
   Income tax at the Australian federal statutory
    rate of 36%
    (1995--33%)......................................   $33,655     $381,289
   Nondeductible expenses............................       --        86,764
   Other.............................................   (29,902)      24,402
                                                        -------     --------
                                                        $ 3,753     $492,455
                                                        =======     ========
</TABLE>

 
  Net deferred tax liabilities and assets reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes.
Significant components of Axicorp's deferred tax liabilities and assets are as
follows:
 

<TABLE>
<CAPTION>
                                                         MARCH 31,  MARCH 31,
                                                           1995        1996
                                                         ---------  ----------
   <S>                                                   <C>        <C>
   Deferred tax liabilities:
     Accrued income..................................... $541,325   $4,234,068
     Capitalized software...............................   41,321      171,305
                                                         --------   ----------
     Total deferred tax liabilities.....................  582,646    4,405,373
                                                         --------   ----------
   Deferred tax assets:
     Plant and equipment................................      --        47,570
     Accrued employee entitlement.......................   20,520       59,797
     Other accruals.....................................  196,425      657,920
     Net tax loss carry forward.........................  362,095    3,120,943
                                                         --------   ----------
     Total deferred tax assets..........................  579,040    3,886,230
                                                         --------   ----------
   Net deferred tax liabilities......................... $ (3,606)  $ (519,143)
                                                         ========   ==========
</TABLE>

 
  Axicorp's carry forward tax losses of $8,669,286 are available to be offset
against future taxable income, without limitation, provided Axicorp continues
to maintain the same business in the year of loss recoupment which it carried
on prior to its acquisition by PTII. The losses arise principally because of
the treatment for
 
       The accompanying notes are an integral part of these statements. 

                                     F-23

<PAGE>
 
                              AXICORP PTY., LTD.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
taxation purposes of amounts recorded as income receivable at year end which
are not taxable until their receipt in the following year of income.
Management believes that, based on the evidence of the performance of Axicorp
and other factors, the weight of available evidence indicates that it is more
likely than not that Axicorp will be able to utilize the carry forward tax
loss.
 
NOTE 5--RELATED PARTY TRANSACTIONS
 
  During the period April 1, 1994 to March 31, 1995 and the twelve months
ended March 31, 1996 Axicorp paid management fees of $616,000 and $426,000,
respectively, to a company owned primarily by officers and directors of
Axicorp. At March 31, 1995, Axicorp owed management fees of $238,000.
 
  At March 31, 1995 and 1996 Axicorp owed related parties $262,000 and
$1,678,000 respectively. The balance at March 31, 1996 is an unsecured loan,
interest at the prime rate of 12% and is repayable on demand.
 
NOTE 6--EMPLOYEE BENEFIT PLAN
 
  Axicorp is currently required by law to contribute 6% of each employee's
salary to a pension fund for the employee's retirement. Axicorp's contribution
to the pension fund aggregated approximately $44,000 and $157,000 during the
period July 1, 1994 to March 31, 1995 and the twelve months ended March 31,
1996, respectively.
 
NOTE 7--COMMITMENTS AND CONTINGENCIES
 
 Leases
 
  Axicorp leases its office facility and certain equipment under cancellable
lease arrangements. The cancellable office facility lease expires in 1997.
 
  Rental expense under all leases totalled $88,000 for the period from July 1,
1994 to March 31, 1995 and $238,000 during the twelve months ended March 31,
1996.
 
NOTE 8--SALES BY GEOGRAPHIC AREA
 
  Substantially all of the sales of Axicorp have been to customers in
Australia.
 
       The accompanying notes are an integral part of these statements. 

                                     F-24

<PAGE>
 
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
   
 NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE U.S. UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICI-
TATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.     
                               -----------------
 
                              TABLE OF CONTENTS
 

<TABLE>   
<CAPTION>
                                                                          Page
                                                                          ----
<S>                                                                       <C>
Additional Information...................................................   3
Summary..................................................................   4
Risk Factors.............................................................   9
Use of Proceeds..........................................................  18
Dilution.................................................................  19
Dividend Policy..........................................................  19
Capitalization...........................................................  20
Selected Financial Data..................................................  21
Unaudited Pro Forma Consolidated Statements of Operations................  22
Management's Discussion and Analysis of Financial Condition and Results
 of Operations...........................................................  26
Business.................................................................  36
Management...............................................................  57
Certain Transactions.....................................................  64
Principal Stockholders...................................................  66
Description of Capital Stock.............................................  68
Shares Eligible for Future Sale..........................................  72
Certain United States Federal Income Tax Consequences to Non-United
 States Holders..........................................................  73
Underwriting.............................................................  76
Legal Matters............................................................  79
Experts..................................................................  79
Index to Financial Statements............................................ F-1
</TABLE>
    
                               -----------------
   
 UNTIL    , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS U.S. UNDER-
WRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.     
 
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
                                
                             6,000,000 SHARES     
                               
                            [INSERT MAC LOGO]     
 
                                 COMMON STOCK
 
 
                               -----------------
 
                                  PROSPECTUS
                                      , 1996
 
                               -----------------
 
 
                                LEHMAN BROTHERS
 
                         DONALDSON, LUFKIN & JENRETTE
                            SECURITIES CORPORATION
 
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

<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.                                                               +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
            
         [ALTERNATIVE FRONT COVER PAGE FOR INTERNATIONAL OFFERING]     
                  
               Subject to Completion, dated October 11, 1996     
 
PROSPECTUS
                                
                            6,000,000 SHARES     
   
                            [INSERT MAC LOGO]     
 
                              COMMON STOCK
 
                              -------------
   
  All of the shares of Common Stock, par value $0.01 per share (the "Common
Stock"), of Primus Telecommunications Group, Incorporated ("Primus" or the
"Company") offered hereby are being offered by the Company. Of the 6,000,000
shares of Common Stock being offered, 1,200,000 shares are being offered
initially outside the United States and Canada (the "International Offering")
by the International Managers (as defined in "Underwriting") and 4,800,000
shares are being concurrently offered in the United States and Canada (the
"U.S. Offering") by the U.S. Underwriters (as defined in "Underwriting" and,
together with the International Managers, the "Underwriters"). The
International Offering and the U.S. Offering are collectively referred to as
the "Offering."     
   
  Prior to this offering, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering
price for the Common Stock will be between $14.00 and $16.00 per share. See
"Underwriting" for a discussion of the factors considered in determining the
initial public offering price. Application has been made to have the Common
Stock approved for quotation on the Nasdaq National Market under the symbol
"PRTL."     
 
                                -------------
 
    THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
                    SEE "RISK FACTORS" BEGINNING ON PAGE 9.
 
                                 -------------
 
 THESE SECURITIES HAVE NOT BEEN APPROVED  OR DISAPPROVED BY THE SECURITIES AND
  EXCHANGE  COMMISSION  OR  ANY  STATE  SECURITIES  COMMISSION  NOR  HAS  THE
   SECURITIES  AND EXCHANGE  COMMISSION OR  ANY STATE SECURITIES  COMMISSION
    PASSED   UPON  THE  ACCURACY  OR  ADEQUACY  OF  THIS   PROSPECTUS.  ANY
      REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                       Underwriting
                                             Price to Discounts and  Proceeds to
                                              Public  Commissions(1) Company(2)
- --------------------------------------------------------------------------------
<S>                                          <C>      <C>            <C>
Per Share..................................    $           $            $
- --------------------------------------------------------------------------------
Total(3)...................................    $           $            $
</TABLE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) The Company has agreed to indemnify the Underwriters against certain
    liabilities, including liabilities under the Securities Act of 1933, as
    amended. See "Underwriting."
   
(2) Before deducting estimated expenses of $1,200,000 payable by the Company.
           
(3) The Company has granted the Underwriters a 30-day option to purchase up to
    900,000 additional shares of Common Stock on the same terms and conditions
    set forth herein, solely to cover over-allotments, if any. If such option
    is exercised in full, the total Price to Public, Underwriting Discounts and
    Commissions and Proceeds to Company will be $   , $    and $   ,
    respectively. See "Underwriting."     
 
                                 -------------
   
    The shares of Common Stock offered by this Prospectus are offered by the
International Managers subject to prior sale, withdrawal, cancellation or
modification of the offer without notice, to delivery to and acceptance by the
International Managers and to certain further conditions. It is expected that
delivery of certificates representing the shares of Common Stock will be made
at the offices of Lehman Brothers Inc., New York, New York on or about    ,
1996.     
 
                                 -------------
 
LEHMAN BROTHERS                                     DONALDSON, LUFKIN & JENRETTE
                                                       SECURITIES CORPORATION
 
            , 1996.

<PAGE>
 
            
         [ALTERNATIVE BACK COVER PAGE FOR INTERNATIONAL OFFERING]     
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
   
 NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE INTERNATIONAL MANAGERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICI-
TATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.     
 
                               -----------------
 
                               TABLE OF CONTENTS

<TABLE>   
<CAPTION>
                                                                          Page
                                                                          ----
<S>                                                                       <C>
Additional Information...................................................   3
Summary..................................................................   4
Risk Factors.............................................................   9
Use of Proceeds..........................................................  18
Dilution.................................................................  19
Dividend Policy..........................................................  19
Capitalization...........................................................  20
Selected Financial Data..................................................  21
Unaudited Pro Forma Consolidated Statements of Operations................  22
Management's Discussion and Analysis of Financial Condition and Results
 of Operations...........................................................  26
Business.................................................................  36
Management...............................................................  57
Certain Transactions.....................................................  64
Principal Stockholders...................................................  66
Description of Capital Stock.............................................  68
Shares Eligible for Future Sale..........................................  72
Certain United States Federal Tax Consequences to Non-United States
 Holders.................................................................  73
Underwriting.............................................................  76
Legal Matters............................................................  79
Experts..................................................................  79
Index to Financial Statements............................................ F-1
</TABLE>
    
 
                               -----------------
   
 UNTIL    , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS INTERNATIONAL
MANAGERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.     
 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
                                
                             6,000,000 SHARES     
                                
                             [INSERT MAC LOGO]     
 
                                  COMMON STOCK
 
 
                               -----------------
 
                                   PROSPECTUS
                                      , 1996
 
                               -----------------
 
 
                                LEHMAN BROTHERS
 
                          DONALDSON, LUFKIN & JENRETTE
                            SECURITIES CORPORATION
 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<PAGE>
 

                                    PART II
 
                    INFORMATION NOT REQUIRED IN PROSPECTUS
 

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
 
  The following table sets forth an itemization of all estimated expenses, all
of which will be paid by the Company, in connection with the issuance and
distribution of the securities being registered:
 

<TABLE>       
<CAPTION>
      NATURE OF EXPENSE                                                AMOUNT
      -----------------                                              ----------
      <S>                                                            <C>
      SEC Registration Fee.......................................... $   37,061
      NASD Fee......................................................     11,540
      Nasdaq National Market Fee....................................     47,500
      Printing and engraving fees...................................    250,000
      Registrant's counsel fees and expenses........................    350,000
      Accounting fees and expenses..................................    250,000
      Blue Sky expenses and counsel fees............................     10,000
      Transfer agent and registrar fees.............................      2,000
      Miscellaneous.................................................    241,899
                                                                     ----------
        TOTAL....................................................... $1,200,000
                                                                     ==========
</TABLE>
    
     --------
     * To be supplied by amendment.
 

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
 
  Section 145 of the Delaware General Corporation Law (the "DGCL") permits
each Delaware business corporation to indemnify its directors, officers,
employees and agents against liability for each such person's acts taken in
his or her capacity as a director, officer, employee or agent of the
corporation if such actions were taken in good faith and in a manner which he
or she reasonably believed to be in or not opposed to the best interests of
the corporation, and with respect to any criminal action, if he or she had no
reasonable cause to believe his or her conduct was unlawful. Article X of the
Company's Amended and Restated By-Laws provides that the Company, to the full
extent permitted by Section 145 of the DGCL, shall indemnify all past and
present directors or officers of the Company and may indemnify all past or
present employees or other agents of the Company. To the extent that a
director, officer, employee or agent of the Company has been successful on the
merits or otherwise in defense of any action, suit or proceeding referred to
in such Article X, or in defense of any claim, issue or matter therein, he or
she shall be indemnified by the Company against actually and reasonably
incurred expenses in connection therewith. Such expenses may be paid by the
Company in advance of the final disposition of the action upon receipt of an
undertaking to repay the advance if it is ultimately determined that such
person is not entitled to indemnification.
 
  As permitted by Section 102(b)(7) of the DGCL, Article 11 of the Company's
Amended and Restated Certificate of Incorporation provides that no director of
the Company shall be liable to the Company for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Company or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for the unlawful payment of dividends on or
redemption of the Company's capital stock, or (iv) for any transaction from
which the director derived an improper personal benefit.
 
  The Company expects to obtain a policy insuring it and its directors and
officers against certain liabilities, including liabilities under the
Securities Act.
 
  The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the Registrant
and its officers and directors for certain liabilities arising under the
Securities Act or otherwise.
 
                                     II-1

<PAGE>
 

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
   
  The Company issued 178,574 shares of Common Stock to John F. DePodesta, its
incorporator, on February 4, 1994 for consideration of $250. Additionally, Mr.
Singh purchased 3,392,905 shares of Common Stock from the Company on June 1,
1994 for $250,000. A trust, the voting power of which is vested in Mr. Singh,
purchased 396,828 shares of Common Stock from the Company on September 30,
1994 for $250,000. During the fourth quarter of 1994, the Company issued to
Mr. Krieger, a former director of the Company, in recognition of the support
he gave to the Company, 71,430 shares of Common Stock. No underwriter or
placement agent participated in any of the foregoing issuances of securities.
       
  During the first quarter of 1995, the Company sold its Common Stock to a
group of private investors consisting of certain family members and colleagues
of Mr. Singh and Mr. DePodesta. The investors paid $300,000 for 476,204 shares
of Common Stock in this transaction. On March 31, 1995, pursuant to an
agreement whereby Mr. Singh forgave certain indebtedness in the amount of
$350,000 owed him by the Company, the Company issued Mr. Singh 555,559 shares
of Common Stock. No underwriter or placement agent participated in any of the
foregoing issuances of securities.     
   
  As of December 31, 1995, 1,757,613 shares of the Company's Common Stock were
sold for an aggregate price of $5,198,500 to investors familiar with Mr. Singh
and the Company. This sale was placed by Northeast Securities, Inc. ("NSI"),
which used Andrew Krieger, a former director, as a selling agent. Underwriting
commissions and other expenses in this transaction were $787,440 and 234,378
shares of the Company's Common Stock. On January 31, 1996, NSI and Mr.
Krieger, both acting as placement agents, privately placed 1,771,194 shares of
the Company's Common Stock for an aggregate price of $6,286,404 to other
investors familiar with Mr. Singh and the Company. Underwriting commissions
and other expenses in this transaction totalled $613,167 and     shares of the
Company's Common Stock.     
   
  On February 15, 1996, Teleglobe USA, Inc. invested in the Company by
purchasing 410,808 shares of the Company's Common Stock for $1,458,060. On
March 1, 1996, in connection with the Company's purchase of Axicorp, certain
vendors of Axicorp received 455,000 shares of the Company's Series A
Convertible Preferred Stock, par value $.01 per share. In addition, on July
31, 1996, the Soros/Chatterjee Group bought 965,999 shares of the Company's
Common Stock for approximately $8,000,000 and for $8,000,000 was issued
warrants to purchase additional shares of Common Stock. No underwriter or
placement agent participated in any of the foregoing issuances of securities.
    
  The Company believes that the foregoing described issuances of securities,
if they constitute sales, are exempt from registration under the Act by virtue
of the exemption provided by Section 4(2) thereof for transactions not
involving a public offering.
 

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
 
  (A) EXHIBITS:
 

<TABLE>     
<CAPTION>
   EXHIBIT NO.                            DESCRIPTION
   -----------                            -----------
   <C>         <S>
     1.1       Form of U.S. Underwriting Agreement.(/1/)
     1.2       Form of International Underwriting Agreement.(/1/)
     3.1       Amended and Restated Certificate of Incorporation.(/2/)
     3.2       Amended and Restated By-Laws.(/2/)
     4.1       Specimen Certificate of the Company's Common Stock, par value
                $.01 per share.(/2/)
     5.1       Opinion of Pepper, Hamilton & Scheetz respecting the Common
                Stock registered hereby.(/1/)
    10.1       Share Acquisition Deed, dated March 1, 1996, between the Company
                and the shareholders of Axicorp Pty., Ltd.(/2/)
    10.2       Switched Transit Agreement, dated June 5, 1995, between
                Teleglobe USA, Inc. and the Company for the provision of
                services to India.
    10.3       Hardpatch Transit Agreement, dated February 29, 1996, between
                Teleglobe USA, Inc. and the Company for the provision of
                services to Iran.
</TABLE>
    

                                     II-2

<PAGE>
 

<TABLE>     
<CAPTION>
   EXHIBIT NO.                            DESCRIPTION
   -----------                            -----------
   <C>         <S>
    10.4       Agreement for Billing and Related Services, dated February 23,
                1995, between the Company and Electronic Data Systems Inc.(/2/)
    10.5       Employment Agreement, dated June 1, 1994, between the Company
                and K. Paul Singh.
    10.6       Primus Telecommunications Group, Incorporated 1995 Stock Option
                Plan.(/2/)
    10.7       Primus Telecommunications Group, Incorporated 1995 Director
                Stock Option Plan.(/2/)
    10.8       International Correspondent Agreement between the Honduras
                Telecommunications Company and the Company dated November 30,
                1995.
    10.9       Shareholders Agreement, dated February 22, 1996, among Teleglobe
                USA, Inc., K. Paul Singh and the Company.(/2/)
    10.10      Securityholders' Agreement, dated July 31, 1996, among the
                Company, K. Paul Singh, Quantum Industrial Partners LDC, S-C
                Phoenix Holdings, L.L.C., Winston Partners II LDC and Winston
                Partners LLC.
    10.11      Registration Rights Agreement, dated July 31, 1996, among the
                Company, Quantum Industrial Partners LDC, S-C Phoenix Holdings,
                L.L.C., Winston Partners II LDC and Winston Partners LLC.(/2/)
    10.12      Service Provider Agreement between Telstra Corporation Limited
                and Axicorp Pty., Ltd. dated May 3, 1995.
    10.13      Dealer Agreement between Telstra Corporation Limited and Axicorp
                Pty., Ltd. dated January 8, 1996.
    10.14      Hardpatch Transit Agreement dated October 5, 1995 between
                Teleglobe USA, Inc. and the Company for the provision of
                services to India.
    11.1       Statement re: Computation of Per Share Earnings.
    22.1       Subsidiaries of the Registrant.(/2/)
    23.1       Consent of Deloitte & Touche LLP (included on page II-5 of this
                Registration Statement).
    23.2       Consent of Price Waterhouse (included on page II-6 of this
                Registration Statement).
    23.3       Consent of Pepper, Hamilton & Scheetz (included in Exhibit
                5.1).(/1/)
    24.1       Powers of Attorney.(/2/)
    27.1       Financial Data Schedule for the Company for the year ended
                December 31, 1995.
    27.2       Financial Data Schedule for the Company for the six months ended
                June 30, 1996.
    27.3       Financial Data Schedule for Axicorp Pty., Ltd. for the twelve
                months ended March 31, 1996.(/2/)
</TABLE>
    
- --------
   
(1) To be filed by amendment.     
   
(2) Previously filed.     
 
  (B) CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
 
  All schedules have been omitted because they are not applicable, not
required, or the required information is included in the Financial Statements
or the notes thereto.
 

ITEM 17. UNDERTAKINGS
 
  The undersigned registrant undertakes that insofar as indemnification for
liabilities arising under the Act 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
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 such liabilities (other than the payment by the
Registrant of expenses incurred
 
                                     II-3

<PAGE>
 
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.
 
  The undersigned registrant hereby undertakes that:
 
    (1) For purposes of determining any liability under the Act, the
  information omitted from the form of prospectus filed as part of this
  Registration Statement in reliance upon Rule 430A and contained in a form
  of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
  497(h) under the Act shall be deemed to be part of this Registration
  Statement as of the time it was declared effective.
 
    (2) For purposes of determining any liability under the Act, each post-
  effective amendment that contains a form of prospectus 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.
 
  The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
 
                                     II-4

<PAGE>
 
                         INDEPENDENT AUDITORS' CONSENT
   
  We consent to the use in this Amendment No. 1 to Registration Statement No.
333-10875 of Primus Telecommunications Group, Incorporated of our report dated
April 23, 1996, except for Note 13 and Note 14, as to which the dates are July
31, 1996, and the effective date of the Registration Statement, respectively,
appearing in the Prospectus, which is part of this Registration Statement, and
to the reference to us under the headings "Selected Financial Data" and
"Experts" in such Prospectus.     
 
Deloitte & Touche LLP
 
Washington, D.C.
     , 1996
 
                              ------------------
   
  The foregoing consent is in the form that will be signed upon the completion
of the restatement of capital accounts to effect the split of all shares of
common stock at a ratio of 3.381 to 1 and to reflect conversion of all
outstanding shares of preferred stock into shares of common stock.     
 
Washington, D.C.
   
October 10, 1996     
 
                                     II-5

<PAGE>
 
                       CONSENT OF INDEPENDENT ACCOUNTANTS
   
  We hereby consent to the use in the Prospectus constituting part of the
Registration Statement on Form S-1 (File No. 333-10875) of our report dated
July 31, 1996, relating to the financial statements of Axicorp Pty., Ltd.,
which appears in such Prospectus. We also consent to the references to us under
the headings "Experts" and "Selected Financial Data" in such Prospectus.
However, it should be noted that Price Waterhouse has not prepared or certified
such "Selected Financial Data."     
 
Price Waterhouse
 
Melbourne, Australia
   
October 10, 1996     
 
                                      II-6

<PAGE>
 
                       SIGNATURES AND POWER OF ATTORNEY
   
  Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Philadelphia,
Commonwealth of Pennsylvania, on the 2nd day of October, 1996.     
 
                                          Primus Telecommunications Group,
                                           Incorporated
 
                                                     /s/ K. Paul Singh
                                          By: _________________________________
                                                       K. Paul Singh
                                               Chairman, President and Chief
                                                     Executive Officer
                                                      
  Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on October 2,
1996 in the capacities indicated:     


<TABLE>     
<CAPTION> 
 
             SIGNATURES                                   TITLE
             ----------                                   -----
<S>                                       <C> 
          /s/ K. Paul Singh               Director, Chairman, President and
- -------------------------------------      Chief Executive Officer (principal
            K. PAUL SINGH                  executive officer)
 
         /s/ Neil L. Hazard               Executive Vice President and Chief
- -------------------------------------      Financial Officer (principal
           NEIL L. HAZARD                  financial officer and principal
                                           accounting officer)
 
               
               *                          Executive Vice President, Law and
- -------------------------------------      Regulatory Affairs and Director  
          JOHN F. DEPODESTA
 
               *                          Director 
- -------------------------------------
           HERMAN FIALKOV
                                                    
               *                          Director 
- -------------------------------------
         DAVID E. HERSHBERG
                                                      
               *                          Director 
- -------------------------------------
             JOHN PUENTE
   
 * /s/ K. Paul Singh, Attorney-in-Fact 

</TABLE>
      
 
                                     II-7

<PAGE>
 
                                 EXHIBIT INDEX
 

<TABLE>   
<CAPTION>
 EXHIBIT NUMBER                           DESCRIPTION
 --------------                           -----------
 <C>            <S>
  10.2          Switched Transit Agreement, dated June 5, 1995, between
                 Teleglobe USA, Inc. and the Company for the provision of
                 services to India.
  10.3          Hardpatch Transit Agreement, dated February 29, 1996, between
                 Teleglobe USA, Inc. and the Company for the provision of
                 services to Iran.
  10.5          Employment Agreement, dated June 1, 1994, between the Company
                 and K. Paul Singh.
  10.8          International Correspondent Agreement between the Honduras
                 Telecommunications Company and the Company dated November 30,
                 1995.
  10.10         Securityholders' Agreement, dated July 31, 1996, among the
                 Company, K. Paul Singh, Quantum Industrial Partners LDC, S-C
                 Phoenix Holdings, L.L.C., Winston Partners II LDC and Winston
                 Partners LLC.
  10.12         Service Provider Agreement between Telstra Corporation Limited
                 and Axicorp Pty., Ltd. dated May 3, 1995.
  10.13         Dealer Agreement between Telstra Corporation Limited and
                 Axicorp Pty., Ltd. dated January 8, 1996.
  10.14         Hardpatch Transit Agreement dated October 5, 1995 between
                 Teleglobe USA, Inc. and the Company for the provision of
                 services to India.
  11.1          Statement re: Computation of Per Share Earnings.
  23.1          Consent of Deloitte & Touche LLP (included on page II-5 of this
                 Registration Statement).
  23.2          Consent of Price Waterhouse (included on page II-6 of this
                 Registration Statement).
  27.1          Financial Data Schedule for the year ended December 31, 1995.
  27.2          Financial Data Schedule for the six months ended June 30, 1996.
</TABLE>
    





<PAGE>
 
                                                                    EXHIBIT 10.2

                                                                    CONFIDENTIAL
  
                          SWITCHED TRANSIT AGREEMENT
             BETWEEN TELEGLOBE AND GLOBAL TELECOMMUNICATIONS, INC.
                             FOR SERVICES To INDIA

The Service:
- ----------- 

     Teleglobe will arrange to provide GTI, at its designated and agreed upon
operating center, and GTI will use and pay Teleglobe for international switched
transit services to India via the following configuration, whereby GTI will
arrange foreign-end service in cooperation with VSNL (India) including direct
settlement, subject to Teleglobe's receipt of confirmation of satisfactory
settlement procedures from GTI and VSNL (India). The provision of these
facilities will be on satellite and cable facilities now, or in the future, in
operation.

     Transition from switched to hardpatched facilities may occur following
Primus' request and following 90 days from which time the international switched
facilities become operational, and subject to capacity and concurrence and
readiness by Teleglobe and VSNL to effectuate service transition. No penalties
or charges would be incurred by GTI in requesting and implementing this
transition.

Configuration:
- ------------- 

                                                                 TRANSOCEANIC
                                                                 CABLE ROUTING

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

                                      TORONTO        DCME

                                   -------------------------
                                                                 
                                                                 ---------
               CANADA/US BORDER                                  NEW DELHI    

                      =
                      =   
                      =
60 HUDSON             =                                          359E SATELLITE
NEW YORK,
 NY          =                                                ROUTING
                      =                                                
                ---------------    -------------------------

- ---------------- MOORER'S FORK ----   MONTREAL       DCME   --------------------

                ---------------    -------------------------     ---------
                                                                 BOMBAY







Invoicing:
- --------- 

     Teleglobe will invoice GTI monthly for the services. All invoice amounts
are due 30 days from invoice date. The service commencement date will be the "in
service" date of the international facilities.

     Teleglobe reserves the right to terminate service with thirty (30) days
written notice for accounts with past due balances.

<PAGE>
 
                                                                    CONFIDENTIAL

Operational:
- ----------- 

     The service performance will be commensurate with Teleglobe's backbone
network, which meets and exceeds the standards of the industry.

     DCME or low-rate encoded compression will be used to no more than 4:1 on
the routes.

Liability:
- --------- 

     TELEGLOBE shall not be liable for any loss or damage sustained by GTI, its
interconnecting carriers or its end users. by reason of any failure in or
breakdown of the communication facilities associated with the circuits under
this agreement or for any interruption or degradation of service whatsoever
shall be the cause of such failure, breakdown, interruption or degradation and
however long it shall last.

     TELEGLOBE will not be responsible for any direct, indirect, consequential,
or any other damages resulting from any action that might be taken by VSNL which
would result in the cancellation of service or cause a disruption of service.

Confidentiality:
- --------------- 

     GTI will treat this agreement, all product information, descriptions and
prices, methods of operation and their terms and conditions as strictly
confidential. GTI will not disclose any of this information or any of these
materials to any person who is not a party to this agreement. Notwithstanding
the foregoing, GTI may disclose, on a limited basis, agreement terms as
necessary or required by regulatory authorities, auditors, attorneys or
government agents.

Term:
- ---- 

     The term for this service will be one year, commencing upon the "in-
service" date of the international facilities, or until service transition to
hardpatch transit circuits occurs.

Pricing and Volume Commitment:
- ----------------------------- 

     The monthly charge for this service will be US$22,500. Teleglobe will
retroactively adjust billing to GTI, based upon GTI's actual monthly call volume
at the rate of $0.15/minute, with call durations rounded up to the nearest six
seconds and monthly volume rounded up to the nearest minute, and subject to an
average volume commitment of 150,000 minutes per month during the period that
GTI has in service with Teleglobe. Any installation charges for line connections
from New York to the US/Canadian border, not to exceed US$3,000 per line, would
be passed through as assessed.

Force Majeure:
- ------------- 

     No failure or omission by either party to carry out or observe any of the
terms and conditions of this Agreement shall give rise to any claim against the
party in question or be deemed a breach of this Agreement if such failure or
omission arises from a cause of force majeure, an act of Government or any other
cause beyond the reasonable control of that party.

                                      -2-

<PAGE>
 
                                                                    CONFIDENTIAL

Termination:
- ----------- 

     If, before the expiration of the contracted terms, the service is canceled
by GTI for any reason, GTI shall pay a termination charge of one hundred percent
(100%) of the total monthly charges for the unexpired portion of the contracted
term, unless GTI signs a new, mutually agreeable commitment that would provide
Teleglobe with revenues that would be equal to or exceeding those of the
original requirements remaining dollar commitment over an equivalent period.

Approval:
- -------- 

     The parties have executed this Agreement through their duly authorized
representatives .

TELEGLOBE                              GLOBAL TELECOMMUNICATIONS, INC.

/s/ Marc Van Doorn                     /s/ K. Paul Siugh
______________________________         ______________________________ 
Name                                   Name


Chief Financial Officer                CEO and President
______________________________         ______________________________ 
Title                                  Title


10/5/95                                10/5/95
______________________________         ______________________________ 
Date                                   Date

                                      -3-

<PAGE>
 
                                                                    CONFIDENTIAL

                              LETTER OF AGREEMENT
                     BY AND BETWEEN TELEGLOBE USA INC. AND
                        GLOBAL TELECOMMUNICATIONS, INC.

Re:  Switched and Hardpatch Transit Service Agreement between Teleglobe and
     Global Telecommunications, Inc.; India

In connection with the telecommunications services agreement between Teleglobe
and Global Telecommunications, Inc. dated ______________, 1995, Teleglobe has
agreed to provide Global Telecommunications, Inc. with a credit of US$2,000 per
month against the fixed monthly charges of the DS-1 (____________) interconnect
circuit.

This credit will continue in effect so long as the current facility
configuration between Teleglobe and GTI remains unchanged, and may be adjusted
from time to time to reflect changes in the cost of leased line facilities.


Agreed to by:
    

TELEGLOBE                              GLOBAL TELECOMMUNICATIONS, INC.

/s/ Marc Van Doorn                     /s/ K. Paul Singh     
______________________________         ______________________________
Name                                   Name


Chief Financial Officer                CEO and President
______________________________         ______________________________ 
Title                                  Title


10/5/95                                10/5/95
______________________________         ______________________________ 
Date                                   Date

                                      -4-



<PAGE>
 
                                                                    EXHIBIT 10.3

                                                                    CONFIDENTIAL

                          HARDPATCH TRANSIT AGREEMENT
             BETWEEN TELEGLOBE AND PRIMUS TELECOMMUNICATIONS, INC.
                             FOR SERVICES TO IRAN

Description of Service:
- ---------------------- 

     Teleglobe will arrange to provide Primus, at its designated and agreed upon
operating center, and Primus will use and pay for a 512 KB circuit (eight clear
64 KB contiguous channel voice half-circuits) to Iran.  The provision of this
facility is in cooperation with T.C.I. (Iran) via INTELSAT 359E satellite
facilities now, or in the future, in operation, or other satellite facilities as
may be required and mutually agreed to by Teleglobe, T.C.I. and Primus.

     These facilities will be subject to concurrence and matching order by
T.C.I.

Term:
- ---- 

     The term for this service will be six months, commencing upon the "in
service" date of the international facilities.  This service will be renewable
in calendar month increments.

Pricing:
- ------- 

     The monthly charge for the eight clear channel international voice half-
circuit service is US$11,908. FOB 60 Hudson, Room 1107, New York, New York
10013.

Invoicing:
- --------- 

     Teleglobe will invoice Primus monthly for the service.  All invoice amounts
are due 30 days from invoice date.  The service commencement date will be the
"in service" date of the international
 facilities.

     Teleglobe reserves the right to terminate service with thirty (30) days
written notice for accounts with past due balances.

Operational:
- ----------- 

     The service activation for the eight clear channel international voice
half-circuits would be within 60 days of the execution of the Agreement.
Teleglobe will request space segment match from T.C.I. and initiate procurement
of space segment within seven days of the execution of this agreement.

     The service performance will be commensurate with Teleglobe's backbone
network, which meets and exceeds the standards of the industry.

     Any required echo cancellation and/or signaling will be the responsibility
of GTI.

     The restoration of these station-kept, non-preemptible satellite
facilities, in the event of an outage or failure, would be in accordance with
the standard INTELSAT policy under Article III of the INTELSAT Agreement.

<PAGE>
 

                                                                    CONFIDENTIAL
 
Termination:
- ----------- 

     If, before the expiration of the contracted terms, the service is canceled
by the customer for any reason, the customer shall pay a termination charge of
one hundred percent (100%) of the total monthly charges for the unexpired
portion of the contracted term, unless the customer signs a new, mutually
agreeable commitment that would provide Teleglobe with revenues that would be
equal to or exceeding those of the original requirements remaining dollar
commitment over an equivalent period.

Force Majeure:
- ------------- 

     No failure or omission by either party to carry out or observe any of the
terms and conditions of this Agreement shall give rise to any claim against the
party in question or be deemed a breach of this Agreement if such failure or
omission arises from a cause of force majeure, an act of Government or any other
cause beyond the reasonable control of that party.

Liability:
- --------- 

     TELEGLOBE shall not be liable for any loss or damage sustained by Primus,
its interconnecting carriers or its end users, by reason of any failure in or
breakdown of the communication facilities associated with the circuits under
this Agreement or for any interruption or degradation of service whatsoever
shall be the cause of such failure, breakdown, interruption or degradation and
however long it shall last.

     TELEGLOBE will not be responsible for any direct, indirect, consequential,
or any other damages resulting from any action that might be taken by T.C.I.
which would result in the cancellation of service or cause a disruption of
service.

Confidentiality:
- --------------- 

     Primus will treat this agreement, all product information, descriptions and
prices, methods of operation and their terms and conditions as strictly
confidential.  Primus will not disclose any of this information or any of these
materials to any person who is not a party to this agreement.  Notwithstanding
the foregoing, Primus may disclose, on a limited basis, agreement terms as
necessary or required by regulatory authorities, auditors, attorneys or
government agents.

Approval:
- -------- 

     The parties have executed this Agreement through their duly authorized
representatives.
    
TELEGLOBE                          PRIMUS TELECOMMUNICATIONS, INC.

/s/ Paulo Guidi                    /s/ K. Paul Singh
_________________________          __________________________
Name                               Name

V.P./GM                            CEO and President
_________________________          __________________________ 
Title                              Title

2/29/96                            1/21/96
_________________________          __________________________
Date                               Date     

                                      -2-



<PAGE>
 
                              EMPLOYMENT AGREEMENT


          THIS AGREEMENT made as of June 1, 1994 by and between K. Paul Singh, a
resident of Alexandria, Virginia (the "Execu-tive"), and Global
Telecommunications, Inc., a corporation organized and existing under the laws of
the State of Delaware (the "Company").

                                  WITNESSETH:

          WHEREAS, the Executive is currently the Chairman of the Board,
President and Chief Executive Officer of the Company; and

          WHEREAS, the Board of Directors of the Company desires assurance that
the Executive will continue as its leader for at least the next five years; and

          WHEREAS, the Executive is willing to commit to undertake his
responsibilities as Chairman of the Board, President and Chief Executive Officer
of the Company on the terms and conditions hereinafter set forth.

          NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, and intending to be legally bound, the parties,
subject to the terms and conditions set forth herein, hereby agree as follows:

     1.   Employment and Term. The Company hereby employs the Executive, and the
          -------------------                                            
Executive hereby accepts employment with the Company, for the period commencing
on the date hereof and continuing until May 30, 1999 and from year to year
thereafter,

<PAGE>

 
unless terminated by either party by written notice of termination given to the
other party.  Termination by the Company of the employment of Executive
hereunder shall be effective (a) 90 days after the date such notice is given if
such termination is pursuant to paragraphs 5 or 6 below, or (b) immediately upon
the date such notice is given if such termination is pursuant to paragraph 7
below.

     2.   Responsibilities. During the term of his employment, the Executive
          ----------------                                         
shall devote his full time, attention, loyalty, skill and efforts to the
performance of his responsibilities to the Company as Chairman of the Board,
President and Chief Executive Officer, or if another person should be appointed
President by the Board of Directors, as Chairman of the Board and Chief
Executive Officer. Executive shall also be a member of the Compensation
Committee of the Board of Directors. The Company will not during the terms of
this Agreement demote the Executive of reduce his responsibility as the CEO, or
otherwise reduce his stature in the Company.

     3.   Compensation. The Company shall pay or provide to the Executive, and
          ------------                                                     
the Executive shall accept, the following as full compensation for all services
rendered hereunder. All compensation shall be subject to all applicable
withholding and similar requirements.

          (A)  Base Salary. The Company shall pay to the Executive a base salary
               -----------     
(the "Base Salary") at the annual rate of

                                      -2-

<PAGE>
 
$185,000.  The Base Salary shall be reviewed on an annual basis and may be
increased from time to time at the discretion of the Board of Directors.  It is
understood and agreed that Executive has and will defer payment of Base Salary
until April 1, 1995, at which time Executive will be entitled to received Base
Salary since June 1, 1994.

          (B)  Bonus or Incentive Compensation.  Executive will participate in
               -------------------------------                                
any bonus or incentive compensation plan (including stock option and stock bonus
plans) approved by the Board of Directors for senior management of the Company.

          (C)  Benefits. The Company shall provide to the Executive, without any
               --------                              
payment or contribution by the Executive or members of his family, throughout
his employment by the Company the following benefits:

               a.   Life Insurance. The policy in the amount of three times the
                    --------------                   
Base Salary insuring the life of the Executive currently owned by the Company,
the death benefits of which are payable to the beneficiaries designated by the
Executive.

               b.   Disability Insurance.  Disability Insurance providing the
                    --------------------                                     
Executive with monthly payments during the period of his disability (after
termination of his employment) in an amount equal to 1/12th of his then
applicable annual Base Salary immediately prior to his disability.  If the
disability insurance policy should begin payment while the Executive is still
being compensated by the Company under the terms of this Agreement, the

                                      -3-

<PAGE>
 
Executive will reimburse the Company for all portions of such payments which
cause his total compensation to exceed the amounts otherwise payable to the
Executive under the terms of this Agreement.

               c.   Medical. Medical insurance protection for the Executive and
                    -------                        
his family at least as favorable to the Executive and his family as the
protection and plan being made available to them on the date of this Agreement.
In addition, if not covered by insurance, the Company shall provide the
Executive with an annual health checkup.

               d.   Professional Services Allowance. The Company will pay up to
                    -------------------------------                             
$2,500 per year for Executive's tax planning and preparation and/or other
financial planning services used by the Executive.

               e.   Other. Such other benefits, not duplicative of the
                    -----                   
foregoing, which the Board of Directors may now or in the future make available
to its senior Executives.

     4.   Support and Expenses. The Company shall provide the Executive with an
          --------------------                                    
office, staff and other support appropriate for the Chief Executive Officer of
an organization of the stature of the Company, and the Company shall pay or
reimburse the Executive for all reasonable travel and other expenses incurred by
him in connection with the performance of his services under this Agreement upon
presentation of expense statements or vouchers and such other supporting
information as the Company may from time to time reasonably request.

                                      -4-

<PAGE>
 
     5.   Termination by Company After May 30, 1999. If the Company shall
          -----------------------------------------                       
terminate the employment of Executive after May 30, 1999, for a reason other
than "disability" or "cause," as defined in Section 7 hereof, the Company shall
continue to pay the Executive all of his compensation set forth in Section 3
hereof through the effective date of termination. Thereafter the Company shall
pay to the Executive any compensation and other benefits which were vested as of
the effective date of termination but payable at a later date. In addition to
all of the foregoing, the Company shall pay to the Executive on the first
business day of the month following the effective date of termination severance
pay (herein called "Severance Pay") in a lump sum equal to 1/12th of his then
applicable annual Base Salary.

     6.   Termination by Company Prior to June 1, 1999. If the Company shall
          --------------------------------------------                 
terminate the employment of Executive prior to June 1, 1999, for a reason other
than "disability" or "cause" as defined in Section 7 hereof, or if the Executive
shall terminate his employment after the Company has committed a material breach
of this Agreement, then the Company shall pay to the Executive as they become
due, amounts otherwise payable to the Executive if he had remained in the
employment of the Company until June 1, 1999. In addition, the Company shall (i)
forthwith pay Severance Pay computed in accordance with Section 5 hereof, (ii)
thereafter pay all amounts of compensation and benefits which were vested on the
date of termination but not payable until a later date, including

                                      -5-

<PAGE>
 
amounts payable under Section 3B hereof, and (iii) comply with Section 9 hereof.

     7.   Termination for Disability of Cause. The Company may terminate the
          -----------------------------------                            
Executive's employment due to "disability" if the Board of Directors shall
determine in good faith, that, by reason of physical or mental illness or other
condition continuing for more than one hundred and twenty (120) consecutive days
or for shorter periods aggregating more than one hundred and twenty (120) days
in any period of twelve (12) months (excluding in each case days on which on the
Executive was on vacation), the Executive has been substantially unable to
render services of the character contemplated by this Agreement. The Company may
terminate the Executive's employment for "cause" if the Board of Directors shall
determine in good faith that there shall have been a willful breach by the
Executive in a material manner of his duty of loyalty to the Company. If the
Company shall terminate the employment of Executive for disability or for cause
at any time, the Company shall have no further obligation hereunder except for
payment of Base Salary for services previously rendered, payment or provision of
other compensation or benefits previously vested, and the duty set forth in
Section 9 hereof.

     8.   Voluntary Termination. If prior to breach of this Agreement by the
          ---------------------                                          
Company, the Executive shall resign as an employee during the term of his
employment, the Company shall

                                      -6-

<PAGE>
 
have no further obligation hereunder except for payment of Base Salary for
services previously rendered, payment or provision of other compensation or
benefits previously vested, and the duty set forth in Section 9 hereof.

     9.   Insurance after Termination. If the Company's group life, health and
          ---------------------------                                      
disability insurance plans do not continue to protect the Executive after
termination of employment, the Company will use its best efforts upon
termination of the Executive's employment for any reason other than death to
arrange for transfer from a Company plan to the Executive (to be carried
thereafter at his own expense) any life, health and disability insurance
protection which may be so transferred.

    10.   Loans. Executive has loaned the Company $300,000 (Three-hundred
          -----                                                           
thousand dollars). It is agreed that the Company shall repay the loan, plus
interest, out of operating revenues of the Company. Interest shall be calculated
at the rate in effect from time to time designated by The Chase Manhattan Bank,
N.A., as its prime rate.

    11.   Covenant Not to Compete. The Executive covenants and agrees that, from
          -----------------------                                     
the date hereof and until (i) six months following resignation by the Executive
pursuant to Section 8 hereof, or (ii) in the case of any other termination of
Executive's employment, six months following the date upon which the final
payment of amounts payable to the Executive by the Company by reason of such
termination becomes due, he shall not,

                                      -7-

<PAGE>
 
either directly or indirectly, (a) engage in or conduct any business competitive
with the Company's business, whether individually or as an employee, agent,
officer, director, owner, consultant or otherwise, without the prior written
consent of the Board of Directors of the Company, or (b) induce or attempt to
induce any existing or future employee or consultant of the Company or any of
its Affiliates to leave such employment.

     12.  Litigation. If litigation shall be brought by either party to enforce
          ----------
or interpret any provision contained herein and such party (the "prevailing
party") shall prevail on any issue contested in such litigation either through
settlement or judgment in favor of the prevailing party, the other party shall
reimburse the prevailing party for reasonable attorneys' fees and disbursements
incurred by the prevailing party in such litigation, and shall pay prejudgment
interest on any money judgment obtained by the prevailing party calculated at
the rate in effect from time to time designated by The Chase Manhattan Bank,
N.A., as its prime rate from the date of the breach by such other party under
this Agreement.

     13.  Entire Agreement; Amendments. This Agreement contains the entire
          ----------------------------                                     
agreement and understanding of the parties relating to the subject matter hereof
and supersedes all prior discussions, agreements and understandings of every
nature between them. This Agreement may not be changed or modified, except by an
agreement in writing signed by all of the parties hereto.

                                      -8-

<PAGE>
 
     
          IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day of year first above written.



                                        /s/ K. Paul Singh
                                        _______________________________
                                        K. Paul Singh


ATTEST:                                 GLOBAL TELECOMMUNICATIONS, INC.


/s/ John DePodesta                      By:/s/ K. Paul Singh      
________________________________           ____________________________
Secretary

                                      -9-



<PAGE>
 
                       INTERNATIONAL OPERATING AGREEMENT


This agreement concluded the 30th day of November 1995, by and between The
Hondurena Telecomunications Company (hereinafter called HONDUTEL, which shall
include it successors or permitted assigns) having its principal office at the
Telecommunications Building, Colon Avenue, Tegucigalpa Honduras and PRIMUS
TELECOMUNICATIONS, INC. (hereinafter called PRIMUS, which shall include its
successors or permitted assigns) a corporation organized and existing under the
laws of the State of Virginia and having its offices at 8180 Greensboro Drive
11th Floor, McLean, Virginia 22102.


PURPOSE:

Whereas, PRIMUS operates it facilities across the United States, its territories
to include the territories of Puerto Rico, Virgin Islands and Guam which
constitute a telecommunications system within the United States of America.
Honduras operates telecommunications facilities in Honduras to provide
international service within Honduras and whereas HONDUTEL and PRIMUS desire to
jointly provide international telecommunications service between Honduras and
the United States and points beyond; now therefore the named parties in
consideration of the mutual
 agreement hereby agree to as follows:


1.  ESTABLISHMENT OF SERVICE:

The interested parties agree to establish and continue telecommunications
services between Honduras and the United

                                      -1-

<PAGE>
 
States in accordance with the following terms and conditions stated on this
agreement.


2.  SERVICES PROVIDED:

The long distance international telecommunications services provided are those
reflected in Annex A (Services) which comprise an integral part of this
agreement without prejudice for the other services which can be provided at a
later date in accordance with this agreement. Each party agrees to provide the
equipment and means necessary to provide in a continuous fashion the levels and
quality of service universally accepted in each country. International phone
service provided between HONDUTEL and PRIMUS shall be automatic and semi-
automatic, the latter to include person to person, station to station, reverse
charges and direct dial. Callback service between Honduras and the United States
or third countries shall not be offered nor provided to its customers in the
United States or Honduras. The services, subject of this agreement may be
modified or broadened upon concurrence of both parties and it changes
incorporated into this agreement herein.


3.  NATIONAL TARIFFS

The charges that result to the customers for services are hereafter referred to
as "National Tariffs" and may be stated in foreign currency, allowing each party
to liberally determine

                                      -2-

<PAGE>
 
National Tariffs to be applied to each of the services detailed in Annex A
(Services) of this agreement.

4.  DIVISION OF REVENUE:

The division of revenue and proportional division of revenues for telephone
services between Honduras and the United States will be in accordance with those
described in Annex B.


5.  PREPARATION AND ESTABLISHMENT OF BILLINGS:

A.  MONTHLY STATEMENTS:

    1.  Each party shall prepare a monthly billing including, but not limited   
    to, the number of calls by class of service, the number of minutes and the  
    share of accounting rate credited to the other.  Each party shall forward   
    such monthly billing as soon as practicable after the calendar month to     
    which the billing relates, but in no event later than the end of the second 
    calendar month following the month to which the billing relates.  In case   
    of delay the parties shall notify one another.  (see Annex C)               
                                                                                
    2.  No credit allowance shall be made in the monthly notice for             
    uncollectible amounts.  Each party shall be responsible for its own         
    uncollectibles. However customer credits resulting from defective service   
    from the monthly notices submitted to the other party may be deducted,      
    provided such deduction is made before the monthly notice involved is       
    forwarded to the other party.                  

                                      -3-

<PAGE>
 
B.   PAYMENTS OF STATEMENTS DUE:

     1.  The amount due each month as covered by monthly billing, shall be
     reduced to a net balance due each party, Net balances due one party to the
     other shall be paid by the owing party as soon as possible, but in no event
     later than six weeks after the monthly billing.  A balance owed should not
     be delayed pending an adjustments to a billings.

     2.  Payments made to billings presented under this agreement shall be made
     by the parties in US dollars.

6.   DELAYED PAYMENTS:

Notwithstanding the stipulations of this agreement, if there is a delay on the
part of the parties of the net balance due, in accordance with paragraph 5.b.,
the party owed may notify the owing party in writing, ninety (90) days after the
payment due date of the restriction or suspension of services stipulated in this
agreement.  The party being owed may terminate his obligation stated in the
agreement until the balance due is paid.

7.   ROUTES AND SERVICING OF FACILITIES:

     a.  The telecommunications services cover this agreement shall be served
     by;

     (1) Dedicated circuits between Honduras and the United States.

     (2) Circuits transiting other countries.

                                      -4-

<PAGE>
 
     (3) Combination of dedicated and transiting circuits agreed upon by both
     parties.

     b.  Each party shall provide, at its own expense the telecommunication
     facilities located within its area of operation necessary to provide
     service between Honduras and the United States.

     c.  Each party shall provide, at its own expense, half of the international
     telecommunications facilities necessary to provide services between
     Honduras and The United States.

     d.  Each party shall maintain interconnectivity of international circuits
     within the national network within its country or territories.

     e.  Each party shall notify the other as soon as practicable of any failure
     in its facility in its area of operations that will result in an extended
     interruption of service between Honduras and the United States.

8.   TECHNICAL AND OPERATIONAL MATTERS

Unless agreed upon by both parties, the technical and operational methods of
operations applied by the parties will be in accordance with the recommendations
of the International of the Telecommunications Union (ITU) and any future
revision of the same.

9.   RESPONSIBILITIES:

                                      -5-

<PAGE>
 
Neither party shall be liable to the other for any loss or damage sustained by
any failure, breakdown of the communications facilities or any interruption of
service set forth on this agreement.

10.  PROPRIETARY INFORMATION:

Any and all information produced as a result of this agreement and considered
private by either party shall be maintained in strict confidence by the party
that receives it, and can only be revealed to a third party upon prior approval
of the corresponding party. if the information is prepared in writing, it should
clearly be stated by the preparing party that the information is proprietary; if
related orally, the party should state he is sharing proprietary information, at
the time of the discussion, following up same in writing.


11.  GOVERNMENTAL APPROVALS:

The parties agree with regard to all commitments and obligations to which they
subject themselves under this agreement to lend themselves a full cooperation in
obtaining and continuance of all necessary governmental licenses, consents,
permit, authorizations and approvals required by the laws of each country.

12.  ADDRESSES:

                                      -6-

<PAGE>
 
For purposes of this agreement, it is agreed the following will be the addresses
for the parties involved:

          PRIMUS TELECOMUNICATIONS, INC.
          8180 GREENSBORO DRIVE 11TH FLOOR,
          MCLEAN, VIRGINIA 22102, U.S.A.
          ATTN:  MR. JOHN MELICK III
               VICE PRESIDENT

          EMPRESA HONDURERA DE TELECOMUNICACIONES (HONDUTEL)
          PALACIO DE TELECOMUNICACIONES, AVE. COLON
          APARTADO POSTAL No. 1794
          TEGUCIGALPA, M.D.C. HONDURAS, C.A.
          ATTN:  ABOGADO JOSE MARIO MALDONADO
          GERENTE GENERAL

13.  EFFECTIVE DATE AND DURATION

This agreement shall be in effect on the 30th day of November 1995 and shall be
in effect until one of the parties communicates to the other in writing to
terminate this agreement giving not less than one (1) year notice.  Any
correspondence regarding the termination of this agreement will be considered a
valid document, thirty (30) days from the date the letter is sent to the address
indicated in paragraph 12.  Any monies due to either party, pursuant to
paragraphs 5 and 6, to this agreement shall not be affected by any such
termination.

                                      -7-

<PAGE>
 
14.  MODIFICATION AND ADDITIONS:

This agreement and any addition or annex it contains can be modified or expanded
in writing only and signed only by authorized personnel representing each of the
parties.

15.  RELATIONSHIP OF THE PARTIES:

The relationship between HONDUTEL and PRIMUS with regard to this agreement shall
be as coequals in jointly providing telecommunications services and in no case
should it be construed as an association between the parties as such each will
limit his obligation to those stated in this agreement.

16.  ASSIGNMENT:

This agreement shall not be transferred or assigned by PRIMUS without the
written consent of HONDUTEL, and similarly it shall not be transferred or
assigned by HONDUTEL, without the written consent of PRIMUS.  Notwithstanding
the foregoing, either party may, without the other's consent, make an assignment
to a successor, affiliate, subsidiary or to any entity under the same control of
such party.  In the event of any such assignment, the successor shall undertake,
in writing to the other party, the performance and liability for these
obligations, duties and interests which are a part of this agreement and the
predecessor shall be relieved of such obligations, duties, and interests, except
for matters arising out of events occurring prior to the date of such
undertaking.

                                      -8-

<PAGE>
 
17.      MISCELLANEOUS PROVISIONS:

Nothing on this agreement shall restrict or prejudice the rights of one or the
other parties for reaching similar service agreement with other parties.

The headings for each of the paragraphs in this agreement serve only as points
of reference and under no circumstances shall they define, modify or restrict
the significance or interpretation of the terms or conditions herein . No
agreement or decision of one or the other parties may impose any provision of
same or interpret same to violate the provisions of this agreement.

This agreements should be written in English and Spanish in two copies; each
shall be considered  an original with identical legal effect.  This agreement
will be executed by the authorized parties mentioned herein.

    
       /s/ Jose Mario Maldonado                             January 2, 1996     
_______________________________________                     ________________
EMPRESA HONDURENA DE TELECOMUNICACIONES                     DATE
     ABOGADO JOSE MARIO MALDONADO
               GERENTE GENERAL

    
       /s/ John Melick                                      January 2, 1996     
_______________________________________                     ________________
PRIMUS TELECOMUNICATIONS, INC.                              DATE
     MR. JOHN MELICK III
     VICE PRESIDENT

                                      -9-

<PAGE>
 
                                    ANEXO A

                                    SERVICES


SERVICES

The following are services available to the customers On each country;


Telephone Service:

     International automatic direct dial
     Semiautomatic Person to Person
     Semiautomatic Station to Station
     Reversed Charge calls
     Direct Dial

Circuits leased to third patties:

Television Service:

Radio Transmissions:

These services will be provided by and under contracts or other legal methods
established for such services.


Other Services:

Other services will be agreed upon mutually, such as data transmission, video
conferencing, prepaid or debit card, etc. in accordance with the availability of
the parties.


Special Service:

When a telecomunications company requires the services of the other in the
others country, (Presidential visits, etc) the party whose country is being
visited, shall be responsible for coordinating the required services.


Callback Services:

Callback services between Honduras and the United States and to third countries
should not be offered to customers in the United States in the United States nor
Honduras.

                                      -10-

<PAGE>
 
                                    ANEXO B


DISTRIBUTION OF TARIFS AND SHARED TARIF DISTRIBUTION
- ----------------------------------------------------

Rate of Billing                               US $ 1.50/Minute


SHARED TARIFS OF BILLING RATE FOR TRAFFIC TERMINATING IN THE UNITED STATES.
- -------------------------------------------------------------------------- 

                    TO HONDUTEL          TO PRIMUS
                    PER MINUTE           PER MINUTE
                    -----------          ----------

                    US$ 0.75             US$ 0.75


SHARED TARIFS OF BILLING RATE FOR TRAFFIC TERMINATING IN HONDURAS.
- ----------------------------------------------------------------- 

                    TO HONDUTEL          TO PRIMUS
                    PER MINUTE           PER MINUTE
                    -----------          ----------

                    US$ 0.75             US$ 0.75


This rate is applicable to all categories of traffic covered by this agreement
and is expressed in US dollars.

                                      -11-

<PAGE>
 
                                    ANEXO C

                               PAYMENT PROCEDURES


a.   For payments HONDUTEL reports to PRIMUS outgoing traffic from Honduras to
     PRIMUS.

     1.  Automatic traffic

     2.  Semi-automatic traffic (Operator assisted, station to station and
     person to person)

     3.   Incoming reverse charges (collect calls to Honduras)


b.   For payment PRIMUS reports to HONDUTEL:

     1.  Automatic traffic

     2.  Outgoing Service Automatic traffic.

     3.  Incoming reverse Charges (collect calls to the United State).

                                      -12-



<PAGE>
 
                          SECURITYHOLDERS' AGREEMENT

          THIS SECURITYHOLDERS' AGREEMENT (the "Agreement"), entered into this
31st day of July, 1996 is made by and among Primus Telecommunications Group,
Incorporated, a Delaware corporation (the "Company"), K. Paul Singh, a resident
of Virginia, Quantum Industrial Partners LDC, a Cayman Islands limited duration
company ("QIP"), S-C Phoenix Holdings, L.L.C., a Delaware limited liability
company ("S-C"), Winston Partners II LDC, a Cayman Islands limited duration
company ("WP LDC") and Winston Partners II LLC, a Delaware limited liability
company ("WP LLC").  QIP, S-C, NW LDC and WP LLC and their registered assigns
are collectively referred to as the "Investors".

          WHEREAS, pursuant to a Securities Purchase Agreement, dated as of July
31, 1996 (the "Purchase Agreement"), among the Company and the Investors, the
Company shall issue on the date hereof to the Investors (i) 285,714 shares (the
"Purchased Shares") of the Company's common stock, par value $.01 per share (the
"Common Stock") and (ii) warrants (the "Purchase Warrants") exercisable for that
number of shares of Common Stock specified therein and has agreed to issue
additional Common Stock (the "Additional Purchase Agreement Shares") to the
Investors upon the occurrence of certain conditions
 specified in the Purchase
Agreement.  In addition, the Company has issued to the Investors warrants (the
"Contingent Warrants") providing for the issuance of shares of Common Stock upon
the occurrence of certain conditions specified therein; and

          WHEREAS, the parties desire to set forth more fully their agreements
regarding the investment of the Investors in the Company:

          NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, the receipt and sufficiency of which
are acknowledged, the parties hereto, each intending to be legally bound hereby,
agree as follows:

                                   ARTICLE I
                                  DEFINITIONS

          SECTION 1.1.  Definitions.
                        ----------- 

          As used herein, the following terms shall have the respective meanings
set forth below:

          "Affiliate" of any Person means any Person that directly or indirectly
controls, or is under common control with, or is controlled by, such Person.  As
used in this definition, "control" (including with its correlative meanings,
"controlled by" and "under common control with") shall mean the possession,
directly or indirectly, of the power to direct or cause the

<PAGE>
 
direction of the management or policies of a Person (whether through ownership
of securities or partnership or other ownership interests, by contract or
otherwise).  With respect to the Investors, the term "Affiliate" shall include
one or more of Chatterjee Management Company, Purnendu Chatterjee, George Soros
or Soros Fund Management or affiliates thereof, and any Person or entity for
which any such Person or entity acts as investment advisor or investment
manager.

          "Board of Directors" means the Board of Directors of the Company, as
constituted from time to time in accordance with this Agreement and the
Company's by-laws.

          "Business Day" means any day other than a Saturday, Sunday or other
day on which banking institutions are authorized or required by law or executive
order to close in New York, New York.

          "Capital Stock" means any class of capital stock of the Company.

          "Change of Control" means any transaction or series of transactions in
which any person or group (within the meaning of Rule 13d-5 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Sections 13(d) and
14(d) of the Exchange Act) other than Singh (but including any person or group
that becomes an Affiliate of Singh as a result of, or in contemplation of, any
such transaction or series of transactions) becomes the direct or indirect
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), by way of
merger, consolidation, other business combination or otherwise, of greater than
30% of the total voting power (on a fully diluted basis as if all convertible
securities had been converted and all warrants and options had been exercised)
entitled to vote in the election of Directors of the Company or the surviving
Person of any such merger, consolidation or other business combination (if other
than the Company).

          "Compelled Sale" means the sale by the Investors of Investor Shares
pursuant to Section 3.4.

          "Director" means a member of the Board of Directors.

          "Family Group" means a Person's parents, spouse, descendants (whether
or not adopted) and stepchildren and any trust solely for the benefit of such
Person and/or the Person's parents, spouse, stepchildren and/or descendants.

          "First Year Compelled Sale Price" is that Compelled Sale Price
required to be received by an Investor on the date of the Compelled Sale so that
such Compelled Sale Price when added to all cash flows to each Investor from its
investments in the

                                      -2-

<PAGE>
 
Company (including, without limitation, dividends and sales of stock, etc.,
during the period from the date hereof to the date of the Compelled Sale)
provides a rate of return of at least 35% on all cash flows from such Investor
in connection with its investments in the Company (including, without
limitation, the initial purchase, the exercise price with respect to any
exercise of warrants or options, other than the Warrant B Alternative Exercise
Price (as defined in the Purchase Warrants) etc., during the period from the
date hereof to the date of the Compelled Sale).  For purposes of this
definition, the 35% rate of return referred to above is the rate required as of
the date of the Compelled Sale and is not to be annualized.  By way of example
only, on the date of the Compelled Sale, the aggregate of the Compelled Sale
Price and all other cash flows to such Investor from its investment in the
Company must be $1.35 for every  $1.00 of cash flow from such Investor in
connection with its investment in the Company.

          "Investor Shares" means (i) the Purchased Shares issued to the
Investors pursuant to the Purchase Agreement; (ii) the Purchase Warrants issued
to the Investors pursuant to the Purchase Agreement; (iii) the Contingent
Warrants issued to the Investors pursuant to the Purchase Agreement; (iv) any
shares of Common Stock issued or issuable upon exercise of the Purchase Warrants
referred to in clause (ii); (v) any shares of Common Stock issued or issuable
upon exercise of the Contingent Warrants referred to in clause (iii); (vi) the
Additional Purchase Agreement Shares; and (vii) any shares of Common Stock
issued or issuable directly or indirectly with respect to the securities
referred to in clauses (i) through (vi) by way of stock dividend or stock split
or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization.  As to any particular shares constituting
Investor Shares, such shares will cease to be Investor Shares when they have
been (x) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them, or (y) sold to the
public through a broker, dealer or market maker pursuant to Rule 144 (or by
similar provision then in force) under the Securities Act.

          "Person" means any individual, corporation, partnership, firm, joint
venture, association, joint-stock company, trust, unincorporated organization or
other entity.

          "Priority Return" is the cash amount that the Company would have to
transfer to each Investor on the date of the Compelled Sale so that the internal
rate of return on (i) all the cash flows both to and from each Investor from its
investments in the Company (including, without limitation, the initial purchase,
the exercise price with respect to any exercise of warrants or options,
dividends, sale of stock (including the amount received pursuant to the
Compelled Sale, but excluding the Warrant B

                                      -3-

<PAGE>
 
Alternative Exercise Price as defined in the Purchase Warrants) etc., during the
period from the date hereof to and including the date of the Compelled Sale) and
(ii) the cash amount referred to above, would be 35%.

          "Public Offering" means an underwritten public offering of shares of
Common Stock pursuant to an effective Registration Statement under the
Securities Act of 1933, as then in effect or any comparable statement under any
similar federal statute then in force or effect.

          "Qualified Public Offering" means a Public Offering of at least
1,000,000 shares of Common Stock at a price per share of at least $35 (before
underwriting commissions).

          "Singh" means K. Paul Singh, a resident of Virginia, or in the event
he is not then alive or legally competent, his executor, the administrator of
his estate or his legal representative (including, without limitation, his
guardian, conservator or other similar fiduciary).

          "Third Party" means any Person that is not an Affiliate or a member of
the Family Group, as appropriate, of the Company, Singh or the Investors.

          "Underlying Shares" means (i) the Purchased Shares issued to the
Investors pursuant to the Purchase Agreement; (ii) any shares of Common Stock
issued or issuable upon exercise of the Purchase Warrants issued to the
Investors pursuant to the Purchase Agreement; (iii) any shares of Common Stock
issued or issuable upon exercise of the Contingent Warrants issued to the
Investors pursuant to the Purchase Agreement, (iv) the Additional Purchase
Agreement Shares, (v) any shares of Common Stock issued or issuable directly or
indirectly with respect to the securities referred to in clauses (i) through
(iv) by way of stock dividend or stock split or in connection with a combination
of shares, recapitalization, merger, consolidation or other reorganization and
(v) any other shares of Capital Stock held by the Investors; provided that
Underlying Shares will cease to be Underlying Shares when they cease to be
Investor Shares.

                                  ARTICLE II
                    CORPORATE GOVERNANCE; VOTING AGREEMENTS

          SECTION 2.1.  Board of Directors.
                        ------------------ 

             (a) The parties hereto agree that the Investors shall collectively 
be entitled to designate one (1) member of the Board of Directors (the
"Investors' Nominee") to be appointed immediately after the closing of the
issuance of the Purchased Shares and the Purchase Warrant.

                                      -4-

<PAGE>
 
              (b) Singh agrees that he will vote all shares of Capital Stock 
owned by him, controlled by him, or over which he has voting power to elect, and
will otherwise support the election of, the Investors' Nominee as a Director. No
transfer of shares of Capital Stock by Singh shall be permitted unless such
transferee agrees to be bound by the provisions of this Section 2.

              (c) The Company agrees that it will take all actions necessary to
insure that the Investors' Nominee is nominated as a member of the Board of
Directors.

              (d) In the event that any Investors Nominee vacates his seat on 
the Board of Directors, whether by resignation, death, removal or otherwise, the
parties hereto agree to fill any such vacancy with a person designated by the
Investors.

        SECTION 2.2.  Approved Offerings.  Each Investor hereby agrees to vote
                      ------------------                                      
its shares of Capital Stock and take all other necessary actions within its
control to approve a debt and/or equity offering (if such an offering is deemed
to be desirable by the Company) on substantially the same terms as have been
proposed as of the date hereof by Lehman Brothers, financial advisor to the
Company (a draft, dated July 26, 1996, of the registration statement of which
has been delivered to the Investors); provided that the price per security
offered in such a debt and/or equity offering is at least $35.  Each Investor
hereby agrees to waive its right to include any of its Underlying Shares in such
offering.

        SECTION 2.3.  Further Assurances.  Each holder of Capital Stock
                      ------------------                               
hereto, and the Company, as applicable, hereby consents and agrees to vote its
shares of Capital Stock and take all actions required under the Company's
certificate of incorporation and by-laws and otherwise use its best efforts to
cause the transactions contemplated by this Agreement and the provisions hereof
to be effectuated.

        SECTION 2.4.  Termination of Obligations.  The obligations set forth
                      --------------------------                            
in Section 2.1 shall terminate upon the consummation of a Qualified Public
Offering.
                                  ARTICLE III
                    PREEMPTIVE RIGHTS; TRANSFER RESTRICTIONS
                              AND OFFER PROCEDURES

        SECTION 3.1.  Preemptive Rights.
                      ----------------- 

              (a) Except for the issuance of the Company's Capital Stock or
securities (i) pertaining to options or rights

                                      -5-

<PAGE>
 
to acquire shares of Capital Stock existing on the date hereof, (ii) pursuant to
a Public Offering if the managing underwriter of such Public Offering advises
the Company in writing that in its opinion it is necessary for the Investors to
waive their preemptive rights granted hereunder in order for the Public Offering
to achieve its maximum benefit, (iii) pursuant to the exercise of the Purchase
Warrants and/or the Contingent Warrants, (iv) as the Additional Purchase
Agreement Shares, or (v) additional stock or option issuances to directors or
employees of the Company pursuant to stock option plans existing on the date
hereof including the number of shares issuable thereunder as of the date hereof
(or amendments to such plans or new plans if agreed to by the Investors), if the
Company at any time after the date hereof authorizes the issuance or sale of any
Capital Stock or any securities containing options or rights to acquire any
shares of Capital Stock (other than as a dividend on the outstanding Capital
Stock), the Company shall first offer to sell to each Investor a portion of such
Capital Stock or other securities equal to the percentage of Underlying Shares
held by such Investor at the time of such issuance; provided that for purposes
of this Section 3.1, Underlying Shares shall not include (x) the Contingent
Warrants if the proposed issuance of Capital Stock or other securities by the
Company takes place prior to the time the Contingent Warrants are by their terms
exercisable or have by their terms become null and void or (y) the Additional
Purchase Agreement Shares if the right to receive them has not occurred.

          (b) In order to exercise its purchase rights hereunder, each Investor
must within 20 days after receipt of written notice from the Company describing
in reasonable detail the Capital Stock or securities being offered, the purchase
price thereof, the payment terms and such Investor's pro rata percentage
allotment, deliver a written notice to the Company describing its election
hereunder.  Any Capital Stock not elected to be purchased by the end of such 20-
day period shall be reoffered for an additional 10-day period by the Company on
a pro rata basis to the Investors who elected to purchase all shares of such
Capital Stock originally offered to such Investors.

          (c) Upon the expiration of the offering periods described above, the
Company shall be entitled to sell such Capital Stock or securities which the
Investors have not elected to purchase during the 120 days following such
expiration on terms and conditions no more favorable to the purchasers thereof
than those offered to the Investors.  Any Capital Stock or securities offered or
sold by the Company to any Person after such 120-day period must be reoffered to
the Investors pursuant to the terms of this Section 3.1.

                                      -6-

<PAGE>
 
          SECTION 3.2.  Transfer Restrictions.
                        --------------------- 

                (a)  No Investor shall transfer any interest in any Investor 
Shares except pursuant to and in accordance with the provisions of this 
Section 3.2.

                (b)  If, at any time, an Investor wishes to sell any of its 
Investor Shares to a Third Party, such sale shall be made pursuant to the 
following procedures:

                     (i)   Each Investor shall deliver to the Company a written 
notice of its intention (an "Offer Notice"), describing the material terms and
conditions of the proposed sale, including the number of Investor Shares offered
for sale (the "Offered Shares") and the proposed price. The Company shall have
30 calendar days from the date of receipt of the Offer Notice to give each such
Investor written notice that it intends to purchase (or to have its designee
purchase) the Offered Shares on the same terms and conditions set forth in the
Offer Notice (a "Purchase Notice"). If the Company delivers to any such Investor
a Purchase Notice within such time period, the closing for the purchase and sale
of the Offered Shares to be purchased by the Company (or its designee) must take
place within 60 calendar days from the date of such Purchase Notice (the
"Closing Period"). In the event the Company fails to deliver to any such
Investor a Purchase Notice within 30 calendar days from the date of its receipt
of the Offer Notice, delivers a notice indicating that it does not intend to
purchase the Offered Shares or fails to close the purchase and sale of the
Offered Shares prior to the expiration of the Closing Period, any such Investor
will have the right, for a period of 120 calendar days after the earlier of (i)
the date the Company delivers a notice indicating that it does not intend to
purchase the Offered Shares; (ii) the date that is 30 calendar days after the
date of delivery of the Offer Notice to the Company or (iii) the expiration of
the Closing Period to sell the Offered Shares to any Third Party, at a price per
share not less than 95 % of the price proposed in the Offer Notice.

                     (ii)  The purchase price for any Investor Shares purchased 
by the Company (or its designee) pursuant to this Section 3.2(b) will be paid in
cash by wire transfer in immediately available funds to a bank account
designated by each Investor not less than three Business Days prior to closing.

                     (iii) At any closing under this Section 3.2(b), each 
Investor will deliver to the relevant purchaser good and valid title to the
Investor Shares being sold by each such Investor, free and clear of any taxes,
liens or charges.

                (c)  Permitted Transferees.  The restrictions set forth in 
Section 3.2(b) shall not apply to (i) any transfer of Investor Shares by any 
Investor among its Affiliates or (ii) a

                                      -7-

<PAGE>
 
transfer of Investor Shares by any Investor pursuant to the laws of descent and
distribution or among such Investor's Family Group; provided that the provisions
of this Agreement will continue to be applicable to the Investor Shares after
any transfer pursuant to clauses (i) and (ii) above and the transferees of such
Investor Shares shall agree in writing to be bound by the provisions of this
Agreement.

          (d) Transfers to Competitors.  Notwithstanding paragraph (c) above,
without the prior written consent of the Company, no Investor shall transfer any
Investor Shares to any company that either directly or through an Affiliate
competes to a material extent with the Company or any of its subsidiaries in the
provision of international telecommunications services in the United States,
Australia, the United Kingdom, France, Germany, Mexico, Hong Kong, Italy and
Canada.  Each Investor agrees to notify the Company if, to its knowledge, it is
transferring any Investor Shares to any company that either directly or through
an Affiliate competes to a material extent with the Company or any of its
Subsidiaries in the provision of international telecommunications.

          (e) Transfers to One Hundred Persons.  Notwithstanding paragraph (c)
above, without the prior written consent of the Company, the Investors will not
transfer their Investor Shares to more than 100 transferees in the aggregate.

          (f) Termination of Restrictions.  The restrictions set forth in
Section 3.2(b) shall terminate upon the consummation of a Qualified Public
Offering.  The restrictions set forth in Section 3.2(d) shall terminate upon the
earlier of (i) the consummation of a Qualified Public Offering or (ii) three
years from the date hereof.  The restrictions in Section 3.2(e) shall terminate
upon the consummation of a Public Offering.

       SECTION 3.3.  Legends.  Each certificate evidencing outstanding
                     -------                                          
Investor Shares held by Investors shall bear a legend in substantially the
following form:

       THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
       UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  THESE SHARES MAY NOT BE
       SOLD OR OFFERED FOR SALE UNLESS THERE IS AN EFFECTIVE REGISTRATION
       STATEMENT IN EFFECT UNDER THE SAID ACT, OR UNLESS AN EXCEPTION FROM
       REGISTRATION IS AVAILABLE.

       THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS
       ON TRANSFER AS SET FORTH IN THE SECURITYHOLDERS' AGREEMENT DATED AS OF
       JULY 31, 1996, COPIES OF WHICH WILL BE FURNISHED BY PRIMUS
       TELECOMMUNICATION

                                      -8-

<PAGE>
 
          GROUP, INCORPORATED AND ANY SUCCESSOR THERETO UPON REQUEST AND WITHOUT
          CHARGE.

          SECTION 3.4.  Right to Compel Sale.
                        -------------------- 

               (a) If at any time a Third Party offers to buy 80% or more of the
outstanding shares of Capital Stock and holders of a majority of the Capital
Stock, including Singh, (other than the Investor Shares held by the Investors)
agree to sell their shares of Capital Stock to such Third Party, Singh or the
Company shall have the right (but not the obligation) to compel Investors to
sell their Investor Shares to such Third Party if the following conditions are
met: (i) the terms and conditions for the purchase of the Investor Shares
(including the price (the "Compelled Sale Price") are identical to those
relating to the purchase of all other outstanding shares of Capital Stock, (ii)
the Third Party Investor must purchase all of the Investor Shares owned by
Investors, (iii) the consideration to be received by each Investor and every
other seller of shares of Capital Stock to such Third Party shall be cash or
liquid securities, (iv) during the period commencing on the date hereof and
ending on the first anniversary (the "First Anniversary") of the date hereof,
each Investor receives the First Year Compelled Sale Price and (v) following the
First Anniversary, the Compelled Sale Price must be an amount such that the
Priority Return shall be equal to or less than zero.

               (b) In the event the Company or Singh elects to exercise its 
right to cause a Compelled Sale, it will deliver written notice (a "Compelled
Sale Notice") to Investors, setting forth the consideration and describing the
other material terms and conditions of the Compelled Sale, including the
proposed closing date, which shall be not less than 15 Business Days from the
date the Compelled Sale Notice is delivered. At the closing for the Compelled
Sale, against payment of the purchase price for the Investor Shares to be sold
by Investors, Investors will deliver to the Third Party the certificate or
certificates representing the number of Investor Shares held by Investors, duly
endorsed, together with all other documents which are necessary in order to
effect such Compelled Sale.

               (c) The rights and obligations set forth in this Section 3.4 
shall terminate upon the consummation of a Qualified Public Offering.

          SECTION 3.5.  Tag Along.
                        --------- 

               (a) If Singh proposes to sell, in one transaction or in a series 
of related transactions (a "Tag Along Sale") any shares of Common Stock of the
Company to any Third Party, Investors shall have the right to participate in
such Tag Along Sale on the following terms:

                                      -9-

<PAGE>
 
               (i)   Singh shall give Investors not less than 20 Business Days' 
written notice (a "Sale Notice") of its intention, describing the price offered,
all other material terms and conditions of the Tag Along Sale and, if the
consideration payable pursuant to the Tag Along Sale consists in whole or in
part of consideration other than cash, such information relating to such other
consideration as Investors may reasonably request and which is available to
Singh.

               (ii)  In connection with any Tag Along Sale, Investors shall 
have the right, in their sole discretion, to sell, for the same price per share
being paid to, and otherwise on the same terms and conditions, as Singh,
Underlying Shares then held by it in such amount as determined pursuant to the
next sentence. If an Investor has elected to participate in such sale, it shall
be entitled to sell such amount of Underlying Shares equal to its pro rata
ownership of shares in comparison to Singh.

          For example, if the sale contemplated a sale of 100 shares by Singh
and if Singh at such time owns 30% of all the shares of the corporation on a
fully-diluted basis and if an Investor elects to participate and owns 20% of all
shares of the corporation on a fully-diluted basis, Singh would be entitled to
sell 60 shares and the Investor Holder would be entitled to sell 40 Underlying
Shares.

          An Investor may sell a Purchase Warrant or a Contingent Warrant (if
such Contingent Warrant is then exercisable) in the proposed transfer rather
than the Underlying Shares relating thereto.  In such case, the price of such
warrant shall be equal to the price at which the Common Stock is to be
transferred times the number of shares of Common Stock into which such warrant
would be exercisable at that time minus the exercise price of such warrant.
With respect to a Purchase Warrant, any such Purchase Warrant will be treated as
if it were exercisable on such date.

               (iii) Investors must exercise their tag along right by giving
written notice to Singh or the Company, as the case may be, within 15 Business
Days of the delivery of a Sale Notice, specifying the number of Investor Shares
that each Investor desires to include in the Tag Along Sale.  At the closing for
the Tag Along Sale, against payment of purchase price for the Investor Shares to
be sold by Investors, Investors will deliver to the Third Party the certificate
or certificates representing such number of Investor Shares, duly endorsed,
together with all other documents which are necessary in order to effect such
Tag Along Sale.

                                      -10-

<PAGE>
 
              (b) The provisions of this Section 3.5 shall not apply to any 
sale or sales of up to 2.5% (in the aggregate) of the amount of Common Stock 
owned by Singh on the date hereof.

              (c) The rights and obligations set forth in this Section 3.5 shall
terminate upon the consummation of a Qualified Public Offering.


                                   ARTICLE IV
                                 MISCELLANEOUS

          SECTION 4.1.  Share Certificates.  Any shares of Capital Stock issued
                        ------------------                                     
to an Investor pursuant to the Purchase Agreement, Purchase Warrant, Contingent
Warrant, or pursuant to preemptive rights exercised hereunder will be
Permanently Unrestricted Share Certificates (as defined in the by-laws of the
Company).  The Company shall not amend its by-laws with respect to Article IX
thereof or in any other way that adversely affects an Investor or the
transferability of shares owned by such Investor, without such Investor's prior
written consent.

          SECTION 4.2.  Transfers in Violation of Agreement.  Any transfer or
                        -----------------------------------                  
attempted transfer of any Investor Shares in violation of any provision of this
Agreement shall be void, and the Company shall not record such transfer on its
books or treat any purported transferee of such Investor Shares as the owner of
such shares for any purpose.

          SECTION 4.3.  Amendment and Waiver.  Except as otherwise provided
                        --------------------                               
herein, no modification, amendment or waiver of any provision of this Agreement
shall be effective against any party hereto unless such modification, amendment
or waiver is approved in writing by such party.

          SECTION 4.4.  Severability.  Whenever possible, each provision of this
                        ------------                                            
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement shall be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.

          SECTION 4.5.  Entire Agreement.  Except as otherwise expressly set
                        ----------------                                    
forth herein, this document, the Purchase Agreement, the Registration Rights
Agreement, the Purchase Warrant and the Contingent Warrant embody the complete
agreement and understanding among the parties hereto with respect to the

                                      -11-

<PAGE>
 
subject matter hereof and supersede and preempt any prior understandings,
agreements or representations by or among the parties, written or oral, which
may have related to the subject matter hereof in any way.

          SECTION 4.6.  Successors and Assigns.  The provisions of this
                        ----------------------                         
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, and to the extent applicable heirs,
executors, administrators and legal representatives and any subsequent holders
of Investor Shares and the respective successors and assigns of each of them, so
long as they hold Investor Shares.

          SECTION 4.7.  Counterparts.  This Agreement may be executed in
                        ------------                                    
separate counterparts each of which shall be an original and all of which taken
together shall constitute one and the same agreement.

          SECTION 4.8.  Remedies.  The parties hereto agree and acknowledge that
                        --------                                                
money damages may not be an adequate remedy for any breach of the provisions of
this Agreement and that the parties hereto shall have the right to injunctive
relief, in addition to all of its rights and remedies at law or in equity, to
enforce the provisions of this Agreement.  Nothing contained in this Agreement
shall be construed to confer upon any Person who is not a signatory hereto any
rights or benefits, as a third party beneficiary or otherwise.

          SECTION 4.9.  Notices.  All notices, demands or other communications
                        -------                                               
to be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given when personally
delivered or received by certified mail, return receipt requested, confirmed
telecopy or sent by guaranteed overnight courier service.  Such notices, demands
and other communications will be sent to the parties as indicated in the
Purchase Agreement, and to Singh as indicated below, or to any party (including
any new party) at such address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.

               K. Paul Singh
               9888 Windy Hollow Road
               Great Falls, Virginia 22066
               Fax:  703-757-9378

               with a copy to:

               Pepper, Hamilton & Scheetz
               3000 Two Logan Square
               Eighteenth and Arch Street
               Philadelphia, Pennsylvania 19103-2799
               Attention: Julia D. Corelli

                                      -12-

<PAGE>
 
          SECTION 4.10.  Governing Law.  The corporate law of Delaware will
                         -------------                                     
govern all issues concerning the relative rights of the Company and its
stockholders.  All other issues concerning this Agreement shall be governed by
and construed in accordance with the laws of the State of New York, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of New York or any other jurisdiction) that would cause the
application of the law of any jurisdiction other than the State of New York.

          SECTION 4.11.  Descriptive Headings.  The descriptive headings of this
                         --------------------                                   
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.

          IN WITNESS WHEREOF, the parties, by their respective officers duly
authorized, have caused this Agreement to be duly executed and delivered as of
the date hereof.

                              PRIMUS TELECOMMUNICATIONS GROUP, 
                              INCORPORATED

                                  
                              By: /s/ K. Paul Singh
                                 ------------------------------      
                                    K. Paul Singh
                                    President, Chief Executive Officer



                               /s/ K. Paul Singh
                              ---------------------------------      
                              K. PAUL SINGH


                              QUANTUM INDUSTRIAL PARTNERS LDC


                              By: /s/ Michael Neus
                                 ------------------------------
                                    Name:  Michael Neus
                                    Title: Attorney-in-fact       


                              S-C PHOENIX HOLDINGS, L.L.C.


                              By: /s/ Michael Neus
                                 ------------------------------
                                    Name:  Michael Neus
                                    Title: Attorney-in-fact       

                            [EXECUTIONS CONTINUED]

                                      -13-

<PAGE>
 
                              WINSTON PARTNERS II LLC

                              By:   Chatterjee Advisors L.L.C., its manager

    
                              By: /s/ Peter Hurwitz
                                 ------------------------------
                                    Name: Peter Hurwitz
                                    Title: Manager


                              WINSTON PARTNERS II LDC


                              By: /s/ Peter Hurwitz
                                 -------------------------------
                                    Name: Peter Hurwitz
                                    Title: Attorney-in-fact       

                                      -14-



<PAGE>
 
                                                                      
                                                                   Exhibit 10.12
                                                                                


                          TELSTRA CORPORATION LIMITED

                                  ("Telecom")



                                      and



                                AXICORP PTY LTD

                             ("Service Provider")


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

                          SERVICE PROVIDER AGREEMENT

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

<PAGE>
 

<TABLE> 
<CAPTION> 
 <S>                                                                        <C> 
 1  INTERPRETATION......................................................... 1
 2  APPOINTMENT AND OPERATION.............................................. 7
 3  OPERATIONS MANUAL...................................................... 9
 4  RELATIONSHIP OF PARTIES................................................ 9
 5  STEERING COMMITTEE..................................................... 10
 6  PERFORMANCE TARGETS.................................................... 11
 7  SERVICE PROVIDER'S OBLIGATIONS......................................... 12
 8  TELECOM'S OBLIGATIONS.................................................. 15
 9  BILLING CUSTOMERS...................................................... 18
10  DISCONNECTION.......................................................... 22
11  PROVISION OF BILLING AND CUSTOMER INFORMATION.......................... 23
12  PROVISION OF THE BILLING ENQUIRY SERVICE............................... 24
13  PROVISION OF FULL CUSTOMER SERVICE..................................... 26
14  PROVISION OF THE CUSTOMER ENQUIRY SERVICE.............................. 28
15  EQUIPMENT.............................................................. 30
16  TERM AND TERMINATION................................................... 31
17  INTELLECTUAL PROPERTY RIGHTS, TRADE NAMES AND TELECOM               
    CONFIDENTIAL INFORMATION............................................... 34
18  LIMITATION OF LIABILITY AND INDEMNITY.................................. 37
19  ENTIRE AGREEMENT AND AMENDMENT......................................... 38
20  SALE, ASSIGNMENT AND TRANSFER.......................................... 38
21  WAIVER AND VARIATION................................................... 38
22  NOTICES................................................................ 38
23  GOVERNING LAW, JURISDICTION AND SERVICE OF PROCESS..................... 39
24  SEVERABILITY........................................................... 39
25  EXERCISE OF RIGHTS..................................................... 40
26  FURTHER ASSURANCES..................................................... 40
27  FORCE MAJEURE.......................................................... 40
28  REMEDIES CUMULATIVE.................................................... 40
29  LEGISLATION............................................................ 41
30  SET OFF................................................................ 41
31  APPROVALS AND CONSENTS................................................. 41
32  DUTIES, TAXES, Etc..................................................... 41
33  DISPUTE RESOLUTION..................................................... 42
34  PUBLICITY.............................................................. 42
</TABLE>
 

<PAGE>
 
                                   AGREEMENT



THIS AGREEMENT
 is made on the Commencement Date.


BETWEEN:  TELSTRA CORPORATION LIMITED (ACN 051 775 556) a corporation organised
          under the laws of Australia, through its business unit Mobile
          Communication Services, having a place of business at 79 Victoria
          Parade, Collingwood, Victoria ("Telecom")
    
AND:      AXICORP PTY LTD (ACN 061 754 943) a company incorporated in the State
          of Victoria and having its registered office at Level 4, 468 St. Kilda
          Road, Melbourne Victoria ("Service Provider"),      


RECITALS:

Telecom is the holder of a public mobile license under the Act and pursuant to
that license supplies the Mobile Service to the public generally in Australia.

Service Provider is appointed by Telecom to promote the Mobile Services in the
Territory, and to provide certain services to persons acquiring the Mobile
Services, on the terms and conditions of this Agreement.

The services provided by Service Provider under this Agreement are to be rolled
out in three stages.  From the commencement of this Agreement, Service Provider
operates as a Premium Telecom MobileNet dealer.  In the second stage, which
commences on the Launch Date, Service Provider provides the Billing Service, the
Billing Enquiry Service and the Credit Management Service in addition to its
operation as a dealer.  In the third stage, which commences on the Full Customer
Service Launch Date, Service Provider also provides the Full Customer Service.

    
Telecom acknowledges that the Federal Government's policy, as enacted in the 
Act, is to foster competition amongst telecommunications service providers.  The
object of this Agreement is to provide Service Provider with the opportunity to
provide certain services typically provided by telecommunication service
providers to persons acquiring the Mobile Services.  The purpose of this
Agreement is not to limit or restrict the number of persons employed by Telecom
to provide such services.      


OPERATIVE PROVISIONS:

1    INTERPRETATION

1.1  The following words have these meanings in this Agreement unless the
     contrary intention appears.

     "Act" means the Telecommunications Act 1991 (Cth).
    
- --------------------------------------------------------------------------------
Service Provider Agreement                                                Page 1
     

<PAGE>
 
Telstra Corporation Limited                                    AXICORP AGREEMENT
                                                               -----------------
- --------------------------------------------------------------------------------

     "Acceptance Criteria" means the criteria set out in clause 13.2 which
     Service Provider must meet prior to commencing the supply of the Full
     Customer Service.

     "Affiliate" means a person:

     (a)  who Service Provider wishes to appoint to promote the Mobile Services,
          and procure New Connections, in accordance with this Agreement; and

     (b)  whose appointment has been approved in writing by Telecom; and

     (c)  whose appointment has not been terminated pursuant to clause 2.9

     and "Affiliates" shall be similarly construed.

     "AMPS Mobile Sevice" means an analogue cellular mobile service supplied by
     Telecom.

     "AMPS Connection" means a Connection in relation to the AMPS Mobile
     Service.

     "Applicable Law" means the Trade Practices Act 1974 (Cth), the Fair Trading
     Act 1985 (Vic), any fair trading any legislation in force in the Territory
     from time to time, legislation of the Commonwealth, States and Territories
     of Australia in force from time to time of a similar nature, principles of
     equity and the common law relating to trading or the supply of goods or
     services in the Territory, competition or trade practices generally.

     "Application Form" has the meaning given to that phrase in clause 7.6(a).

     " Beneficial Owner" means a person having an interest as a sole proprietor,
     partner or joint venturer in Service Provider or the Business or having a
     Relevant Interest in any shares in Service Provider, whether directly or
     through one or more interposed companies, partnerships or trust estates,
     and includes beneficiaries under any trust or settlement of which Service
     Provider or a shareholder in Service Provider is a trustee and any other
     grammatical form of "Beneficial Owners" shall bear a similar meaning.

     "Billing Enquiry Service" has the meaning given to it in clause 12.1.

     "Billing Service" means the assignment by Telecom to Service Provider of
     PIP Debts as contemplated by clause 9 of this Agreement and the collection
     by Service Provider of those Debts.

     "Business" means the business carried out by Service Provider relating to
     this

     "Business Day" means a day on which banks are open for general banking
     business in the place specified in Victoria.

     "Churn" means the Connection of a customer who was a customer of another
     carrier immediately preceding Connection.

     "Commencement Date" means the date specified in Item 1 of Schedule 1.

- --------------------------------------------------------------------------------
Service Provider Agreement                                                Page 2

<PAGE>
 
Telstra Corporation Limited                                    AXICORP AGREEMENT
                                                               -----------------
- --------------------------------------------------------------------------------

     "Connection" means a customer who has made an application to Telecom to use
     a Mobile Service and that application has been accepted by Telecom so that
     the customer is personally entitled to lawfully use the Mobile Service.

     "Contract Year" means a period commencing on 1 July in one calendar year
     and ending on 30 June in the following calendar year, except the first
     Contract Year which commences on the Commencement Date and ends on the
     succeeding 30 June.

     "Controlled Entity" means:

     (a)  any body corporate in which Service Provider or any current director
          or any person who has been a director in the last 2 years controls the
          composition of the board of directors or at any general meeting of
          which Service Provider is in a position to cast or control the casting
          of more than one half of the maximum number of votes that might be
          cast in relation to any motion;

     (b)  any partnership in which Service Provider is beneficially entitled
          either together or separately and whether directly or indirectly to
          more than one half of the voting rights, income or capital of the
          partnership;

     (c)  any unincorporated joint venture or consortium in which Service
          Provider is beneficially entitled either together or separately and
          whether directly or indirectly to more than half one of the voting
          rights, output or assets of the joint venture or consortium; and

     (d)  any trust of which Service Provider is the trustee or to which Service
          Provider is beneficially entitled either together or separately and
          whether directly or indirectly to more than one half of the voting
          rights, income or capital of the trust.

     "Credit Management Service" means the credit assessment and bad debt
     management services set out in clause 9.19.

     "Customer Enquiry Service" has the meaning given to it in clause 14.1.

     "Disconnection" means a New Connection which has been discontinued or
     suspended.

     " Displayed Marks" means the Trade Marks set out in Schedule 4.

     "Equipment" means all or any of the following:

     (a)  RAM Equipment; and

     (b)  such other things as Telecom supplies to Service Provider from time to
          time and determines to be "Equipment" for the purposes of this
          definition.

     "Force Majeure" in relation to a party, means an act of God, fire,
     lightning, explosion, flood, subsistence, insurrection or civil disorder,
     war or military operation, government or quasi government restraint,
     expropriation, prohibition, intervention, direction or embargo, inability
     or delay in obtaining government or quasi government approvals, consents,
- --------------------------------------------------------------------------------
Service Provider Agreement                                                Page 3

<PAGE>
 
Telstra Corporation Limited                                    AXICORP AGREEMENT
                                                               -----------------
- --------------------------------------------------------------------------------

     permits, licenses or authorities, industrial disputes of any kind and any
     other cause whether similar or not outside of the party affected control.

     "Full Customer Service" has the meaning given to it in clause 13.1.

     "Full Customer Service Application" has the meaning given to it in clause
     13.4.

     "Full Customer Service Launch Date" has the meaning given to it in clause
     2.3.

     "Generic Title" means a title to be determined by Telecom in consultation
     with Service Provider to be used to describe participants in the Enhanced
     PIP Programme.

     "Gross Bill" means the total amount of the network activation fees, network
     access fees, National Direct Dial call charges and call diversion charges
     that Telecom charges a customer in respect of a Connection.  All other
     charges payable by a customer to Telecom are excluded from the calculation
     of the Gross Bill.

     "Gross Billing Error" means a manifest and self evident error in
     information made available to Service Provider by Telecom pursuant to
     clause 9.1.

     "GSM Mobile Service" means a digital mobile service commonly known as
     "Global System for Mobile Communications" supplied by Telecom.

     "GSM Connection" means a Connection in respect of the GSM Mobile Service.

     "Information" means information and know how including, but not limited to,
     source and object codes, flow charts and logic diagrams, data concepts,
     technology, manufacturing processes, industrial, marketing and commercial
     knowledge, customer lists and all customer related information whether or
     not in printed form.

     "Intellectual Property Rights" means all rights conferred under statute,
     common law and equity in and in relation to inventions, designs, trade
     marks, trade names, logos and get up, circuit layouts, confidential
     information and copyright and any other intellectual property rights as
     defined by Article 2 of the World Intellectual Property Organisation
     Convention of July 1967.

     "Launch Date" has the meaning given in clause 2.3.

     "mobile service" means a public mobile telecommunications service as
     defined in section 25 of the Act.

     "Mobile Service" means the AMPS Mobile Service or the GSM Mobile Service
     and "Mobile Services" means both of them.

     "Net Connections" means the number of New Connections in a Quarter less the
     number of Disconnections in that Quarter. 

     "New Connection" means a Connection in relation to a Mobile Service that
     Telecom is reasonably satisfied was arranged or procured by Service
     Provider or an Affiliate in the Territory after the Commencement Date.

- --------------------------------------------------------------------------------
Service Provider Agreement                                                Page 4

<PAGE>
 
Telstra Corporation Limited                                    AXICORP AGREEMENT
                                                               -----------------
- --------------------------------------------------------------------------------

    
     "Operations Manual" means the Enhanced PIP operations manual to be
     developed by the parties in accordance with clause 3 setting out, amongst
     other things, the manner in which the parties must perform certain of their
     obligations under this Agreement.      

     "PIP Connection" means:

     (a)  a New Connection, or

     (b)  a Serviced Connection.

     "PIP Debt" means Telecom Debts which have been offered for assignment by
     Telecom and deemed to have been accepted by Service Provider in accordance
     with clause 9 of this Agreement.

     "Quarter" means a 3 month period (or part thereof) commencing on 1 January,
     1 April, 1 July or 1 October.

     "RAM Equipment" means rapid access module hardware for use by Service
     Provider in the electronic processing of customer applications at Service
     Provider's premises.

     "Related Body Corporate" has the meaning given to that phrase in section 9
     of the Corporations Law.

     "Relevant Interest" has the meaning given to that phrase in Division 5 of
     Part 1.2 of the Corporations Law.

     "Service Provider Confidential Information" means all information disclosed
     or otherwise provided by Service Provider to Telecom or otherwise obtained
     by Telecom relating to or developed in connection with the Business which:

     (a)  is not Telecom Confidential Information; and

     (b)  is not, by reason of general publication or the like, readily
          available in the public domain (other than as a result of an
          unauthorised disclosure or other breach of confidence).

     "Serviced Connection" means a Connection in respect of which the relevant
     customer has requested or consented to Service Provider providing the
     Billing Service. the Billing Enquiry Service, the Credit Management Service
     and, if applicable, the Full Customer Services and Telecom has agreed to
     the provision of those services in respect of that Connection.

     "Steering Committee" has the meaning given in clause 5.1.

     "Telecom Confidential Information" means all information disclosed or
     otherwise provided by Telecom to Service Provider or otherwise obtained by
     Service Provider relating to or developed in connection with the business
     of Telecom, a Mobile Service or customers who have contracted to use a
     Mobile Service and any Value Added Services, which is not, by reason of
     general publication or the like, readily available in the public 

- --------------------------------------------------------------------------------
Service Provider Agreement                                                Page 5

<PAGE>
 
Telstra Corporation Limited                                    AXICORP AGREEMENT
                                                               -----------------
- --------------------------------------------------------------------------------

     domain (other than as a result of an unauthorised disclosure or other
     breach of confidence).
         
     "Telecom Debt" means a debt owed to Telecom by a customer in respect of a
     PIP Connection or a Value Added Service supplied in connection with that
     PIP Connection.     

     "Territory" means the territory specified in Item 3 of Schedule 1.

     "Trade Mark" means any trade mark owned by Telecom (whether registered or
     unregistered).

     "VAS Fee%" has the meaning set out in paragraph 1.3(c) of Schedule 2.

     "Value Added Services" means the "MobileNet Memo" service, the "MobileNet
     MessageBank" service, the "Safe'n Sure" insurance service and the
     "MobileNet EasyCall" service.

12   In this Agreement unless the contrary intention appears:

     (a)  the singular includes the plural and vice versa;

     (b)  a reference to an agreement or another instrument includes any
          variation or replacement of either of them;
                  
     (c)  a reference to an annexure or schedule is a reference to an annexure
          or schedule to this Agreement and a reference to this Agreement
          includes a recital, annexure or schedule;     

     (d)  a reference to a clause is a reference to a clause of this document
          and a reference to a paragraph of the schedules;

     (e)  a reference to a statute, ordinance, code or other law includes
          regulations and other instruments under it and consolidations,
          amendments, reenactments or replacements of any of them;

     (f)  the word person includes a firm, body corporate, unincorporated
          association or an authority;

     (g)  a reference to a person includes the person's executors
          administrators, successors, substitutes (including, without
          limitation, persons taking by novation) and assigns;

     (h)  all dollar amounts are expressed in Australian dollars;

     (i)  if the day on which the payment of money falls due is not a Business
          Day, the due date shall be deemed to be the next Business Day;

     (j)  a reference to a third person is a reference to a person who is not a
          party to this Agreement; and

- -------------------------------------------------------------------------------
Service Provider Agreement                                             Page 6

<PAGE>
 
Telstra Corporation Limited                                  AXICORP AGREEMENT
                                                             ------------------
- -------------------------------------------------------------------------------
     
     (k)  an agreement representation or warranty on the part of or in favour of
          two or more persons binds or is for the benefit of them jointly and
          severally.

1.3  For the purposes of this Agreement each Affiliate shall be deemed to be a
     contractor of Service Provider regardless of whether or not any express
     contract exists between Service Provider and that Affiliate.

1.4  Headings are included for convenience and do not affect the interpretation
     of this Agreement.

2    APPOINTMENT AND OPERATION

2.1  Telecom appoints Service Provider on the terms of this Agreement in the
     Territory to:
              
     (a)  promote the Mobile Services; and     

     (b)  provide the Billing Service, the Billing Enquiry Service, the Credit
          Management Service and the Full Customer Service to certain persons
          acquiring the Mobile Services;

     (c)  and Service Provider agrees to act in that capacity.

2.2  Service Provider acknowledges that its appointment under clause 2.1 is non-
     exclusive.

2.3  (a)  Service Provider must not commence providing the Billing Service, the
          Billing Enquiry Service or the Credit Management Service until a
          launch date to be determined by the Steering Committee ("Launch
          Date").  The parties acknowledge that they will aim for a Launch Date
          of 1 July 1995, but Telecom does not represent or warrant that that
          date or any other is achievable or will be achieved.

     (b)  Service Provider must not commence providing the Full Customer Service
          unless Service Provider's Full Customer Service Application has been
          approved in writing by Telecom.  The date of commencement of the Full
          Customer Service shall be determined by the Steering Committee ("Full
          Customer Service Launch Date").  The parties acknowledge that they
          will aim for an Full Customer Service Date which is no longer than 1
          Month after the date on which Service Provider makes the Full Customer
          Service Application pursuant to clause 13.4, but Telecom does not
          represent or warrant that that date or any other is achievable or will
          be achieved.

2.4  Any existing agreement, Strategic Partnership Agreement, SPA Replacement
     Agreement or FlexiPlan 1000 agreement relating to the Mobile Services
     between Telecom and Service Provider or any Related Body Corporate of
     Service Provider terminates on and from the Commencement Date.  Service
     Provider warrants that it is authorised to enter into this clause 2.4 on
     behalf of all of its Related Bodies Corporate who are parties to such an
     agreement.

- -------------------------------------------------------------------------------
Service Provider Agreement                                              Page 7

<PAGE>
 
Telstra Corporation Limited                                    AXICORP AGREEMENT
                                                               -----------------
- --------------------------------------------------------------------------------

2.5  Subject to clause 2.6, Service Provider may not subcontract the performance
     of any of its obligations under this Agreement without the prior written
     consent of Telecom (which consent must not be unreasonably withheld).

2.6  Service Provider may promote the Mobile Services, and procure New
     Connections, by means of Affiliates.  The promotion of the Mobile Services
     and the procurement of New Connections for the purposes of this clause 2.6
     does not include the provision of the Billing Service, Billing Enquiry
     Service, Credit Management Service or Full Customer Service by an
     Affiliate.  Subject to the terms of this Agreement, the remuneration of
     Affiliates shall  be the sole responsibility of Service Provider and
     Telecom shall not be required to make any payment to Affiliates whatsoever.

2.7  Service Provider must ensure that Affiliates:

     (a)  at all times act in a manner that is consistent with this Agreement;
          and

     (b)  do not do, or fail to do, any act or thing which if done, or failed to
          be done, by
          Service Provider would amount to a breach of this Agreement.

2.8  Service Provider agrees to indemnify, and keep indemnified, Telecom from
     and against liability and all loss and damage of any kind whatsoever
     (including indirect, special or consequential loss or damage) caused
     directly or indirectly from any breach by Service Provider of clause 2.7.

2.9  The appointment of an Affiliate:

     (a)  may be terminated by Telecom giving notice to Service Provider if the
          Affiliate does, or falls to do, any act or thing which if done, or
          failed to be done, by Service Provider would amount to a breach of
          this Agreement;

     (b)  may be terminated at any time by Service Provider provided Service
          Provider  gives Telecom 30 days prior written notice of that
          termination; and
    
     (c)  automatically terminates upon the expiration or termination of this
          Agreement.      

2.10 Service Provider must ensure that, where Telecom has a right under this
     Agreement to carry out any inspection or other conduct in relation to
     Service Provider or any of its premises, Telecom can carry out such an
     inspection or other conduct in relation to any Affiliate or any of its
     premises.


3    OPERATIONS MANUAL

3.1  Telecom and Service Provider acknowledge that many of the detailed
     procedures necessary or desirable to fully implement this Agreement have
     not yet been agreed upon.  Telecom and Service Provider agree to use their
     best efforts to carry out bona fides negotiations in relation to, and agree
     upon, such procedures.  Where appropriate, these procedures will be
     included in the Operations Manual.

- -------------------------------------------------------------------------------
Service Provider Agreement                                          Page 8

<PAGE>
 
Telstra Corporation Limited                                   AXICORP AGREEMENT 
                                                              -----------------
- -------------------------------------------------------------------------------

3.2  The parties shall use their best endeavours to develop the Operations
     Manual as soon as practicable. The operations Manual shall be developed,
     and may be amended from time to time, by Telecom in consultation with
     Service Provider. Service Provider acknowledges that:

     (a)  It will be necessary for Telecom to ensure that the Operations Manual
          is substantially identical to any operations manual developed pursuant
          to an agreement similar to this Agreement entered into by Telecom and
          another party; and

     (b)  It is likely that it will be necessary for Telecom's computer systems
          to treat Service Provider substantially identically to such other
          parties.

3.3  Where this Agreement provides that the Operations Manual shall contain
     certain matters (including performance benchmarks or operational
     specifications) with which Service Provider is obliged to comply, and those
     matters are not agreed by the Steering Committee within 90 days of the time
     at which such matters are first applicable to Service Provider, then
     Telecom may by written notice to Service Provider terminate this Agreement
     with immediate effect.


4    RELATIONSHIP OF PARTIES

4.1  Subject to clause 4.2, Service Provider is an independent contractor and is
     not the agent, joint venturer, partner or employee of Telecom and Telecom
     shall not be obligated by any agreements, representations or warranties
     made by Service Provider to any person.  Service Provider and Telecom
     acknowledge that neither has the power or authority, directly or
     indirectly, or through its servants or agents, to bind the other party with
     a customer or a third person, or otherwise to negotiate or enter into a
     binding relationship for or on behalf of the other party.

4.2  Service Provider is the agent of Telecom for the sole purposes of receiving
     from customers executed and correctly and fully completed Application Forms
     and processing those Application Forms in accordance with this Agreement
     and for the purpose of holding and of using any customer information
     supplied by Telecom.


5    STEERING COMMITTEE
    
5.1  The parties will establish a steering committee  ("Steering Committee")
     whose primary function will be to monitor the practical operation of this
     agreement and to provide a forum in which the parties can raise matters in
     relation to which the parties are required or wish to consult with each 
     other.       

5.2  Each party must appoint two representatives to the Steering Committee.  At
     least one representative of each party will have authority to make binding
     decisions for the party they represent.

5.3  The parties agree that:

     (a)  the Steering Committee will meet monthly or as the parties otherwise
          agree;

- --------------------------------------------------------------------------------
Service Provider Agreement                                             Page 9

<PAGE>
 
Telstra Corportion Limited                                   AXICORP AGREEMENT
                                                             -----------------
- --------------------------------------------------------------------------------
    
     (b)  the Steering Committee's chairperson will alternate from  one  meeting
          to  the  next between the parties' representatives;      

     (c)  responsibility for taking minutes, distributing draft minutes,
          incorporating amendments to draft minutes, distributing draft agendas
          and incorporating amendments to draft agendas, will alternate between
          representatives from one meeting to the next;

     (d)  a party may of its own motion call a meeting of the Steering Committee
          provided that it provides the other party with no less than two
          business days' notice of the time and place of such meeting; and

     (e)  there must be at least one representative of each party with the
          authority referred to in clause 5.2 present at the time and place
          nominated for the Steering Committee meeting before that meeting can
          proceed.  Each party shall use its best endeavours to ensure that such
          a representative is present at the time and place nominated for any
          Steering Committee meeting.

5.4  The parties' representatives on the Steering Committee must examine any
     matter for consultation promptly and must use their best endeavours acting
     in good faith to reach agreement in relation to those matters.

5.5  The Steering Committee shall meet at least once per quarter or less often
     if mutually agreed by the parties for the purpose of reviewing the
     performance of this Agreement, and the parties rights (including rights to
     remuneration) and obligations under this Agreement, provided that no
     amendments shall be made to the Agreement unless agreed to in writing by
     the parties.

6.   PERFORMANCE TARGETS

6.1  Subject to clause 6.2 and 6.3, the Steering Committee must on or before 30
     June each year (or such other date as may be agreed) and agree upon a set
     of performance targets for Service Provider for the year commencing on 1
     July of that year and ending on 30 June of the following year.  If the
     Steering Committee fails to agree upon such targets by 30 June (or such
     other date as may be agreed) of a particular year then Telecom may
     terminate this Agreement by giving 30 days notice in writing. A set of
     performance targets may include targets relating to:

     (a)  maximum and/or minimum New Connections or Net Connections relating to
          either or both of the AMPS Mobile Service and the GSM Mobile Service;
    
     (b)  churning customers from a competing mobile service to a Mobile Service
          or migrating customers from the AMPS Mobile Service to the GSM Mobile
          Service;      

     (c)  the types of customers Service Provider is required to connect to the
          Mobile Services;

     (d)  the performance of the Billing Service, the Billing Enquiry Service,
          the Credit Management Service and, if applicable, the Full Customer
          Service; and

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     (e)  maximum and/or minimum penetration of each of the Value Added
          Services.
6.2  The set of performance targets to apply for the three period from the
     Launch Date are:
    
     (a)  Service Provider must achieve at least 2000 PIP Connections per month
          of which.      

          (i)   at least 1000 must be New Connections; and

          (ii)  at least 1000 must be Serviced Connections;
    
     (b)  of the PIP Connections:      

          (i)   60% (+/- 2%) must be customers on Flexiplan 10, Flexiplan 20 or
                Flexiplan Standard;

          (ii)  20% (+/- 2%) must be customers on Flexiplan 80, Flexiplan 130 or
                Flexiplan 240; and

          (iii) 20% (+/- 2%) must be customers on Corporate Flexiplan;

     (c)  at least 60% of New Connections must be GSM Connections;

     (d)  of the New Connections that are GSM Connections:

          (i)   at least 45% must have immediately before GSM Connection
                formerly been AMPS or GSM customers of another carrier;

          (ii)  at least 40% must have immediately before GSM Connection
                formerly been customers in respect of the AMPS Mobile Service;
                and

          (iii) not more than 15% must have immediately before GSM Connection
                formerly been persons who did not acquire a mobile service;

     (e)  of the New Connections that are AMPS Connections:

          (i)   at least 60% must have immediately before AMPS Connection
                formerly been AMPS or GSM customers of another carrier;

          (ii)  not more than 40% must have immediately before AMPS Connection
                formerly been persons who did not acquire a mobile service; and

     (f)  the Service Provider must achieve the following rates of adoption by
          PIP Connections of the Value Added Services:

          (i)   MessageBank - use by at least 40% of PIP Connections;

          (ii)  Memo - use by at least 10% of PIP Connections;

          
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          (iii)  Insurance (Safe'n'Sure) - use by at least 10% of PIP
                 Connections; and      
    
          (iv)   EasyCall (MobileNet) - use by at least 3% of PIP Connections.
     

6.3  Prior to the expiration of the performance targets specified in clause 6.2
     the Steering Committee must specify new performance targets for the period
     from the expiration of those performance targets to 30 June 1996. If no
     such performance targets are agreed prior to the expiration of the
     performance targets set out in clause 6.2 then Telecom may terminate this
     Agreement by giving 30 days notice in writing.


7    SERVICE PROVIDER'S OBLIGATIONS

7.1  Service Provider must, during the term of this Agreement:

     (a)  to the extent permissible by Applicable Law and subject to clauses 6.1
          and 6.2, at all times use its best endeavours to promote the Mobile
          Services and  the  Value Added Services and to maximise the number of
          New Connections to the Mobile Services within the Territory;

     (b)  carry out the Billing Service, the Billing Enquiry Service, Credit
          Management Service and, if applicable, the Full Customer Service in an
          efficient and professional manner and in accordance with this
          Agreement and the Operations Manual;

     (c)  provide and maintain suitable and sufficient facilities, staff and
          resources to perform its obligations under this Agreement;

     (d)  establish a dealer network owned and operated by Service Provider or
          affiliated with Service Provider;

     (e)  establish an infrastructure to co-ordinate corporate, sales,
          marketing, operations and wholesale functions;

     (f)  provide a distribution channel management organisation to manage
          Service Provider's retail stores, dealers, telemarketing activities
          and other distribution activities;

     (g)  establish a 24-hour nationwide mobile phone repair service;

     (h)  comply with Telecom's requirements for prominent Telecom public
          display signage within Service Provider owned, operated or affiliated
          stores;

     (i)  inform customers in respect of PIP Connections that complaints
          relating to the Mobile Services must be directed to Service Provider
          and that Service Provider will be the assignee of Telecom of PIP Debts
          and will be collecting those PIP Debts in that capacity;

     (j)  use its best endeavours to ensure that customers purchasing mobile
          phones are fully and properly instructed in all aspects of the
          operation of the phones and the relevant Mobile Service;

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     (k)  sell only AUSTEL approved mobile phones to customers;

     (l)  use its best endeavours not to do or permit the doing (whether by
          customers or itself) of anything likely to impair, interfere with or
          damage a Mobile Service network or its operation;

     (m)  immediately advise Telecom if it has knowledge that any person is
          infringing or attempting to infringe any Intellectual Property Rights
          owned or used by Telecom;

     (n)  permit persons authorised by Telecom to inspect and take copies, at
          any reasonable time, of all records relating to the performance of
          this agreement in the power, possession or reasonable control of
          Service Provider and furnish to Telecom, upon request, such reports as
          Telecom requires in connection with Service Provider's obligations
          under this Agreement;

     (o)  without limiting the generality of clause 7. 1 (n) above, keep full,
          true and accurate records in such detail and format as Telecom may
          reasonably require from time to time relating to:
    
          (i)  PIP Connections; and      

          (ii) the performance of the Billing Service, the Billing Enquiry
               Service, the Credit Management Service and, if applicable, the
               Full Customer Service;

     (p)  comply with all statutory and common laws including, but not limited
          to, the Applicable Law;

     (q)  subject to clause 17, at all times identify itself by means of the
          Generic Title and  do so in accordance with such instructions as are
          provided by Telecom from time to time; and

     (r)  maintain all permits and registrations necessary to entitle it to
          lawfully perform its obligations under, and the activities
          contemplated by, this Agreement.

7.2  Service Provider must meet the performance targets set out  in  clauses
     6.1  and  6.2  and  any performance targets subsequently set by the
     Steering Committee pursuant to clauses 6.1 and 6.3.  If Service Provider
     fails to meet and comply with such targets the matter must be referred to
     the Steering Committee for resolution by direct negotiation. If the matter
     cannot be resolved within 30 days of being referred to the Steering
     Committee, Telecom may at its option by providing 14 days written notice:

     (a)  specify new rates of remuneration to replace those set out in Schedule
          2; or

     (b)  terminate this Agreement.



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7.3  Prior to the Launch Date and before the commencement of each Quarter
     Service Provider must provide Telecom with the opportunity to review
     Service Provider's proposed must provide distribution and business plans
     and obtain Telecom's approval of those plans. The distribution plan must
     set out all distribution activities and campaigns to be carried out by
     Service Provider.

     The business plan must set out all activities and campaigns to be carried
     out by Service Provider in the following Quarter in relation to Service
     Provider's performance of its obligations under this Agreement.  The
     business plan includes, but is not limited to, information concerning
     Service Provider's business structure, the location of Service Provider's
     activities, the promotion by Service Provider of particular goods or
     services or both, the targeting of particular geographic areas or
     particular customers or classes of customers, and other matters related to
     the management, structure and operation of the Mobile Services Division of
     Service Provider.  The business plan must also detail any proposed
     promotion or supply of a Mobile Service in conjunction with a
     telecommunications service that competes with a telecommunications service
     supplied by Telecom.

7.4  Service Provider must not carry out any activity or campaign other than in
     accordance with a business plan approved in writing by Telecom pursuant to
     clause 7.3.

7.5  Service Provider shall not make any representation, or statement, to any
     person with respect to a Mobile Service, its suitability for any particular
     use, compatibility with any equipment, its characteristics, performance or
     otherwise, that is inconsistent with any written specifications relating to
     the Mobile Service provided by Telecom to Service Provider specifically for
     the purpose of being passed on to customers.

7.6  Service Provider must:

     (a)  ensure that each application by a customer for supply of a Mobile
          Service is made on an application form in the form approved by Telecom
          from time to time (the "Application Form");

     (b)  ensure that each customer agrees to the disclosure and use of customer
          information by Telecom and Service Provider for the purposes of the
          provision of telecommunications services and the services described in
          clause 2.1(b) to the customer (including the promotion of those
          services and any related services), and that such agreement is
          recorded on each customer Application Form; and

     (c)  process each Application Form in accordance with the Operations Manual
          or as agreed between the parties.

7.7  Subject to clause 7.7A, to the extent permitted by Applicable Law, Service
     Provider shall not and shall procure that each of its Related Bodies
     Corporate and each Controlled Entity do not during the term of this
     Agreement:

     (a)  promote a mobile service other than the Mobile Services or canvass any
          customer to connect to a mobile service which competes with a Mobile
          Service;

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     (b)  display signage or merchandising material at any retail store or
          retail premises (or part thereof) wholly owned or operated by Service
          Provider which promotes a mobile service that competes with a Mobile
          Service; or

     (c)  display signage or merchandising material at any retail store or
          retail premises (or part thereof) wholly owned or operated by Service
          Provider which promotes any carrier (as
          defined in the Act) other than Telecom, or any provider of
          telecommunications services other than Telecom or Service Provider.

7.7A Clause 7.7 does not apply to a Related Body Corporate of the Service
     Provider that is not a Controlled Entity and is totally independent of the
     Service Provider including having independent operations, systems, staff,
     management, premises, distribution channels, funding and resources.

7.8  (a)  Nothing in this Agreement shall prevent Service Provider from
          complying with a request from a customer to be corrected to a mobile
          service which competes with a Mobile Service.

     (b)  If, at any time, more than 5% of the customers connected to a mobile
          service by Service Provider are connected to mobile services other
          than  Mobile  Services.  Service Provider shall immediately notify
          Telecom of that fact in accordance with clause 22.

7.9  Nothing in this Agreement limits the manner in which, or extent to which,
     Telecom  can restructure its work practices and systems or deal with its
     employees provided that such conduct is not inconsistent with this
     Agreement.


8    TELECOM'S OBLIGATIONS

8.1  Subject to clause 7.2 and this clause 8. 1, Telecom agrees to pay to
     Service Provider the commission and fees specified in Schedule 2 in respect
     of the provision of the services described in clause 2.1.  The commission
     and fees specified in Schedule 2 apply to published PMTS tariffs current on
     the date this Agreement was made ("Existing Tariffs").  Where there is a
     variation to an Existing Tariff ("Varied Tariff") or where a tariff comes
     into force for which there was no corresponding Existing Tariff ("New
     Tariff"), then the commission and fees contained in Schedule 2 shall apply
     to the Varied tariff or the New Tariff unless Telecom notifies Service
     Provider in writing that the commission and fees contained in Schedule 2 do
     not apply to that Varied Tariff or New Tariff.

     Where Telecom does so notify Service Provider within 1 month of the coming
     into force of the Varied Tariff or New Tariff, the matter shall be referred
     to the Steering Committee whereupon the parties shall be referred to the
     Steering Committee whereupon the parties shall agree the levels of
     remuneration applicable in respect of PIP Connections acquiring services
     under the Varied Tariff or New Tariff. For the avoidance of doubt, the
     commission and fees contained in Schedule 2 do not apply in respect of a
     Connection if Telecom's charges in relation to that Connection are not
     contained in a published PMTS tariff.

     If the Steering Committee is unable to reach agreement on the level of
     remuneration to apply to the New Tariff or the Varied Tariff within 1 month
     of the matter being referred to it, either party shall be entitled to
     terminate this Agreement.

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8.2  The obligation to pay an amount under clause 8.1 is to be satisfied by
     deducting the commission and the fee from an amount payable to Telecom
     under clause 9.4.

8.3  Telecom must:

     (a)  supply the Mobile Services in accordance with Telecom's PMTS Tariff
          filed with AUSTEL (as amended from time to time) or in accordance with
          paragraph 2.3 of Schedule 2;

     (b)  operate and maintain the Mobile Service network infrastructure in
          accordance with good telecommunications engineering practice;

     (c)  promote and advertise the Mobile Services through mainstream marketing
          including television, radio and the print media;

     (d)  provide Service Provider with up to date information relating to
          Telecom's terms and conditions of supply of, including Telecom's fees
          and charges for, the Mobile Services;
          
     (e)  without limiting the generality of clause 8.3(d), notify Service
          Provider of any and all relevant and material amendments to Telecom's
          PMTS Tariff filed with AUSTEL;     

     (f)  provide Service Provider with such technical and product information
          and material relating to the Mobile Services as is agreed between the
          parties from time to time to assist Service Provider in the
          performance of its obligations under this agreement and, in any event,
          all appropriate technical and product information routinely made
          available to Telecom MobileNet Premium Dealers;

     (g)  provide Service Provider with such marketing information, promotional
          literature and product support material relating to the Mobile
          Services as is agreed between the parties from time to time;
          
     (h)  provide Service Provider with Equipment and training to assist it to
          perform its obligations under this Agreement;     

     (i)  provide a dedicated account manager or account management team for
          Service Provider with responsibilities including, but not limited to:

          (i)   acting as a liaison between Telecom and Service Provider in
                relation to Service Provider's and Telecom's rights and
                obligations under this Agreement;

          (ii)  advising Service Provider on mobile network rollout and Mobile
                Service availability on a regular basis;

          (iii) advising Service Provider on marketing initiatives and sales
                programs relating to the Mobile Services;

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          (iv) advising Service Provider in relation to mobile dealer
               acquisitions and, where appropriate, acting as mobile dealer
               liaison; and

          (v)  assisting Service Provider in securing its hardware requirements;

     (j)  where available, provide international roaming services to customers
          referred to Telecom by Service Provider in accordance with the
          Operations Manual;

     (k)  provide Service Provider with access to mobile tariffs comparison
          data;

     (l)  provide Service Provider with advice relating to the network alarms
          and fault reporting systems specified in the Operations Manual;

     (m)  provide Service Provider with advice relating to customer credit limit
          overrun alarms in the manner specified in the Operations Manual; and

     (n)  use its best endeavours to ensure that customers migrating from the
          AMPS Mobile Service to the GSM Mobile Service will be able to retain
          the last 6 digits of their mobile phone numbers (unless inconsistent
          with Telecom's numbering policies in relation to the GSM Mobile
          Service) and will be able to divert calls being made to their old
          mobile phone number to their new mobile phone number for a reasonable
          period after migration.

8.4  Telecom must:

     (a)  at its expense train an employee or officer of Service Provider in
          relation to the manner in which Service Provider must carry out its
          obligations under this Agreement so that that employee or officer can
          provide similar training to other Service Provider employees; and

     (b)  invite representatives of Service Provider to attend conferences and
          training programs relating to the Mobile Services.

8.5  Telecom shall not be responsible for travelling and accommodation expenses
     incurred by Service Provider employees, officers or representatives in
     connection with the activities referred to in clause 8.4.

8.6  In addition to the remuneration specified in Schedule 2, Telecom must make
     available to Service Provider the equivalent of the following benefits and
     allowances typically made available to Telecom MobileNet Premium Dealers
     from time to time:

     (a)  participation in Telecom's churn incentive programmes;

     (b)  if Telecom launches a promotion involving discounted handsets, access
          to such discounted handsets and, if those handsets are not available,
          Telecom must meet with Service Provider and discuss in good faith
          whether alternative handsets could be made available for the purposes
          of the promotion; and

     (c)  participation in Telecom's mobile service promotion programmes,

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     provided that Service Provider's rights in respect of such benefits and
     allowances shall;

     (d)  apply only for so long as those benefits or allowances are typically
          available to Telecom MobileNet Premium Dealers; and

     (e)  not be any greater than the rights of Telecom MobileNet Premium
          Dealers.


9    BILLING CUSTOMERS

9.1  Telecom agrees from time to time, and in any event before the times
     specified in the Operation Manual, to make available to Service Provider
     information relating to and specifying certain Telecom Debts for sale to 
     Service Provider in the manner at out in clause 11.

9.2  The making available by Telecom of the information relating, to the Telecom
     Debts specified in that information in accordance with clause 9.1 and in
     the manner specified by clause 11 will constitute an offer by Telecom to
     assign to Service Provider all of the Telecom Debts specified in that
     information.

9.3  The purchase price of a Telecom Debt is the amount of the Telecom Debt
     after taking into account any Gross Billing Error in respect of the Telecom
     Debt.

9.4  Telecom's offer to assign the Telecom Debts specified in the information
     will be deemed to be accepted in respect of all of the Telecom Debts
     specified in the information (without the need for any notification of
     acceptance to Telecom) immediately upon the Service Provider paying the sum
     of $10.00 to Telecom.

     Upon acceptance of the offer to assign the Telecom Debts title to the
     Telecom Debts will vest in Service Provider and become PIP Debts. Service
     Provider undertakes to Telecom not to seek payment of any PIP Debt until
     that PIP Debt has vested in Service Provider by operation of this clause
     9.4.

9.5  The payment referred to in clause 9.4 must in respect of the amount
     described in clause 9.4 be made in cash or company cheque.

9.6  (a)  If Service Provider wishes to accept Telecom's offer (which acceptance
          must be in the manner set out in clause 9.4), then payment to Telecom
          must be made on or before 30 days after the information referred to in
          clause 9.1 is made available to Service Provider.

     (b)  If Service Provider does not accept Telecom's offer in accordance with
          clause 9.6(a) by payment on or before 30 days after the information
          referred to in clause 9.1 is made available to Service Provider,
          Telecom may by notice to Service Provider terminate this Agreement
          with immediate effect.

9.6A If the Service Provider accepts Telecom's offer to assign Telecom Debts
     specified in the information relating to those Telecom Debts then the
     Service Provider shall in respect of the PIP Debts pay to Telecom 30 days
     after acceptance of the offer the aggregate amount of the PIP Debts which
     are comprised in the Telecom Debts assigned less:

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     (a)  any Gross Billing Errors; and

     (b)  the sum of $10.

9.6B The payment referred to in clause 9.6A must:

     (a)  in respect of the amount described in clause 9.6A less the commission
          and fee under Schedule 2 in respect of the relevant PIP Connections,
          be made in cash or company cheque; and

     (b)  in respect of the amount described in clause 9.6A equal to the
          commission and fee under Schedule 2 in respect of the relevant PIP
          Connections, be made by the set off of the obligation of Telecom to
          pay that commission and fee to Service Provider in respect of the
          relevant PIP Connections.

9.7  [Clause deleted].

9.8  If Telecom disputes that a Gross Billing Error has occurred the dispute
     shall be immediately referred to the Steering Committee.

9.9  If the Steering Committee does not agree that a Gross Billing Error has
     occurred, Service Provider must pay to Telecom any amount withheld pursuant
     to clause 9.4(b) on or before the later to occur of:

     (a)  the date specified by clause 9.6; and

     (b)  7 days after the ruling on the dispute by the Steering Committee.

9.10 Service Provider must comply with the Operations Manual when collecting PIP
     Debts.

9.11 Any bill or account sent by Service Provider to a customer in relation to a
     PIP Debt must:

     (a)  be in a form approved by Telecom;

     (b)  state separately the amount of each Telecom fee or charge levied in
          respect of a Mobile Service or a Value Added Service constituting a
          component of that PIP Debt and prominently identify Telecom as the
          supplier of the relevant Mobile Service and any Value Added Services;
          and

     (c)  not demand payment of any Telecom fee or charge in respect of a Mobile
          Service other than Telecom's applicable fee or charge in respect of
          the Mobile Service as specified by the information made available to
          Service Provider by Telecom under clause 9.1 and not allow any rebate,
          refund, discount or similar payment in respect of that Mobile Service
          from such fee or charge other than as specified in that information or
          otherwise authorised in writing by Telecom from time to time.
    
9.12 The procedure for the granting of credits to customers in relation to PIP
     Connections shall be set out in the Operations Manual. Where such a
     procedure is not so set out, Service Provider shall not grant such credits
     without authorization in writing from Telecom. The Operations Manual shall 
     provide that Service Provider shall bear the entire cost of credits       

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     which are not related to difficulties experienced by the customer in
     relation to the technical operation of the relevant Mobile Service or any
     Value Added Service.

9.13 If Service Provider has not complied in full with its obligations under
     clause 9.4 in respect of a particular Telecom Debt and Service Provider
     receives from the customer moneys in respect of that Telecom Debt, Service
     Provider:
    
     (a)  must upon receipt of those moneys immediately pay those moneys (to the
          extent to which Service Provider has not already made payment under
          clause 9.4 in respect of that Telecom Debt) to Telecom; and       

     (b)  pending such payment, hold those moneys on trust for Telecom.

     Telecom may in its absolute discretion allocate any shortfall in the amount
     payable by Service Provider under clause 9.4 to any Telecom Debt.

9.14 Service Provider agrees that information made available under clause 9.1 is
     prima facie evidence that the Telecom Debts specified by that information
     are owed to Telecom by the customer and that the relevant Mobile Service
     has been supplied to that customer in the manner specified by that
     information.

9.15 If Service Provider establishes to the reasonable satisfaction of Telecom
     that:

     (a)  information made available to Service Provider under clause 9.1 is
          inaccurate; and

     (b)  as a result Service Provider has made a payment to Telecom under
          clause  9.2  in excess of that which it would have made had the
          information been accurate,

     Telecom must pay to Service Provider an amount equal to the amount of that
     excess within 30 days together with interest calculated in accordance with
     clause 9.17.

9.16 Telecom and Service Provider must carry out the reconciliation procedures
     set out in the Operations Manual at least once every six months or with
     such frequency as may be agreed.

9.17 Without limiting the generality of clause 16.2(g), if a party is in breach
     of a payment obligation under this Agreement that party must pay to the
     other party interest on the amount of that payment calculated daily at an
     annual rate equal to 1.5% above the Commonwealth Bank of Australia's
     corporate reference rate as published from time to time (or any similar
     rate published by the Commonwealth Bank of Australia from time to time)
     from the date the payment became payable until the date the payment is paid
     in full.

9.18 Service Provider acknowledges and agrees that:

     (a)  provided a PIP Debt has been assigned to Service Provider in
          accordance with this clause 9, Telecom shall not be liable to Service
          Provider in the event that Service Provider cannot collect all or any
          of a PIP Debt;

     (b)  provided a PIP Debt has been assigned to a Service Provider in
          accordance with this clause 9, Telecom shall not be liable for, or in
          relation to, any fraud or dishonesty committed by any customer
          relating to that PIP Debt; and

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     (c)  Telecom may disclose information to third parties including other
          carriers relating to the Mobile Services, and the acquisition by
          customers of the Mobile Services, pursuant to interconnect or other
          agreements or arrangements to the extent that disclosure is required
          by those agreements or arrangements.

9.19 Service Provider must carry out the following in relation to credit
     assessment and bad debt management ("Credit Management Service"):
    
     (a)  ensure that it carries out a credit check in respect of each customer
          applying for the supply of a Mobile Service in the manner set out in
          the Operations Manual;       
    
     (b)  not process any application for the supply of a Mobile Service by a
          customer who falls to meet the credit worthiness requirements set out
          in the Operations Manual; and       

     (c)  ensure that it complies with the bad debt collection methods as set
          out in the Operations Manual.
    
9.20 Service Provider must, upon Telecom giving reasonable notice, include with
     any bill sent to customers in respect of PIP Connections any documentation,
     including promotional material, nominated by Telecom. Service Provider will
     procure delivery of such documentation to the relevant customers at its
     own  cost and expense.  Telecom will bear the cost and expense of
     production of such documentation.       

9.21 Service Provider acknowledges and agrees that Telecom has the unqualified
     right to contact, correspond with, deliver documentation to, or  otherwise
     deal with any customer, including any PIP Connection provided that such
     conduct is not inconsistent with this Agreement.

9.22 Prior to the Launch Date and before the commencement of each Quarter,
     Service Provider's must provide Telecom with the opportunity to review
     Service Provider's proposed marketing plan and obtain Telecom with the
     opportunity to review Service Provider's proposed must set out all
     marketing and promotional activities and campaigns to be carried out by
     Service Provider in respect of the Mobile Services, Value Added Services
     and any services specified in clause 2.1.  Also, it must detail any
     proposed promotion or supply of a Mobile Service in conjunction with a
     telecommunications service that competes with a telecommunications service
     supplied by Telecom.

9.23 Service Provider must not carry out any marketing or  promotional  activity
     or  campaign  in respect of the Mobile Service, Value Added Services or any
     service specified  in  clause  2.1 other than in accordance with a
     marketing plan approved in writing by Telecom pursuant to clause 9.22.


10   DISCONNECTION

10.1 Telecom must disconnect a PIP Connection from the Mobile Service as soon as
     practicable after Service Provider has established to the satisfaction of
     Telecom that:

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     (a)  despite Service Provider having attempted to collect the relevant PIP
          Debt in the manner set out in the Operations Manual, Service Provider
          has been unable to collect that PIP Debt;

     (b)  the customer in respect of that PIP Debt has requested Service
          Provider to procure the disconnection of that PIP Connection; or

     (c)  disconnection of that PIP Connection is otherwise necessary.  Telecom
          will not refuse any reasonable request to disconnect a PIP customer
          pursuant to this clause 10.1(c).

10.2 Telecom reserves the right to disconnect any PIP Connection in accordance
     with Telecom's normal operational procedures provided Telecom does not in
     respect of such disconnections treat PIP Connections differently to
     Connections procured by Telecom or another of Telecom's MobileNet dealers.
    
10.3 Telecom must execute a legal assignment to Service Provider of any PIP Debt
     if:      

     (a)  Telecom has disconnected that PIP Connection under clause 10.1; and

     (b)  Service Provider can establish to the reasonable satisfaction of
          Telecom that Service Provider will not be able to collect the PIP Debt
          without commencing legal proceedings against the customer.

10.4 Service Provider must at its own expense take all steps necessary to ensure
     any assignment of a Debt made pursuant to clause 10.3 is lawful and
     complies with all legal requirements including, without limitation, any
     requirements relating to registration or notification of that assignment.
     Telecom shall, at Service Provider's cost, provide Service Provider with
     such reasonable assistance as Service Provider may require in relation to
     its obligations under this clause 10.4.

10.5 Service Provider has no right to, and must not attempt to, commence any
     legal proceedings
     in its own name or in the name of Telecom in relation to any PIP Debt until
     that P Debt has been legally assigned to Service Provider under clause
     10.3.

10.6 Service Provider shall provide Telecom with such documentary or other
     evidence as Telecom may reasonably require to satisfy itself of any of the
     matters referred to in clauses 10.1 and 10-3(b).


11   PROVISION OF BILLING AND CUSTOMER INFORMATION

11.1 Each party must provide the other party with access to information as set
     out in the Operations Manual which is stored on its computer system or
     using any other means.  Such access shall be provided in the manner set out
     in the Operations Manual.  Such access must be used solely for the purpose
     of:

     (a)  in the case of Service Provider - carrying out its obligations under,
          and the activities contemplated by, this agreement; and

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     (b)  in the case of Telecom - updating its records in relation to customers
          in respect of PIP Connections.

11.2 Service Provider acknowledges and agrees that Telecom must have access, by
     the means referred to in clause 11.1(b) or by such other means as Telecom
     may reasonably require, to all customer information relating to PIP
     Connections including name and address and details of the customer's
     payment and complaint records any other historical information relating to
     the supply of services to the customer pursuant to this Agreement.

11.3 (a)  Each party shall comply with the security and other requirements in
          relation to the other party's computer system set out in the
          Operations Manual.

     (b)  Upon termination of this Agreement, Telecom may at any time disconnect
          any computer or other electronic information links between Service
          Provider and Telecom and Telecom and Service Provider shall co-operate
          fully with such disconnections to the extent reasonably necessary to
          minimise disruption to customers in respect of PIP Connections.

11.4 For the avoidance of doubt and unless otherwise agreed by the parties:

     (a)  It is the responsibility of each party to acquire any and all computer
          hardware and software necessary or desirable for the purpose of
          fulfilling its obligations or exercising its rights under this
          Agreement; and

     (b)  the costs of any leased line or other means of connecting the parties'
          respective computer systems shall be bore by Service Provider.

11.5 If Service Provider falls to obtain customer agreement to the disclosure or
     use of customer information as set out in clause 7.6(b), Service Provider
     shall indemnify Telecom against every expense, loss or penalty howsoever
     incurred by Telecom as a result of it disclosing or using that customer
     information, whether such expense, loss or penalty arises out of any breach
     of Applicable Law or any legal or other action undertaken against Telecom
     as a result of that disclosure or use.


12   PROVISION OF THE BILLING ENQUIRY SERVICE

12.1 Service Provider shall establish and operate a 24 hour, seven days per
     week, billing enquiry service for customers in respect of PIP Connections
     answering customer billing queries or receiving customer billing complaints
     or reports relating to billing of the Mobile Services (the "Billing Enquiry
     Service").

12.2 Subject to this clause 12, the Billing Enquiry Service must be provided in
     accordance with the Operations Manual and must facilitate the speedy and
     professional resolution, or where appropriate referral, of billing,
     charging and credit queries.

12.3 Service Provider must use its best endeavours to ensure that customer
     billing enquiries made in relation to PIP Connections are made to the
     Billing Enquiry Service rather than to Telecom's own customer enquiry
     operators.


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12.4  Should Telecom receive a call relating to the billing of a PIP Connection,
      Service Provider shall pay to Telecom $5 in respect of that call. Telecom
      shall invoice Service Provider from time to time for all such calls.
      Service Provider shall pay the amount so claimed on or before 14 days
      after Telecom provides such invoice. The parties acknowledge that amount
      of $5 is a genuine pre-estimate of the cost to Telecom of it processing
      such a call. Should the receipt of such a call cost Telecom more than $5,
      Telecom shall be entitled to claim from Service Provider the actual cost
      incurred. This clause 12.4 does not apply during the three month period
      immediately after the Launch Date.      

12.5  Telecom and Service Provider acknowledge that there will be certain
      categories of queries received by the Billing Enquiry Service which:

      (a)  will require that Telecom provide Service Provider with information
           so that the can be adequately resolved; and

      (b)  may need to be formally referred to, and resolved by, Telecom.

12.6  Service Provider may request information from Telecom in relation to
      queries received by the Billing Enquiry Service failing within the
      categories of queries specified in the Operations Manual. Telecom must use
      reasonable endeavours to comply with any such request in the manner set
      out in the Operations Manual.

12.7  Service Provider must use its best endeavours to resolve all queries
      received by the Billing Enquiry Service without requesting information
      from Telecom in relation to that query under clause 12.6.

12.8  Service Provider must refer queries received by the Billing Enquiry
      Service falling within the categories of queries specified in the
      Operations Manual to Telecom for resolution by Telecom directly with the
      complainant.

12.9  Telecom and Service Provider agree that it is intended that Telecom will
      not have any direct contact with any customer that has made a query to the
      Billing Enquiry Service unless that query is formally referred to Telecom
      under clause 12.8.
    
12.10 When supplying the Billing Enquiry Service, Service Provider must meet
      such benchmarks and performance standards as may be specified in the
      Operations Manual (or otherwise agreed) from time to time. It is
      anticipated that such benchmarks and performance standards all be based
      upon the performance of Telecom's own customer enquiry service. Until such
      time as they are specified in the Operations Manual (or otherwise agreed)
      the Billing Enquiry Service standards the Service Provider must meet are:
     
      (a)  Inbound calls:

           (i)   At least 90% of calls to be answered within 10 seconds;

           (ii)  Less than 2% of calls to be abandoned;

           (iii) At least 95% of customer enquiries to be resolved on the first
                 call; and

           (iv)  less than 5% of calls to be transferred to Telecom.

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      (b)  Customer complaints in relation to the Billing Service, Billing
           Enquiry Service and Credit Management Service:

           (i)   All complaints to be acknowledged within 1 day;

           (ii)  Final resolution to occur within 3 days where possible.

      (c)  Customer Satisfaction to be rated Very Good or Excellent by at least
           85% of customers in relation to:
    
           (i)   perception of bill accuracy;      
    
           (ii)  bill presentation (MobileNet segment);      

           (iii) customer service quality with respect to billing and billing
                 enquiries; and

           (iv)  quality of the billing information provided to the customer.

12.11 Service Provider must provide a quarterly report to Telecom on its
      performance of each of the standards set out in clause 12.10. Following an
      initial performance review, a quarterly performance audit of each service
      standard will be carried out by Telecom. Where unacceptable performance is
      reported, Telecom may undertake more frequent audits as necessary to
      establish that adequate remedial action has been undertaken to resolve the
      under performance.

12.12 Following an initial performance review of documented procedures, a
      quarterly performance audit of each documented procedure will be carried
      out by Telecom. Where unacceptable performance is reported, Telecom may
      undertake more frequent audits as necessary to establish that adequate
      remedial action has been undertaken to resolve the under performance.

12.13 Service Provider shall maintain such records or documents, and produce
      such reports, as Telecom may request in relation to the performance of the
      Customer Enquiry Service. Service Provider shall, upon reasonable notice,
      make its premises, and such records, documents or reports as Telecom may
      reasonably request, available to Telecom or its agents or contractors for
      the purpose of auditing the performance of the Customer Enquiry Service
      and assessing whether Service Provider has complied with its obligations
      under clause 12.10.


13    PROVISION OF FULL CUSTOMER SERVICE

13.1  Full Customer Service comprises all aspects of service to customers who
      have PIP Connections other than the provision of the Mobile Services,
      Value Added Services or the provision of services provided to those
      customers by Service Provider as part of the Billing Service, Billing
      Enquiry Service or the Credit Management Service. Full Customer Service
      includes:

      (a)  the provision of a Customer Enquiry Service as set out in clause 14;

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      (b)  the giving of advice to customers on Value Added Services;      
    
      (c)  the giving of advice to customers on and the providing of support to
           customers of Mobile Services and other Telecom products and services;
           and      

      (d)  the promotion of new products to customers.

13.2  In order to be eligible to make an application under clause 13.4 to
      provide Full Customer Service under this Agreement, Service Provider must
      meet the following criteria ("Acceptance Criteria"):

      (a)  Service Provider must have compiled with all of its obligations under
           this Agreement including all performance targets, benchmarks and
           performance standards for the preceding six months (including
           satisfactory performance as measured by the two most recent quarterly
           reviews under clauses 12.11 and 12.12); and
    
      (b)  Service Provider must have achieved at least 20,000 PIP Connections.
     
13.3  Telecom may, at its absolute discretion, waive the requirements of clause
      13.2, either wholly or in part, by notice in writing to Service Provider.

13.4  Where Service Provider reasonably considers that it meets the Acceptance
      Criteria set out in clause 13.2 for the provision of the Full Customer
      Service, Service Provider may apply in writing to Telecom ("Full Customer
      Service Application") stating that it wishes to commence the provision of
      the Full Customer Service.

13.5  Service Provider shall include in the Full Customer Service Application,
      information setting out the manner in which it meets the Acceptance
      Criteria. Service Provider agrees to provide to Telecom such further
      information as Telecom may reasonably request for the purpose of assessing
      the Full Customer Service Application.

13.6  The Service Provider may not commence providing the Full Customer Service
      until it has received Telecom's written approval of the Service Provider's
      Full Customer Service Application and the requirements of clause 2.3(b)
      have been met.

13.7  A provider of Full Customer Service must provide all of the Full Customer
      Service as set out in clause 13.1. The parties acknowledge that further
      services may be provided by a Full Customer Service provider from time to
      time, subject to agreement between the parties.


14.   CUSTOMER ENQUIRY SERVICE

14.1  Service Provider shall establish and operate a 24 hour, seven days per
      week, customer enquiry service for customers in respect of PIP Connections
      answering customer queries or receiving customer complaints or reports
      relating to the Mobile Services (the "Customer Enquiry Service").

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14.2  Subject to clause 14, the Customer Enquiry Service must be provided in
      accordance with the Operations Manual and must facilitate the speedy and
      professional resolution, or where appropriate referral, of matters
      including;

      (a)  customer complaints;
     
      (b)  network operational queries;      
    
      (c)  fault reports;      

      (d)  promotional and other offers; and
 
      (e)  other matters as agreed between the parties from time to time.
    
14.3  Service Provider must use its best endeavours to ensure that customer
      enquiries made in relation to PIP Connections are made to the Customer
      Enquiry Service rather than to Telecom's own customer enquiry operators.
      Should Telecom receive a call relating to the billing of a PIP Connection,
      Service Provider shall pay to Telecom $5 in respect of that call Telecom
      shall invoice Service Provider from time to time for ail such calls.
      Service Provider shall pay the amount so claimed on or before 14 days
      after Telecom provides such invoice. The parties acknowledge that amount
      of $5 is a genuine pre-estimate of the cost to Telecom of it processing
      such a call. Should the receipt of such a call cost Telecom more than $5,
      Telecom shall be entitled to claim from Service Provider the actual cost
      incurred.      

14.4  Telecom and Service Provider acknowledge that there will be certain
      categories of queries received by the Customer Enquiry Service which:

      (a)  will require that Telecom provide Service Provider with information
           so that they can be adequately resolved; and

      (b)  may need to be formally referred to, and resolved by, Telecom.

14.5  Service Provider may request information from Telecom in relation to
      queries received by the Customer Enquiry Service failing within die
      categories of queries specified in the Operations Manual. Telecom must use
      reasonable endeavours to comply with any such request in the manner set
      out in the Operations Manual.

14.6  Service Provider must use its best endeavours to resolve all queries
      received by the Customer Enquiry Service without requesting information
      from Telecom in relation to that query under clause 14.5.

14.7  Service Provider must refer queries received by the Customer Enquiry
      Service falling within the categories of queries specified in the
      Operations Manual to Telecom for resolution by Telecom directly with the
      complainant.

14.8  Telecom and Service Provider agree that it is intended that Telecom will
      not have any direct contact with any customer that has made a query to the
      Customer Enquiry Service unless that query is formally referred to Telecom
      under clause 14.7.

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14.9  When supplying the Customer Enquiry Service, Service Provider must meet
      such benchmarks and performance standards as may be specified in the
      Operations Manual (or otherwise agreed) from time to time. It is
      anticipated that such benchmarks and performance standards shall be based
      upon the performance of Telecom's own customer enquiry service. Until such
      time as they are specified in the Operations Manual (or otherwise agreed)
      the Customer Enquiry Service standards the Service Provider must meet are:

      (a)  Inbound calls:

           (i)   At least 90% of calls to be answered within 10 seconds;
 
           (ii)  Less than 2% of calls to be abandoned;

           (iii) At least 95% of customer enquiries to be resolved on the first
                call; and

           (iv)  less than 5% of calls to be transferred to Telecom.

      (b)  Customer complaints in relation to the Full Customer Service:

           (i)   All complaints to be acknowledged within 1 day;

           (ii)  Final resolution to occur within 3 days where possible.

      (c)  Customer Satisfaction to be rated Very Good or Excellent by at least
           85% of customers in relation to:

           (i)   perception of non billing information accuracy;

           (ii)  non bill information presentation (where information is
                presented in visual form);

           (iii) non-billing customer service quality; and

           (iv)  quality of non billing information provided to the customer.

14.10 Service Provider must provide a quarterly report to Telecom on its
      performance of each of the standards set out in clause 14.9. Following an
      initial performance review, a quarterly performance audit of each service
      standard will be carried out by Telecom. Where unacceptable performance is
      reported, Telecom may undertake more frequent audits as necessary to
      establish that adequate remedial action has been undertaken to resolve the
      under performance.

14.11 Following an initial performance review of documented procedure, a
      quarterly performance audit of each documented procedure will be carried
      out by Telecom. Where unacceptable performance is reported, Telecom may
      undertake more frequent audits as necessary to establish that adequate
      remedial action has been undertaken to resolve the under performance.

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14.12 Service Provider shall maintain such records or documents, and produce
      such reports, as Telecom may request in relation to the performance of the
      Customer Enquiry Service. Service Provider shall, upon reasonable notice,
      make its premises, and such records, documents or reports as Telecom may
      reasonably request, available to Telecom or its agents or contractors for
      the purpose of auditing the performance of the Customer Enquiry Service
      and assessing whether Service Provider has compiled with its obligations
      under clause 14.9.

15    EQUIPMENT

15.1  Subject to clause 15.2, Telecom licenses Service Provider to use the
      Equipment and any and all operating or other software supplied to Service
      Provider by Telecom for use with the Equipment.

15.2  Service Provider shall only use Equipment for the purposes of this
      Agreement in accordance with such specifications or requirements issued by
      Telecom from time to time.

15.3  Service Provider:

      (a)  shall have no ownership, property or rights in the Equipment and
           shall hold the Equipment as a mere bailee at will for Telecom;

      (b)  must not remove the Equipment from its premises without Telecom's
           consent;  or

      (c)  must not purport to sell, encumber or grant any right to or in the
           Equipment.

15.4  Telecom or any of its servants, agents or representatives may, upon giving
      reasonable notice, recover possession of the Equipment and Service
      Provider shall assist and indemnify Telecom in relation to such recovery.

15.5  Service Provider shall:

      (a)  ensure that Equipment is stored clear of any interferences or
           contamination (including but not limited to fire, storm, flood,
           explosion, dust, water and theft) which may damage it;

      (b)  at times insure the Equipment in the name of Telecom for the full
           insurable value of that Equipment with a reputable insurer and shall
           keep Telecom indemnified in respect of all loss and damage to that
           Equipment. Service Provider shall, upon request, promptly furnish to
           Telecom evidence of such insurance;

      (c)  comply fully with any reasonable directions and recommendations that
           Telecom may provide from time to time in respect the Equipment;

      (d)  return that Equipment, and all reproductions of any operating or
           other software supplied to Service Provider by Telecom for use with
           that Equipment (in any material form), to Telecom immediately upon
           request (whether or not that request is made during the term of this
           Agreement) and, in any event within 7 days of the termination of this
           Agreement.

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16   TERM AND TERMINATION

16.1 Subject to clauses 2.3, 6.1, 6.3, 7.2, 8.1, 9.6. 9.7(b), 16.2, 16.3 and
     29.3, this Agreement comes into force on the Commencement Date and remains
     in force:

     (a)  for the period specified in Item 2 of Schedule 1 (the "Initial
          Period"); and

     (b)  upon expiry of the Initial Period, for such additional periods as may
          be agreed between the parties.

16.2 Telecom may terminate this Agreement at any time by notice in writing to
     Service Provider if:

     (a)  Service Provider takes or threatens to take, or has taken or
          instituted against it, any action or proceeding whether voluntary or
          compulsorily which has an object or may result in the winding up of
          Service Provider (other than a voluntary winding up for the purpose of
          solvent amalgamation or reconstruction) or is placed under
          administration or in receivership or a Controller (as defined in the
          Corporations Law) is appointed over the whole or any part of its
          undertaking;

     (b)  Service Provider enters or proposes to enter into any scheme of
          arrangement or any composition for the benefit of its creditors;

     (c)  Service Provider stops payment or admits in writing its inability to
          pay its Debts as they fall due, or is deemed to be unable to pay its
          Debts pursuant to section 460 of the Corporations Law;

     (d)  as a result of the operation of section 459(l) of the Corporations
          Law, Service Provider is taken to have failed to comply with a
          statutory demand;

     (e)  any of the events specified in clause 16.2(a) to (d) above inclusive
          occurs in relation to a corporation which is a guarantor of or surety
          for the obligations of Service Provider under this Agreement;

     (f)  any director of Service Provider:

          (i)  becomes bankrupt, presents a Debtor's petition within the meaning
               of the Bankruptcy Act, or at a meeting of any of his creditors he
               consents to present a Debtor's petition under, or to sign an
               authority under section 118 of the Bankruptcy Act or commits any
               of the acts of bankruptcy specified in sections 40(i)(h) to (n)
               of the Bankruptcy Act; or

          (ii) executes a deed of assignment or a deed of arrangement under the
               Bankruptcy Act;

     (g)  Service Provider defaults and such default continues for a period of
          fourteen (14) days after written notice has been given to it by
          Telecom in the payment of all or any moneys which may now or in the
          future become owing by Service Provider on any account whatsoever by
          Service Provider to Telecom;

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     (h)  for any reason within Service Provider's control Service Provider
          fails to actively operate the Business for a period of more than 10
          consecutive Business Days without the prior written permission of
          Telecom;     

     (i)  Service Provider in a Quarter submits to Telecom any report or
          statement:

          (a)  which is to be used by Telecom as a basis for determining the
               remuneration due to Service Provider and that report or statement
               overstates, or contains an error which results in an over
               calculation of, the remuneration due to Service Provider by more
               than 5% of the true and correct amount due; or
    
          (b)  which overstates the true and correct number of PIP Connections
               by more than 5 percent;      

          provided that Telecom has first offered Service Provider the
          opportunity to explain that overstatement or error and Service
          Provider has been unable to establish that the overstatement was not
          made deliberately or recklessly or as a result of incorrect
          information supplied to it by Telecom;

     (j)  Service Provider breaches any of the terms of any of its loan,
          security or like agreements or any lease or agreement relating to this
          Agreement or fails to make on the due date any payment due in respect
          of any loan or Debt taken out or owed by Service Provider which loan
          or Debt is or may in the future be guaranteed or otherwise secured by
          Telecom or any of its related corporations;

     (k)  a demand is made on Telecom for payment of money under any instrument,
          guarantee or indemnity given by Telecom to secure advances or other
          financial accommodation made to Service Provider;

     (l)  Service Provider attempts or purports to sell, assign or transfer this
          Agreement, the Beneficial Ownership of the Business, or any licenses,
          concession agreements or permits which are required by or related to
          the Business without Telecom's prior written consent (which must not
          be unreasonably withheld);

     (m)  there is a change in the Beneficial Ownership of Service Provider
          without Telecom's prior written consent (which must not be
          unreasonably withheld); or

     (n)  a Full Bench of the Australian Industrial Relations Commission finds
          that this Agreement adversely affected Telecom's staff and was the
          substantial cause of industrial disputation.

16.3 If:

     (a)  a party is in breach of any material obligation under this Agreement;
          and

     (b)  the other party has notified that party of that breach; and

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      (c)   if that breach is capable of remedy;

            (i)  the Steering Committee has met to discuss remedying that breach
                 and;

            (ii) the party in breach has not remedied that breach within 21 days
                 of that meeting (or such other period as may be agreed);

      then the other party may by notice in writing immediately terminate this
      Agreement.

16.4  Without prejudice to its rights under clauses 16.2 and 16.3, Telecom may,
      notwithstanding any other clause, suspend the provision of any goods and
      services to Service Provider pursuant to this Agreement during any period
      in which amounts owing to it under this Agreement are unpaid.

16.5  Upon termination of this Agreement, Service Provider must at its own
      expense:

      (a)  pay to Telecom all moneys owed by it to Telecom within 7 days of
           termination;

      (b)  immediately cease to identify itself by means of the Generic Title;

      (c)  immediately cease, and ensure that each Affiliate ceases, to hold
           itself out to the public in any manner as being approved by or
           affiliated with Telecom to promote the Mobile Services;

      (d)  immediately cease, and ensure that each Affiliate ceases, all use of
           the Trade Marks; and

      (e)  unless agreed otherwise in writing with Telecom, remove, destroy or
           obliterate all signage, materials or documentation on Service
           Provider's or a Affiliate's premises which refers to Telecom or the
           Mobile Services within 7 days thereafter, by statutory declaration,
           certify that this has been done.

16.5A Service Provider acknowledges and agrees that Telecom may in the event
      that this agreement has been, or is to be, terminated in accordance with
      this clause deliver to each customer in respect of a PIP Connection a
      notice advising the customer that this Agreement has been or is to be (as
      the case may be) terminated and that Service Provider will no longer be
      supplying the Billing Service, the Billing Enquiry Service, the Credit
      Management Service and, if applicable, the Full Customer Service.

16.6  Telecom and its servants or agents may, upon giving reasonable notice,
      enter on Service Provider's or an Affiliate's premises where any Trade
      Marks, similar marks, signs or sign writing may be and remove or
      obliterate the same and carry out any works reasonably necessary for such
      removal or obliteration at Service Provider's expense, should Service
      Provider fail to comply with its obligations under clause 16.5.

16.7  Any expiration or termination of this Agreement does not affect the rights
      and obligations of the parties under clauses 15, 16.5, 16.5A, 16.6, 16.7,
      16.8, 17.12, 18.3 and 30, which survive termination.

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16.8 Service Provider acknowledges and agrees that upon termination or
     expiration of this Agreement all Service Provider's right to future
     remuneration under this Agreement shall immediately cease.

16.9 Telecom acknowledges that wrongful termination of this Agreement by Telecom
     would amount to a breach of this Agreement in relation to which Service
     Provider would be entitled to recover damages.


17   INTELLECTUAL PROPERTY RIGHTS, TRADE MARKS AND TELECOM CONFIDENTIAL
     INFORMATION

17.1 A party shall not use the other party's Intellectual Property Rights except
     as expressly permitted in this Agreement.

17.2 The parties agree that all Intellectual Property Rights in and to any
     modifications or changes to any item or thing in which Intellectual
     Property Right subscripts (including computer software, computer hardware
     or documentation) are the property of the party that owns the Intellectual
     Property Rights in that item or thing.

17.3 Service Provider acknowledges that the Trade Marks are the exclusive
     property of Telecom and that Service Provider has no rights in or to the
     Trade Marks other than under this Agreement.

17.4 Service Provider is granted the non-exclusive right to use the Displayed
     Trade Marks in relation to the Business in a manner set out in the
     Operations Manual or as specifically approved by Telecom in writing (which
     approval may be revoked or varied by Telecom).  Where necessary or
     desirable Telecom and Service Provider may enter into a registered user
     agreement in respect of a Displayed Trade Mark.  Affiliates may use the
     Displayed Trade Marks in the manner set out in the Operations Manual or as
     determined by Telecom from time to time.

17.5 Service Provider shall not during the term of this Agreement:

     (a)  do anything which may impair Telecom's right, title and interest in
          and to the Trade Marks or which might prejudice their distinctiveness
          or validity or the goodwill of Telecom;

     (b)  except to the extent permitted by clauses 17.4 or with the written
          consent of Telecom, use any of the Trade Marks.

17.6 Service Provider undertakes to keep secret and to protect and preserve the
     confidential nature and secrecy of all Telecom Confidential Information.
     To this end, Service Provider shall not, without Telecom's prior written
     consent:

     (a)  use, disclose or in any way communicate to any other person all or any
          Telecom Confidential Information except as permitted by this Agreement
          or as required by law;

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      (b)  permit unauthorised persons to have access to places where Telecom
           Confidential Information is displayed, reproduced or stored; or      

      (c)  make or assist any person to make any unauthorised use or disclosure
           of Telecom Confidential Information, and shall take all reasonable
           steps (including, obtaining confidentiality undertakings from
           employees, officers, agents, contractors and subcontractors who have
           or may have access to the Telecom Confidential Information) to ensure
           that the Telecom Confidential Information is not used or disclosed by
           Service Provider's employees, officers, agents, contractors or
           subcontractors.

17.7  Telecom undertakes to keep secret and to protect and preserve the
      confidential nature and secrecy of all Service Provider Confidential
      Information. To this end, Telecom shall not, without Service Provider's
      prior written consent:
    
      (a)  use, disclose or in any way communicate to any other person all or
           any Service Provider Confidential Information except as permitted by
           this Agreement or as required by law;      
    
      (b)  permit unauthorised persons to have access to places where Service
           Provider Confidential Information is displayed, reproduced or stored;
           or      

      (c)  make or assist any person to make any unauthorised use or disclosure
           of Service Provider Confidential Information, and shall take all
           reasonable steps (including obtaining confidentiality undertakings
           from employees, officers, agents, contractors and sub-contractors who
           have or may have access to the Service Provider Confidential
           Information) to ensure that the Service Provider Confidential
           Information is not used or disclosed by Telecom's employees,
           officers, agents, contractors or sub-contractors.

17.8  Subject to clause 17.9, Service Provider may disclose Telecom Confidential
      Information, and Telecom may disclose Service Provider Confidential
      Information, to their respective employees, officers, agents, contractors
      and sub-contractors in the course of their employment on a need to know
      basis or to their respective advisers in relation to their rights under
      this Agreement.

17.9  Each Party shall ensure that its employees, officers, contractors, sub-
      contractors, agents and afl other persons under its control or direction
      will be under and will comply with obligations similar to the obligations
      imposed on it under this clause.

17.10 If a party, its employees, officers, agents, contractors or sub-
      contractors breach the confidentiality obligations contained in this
      Agreement it shall immediately notify the other party in writing of this
      and indemnify the other party for all loss and damage caused by such
      breach.

17.11 Each party acknowledges that a breach of this clause may cause the other
      party irreparable damage for which monetary damages would not be an
      adequate remedy. Accordingly, in addition to other remedies that may be
      available, a party may seek and obtain injunctive relief against such a
      breach of threatened breach.

- --------------------------------------------------------------------------------
Service Provider Agreement                                             Page 34

<PAGE>
 
Telstra Corporation Limited                                    AXICORP AGREEMENT
                                                               -----------------
- --------------------------------------------------------------------------------

17.12 The obligations under this clause 17 survive termination of this
      Agreement.

17.13 Notwithstanding any other term of this Agreement, Telecom shall as
      required by its Articles of Association, be entitled to disclose to its
      shareholder, the Commonwealth of Australia, or the Commonwealth's nominee
      pursuant to a shareholder resolution requiring such disclosure, any
      information contained in any books, documents or other papers of Telecom
      except for confidential Information comprising details of products,
      technical processes and know how including computer programs directly
      related to those products, technical processes or know how. For the
      purposes of this provision the words "books, documents or other papers"
      include:
    
      (a)  any book, map, plan, graph or drawing;      

      (b)  any photograph;

      (c)  any label, any marking or other writing which identifies or describes
           anything of which it forms a part, or to which it is attached by any
           means whatsoever;

      (d)  any disk, tape, soundtrack or other device in which sounds or other
           data (not being visual images) are embodied so as to be capable (with
           or without the aid of some other equipment) of being reproduced
           therefrom;

      (e)  any film (including microfilm), negative, tape or other device in
           which  one  or  more visual images are embodied so as to be capable
           (with or without the aid of some other equipment) of being reproduced
           therefrom; and

      (f)  anything whatsoever on which is marked any words, figures, letters 
           or symbols which are capable of carrying a definite meaning to a 
           person conversant with them.


18    LIMITATION OF LIABILITY AND INDEMNITY

18.1  Certain laws imply terms, conditions and warranties into contracts for the
      supply of goods or services and prohibit the exclusion, restriction or
      modification of those terms and conditions and warranties ("prescribed
      terms"). Some prescribed terms permit a supplier to limit its liability
      for a breach thereof. Except as provided by prescribed terms, the
      liability of Telecom in respect of a breach of a prescribed term relating
      to the supply of any goods or services supplied by it to Service Provider
      in connection with this Agreement or the Mobile Services is limited, at
      the option of Telecom, to the replacement or repair of the goods, resupply
      of services or payment of the costs of replacing or repairing the goods or
      resupplying the services.

18.2  Except as provided by prescribed terms (if any):

      (a)  Telecom makes no warranties in relation to the provision of any goods
           or services by it to Service Provider or the Mobile Services,
           including warranties as to fitness for purpose or otherwise; and

      (b)  Service Provider will not under any circumstances have any cause of
           action against or right to claim or recover from Telecom (and its
           employees, officers, 

- --------------------------------------------------------------------------------
Service Provider Agreement                                             Page 35

<PAGE>
 
Telstra Corporation Limited                                    AXICORP AGREEMENT
                                                               -----------------
- --------------------------------------------------------------------------------

          agents, contractors and sub-contractors) whether in tort, breach of
          contract or otherwise, for or in respect of any loss or damage caused
          directly or indirectly by any breach of warranty (if any) in respect
          of any goods or services supplied by it to Service Provider in
          connection with this Agreement or the Mobile Services.
    
18.3 It is not necessary for a party to incur expense or make payment before
     enforcing a right of indemnity conferred by this Agreement.      


19   ENTIRE AGREEMENT AND AMENDMENT

19.1 This Agreement constitutes the entire agreement of the parties about its
     subject matter and any previous agreements, understandings and negotiations
     on that subject matter cease to have any effect.  Service Provider
     acknowledges that in entering into this Agreement it has not relied on any
     representations or warranties about its subject matter except as provided
     in this Agreement.

19.2 No amendment of any part of this Agreement will be valid or have effect
     unless in writing executed by all parties.


20   SALE, ASSIGNMENT AND TRANSFER

20.1 Provided Telecom provides Service Provider with 60 days written notice,
     this Agreement shall be fully assignable by Telecom and shall enure to the
     benefit of any assignee, transferee or other legal successor of Telecom.
     Service Provider agrees to accept performance by any assignee, transferee
     or successor without the need for any agreement of novation.

20.2 Service Provider may not transfer or assign any of its rights under this
     Agreement without Telecom's prior written consent.

21   WAIVER AND VARIATION

     A provision of or a right created under this Agreement may not be:

     (a)  waived except in writing signed by the party granting the waiver; or

     (b)  varied except in writing signed by the parties.

     Waiver of a breach is without prejudice to the right of a party to
     terminate for later breach.

- --------------------------------------------------------------------------------
Service Provider Agreement                                             Page 36

<PAGE>
 
Telstra Corporation Limited                                    AXICORP AGREEMENT
                                                               -----------------
- --------------------------------------------------------------------------------

22      NOTICES

22.1 A notice, approval, consent or other communication in connection with this
     Agreement:

     (a)  must be in writing;

     (b)  must be marked, in the case of Telecom, for the attention of:

               National Manager - Service Providers

          and, in the case of Service Provider for the attention of:

               Manager, Mobile Services;

     (c)  must be left at the address of the addressee, or sent by prepaid
          ordinary post (airmail if posted to or from a place outside Australia)
          to the address of the addressee or sent by facsimile to the facsimile
          number of the addressee which is specified in this clause or if the
          addressee notifies another address or facsimile number then to that
          address or facsimile number.  The address and facsimile number of each
          party is:

          In the case of Telecom:

               Mobile Communication Services
               Telstra Corporation Limited
               79 Victoria Parade
               Collingwood  Vic  3066.
 
          Facsimile:    (03) 416 2852
 
          In the case of Service Provider:
 
               Axicorp Pty Ltd
               Level 4, 468 St Kilda Road
               Melbourne  Vic  3004
 
          Facsimile:    (03) 804 5067

22.2 A notice, approval, consent or other communication takes effect from the
     time it is received unless a later time is specified in it.
 
22.3 A letter or facsimile is taken to be received:

     (a)  in the case of a posted letter, on the third (seventh, if posted to or
          from a place outside Australia) day after posting; and

     (b)  in the case of facsimile, on production of a transmission report by
          the machine from which the facsimile was sent which indicates that the
          facsimile was sent in its entirety to the facsimile number of the
          recipient.

- --------------------------------------------------------------------------------
Service Provider Agreement                                             Page 37

<PAGE>
 
Telstra Corporation Limited                                    AXICORP AGREEMENT
                                                               -----------------
- --------------------------------------------------------------------------------

23   GOVERNING LAW, JURISDICTION AND SERVICE OF PROCESS

23.1 This Agreement and the transactions contemplated by this Agreement are
     governed by the law in force in Victoria.

23.2 Without preventing any other mode of service, any document in an action
     (including, but not limited to, any writ of summons or other originating
     process or any third or other party notice) may be served on any party by
     being delivered to or left for that party at its address for service of
     notices under clause 22.


24   SEVERABILITY

     If the whole or any part of a provision of this Agreement is void,
     unenforceable or illegal in a jurisdiction it is severed for that
     jurisdiction.  The remainder of this Agreement has full force and effect
     and the validity or enforceability of that provision in any other
     jurisdiction is not affected.  This clause has no effect if the severance
     alters the basic nature of this Agreement or is contrary to public policy.


25   EXERCISE OF RIGHTS

     A party may exercise a right, power or remedy at its discretion, and
     separately or concurrently with another right, power or remedy.  A single
     or partial exercise of a right, power or remedy by a party does not prevent
     a further exercise of that or of any other right, power or remedy.  Failure
     by a party to exercise or delay in exercising a right, power or remedy does
     not prevent its exercise.


26   FURTHER ASSURANCES

26.1 Each party agrees, at its own expense, on the request of another party, to
     do everything reasonably necessary to give effect to this Agreement and the
     transactions contemplated by it, including, but not limited to, the
     execution of documents.

26.2 Without limiting the generality of clause 26.1:

     (a)  Service Provider agrees at its own expense, to do everything necessary
          in order to enable Telecom to comply with any obligations that it may
          have under any legislation, statute, law, ordinance, enactment, by-law
          or governmental or quasi-governmental direction (including but not
          limited to the Act and any relevant class license issued by the
          Australian Telecommunications Authority from time to time under that
          Act and the Radiocommunications Act 1983 (Cth)), to the extent that
          the same relates to the performance of any rights or obligations under
          this Agreement whatsoever; and

- --------------------------------------------------------------------------------
Service Provider Agreement                                             Page 38

<PAGE>
 
Telstra Corporation Limited                                    AXICORP AGREEMENT
                                                               -----------------
- --------------------------------------------------------------------------------

     (b)  Service Provider shall on request execute and procure the execution of
          such additional documents in order to more adequately secure the
          obligations of Service Provider under this Agreement, as Telecom
          requires from time to time.


27   FORCE MAJEURE

27.1 An obligation of a party under this Agreement shall be suspended during the
     time and to the extent that the party is prevented from or delayed in
     complying with that obligation by an event of Force Majeure.

27.2 A party affected by an event of Force Majeure must give to the other party
     particulars of the event of Force Majeure and take reasonable steps to
     remove or mitigate the relevant event of Force Majeure except that the
     party will not be obliged to settle a strike, lockout, boycott or other
     industrial dispute.


28   REMEDIES CUMULATIVE

     The right, powers, obligations and remedies provided in this Agreement are
     cumulative with and not exclusive of the rights, powers or remedies
     provided by law or in equity independently of this Agreement.


29   LEGISLATION

29.1 Any present or future legislation which operates on a right, power or
     remedy of a person in connection with this Agreement is excluded except to
     the extent that its exclusion is prohibited or rendered ineffective by law.

29.2 This Agreement shall be subject to and read in accordance with the
     Australian and Overseas Telecommunications Corporation Act 1991 and the
     Act.

29.3 If:

     (a)  the Australian Telecommunications Authority determines; or
    
     (b)  a court of law determines;      

     that this Agreement or any clause of this Agreement contravenes any
     provision of the Act or the Trade Practices Act 1974 (Cth), this Agreement
     may forthwith be terminated upon notice by Telecom to Service Provider
     provided however that Telecom and Service Provider by agreement may amend
     any clause of this Agreement, so far as it practicable, to overcome the
     particular problem.

29.4 Service Provider acknowledges and agrees that if this Agreement is
     terminated pursuant to clause 29.3, Service Provider shall ensure that it
     shall not, directly or indirectly, make a claim against Telecom for any
     loss, damage or cost whatsoever suffered resulting from termination of this
     Agreement pursuant to this clause.

- --------------------------------------------------------------------------------
Service Provider Agreement                                             Page 39

<PAGE>
 
Telstra Corporation Limited                                    AXICORP AGREEMENT
                                                               -----------------
- --------------------------------------------------------------------------------

30   SET OFF

     Telecom shall have the unqualified right to set off any and all moneys due
     to it by Service Provider, whether or not such moneys are due to Telecom
     under the terms of this Agreement or otherwise, against any monies due to
     Service Provider by Telecom.


31   APPROVALS AND CONSENTS
    
31.1 Telecom may give conditionally or unconditionally or withhold its approval
     or consent in its absolute discretion unless this Agreement expressly
     provides otherwise.       

31.2 Service Provider acknowledges and agrees that any and all approvals or
     consents to be given by Telecom in relation to this Agreement must be given
     by the appropriate personnel of Telecom's Mobile Communication Services
     business unit, as set out in the Operations Manual.


32   DUTIES, TAXES, Etc.

     Service Provider shall pay all duties, taxes, levies, charges or imposts on
     or in connection with this Agreement, any document contemplated under this
     Agreement or anything provided under this Agreement (including, but not
     limited to, stamp duty but excluding any income tax imposed on Telecom).


33   DISPUTE RESOLUTION

33.1 Subject to clauses 16.3 and 33.2, any dispute arising in connection with
     the performance of this Agreement must be resolved in the following manner:

     (a)  the dispute must be referred to the Steering Committee;
    
     (b)  the parties (through their representatives on the Steering Committee)
          must use their best endeavours to resolve that dispute by negotiation;
          and;      
    
     (c)  if the dispute cannot be resolved by negotiations:      

          (i)  the parties may agree to appoint or retain a third party
               (including an arbitrator, mediator or expert) in respect of that
               dispute, or

          (ii) in the absence of agreement, either party may take such legal
               steps as it considers appropriate.
    
33.2 This clause 33 does not limit in any way a party's right to seek any form
     of equitable relief including, without limitation, injunctive relief.      

- --------------------------------------------------------------------------------
Service Provider Agreement                                             Page 40

<PAGE>
 
Telstra Corporation Limited                                    AXICORP AGREEMENT
                                                               -----------------
- --------------------------------------------------------------------------------

34   PUBLICITY

     A party may not make press or other public announcements or releases
     relating to this Agreement and the transactions are subject to this
     Agreement without the approval of the other party to the form and manner of
     the announcement or release unless that announcement or release is required
     to be made by law or by a stock exchange.  Service Provider acknowledges
     and agrees that the disclosure by Telecom of information to the Federal
     Government of Australia does not constitute a breach of this clause 34.






- --------------------------------------------------------------------------------
Service Provider Agreement                                             Page 41

<PAGE>
 
Telstra Corporation Limited                                    AXICORP AGREEMENT
                                                               -----------------
- --------------------------------------------------------------------------------

EXECUTED as an Agreement.


SIGNED by DAVID E. HALL,               )
as authorised representative for       )
TELSTRA CORPORATION                    )
LIMITED (ACN 051 775 556) in the       )
presence of:                           )
    
/s/ S. J. Broones
 .................................
Signature of witness

/s/ S. J. Broones
 .................................
Name of witness (block letters)                /s/ David E. Hall
                                               ...........................
O1-79 Victoria PDT, Collingwood VIC            By executing this agreeement the
 .................................              signatory warrants that the
Address of witness                             signatory is duly authorized to 
                                               execute this agreement on behalf
SOLICITOR                                      of TELSTRA CORPORATION LIMITED
 .................................              (ACN 051 775 556)
Occupation of witness

    
SIGNED by PETER SLANEY as              )
authorised representative for AXICORP  )
PTY LTD (ACN 061 754 943) in the       )
presence of                            )

/s/ S. J. Broones       
 .................................
Signature of witness

/s/ S. J. Broones
 .................................
Name of witness (block letters)

O1-79 Victoria PDT, Collingwood, VIC           /s/ Peter Slaney
 .................................              .............................
Address of witness                             By executing this agreeement the
                                               signatory warrants that the 
SOLICITOR                                      signatory is duly authorised to
 .................................              execute this agreement on behalf
Occupation of witness                          of AXICORP PTY LTD (ACN 061 754
                                               943)
     
- --------------------------------------------------------------------------------
Service Provider Agreement                                             Page 42

<PAGE>
 
Telstra Corporation Limited                                    AXICORP AGREEMENT
                                                               -----------------
- --------------------------------------------------------------------------------

                                   SCHEDULE 1

                            Service Provider Details


    
ITEM 1 (Clause 1.1)    /s/ David Hall     

Commencement Date:     3 May 1995.


ITEM 2 (Clause 16.1)

Initial Period: 5 years.


ITEM 3 (Clause 1.1)

Territory:     Australia.

- --------------------------------------------------------------------------------
Service Provider Agreement                                             Page 43

<PAGE>
 
Telstra Corporation Limited                                    AXICORP AGREEMENT
                                                               -----------------
- --------------------------------------------------------------------------------

                                   SCHEDULE 2

                 Service Provider Remuneration - Clauses 8, 9.2


1.   Entitlement to amounts

1.1  Notwithstanding any other provision of this Agreement, the remuneration
     payable to Service Provider prior to 1 January 1996 in respect of AMPS
     Connections is the amount payable under paragraphs 1.3(a)(ii), 1.3(a)(iii),
     1.3(b)(i), 1.6 and 1.7 of this schedule.  No other remuneration is payable
     to Service Provider in respect of AMPS Connections until 1 January 1996.

1.2  Until 1 January 1996 all references to remuneration contained in any
     paragraphs other than paragraphs 1.3(a)(ii) and 1.3(a)(iii) and 1.3(b)(i)
     of this Schedule refer to remuneration in respect of GSM Connections only
     and all calculations required for the determination of any remuneration
     shall disregard entirely any Connection which is an AMPS Connection.

1.3  Subject to paragraphs 1.1 and 1.2 of this schedule, during the term of this
     Agreement, the following amounts are the fees and commission referred to in
     clause 8.1:
    
     (a)  for each New Connection, where the customer concerned has continued to
          acquire the Mobile Service for a period of less than 5 years from the
          date that Connection was made:      
    
          (i)   where the Connection is a GSM Connection - 8% of the Gross Bill
                for that Connection for the previous calendar month; and      
    
          (ii)  where the Connection is an AMPS Connection - 6% of the Gross
                Bill for that Connection for the previous calendar month;
     
          (iii) for each New Connection made during the previous calendar month
                - the amount spent by Service Provider on Co-operative
                Advertising in the month prior to the date of Connection (as
                determined by paragraph 1.4 of this schedule), divided by the
                number of such Connections, up to a maximum of $20 for each such
                Connection, payable once only.

     (b)  for each Serviced Connection:

          (i)    for supplying the Billing Services and the Billing Enquiry
                 Service - 5% of the Gross Bill for that Connection for the
                 previous calendar month;

          (ii)   for supplying the Credit Management Service - 1.5% of the Gross
                 Bill for that Connection for the previous calendar month;

          (iii)  whilst Service Provider is achieving a customer satisfaction
                 rating acceptable to Telecom in relation to the Billing
                 Service, the Billing

- --------------------------------------------------------------------------------
Service Provider Agreement                                             Page 44

<PAGE>
 
Telstra Corporation Limited                                    AXICORP AGREEMENT
                                                               -----------------
- --------------------------------------------------------------------------------

                 Enquiry Service and the Credit Management Service - 0.5% of the
                 Gross Bill for that Connection for the previous calendar month;

          (iv)   whilst Service Provider has more than 10,000 active PIP
                 Connections - 0.5% of the Gross Bill for that Connection for
                 the previous calendar month;

          (v)    whilst Service Provider has more than 20,000 active PIP
                 Connections -0.5% of the Gross Bill for that Connection for the
                 previous calendar month;

          (vi)   for the sale of Telecom Value Added Services - VAS Fee% (as
                 calculated in paragraph 1.3(c) of this schedule) of the Gross
                 Bill for that Connection for the previous calendar month;

          (vii)  whilst Service Provider is providing the Full Customer Service
                 - 3.0% of the Gross Bill for that Connection for the previous
                 calendar month;

          (viii) whilst Service Provider is providing the Full Customer Service
                 and Service Provider has more than 30,000 active PIP
                 Connections- 0.5% of the Gross Bill for that Connections for
                 the previous calendar month;

          (ix)   whilst Service Provider is providing the Full Customer Service
                 and Service Provider has more than 40,000 active PIP
                 Connections- 0.5% of the Gross Bill for that Connections for
                 the previous calendar month;

          (x)    whilst Service Provider is providing the Full Customer Service
                 and Service Provider has more than 50,000 active PIP
                 Connections - 0.5% of the Gross Bill for that Connections for
                 the previous calendar month;

          (xi)   whilst Service Provider is providing the Full Customer Service
                 and Service Provider has more than 75,000 active PIP
                 Connections - 1.0% of the Gross Bill for that Connections for
                 the previous calendar month;

          (xii)  whilst Service Provider is providing the Full Customer Service
                 and Service Provider has more than 100,000 active PIP
                 Connections - 1.0% of the Gross Bill for that Connections for
                 the previous calendar month;

          (xiii) whilst Service Provider is providing the Full Customer Service
                 and Service Provider is achieving a customer satisfaction
                 rating acceptable to Telecom in relation to the Customer
                 Enquiry Service provided by Service Provider - 0.5% of the
                 Gross Bill for that Connection for the previous calendar month;

          (xiv)  whilst Service Provider is providing the Full Customer Service
                 and is achieving 20% of PIP Connections which are Churns or
                 customers who have never previously been connected to a Mobile
                 Service - 1.0% of the Gross Bill for that Connection for the
                 previous calendar month;

- --------------------------------------------------------------------------------
Service Provider Agreement                                             Page 45

<PAGE>
 
Telstra Corporation Limited                                    AXICORP AGREEMENT
                                                               -----------------
- --------------------------------------------------------------------------------

          (xv)   whilst Service Provider is providing the Full Customer Service
                 and is achieving 40% of PIP Connections which are Churns or
                 customers who have never previously been connected to a Mobile
                 Service - 1.0% of the Gross Bill for that Connection for the
                 previous calendar month; and

          (xvi)  whilst Service Provider is providing the Full Customer Service
                 and is achieving 60% of PIP Connections which are Churns or
                 customers who have never previously been connected to a Mobile
                 Service - 1.0% of the Gross Bill for that Connection for the
                 previous calendar month.

          Each fee and commission calculated in accordance with this paragraph
          1.3(b) shall be aggregated in order to determine the total fee and
          commission due to Service Provider in respect of the relevant Serviced
          Connection.

     (c)  The VAS FEE % shall be calculated in accordance with the following
          formula (this formula renders a number which is then expressed as a
          percentage, for example: if the result of this formula is 0.01 the VAS
          Fee % is 1%):

          VAS FEE % = ((MSB x 4) + (MOB x 3) + (SNS x 1) + (TEC x 2))/206

          Where:

          MSB equals  the percentage of PIP Connections using the Message Bank
                      Service expressed as a number;

          MOB equals  the percentage of PIP Connections using the MemoBank
                      Service expressed as a number;
    
          SNS equals  the percentage of PIP Connections using the Safe'n Sure
                      Insurance Service expressed as a number;      
    
          TEC equals  the percentage of PIP Connections using the MobileNet
                      EasyCall Service expressed as a number;      

          Subject to a maximum VAS Fee % of 1.0%.

1.4  For the purposes of paragraph 1.3(a) of this schedule, the date a
     Connection was made shall be deemed to be the first day of the month
     immediately after the month in which that Connection was made.

1.5  Telecom agrees that for the first three months after the relevant launch
     date (being the Launch Date or the Full Customer Service Launch Date)
     Service Provider shall, for the purposes of this schedule, be deemed to
     have met the customer satisfaction requirements of paragraphs 1.3(b)(iii)
     and (xiii) respectively.

1.6  In addition to the fees and commissions specified in paragraph 1.3 Telecom
     shall pay to Service Provider the following fees and commission in respect
     of PIP Connections that are AMPS Connections:

- --------------------------------------------------------------------------------
Service Provider Agreement                                             Page 46

<PAGE>
 
Telstra Corporation Limited                                    AXICORP AGREEMENT
                                                               -----------------
- --------------------------------------------------------------------------------

     (a)  for the period from the Commencement Date to the earlier to occur of
          the Launch Date and 31 December 1995 - 7.5% of the Gross Bill for that
          Connection in respect of each calendar month ending during that
          period, and

     (b)  for the period on and from the end of the period referred to in
          paragraph 1.6(a) to 31 December 1995 - 2.5% of the Gross Bill for that
          Connection in respect of each calendar month ending during that
          period.

1.7  In addition to the fees and commissions specified in paragraph 1.3 Telecom
     shall make a payment to Service Provider equal to 7.5% of the aggregate of
     the Gross Bills during the period from 1 January 1995 to the Commencement
     Date of all PIP Connections that are AMPS Connections. Service Provider
     acknowledges that it will be necessary for Telecom to carry out a
     reconciliation to calculate the amount of this payment. Telecom shall make
     this payment as soon as reasonably practicable after the Commencement Date.

1.8  Connections that were arranged or procured by Service Provider before the
     Commencement Date shall be deemed to constitute PIP Connections for the
     purposes of paragraphs 1.6 and 1.7.

2.   Exceptions to Commission Entitlement

2.1  Notwithstanding any other clause or paragraph, the amounts referred to in
     paragraph 1.3 of this schedule must not be deducted in accordance with
     clause 9.4 if Service Provider does not:

     (a)  in Telecom's reasonable opinion, maintain and keep sufficient
          accounts, records, receipts, invoices and documentation ("proofs") in
          order to justify and substantiate a claim upon Telecom for commissions
          to which Service Provider claims to be entitled under this Agreement;
          or

     (b)  permit persons authorised by Telecom to inspect and take copies at any
          reasonable time of all proofs in the power, possession or control of
          Service Provider.

2.2  Notwithstanding any other clause or paragraph, and without limiting the
     operation of clause 9.11(c), where a PIP Connection is billed an amount
     less than Telecom's applicable fee or charge in respect of the relevant
     Mobile Service as described in clause 9.11(c), Telecom may reduce Service
     Provider's remuneration in respect of that PIP Connection by an amount
     reasonably determined by Telecom to be equal to the difference between the
     billed amount and Telecom's applicable fees or charges.

2.3  Telecom reserves the right to charge customers of Mobile Services less than
     the amount calculated in accordance with any applicable PMTS tariff filed
     with AUSTEL (as amended from time to time).

- --------------------------------------------------------------------------------
Service Provider Agreement                                             Page 47

<PAGE>
 

Telstra Corporation Limited                                    AXICORP AGREEMENT
                                                               -----------------
- --------------------------------------------------------------------------------

                                   SCHEDULE 3

                  Beneficial Owners - Clauses 1.1 and 16.2(m)

<TABLE>    
<CAPTION>
 
TABLE 5.1
- --------------------------------------------------------------------------------------
                                                                 Each Shareholder's   
   Name of each                Address of each                   Interest in Service 
   Shareholder                   Shareholder                     Provider
   <S>                         <C>                               <C>                 
- --------------------------------------------------------------------------------------
Aspect Computing PLC
ACN 005 083 670                        ---                     400,000 Ordinary Shares 
- --------------------------------------------------------------------------------------
Alta Telecommunications PLC     
ACN 087 270 375                        ---                      12,000 Ordinary Shares
- --------------------------------------------------------------------------------------
CCT Australia PLC
ACN 006 955 111       As Trustee of Burns Family Trust          40,000 Ordinary Shares
- --------------------------------------------------------------------------------------
CT Corporation PLC
ACN 062 380 803                        ---                      40,000 Ordinary Shares
- --------------------------------------------------------------------------------------
Willoware PLC
ACN 065 497 450       As Trustee of Kowan Family Trust          12,000 Ordinary Shares
- --------------------------------------------------------------------------------------
INCO PLC
ACN 066 926 403       As Trustee of Darrin Slaney Family Trust   40,000 Ordinary Shares
- --------------------------------------------------------------------------------------
LPS Investments PLC
ACN 066 926 494       As Trustee of Peter Slaney Family Trust   40,000 Ordinary Shares
- --------------------------------------------------------------------------------------
SMNR Consulting PLC
ACN 062 871 381                         ---                     12,000 Ordinary Shares
- --------------------------------------------------------------------------------------
Foovs Aust LTD                          ---                    354,000 Ordinary Shares
- -------------------------------------------------------------------------------------- 
</TABLE>
     

- --------------------------------------------------------------------------------
Service Provider Agreement                                             Page 48


<PAGE>
 
Telstra Corporation Limited                                    AXICORP AGREEMENT
                                                               -----------------
- --------------------------------------------------------------------------------

                                   SCHEDULE 4

                          Displayed Marks - Clause 1.1


These are the only Trade Marks of Telecom which Service Provider is entitled to
use and they may only be used as permitted by this Agreement:

1    Official Telecom Logo

2    Telecom MobileNet

3    MobileNet Access Card

4    MobileNet Digital

     MobileNet

This Schedule may be varied by Telecom from time to time, by notice to Service
Provider.


- --------------------------------------------------------------------------------
Service Provider Agreement                                             Page 49

<PAGE>
 
                                                                        Telestra

12 December 1995                                   Sales & Distribution
                                                   Mobile Communication Services

                                                   Level 2
Axicorp Pty Limited (ACN 061 754 943)              79 Victoria Parade
Level 4                                            COLLINGWOOD VIC  3066
468 St Kilda Road                                  Australia
MELBOURNE VIC  3004
                                                   Telephone  03 9252 1526
                                                   Facsimile  03 9416 4024
                                                   Mobile  0418 116 262

Attn:  Mr. Peter Slaney                            Pager  016 378 657


 Dear Peter,

 Telstra Corporation Limited ("Telstra") wishes to amend the Service Provider
 Agreement between Telstra and Axicorp Pty Limited ("Service Provider") dated 3
 May 1995 as set out below:

 1.   Replace the "Telecom" wherever appearing with "Telstra."

 2.   Removal of Safe'n Sure Insurance
    
      2.1  Remove from the definition of "Value Added Services" in clause 1.1,
           the words: "the "Safe'n Sure" insurance service".     

      2.2  Delete clause 6.2(f)(iii).  Renumber existing clause 6.2(f)(iv) as
           6.2(f)(iii).

      2.3  Amend paragraph 1.3(c) of Schedule 2 by:

           (a)  removing the words "+(SNS x 1)" from the VAS Fee % equation;

           (b)  replacing the figure "206" at the end of the VAS Fee % equation
                with "196"; and

           (c)  removing the words:
                "SNS equals the percentage of PIP Connections using the Safe'n
                Sure Insurance Service expressed as a number;"
 
 3.   Remuneration

      3.1  Amend clause 1.1 by:
 
           (a)  inserting the following definition after the definition after
                the definition of "Controlled Entity";
    
                ""Co-operative Advertising" means advertising related to the
                Mobile Services undertaken by Service Provider with Telstra's
                approval as to the form and content of such advertising."; 
                and     

           (b)  inserting the following definition after the definition of "Net
                Connections":

                ""Net Receipts" means the total amount of national direct dial
                call revenue in respect of charges for the supply of a Mobile
                Service."

         

<PAGE>
 
      3.2  Amend Schedule 2 by:

           (a)  inserting the following subparagraph into paragraph 1.3:

                "(aa)  $30 for each New Connection in the Territory provided
                       that if the provision of the relevant Mobile Service is
                       discontinued or suspended to that New Connection within 6
                       months of the date on which the relevant customer
                       contracted with Telstra to acquire the Mobile Service,
                       Service Provider shall, within 5 Business Days of
                       receiving notice from Telstra to do so, refund to Telstra
                       any payments made by Telstra to Service Provider pursuant
                       to this paragraph;"
    
          (b)  replacing the words "8% of the Gross Bill" in paragraph
                1.3(a)(i) with "11% of Net Receipts.";     

           (c)  replacing the words "6% of the Gross Bill" in paragraph
                1.3(a)(ii) with "9% of Net Receipts"; and
 
           (d)  amending paragraph 1.3 by inserting the following subparagraph:

                "(b)  for each New Connection where the relevant customer first
                      takes up the Value Added Service known as "MessageBank"
                      and maintains that service for a minimum period of 60 
                      days -$15, payable 30 days after the expiration of that 60
                      day period."

The parties agree that the amendments set out above will take effect on and from
[1 January 1996 and shall therefore apply in respect of remuneration calculated
for December 1995 and each month thereafter].

Please acknowledge the consent of Axicorp Pty Limited to these amendments by
executing below and returning this letter to me.

Yours faithfully,

/s/ David Hall
    
DAVID HALL
Mobile Communications Services    -------------------------------------------
Telstra Corporation Limited       Signature of: /s/ Ravi Bhahia     
                                                -----------------------------
                                  as authorised officer of Axicorp Pty Ltd

                                       Date: 18/ 6/96
                                             -- -- --   
         



<PAGE>
 
                                                                   Exhibit 10.13

                                    Telstra

                                 Solution Plus

                                Dealer Agreement

                                 Fixed Network

                                    Axicorp



                            Mallesons Stephen Jaques

                              S 0 L I C I T 0 R S

<PAGE>
 
- --------------------------------------------------------------------------------

                         What is this agreement about?
 
The Agreement Details and the Agreement Terms set out the basis on which We
appoint You as one of Our Solution Plus Dealers in fixed network services. Words
that appear like this have the meanings given in the Agreement Details or the
Agreement Terms.
 
                          Structure of this agreement
 
This agreement is made up by:
 
 .      the agreement details - information about the parties, the term of the
       agreement and the dealership details; and

 .      the basic agreement terms - the basic contractual terms of the
       dealership; and
    
 .      schedule 1 - the duties - details of Your obligations as a dealer; 
       and     
   
 .      schedule 2 - the commission structure - the basis of calculating and
       paying You commission, including commission terms; and
       
 .      schedule 3 - the key performance indicators - Your minimum performance
       requirements; and

 .      schedule 4 - the trade marks schedule - the trade marks which You must
       use; and
 
 .      schedule 5 - the advertising procedures - the procedures You must follow
       when using the trade marks in advertisements; and
 
 .      schedule 6 - the ballot guidelines - the guidelines You must observe
       during preselection ballots;
 and
       
 .      schedule 7 - Your Former Customers - the names of Your Former Customers.

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

<PAGE>
 
                               Agreement Details
- --------------------------------------------------------------------------------

<TABLE>     
<CAPTION>
 
<S>                          <C>
Date of Agreement            8 January                            1996 
                             ------------------------------------      
Agreement term               This agreement starts on 8 January 1996 and
                             it lasts for two years, unless first cancelled
                             under clause 4. 

Details about the parties


     Telstra:                Telstra Corporation Limited ACN 051 775 556 ("We,
                             Us, Our and Ourselves")

     Address:                242 Exhibition Street Melbourne Victoria

     Telstra National        Sue Wiggins
     Dealer Manager:


     Address & fax:          9/580 George Street Sydney NSW 2000 
                             (02)267 2507
 
     Dealer:                 Ultimate Communications (Australia) Pty. Ltd.
                             ---------------------------------------------------
                             ("You, Your and Yourself")

     Address & fax:          4/468 St. Kilda Road, Melbourne 3004  
                             ---------------------------------------------------
                             Fax: 98663878  
                             ---------------------------------------------------

     Dealer                  Campbell Burns
     Representative:         

     Status of Dealer:       [X] Company (ACN 072 365 747)
     (tick whichever box
     applies)                [ ] Partnership
 
                             [ ] Sole Trader
 
                             [ ] Other (please specify)
 
 
Resale Connect Cut Off       
Date (see schedules 1 & 2)   20 January 1996
- --------------------------------------------------------------------------------
</TABLE>
     

<PAGE>
 

- --------------------------------------------------------------------------------
Resale Supply Cut Off 
Date (see schedules 1 & 2)             5:00pm 31 July 1996
 
Flexi-Plan Start Date (see             
clause 7.31 and schedules 1            1 February 1996
& 2)

Commission Prepayment Date (see        1 February 1996
schedule 2)                                               
                                                          
                                       
Amount of Bank                         
Guarantee (see schedule                                   
2)                                                       
                                       Not Applicable    
Dealership details

To be completed

     Services:  
     (tick whichever                   [/] Flexi-Plan - Business Saver Plus
      ----
     boxes apply, a cross 
     in a box has no                   [/] Flexi-Plan - Corporate Centre Long 
     effect)                               Distance
      
                                       [/] Flexi-Plan - Smart Saver
 
                                       [/] Flexi-Plan - Long Distance 4 (only 
                                           for Former Customers)
 
                                       [/] Easycall
 
                                       [/] MessageBank
 
                                       [/] FaxStream
 
                                       [/] Freecall 1800
 
                                       [/] Business Links
 
                                       [_] Centel
 
                                       [/] Centel Plus
 
                                       [/] Win-back
 
                                       [/] Telstra Carrier Selection
 
                                       [/] Line Hunt
- --------------------------------------------------------------------------------


<PAGE>
 
                             Basic Agreement Terms
- --------------------------------------------------------------------------------


1     YOUR APPOINTMENT AND WHAT IT MEANS

1.1   We appoint You as Our Dealer to promote the sale of the Services and to
      extend the demand for the Services. You accept the appointment on the
      terms of this agreement.

1.2   Your appointment is non-exclusive. This means We may promote the Services
      Ourselves or by appointing other persons.

1.3   As Our dealer, You may identify Yourself as a "Telstra Approved Dealer -
      Solution Plus".


2     DUTIES

2.1   What are your duties?

      Your duties are in schedule 1.


      What are our duties?

2.2   We must pay You commission as calculated in schedule 2.

2.3   We will keep records of the commission We pay You. If there is a dispute
      about Your commission. We will, as far as permitted by law and by Our
      privacy policies, allow You to inspect those records. Our records are
      confidential and Your obligations in clauses 3.6 to 3.9 extend to them.

2.4   We may:

      (a)   provide You with advertising assistance (financial or otherwise);
            and

      (b)   give You free Merchandising Material; and

      (c)   give You free management sales and administration advice; and

      (d)   send You regular dealer newsletters and interim information updates.


3     INTELLECTUAL PROPERTY

      Ownership

3.1   Intellectual Property (present or future) is owned by the person who
      creates the Intellectual Property. However:

      (a)   any future Intellectual Property which incorporates the
            Trade Marks is owned by Us; and

      (b)   modifications and changes to Intellectual Property are owned
            by the person who owns the source Intellectual Property.


      Trade Marks

3.2   You acknowledge:

      (a)   Our ownership of the Trade Marks and Our right to control the use of
            them; and

      (b)   Our exclusive right to use the Trade Marks in connection with the
            Services and Our business.

3.3   We give You a non-exclusive licence to use the Trade Marks in connection
      with your sale of the Services. The licence lasts for the term of this
      agreement and it is subject to clauses 3.2 and 3.4.

3.4   Your Trade Marks duties are in paragraph 2 of schedule 1.

3.5   The procedures You must follow when using the Trade Marks in
      advertisements are set out in schedule 5.


      Confidential Information
    
3.6   You must keep secret and do everything You can to protect and preserve the
      confidential nature and secrecy of all Confidential Information.     

3.7   Subject to clauses 3.6 and 3.8. You may disclose Confidential Information
      to Your employees, officers, agents, contractors and subcontractors in the
      course of their employment or service on a need to know basis or to Your
      advisors for advice concerning Your rights under this agreement.

3.8   Your Confidential Information duties are in paragraph 3 of schedule 1.
    
3.9   Your obligations under clauses 3.6 and 3.8 last after the end of this
      agreement, for a period of three (3) years.      

4     WHEN CAN THIS AGREEMENT BE CANCELLED?

4.1   We may cancel this agreement immediately by notice to You, if:

      (a)   You become Insolvent; or
    
      (b)   Our name, equipment, services or personnel through Our association
            with You is brought into disrepute (Our decision on this point must 
            be reasonable but is final); or      

<PAGE>
 
      (c)   You stop or threaten to stop carrying on business; or
    
      (d)   You do not pay any money owing to Us within 14 days of it becoming
            due; or      
    
      (e)   where You are a company, a person or group of persons, not currently
            shareholders in You, tries to acquire a Relevant Interest in 50% or
            more of Your shares in breach of clause 6; or      

      (f)   You try to transfer Your rights under this agreement in breach of
            clause 6; or

      (g)   You breach Your duty in paragraph 1.5 of schedule 1; or

      (h)   We reasonably determine or have reasonable grounds to believe, that
            this agreement contravenes the Act or the Trade Practices Act
            1974(Cth); or

      (i)   You fail to meet Your KPI's in a Quarter; or

      (j)   You fail to meet the Conversion Rate; or

      (k)   You breach Your clause 3.6, 3.7 or 3.8 obligations.

4.2   If You breach this agreement (other than a clause 4.1 breach) and:
    
      (a)   the breach is one which We reasonably believe cannot be remedied, We
            may cancel this agreement immediately by notice to You; or    
    
      (b)   the breach is one which We reasonably believe can be remedied, We
            may cancel this agreement immediately by notice to You if:     

            (i)   We first gave You a written notice which specified the breach
                  and asked for it to be remedied within a reasonable time; and
    
            (ii)  You did not remedy the breach to Our reasonable satisfaction
                  within that time.     

4.3   We may cancel this agreement immediately by notice to You if We have given
      You valid notices under clause 4.2(b) more than three times in a three
      month period (irrespective of whether the notice is later remedied).

4.4   We may elect to treat a clause 4.1(i) and (j) breach as a clause 4.2(b)
      breach.  If We make this election, then that does not stop Us from
      treating the next breach as a clause 4.1 breach.

4.5   Without prejudice to Our rights under clauses 4.1 to 4.4, We may, despite
      any other clause, suspend You as a "Telstra Approved Dealer - Solution
      Plus" (by which We mean suspend Your rights under this agreement including
      Your right to commission) during any period in which:
    
      (a)   amounts owing Us by You under this agreement are unpaid; or      

      (b)   you fail to comply with Our reasonable procedures or instructions.

4.6   You will not be in breach of Your duty under paragraph 1.5(a) of schedule
      1 and We will not cancel this agreement under clause 4.1(g) if You act as
      a Service Provider as long as You comply with the following requirements:

      (a)   You and the Service Provider must be separate companies with 
            different names (the names must not be similar); and
    
      (b)   You must not actively promote that You are in any way connected,
            related to, affiliated with or sponsored by the Service Provider and
            the Service Provider must not do the same; and      

      (c)   You must not be an Associated Body Corporate of the Service Provider
            and the Service Provider must not be an Associated Body Corporate of
            You; and
    
      (d)   the Service Provider must carry on its business as a Switched
            Service Provider or intend to become a Switched Service Provider and
            not as either or both of an Aggregator or a Rebiller.     


5     WHAT HAPPENS ON CANCELLATION OR EXPIRY?

5.1   On cancellation or expiry of this agreement:

      (a)   You must at Your own expense:
           
            (i)    pay to Us all money owing to Us within seven days of
                   cancellation or expiry; and
    
            (ii)   immediately stop identifying Yourself as a " Telstra Approved
                   Dealer" or holding Yourself out to the public as being an
                   approved dealer in the Services or as being sponsored or
                   approved by or affiliated with Us to promote the sale of, or
                   extend the demand for, the Services; and       

            (iii)  immediately stop using the Trade Marks and not use, either


<PAGE>
 
                   directly or indirectly, as trade marks or otherwise the Trade
                   Marks or any trade mark similar to or so nearly resembling a
                   Trade Mark as to be likely to deceive or cause confusion; and

            (iv)   remove from Your premises and, if We ask, return all signs
                   which are owned by Us and remove and obliterate from Your
                   premises all other signs and signwriting which contain a
                   reference to or indicate a connection with Us or the Services
                   or on which any Trade Mark appears; and

    
            (v)    deliver to Us, or at Our option destroy, all Merchandising
                   Material, Our documents and stationery and all other printed
                   material which contains a Trade Mark or a reference to or
                   indicates a connection with the Services in Your power,
                   possession or control and, within seven days from that date,
                   by statutory declaration, certify that this has been done;
                   and      

            (vi)   deliver all Confidential Information to Us; and

            (vii)  not use or disclose Our Confidential Information; and

      (b)   You and any Person Associated With You, must not, in any capacity:

            (i)    compete against Us (whether directly or indirectly); or

            (ii)   become a Service Provider or an agent, dealer or other
                   representative of a Service Provider, except to the extent
                   allowed under clause 4.6; or

            (iii)  become an agent, dealer or other representative of a Carrier
                   other than Us; or
    
            (iv)   disclose or sell to another person the details (including
                   names, addresses, phone and fax numbers and business names)
                   of Your former customers whose names are in Schedule 7, for 
                   period of 12 months following the cancellation or expiry of
                   this agreement in Australia. 
                                     
                                      Rider 1                           
                                                                            

      5.2   In clause 5.1(b), "in any capacity" includes direct or indirect
      involvement (whether alone or jointly with or for any other person) as a
      principal, agent, independent contractor, partner, employee, shareholder,
      unitholder, director, trustee, beneficiary, manager, consultant, adviser
      or financier.

5.3   If clause 5.1(b) is found to be void or unenforceable at law or under any
      statute, then it is replaced with the following new clause 5.1(b):

      "(b)  You and any Person Associated With You, must not, in any capacity:

            (i)    compete against Us (whether directly or indirectly); or

            (ii)   become a Service Provider or an agent, dealer or other
                   representative of a Service Provider, except to the extent
                   allowed under clause 4.6; or

            (iii)  become an agent, dealer or other representative of a Carrier
                   other than Us; or

            (iv)   disclose or sell to another person details (including names,
                   addresses, phone and fax numbers and business names) of Your
                   former customers whose names are in Schedule 7.
    
      for a period of six months following the cancellation or expiry of this
      agreement in Australia." 
             
                                      Rider 2
                                                                         

5.4   If clause 5.1(b) and the new clause 5.1(b) (set out in clause 5.3) are
      found to be void or unenforceable at law or under any statute, then they
      are replaced with the following new clause 5.1(b):

      "(b)  You and any Person Associated With You, must not, in any capacity:

            (i)    compete against Us (whether directly or indirectly); or

            (ii)   become a Service Provider or an agent, dealer or other
                   representative of a Service Provider, except to the extent
                   allowed under clause 4.6; or


<PAGE>
 
            (iii)  become an agent, dealer or other representative of a Carrier
                   other than Us; or

            (iv)   disclose or sell to another person the details (including
                   names, addresses, phone and fax numbers and business names)
                   of Your former customers whose names are in Schedule 7,
    
      for a period of three months following the cancellation or expiry of this
      agreement in Australia." RIDER 3.
     
5.5   If We cancel this agreement:

      (a)   We may:

            (i)    retain any money paid to Us; and

            (ii)   exercise Our right of set off under clause 7.12; and

            (iii)  pursue any other remedies provided by law or equity; and
    
      (b)   We will be released from any further obligations or liabilities
            under this agreement to You, other than the obligation to pay monies
            validly owing to you by Us.
     
    
5.6   You authorize Us and Our employees and agents to enter Your premises where
      any Confidential Information, Trade Marks, signs or signwriting may be and
      to remove or obliterate the Confidential Information or the marks and
      carry out any works reasonably necessary for such removal or obliteration
      at Your expense, should You fail to comply with Your obligations under
      clause 5.1, within the required reasonable period.      

5.7   Schedule 2 sets out the what happens to Your entitlement to commission on
      cancellation or expiry.


6     TRANSFERRING YOUR RIGHTS

6.1   You acknowledge that We have personal confidence in You, and those who
      have a Relevant Interest in You, to carry out Your duties.

6.2   You may only:

      (a)   transfer Your rights under this agreement; or

      (b)   transfer Your business in connection with this agreement,
            
      if before the transfer;
 
      (c)   You give Us reasonable advance notice and get the written consent
            of Our National Dealer Manager; and
    
      (d)   You satisfy Us within reason that the proposed new dealer is
            respectable with experience and a good reputation for conducting
            business; and     

      (e)   You give Us a copy of any contract relating to the transfer; and

      (f)   You, and the proposed new dealer sign a deed (in a form reasonably
            required by Us) in which:

            (i)    the new dealer agrees to be bound by this agreement as if it
                   were You; and

            (ii)   the new dealer acknowledges it must comply with Your
                   obligations under this agreement whether or not the
                   obligations relate to a period before the proposed transfer
                   takes effect; and

            (iii)  You acknowledge that You continue to be bound by this
                   agreement; and

      (g)   any default by You has been remedied or waived by Us; and

      (h)   You and the proposed new dealer comply with all Our reasonable
            requirements.
    
6.3   If You permit a person or group of persons, not currently shareholders in
      You, to acquire a Relevant Interest in 50% or more of Your shares, then
      that will be a breach of this agreement, unless You first got Our written
      consent to the change.      


7     GENERAL

      The ballot process

7.1   Your specific duties concerning the Ballot process are set out in
      paragraph 4 of schedule 1.

7.2   The guidelines You must follow during the Ballot process am set out in
      schedule 6.

      Changing the agreement
    
7.3   The schedules may be changed by mutual agreement between Us and You. We
will give You and You will give Us reasonable advance notice in writing of any
changes that may be required. Changes to the schedules will be taken to have
been accepted when written confirmation of that acceptance is exchanged between
you and Us.    



<PAGE>
 
          

7.4   If We change schedule 2 (the Commission Structure), the commission We pay
      You for a Connection will be determined by the schedule 2 applicable at
      the Connection Date.

7.5   Otherwise this agreement may not be varied except in writing signed by the
      parties.

      Limitation of liability

7.6   Unless expressly provided for under this agreement and to the extent
      permitted by law:

      (a)   all terms, conditions, warranties and representations about the
            Services; and
    
      (b)   any liability of Ours, Our employees or agents in negligence or
            otherwise relating directly or indirectly to the Services     

      are excluded and You release Us from any liability.


      Indemnity

7.7   You agree to indemnify Us (this is like compensating Us for), and keep Us
      indemnified, from and against all liability, loss, damage, penalty and
      costs of any kind whatsoever (including indirect, special or consequential
      loss or damage) caused directly or indirectly from:

      (a)   a breach of this agreement by You; or
    
      (b)   any claim or action against Us arising directly or indirectly out of
            negligence or any wilful act committed by You;

      or any of Your servants, officers, agents, contractors or subcontractors.

      Your relationship with Us

7.8   You are an independent contractor and are not Our agent, joint venturer,
      partner or employee and We will not be bound by any agreements
      representations or warranties made by You to any person. Both parties
      acknowledge that neither party has the power or authority, directly or
      indirectly, or through its servants or agents, to bind the other party
      with a third person, or otherwise to negotiate or enter into a binding
      relationship for or on behalf of the other party.


      Waiver

7.9   A provision of or a right under this agreement may not be waived except in
      writing signed by the party creating the waiver.


      Unforeseen Events

7.10  An obligation of a party under this agreement is suspended during the time
      and to the extent that the party is prevented from or delayed in complying
      with an obligation because of an Unforeseen Event.

7.11  A party affected by an Unforeseen Event must give to the other party
      particulars of the event and take reasonable steps to remove or mitigate
      the relevant event except that the parry will not be obliged to settle a
      strike, lock-out, boycott or other industrial dispute.


      Set-off

7.12  We have the unqualified right to set-off by giving You notice, any moneys
      owed to You by Us, whether that money is owed to You under the terms of
      this agreement or otherwise, against any money owed to Us by You.     


      Remedies cumulative

7.13  The rights, powers and remedies provided in this agreement are cumulative
      with and not exclusive of the rights, powers or remedies provided by law
      or equity independently of this agreement.


      Survival of rights

7.14  Despite expiry of this agreement, any term of this agreement that is
      capable of taking effect after expiry will remain in force.


      Severability

7.15  If the whole or any part of a provision of this agreement is void,
      unenforceable or illegal in a jurisdiction it is severed for that
      jurisdiction. The remainder of this agreement has full force and effect
      and the validity or enforceability of that provision in any other
      jurisdiction is not affected. This clause has no effect if the severance
      alters the basic nature of this agreement or is contrary to public policy.

<PAGE>
 
                                                                               6
- ------------------------------------------------------------------------------
 
      Operation of indemnities

7.16  Each indemnity in this agreement is a continuing obligation, separate and
      independent from other obligations of the parties and survives
      cancellation of this agreement.

7.17  It is not necessary for a party to incur expense or make payment before
      enforcing a right of indemnity conferred by this agreement.


      Approvals and consents
    
7.18  We may give conditionally or unconditionally or withhold Our approval or
      consent but must act reasonably at all times unless this agreement
      expressly provides otherwise. This clause also applies to Our National
      Dealer Manager.     


      Further assurances

      Each party agrees, at its own expense, at the request of the other party
      to do everything reasonably necessary to give effect to this agreement and
      the transactions contemplated by it, including, but not limited to, the
      signing of documents.
    
7.20  You agree, at Our expense, to do everything necessary to enable Us to
      comply with any of Our obligations under any legislation, law or
      government or quasi-government direction, including under the Act, the
      Radiocommunications Act 1991 (Cth) and any class licence issued by AUSTEL.
     

      Entire agreement

7.21  This agreement comprises the entire understanding between the parties.


      Duties and taxes

7.22  You must pay all duties, taxes, levies, charges or imposts on or in
      connection with this agreement, any document contemplated by this
      agreement or anything provided under this agreement (including stamp
      duty).


      Notices

7.23  Notices and communications must be in writing and given according to the
      Agreement Details. Notice details may be changed by giving written notice
      to the other.


Governing law

7.24  This agreement is governed by the laws of Victoria.


      Confidentiality

7.25  The terms and conditions of this agreement are confidential and will not
      be revealed to any third party without the consent of both parties (except
      as required by law or to obtain legal advice).


      Telecommunications Legislation

7.26  This agreement is subject to and is to be read according to the Act and
      the Telstra Corporation Act 1991 (Cth).


      Costs and Stamp Duty

7.27  You must pay Your own costs in connection with this agreement and so must
      We. However, You must pay any stamp duty assessed (including penalties) on
      this agreement.


      Renewal of term

      7.28  This agreement will automatically be renewed for a further term of
            two years, unless We give You a notice to the contrary at least one
            month before the end of the term. The renewed agreement will be on
            the same terms as this agreement except this clause 7.28 will be
            deleted.


      Damages not a sufficient remedy

7.29  You understand that damages are not a sufficient remedy for a breach of
      Your obligations under this agreement. We will be entitled to injunctive
      relief and any other remedy that is available at law, in equity, or under
      this agreement.


      AUSTEL approval

7.30  This agreement is subject to AUSTEL approving:

      (a)   the terms of Smart Saver; and

      (b)   certain changes to:

            (i)     Business Saver Plus; and
    
            (ii)    Corporate Centre Long Distance      

      all on terms satisfactory to Us.

7.31  If this does not happen by the Flexi-Plan Start Date, then We may:

<PAGE>
 
      (a)   cancel this agreement by notice to You (clause 5, except clauses
            5.1(b), 5.2, 5.3 and 5.4. applies on a cancellation); or

      (b)   by notice to You (on or before the Flexi-Plan Start Date) extend
            this date to another date, if We believe there are prospects of
            getting the approvals. The extended date may not be after 30 June
            1996. If We do this then the Commission Prepayment Date and the
            Resale Supply Cut Off Date are similarly extended by the same time.


8     MEANING OF WORDS

8.1   The following words have these meanings in this agreement unless the
      contrary intention appears.

      Act means the Telecommunications Act 1991 (Cth).

      Aggregator means a class of Service Provider who:

      (a)   relies on a Carrier to bill its customers for the provision of
            telecommunication services; and

      (b)   is the legal lessee of the underlying telecommunication lines.

      Associated Body Corporate, in relation to a corporation, means:

      (a)   a Related Body Corporate; or
    
      (b)   a body corporate whose board is the same as or controlled by the
            same directors as the board of the corporation; or     

      (c)   a body corporate in which the same shareholders hold or control a
            majority shareholding as the corporation.

      AUSTEL means the Australian Telecommunications Authority.

      Ballot means the balloting of telephone subscribers within particular
      areas to enable each subscriber to preselect their preferred provider of
      STD and IDD calls.

      Basic Carriage Service Tariffs means the tariffs and general conditions
      concerning basic carriage services, filed by Us with AUSTEL, as amended
      from time to time.

      Business Day means a day on which banks are open for general banking
      business in Melbourne.

      Business Links means the exchange based service described under that name
      in Our Basic Carriage Service Tariffs.

      Business Saver Plus means the Flexi-Plan described under that name in Our
      Basic Carriage Service Tariffs.

      Calling Line Identification means the facility in an exchange used for
      billing and surveillance purposes which identifies the number of the
      calling party.

      Carrier means the holder of a general telecommunications licence under the
      Act.

      Centel means the network service described under that name in Our Basic
      Carriage Service Tariffs.

      Centel Plus means the upgraded version of Centel described under that name
      in Our Basic Carriage Service Tariffs.

      Commission Prepayment Date is the date specified in the Agreement Details,
      as extended under clause 7.31.
    
      Confidential Information means all Information about or developed in
      connection with or in support of Our business of a confidential nature
      (including any matter concerning or arising out of this agreement, the
      Services or customers who have contracted to use the Services, including
      Customer names and details about Customers) disclosed or otherwise
      provided by Us to You or otherwise obtained by You which:      

      (a)   is not, by reason of general publication or the like, readily
            available in the public domain; or

      (b)   if part of the public domain, became part of the public domain as a
            result of an unauthorised disclosure or otherwise by reason of a
            breach of confidence by You or Your officers, employees and agents.


      Connection means:

      (a)   for Telstra Carrier Selection, the connection by Us of a PSTN or
            PSIS line (excluding any Indial Line) to the Preselectable Services
            following the receipt by Us of a valid application or request from
            the Customer selecting Us as the Preferred Carrier on that line (We

<PAGE>
 
            must be satisfied that the application or request was arranged or
            procured by You after the commencement date of this agreement) and

      (b)   for Services other than Telstra Carrier Selection, the connection by
            Us of a Customer to a Service following the receipt by Us of a valid
            application or request from the Customer to use that Service, (We
            must be satisfied that the application or request was arranged or
            procured by You after the commencement date of this agreement).

      Connection Date means the day on which We complete a Connection and the
      Service is ready to be billed to the Customer.

      Conversion Rate has the meaning given to it in schedule 3.

      Corporate Centre Long Distance means the Flexi-Plan described under that
      name in Our Basic Carriage Service Tariffs.

      Customer means Former Customers and New Customers.

      Easycall means the network service described under that name in Our Basic
      Carriage Service Tariffs.

      Faxstream means the facsimile network service described under that name in
      Our Basic Carriage Service Tariffs.

      Flexi-Plan means the charging plans described under that name in the Our
      Basic Carriage Service Tariffs.

      Flexi-Plan Start Date is the date specified in the Agreement Details.
    
      Former Customers means Axicorp Pty. Ltd. former customers, whose names are
      in schedule 7 and who Connect to Us.     

      Freecall 1800 means the telephone charging service described under that
      name in Our Basic Carriage Service Tariffs.

      Indial Line means a connection which will only allow non-metered calls to
      be made within a specific group of telephone users.

      Information means information and know-how including, but not limited to,
      source and object codes, flow charts and logic diagrams, data concepts,
      technology, manufacturing processes and industrial marketing and
      commercial knowledge whether or not in printed form.

      In Place Connection means a reconnection by Us of a previously provided
      telephone service where lead-in cabling from the property point of entry
      to the end facility is on site.


      Insolvent means:

      (a)    if You are a company:
    
             (i)     You are wound up; or     
    
             (ii)    a receiver or receiver and manager is appointed to You;
                     or      
    
             (iii)   a receiver or receiver and manager is appointed over any
                     part of Your property; or      
    
             (iv)    an official manager is appointed to You under a resolution;
                     or      
    
             (v)     You enter into a scheme of arrangement with all or any of
                     your creditors, or make an arrangement or moratorium
                     involving any of them; or      
    
             (vi)    You resolve to wind Yourself up, or otherwise dissolve
                     Yourself; or     

             (vii)   You state that You are unable to pay Your debts when they
                     fall due; or

      (b)    if You are an individual:
    
             (i)     You are declared bankrupt; or      

             (ii)    You enter into an arrangement with some or all of Your
                     creditors.

      Intellectual Property Rights means all rights conferred under statute,
      common law and equity in and in relation to inventions, designs, trade
      marks and trade dress, trade names, logos and get-up, circuit layouts,
      confidential information and copyright and any other intellectual property
      rights as defined by Article 2 of the World Intellectual Property
      Organisation Convention of July 1967.

      International Direct Dialling or IDD means the service which allows
      international telephone calls to be made by dialling direct without the
      assistance of an operator.

<PAGE>
 
- ----------------------------------------------------------------------------- 9
 
      KPI means the key performance indicators in schedule 3.

      Key Dealer Personnel includes

      (a)   any of Your directors who individually or together with other
            directors are in a position to control Your board; and

      (b)   any of Your shareholders who hold a majority of Your shares or who
            individually or together with other shareholders are in a position
            to control a majority of Your shares; and
    
      (c)   the individuals who control the day to day operation of Your
            business; and      

      (d)   any other person who We reasonably consider would have access to
            Confidential Information.

      Line Hunt means the network service which groups more than one line with
      one directory number, enabling a number of incoming calls to be
      distributed to various extensions.

      Long Distance 4 means the Flexi-Plan described under that name in Our
      Basic Carriage Service Tariff.

      MessageBank means Our 24-hour-a-day remote home answering service.

      Merchandising Material means literature, signage or other display,
      merchandising or advertising materials (whether originals or copies).

      Month means a calendar month.

      New Customers means a person, other than a Former Customer, from whom You
      have obtained a properly completed application form for a Service and who
      Connects to Us.

      "Never Busy Fax Facility" means one of the facilities available under the
      Faxstream service and described under that name in Our Basic Carriage
      Service Tariffs.

      New Service means a new Connection from a property point of entry to a
      network point of presence.

      Optus means Optus Networks Pty Ltd (ACN 008 570 330).

      Person Associated with You includes:
     
      (a)    any of Your directors who individually or together with other
             directors is in a position to control Your board; and

      (b)    any of Your shareholders who hold a majority of Your shares or who
             individually or together with other shareholders is in a position
             to control a majority of Your shares; and

      (c)    an Associated Body Corporate of You.

      Preferred Carrier means the Carrier which has been designated by a
      Customer for the carriage of all Preselectable Services, subject to any
      routing of Preselectable Services to an alternative Carrier by prefixing a
      call within the other Carrier's selection code.

      Preselectable Services means the IDD and STD telecommunications services
      or corresponding operator assisted services offered by Us.

      PSIS means the Public Switched ISDN Service.

      PSTN means the Public Switched Telephone Network.

      Quarter means a three Month period (or part) commencing on 1 January, 
      1 April, 1 July or 1 October.

      Rebiller means a class of Service Provider who:

      (a)   bills customer direct for the provision of telecommunication
            services; and

      (b)   is the legal lessee of the underlying telecommunication lines.

      Related Body Corporate has the meaning given to it in the Corporations
      Law.

      Resale Connect Cut Off Date is the date specified in the Agreement
      Details.

      Resale Supply Cut Off Date is the date specified in the Agreement Details,
      as extended under clause 7.31.

      Relevant Interest has the meaning given to it in Division 5 of Part 1.2 of
      the Corporations Law as it applies to shares.

      Revenue means revenue received by Us net of any discounts.

      Service Provider means the supplier of an eligible service under a service
      providers class licence or

<PAGE>
 
- ---------------------------------------------------------------------------- 10 

      an international service providers class licence issued by AUSTEL under
      the Act.

      Services means those services specified in the Agreement Details that are
      for the time being offered by Us but not Services connected through or
      acquired from a Service Provider or a Carrier (not being Us).

      Smart Saver means the Flexi-Plan described under that name in Our Basic
      Carriage Service Tariffs.

      Switched Service Provider means a class of Service Provider who:

      (a)   owns its own telecommunications switches; and

      (b)   leases its telecommunication capacity from a Carrier; and

      (c)   is not the legal lessee of the underlying telecommunication lines.

      Subscription Trunk Dialling or STD means the service which allows long
      distance telephone calls (other than international telephone calls) to be
      made by dialling direct without the assistance of an operator.

      Telstra Carrier Selection means the designation of Us by a Customer as its
      Preferred Carrier.

      Trade Marks means the trade marks described in schedule 4.

      Unforeseen Event in relation to a party, means an act of God, fire,
      lightning, explosion, flood, insurrection or civil disorder, war or
      military operation, government or quasi-government restraint,
      expropriation, prohibition, intervention, direction or embargo, inability
      or delay in obtaining government or quasi-government approvals, consents,
      permits, licences or authorities, industrial disputes of any kind and any
      other cause whether similar or not outside of the affected party's
      control.

      Win-back means You procure or arrange a Connection from a Customer who, at
      the time, was connected to:

      (a)   a Carrier other than Us, whether or not through a Service Provider;
            and

      (b)   Us through a Service Provider, and who, immediately after the
            Connection Date, is no longer connected through a Service Provider.


      Rules of Interpretation

8.2   In this agreement unless the contrary intention appears:

      (a)   the singular includes the plural and vice versa; and

      (b)   "person" includes a firm, a body corporate, an unincorporated
            association or an authority; and

      (c)   an agreement representation or warranty:

            (i)     in favour of two or more persons is for the benefit of them
                    jointly and severally; and

            (ii)    on the part of two or more persons binds them jointly and
                    severally; and

      (d)   a reference to:

            (i)     a person includes the person's executors, administrators,
                    successors, substitutes (including persons taking by
                    novation) and assigns; and

            (ii)    a document includes any variation or replacement of it; and

            (iii)   a law includes regulations and other instruments under it
                    and amendments or replacements of any of them; and

            (iv)    a thing includes the whole and each part of it; and

            (v)     a group of persons includes all of them collectively, any
                    two or more of them collectively and each of them
                    individually; and

            (vi)    the president of a body or authority includes any person
                    acting in that capacity; and

      (e)   "including" when introducing a list of items does not limit the
            meaning of the words to which the list relates to those items or to
            items of a similar kind.

8.3   Headings are inserted for convenience and do not affect the interpretation
      of this agreement.

<PAGE>
 
- --------------------------------------------------------------------------------


                                   Schedule I

                                   The Duties

1     GENERAL DUTIES
- --------------------------------------------------------------------------------
1.1   Despite the signing of this agreement You may continue to connect members
      of the public to Your resale plans and other services up until the Resale
      Connect Cut Off Date.

1.2   On and from Resale Connect Cut Off Date. You must not connect members of
      the public to Your resale plans and other services. However You may
      continue to supply telecommunications services to persons who connected to
      Your resale plans and other services before Resale Connect Cut Off Date,
      up to the Resale Supply Cut Off Date.

1.3   By the Resale Supply Cut Off Date, You must have terminated all
      arrangements that You have in place with members of the public for the
      provision of telecommunications services, so that after this date You no
      longer act as a Service Provider or as an dealer or other representative
      of a Source Provider.

      On and from the date of this agreement You must:

      (a)    strive to promote and extend:

             (i)   the demand for the Services; and

             (ii)   Our goodwill and reputation; and

      (b)    procure Customers to acquire the Services and do Your best to
             maximize the number of Connections; and

      (c)    have the facilities, staff and resources to perform Your duties;
             and

      (d)    develop and carry on a satisfactory promotional program in
             connection with Your duties, including mail lists, advertising and
             participation in trade meetings, exhibitions and fairs, however You
             must not carry on any direct marketing campaigns involving Our
             Services without the prior written approval of Our National Dealer
             Manager; and

      (e)    train Your staff to effectively promote the sale of, and extend the
             demand for, the Services; and

      (f)    immediately let Us know in writing if You have knowledge of any
             serious Customer claim or complaint about the Services and, if We
             ask, promptly give Us a written report setting out Your knowledge
             of the claim or complaint; and

      (g)    immediately let Us know in writing if You have knowledge that any
             person is infringing or is attempting to infringe any Intellectual
             Property Rights owned or used by Us and provide assistance as We
             may ask concerning that infringement or attempted infringement; and

      (h)    act lawfully, loyally and in good faith to Us and comply with Our
             instructions and otherwise act in a manner You would reasonably
             consider to be most beneficial to Our interests; and

      (i)    act fairly and reasonably in all Your dealings with Customers and
             provide a high standard of service to them (Your service to
             Customers is to be no less than any service standards or code of
             conduct established by Us from time to time); and

      (j)    comply with all laws applicable to the performance of Your Duties;
             and

      (k)    comply with Our marketing, administrative and practical procedures
             and instructions as provided by Us from time to time including:

             (i)    the Advertising Procedures in schedule 5; and

             (ii)   any procedures or instructions about the display of
                    Merchandising Material; and

      (l)    get the prior approval of Our National Corporate Identity Manager
             for any marketing or advertising performance of Your duties, and
             initiatives that involve co-branding; and
    
      (m)    comply with Our reasonable directions concerning the performance of
             Your duties; and      

<PAGE>
 
                                                                               2
- ------------------------------------------------------------------------------  
      (n)    avoid deceptive, misleading or unethical practices that are or
             might be detrimental to Us; and

      (o)    not make any false or misleading representations about the Services
             or Us; and

      (p)    not publish or participate in the publication of any misleading or
             deceptive advertising material about the Services or Us; and

      (q)    at all times, identify yourself as a "Telstra Approved Dealer -
             Solution Plus" and do so according to Our instructions provided to
             You from time to time; and

      (r)    not identify Yourself as being Us or Our subsidiary, division,
             partner, joint venturer, agent or employee, or as being independent
             of or associated with Us, other than as a "Telstra Approved 
             Dealer - Solution Plus"; and

      (s)    not admit any liability on Our behalf to any collector or third
             party; and

      (t)    ensure that each application by a Customer for a Service procured
             by You is in the form approved by Us from time to time, is fully
             completed, and is immediately forwarded by You to Our Vendor
             Service Centre, as notified by Us; and

      (u)    ensure that You sight adequate documents verifying the identity of
             each Customer; and

      (v)    keep proper records for all transactions; and
    
      (w)    allow Us (and Our agents) to inspect, copy and audit Your records
             on giving reasonable notice and during business hours, but in the
             case of an emergency, at any time; and     

      (x)    give Us reports in connection with Your duties, promptly when We
             reasonably ask; and

      (y)    comply with any current guidelines and code of conduct published by
             the Australian Direct Marketing Association Ltd; and

      (z)    not disclose or sell to another person the details (including
             names, addresses, phone and fax numbers and business names) of Your
             former customers whose names are in schedule 7; and
                    
      (aa)   when asked promptly procure Key Dealer Personnel to sign a deed
             with Us agreeing to be bound by clauses 3.6 to 3.9, in a form
             reasonably required by Us; and     

      (bb)   when asked promptly procure Persons Associated With You to sign a
             deed with Us agreeing to be bound clauses 5.1 to 5.4 and 
             paragraph 1.5 of this schedule, in a form reasonably required by
             Us;

1.5   On and from the Resale Supply Cut Off Date, neither You nor Persons
      Associated With You must act in any capacity as:

      (a)    a Service Provider or an agent dealer or other representative of a
             Service Provider; or

      (b)    an agent, dealer or other representative of a Carrier other than
             Us

      except with Our written approval. The words "in any capacity" have the
      same meaning as those in clause 5.2.

1.6   You submit a business plan to Us for approval (not to be unreasonably
      withheld) and then vary the plan as We may reasonably ask. The first plan
      must be submitted within 30 days of the date of this agreement and the
      second plan within 30 days of the start of the second year of the term.

1.7   You must not make any representation, or give or try to give any warranty
      or undertaking about the Services, that is in any way inconsistent with,
      or is misleading or deceptive as to:

      (a)    any warranty or guarantee given by Us for the Services; or

      (b)    any written material provided by Us to You for passing on to
             Customers and relating to the Services, their characteristics,
             performance, capability or suitable uses.

1.8   To the extent permitted by law, You must not, during the term of this
      agreement, promote the sale of, or extend the demand for, the Services in
      any manner or on any terms not expressly permitted by this agreement.

<PAGE>
 
- --------------------------------------------------------------------------------


1.9   Nothing in this agreement stops You from complying with a request from a
      Customer who wants to be connected to a telecommunications service
      provided by a person other than Us. However, if You do this, we may
      exercise Our rights under clause 4 of the agreement and under schedule 2.


2     SPECIFIC DUTIES CONCERNING TRADE MARKS
- --------------------------------------------------------------------------------
     
2.1   You must not:

      (a)   make or have any claim to the Trade Marks; or

      (b)   do anything which might impair Our ownership of the Trade Marks or
            which may prejudice their distinctiveness or the validity of Our
            goodwill; or

      (c)   alter, remove or tamper with the Trade Marks or other means of
            identification used in connection with the Services; or

      (d)   except to the extent permitted by this agreement or with Our written
            consent use any of the Trade marks; or

      (e)   challenge the validity of the Trade Marks or dispute Our right,
            title and interest in the Trade Marks; or

      (f)   apply to remove the Trade Marks from the Trade Marks Register; or

      (g)   display on Your premises or otherwise use any trade marks other than
            the Trade Marks; or

      (h)   assist or support any other party to do any of the things listed in
            paragraphs 2.1(a) to 2.1(g) of this schedule.

2.2.  You must only use the Trade Marks:

      (a)   by display at Your premises; and

      (b)   in advertising and promoting Your sales of the Services and not in
            any other aspect of Your business; and
        
      (c)   in connection with Your business as a Telstra Approved Dealer -
            Solution Plus";      

      as permitted by this agreement and, in particular, You must:

      (d)   use the Trade Marks only in a manner which has been specifically
            approved in writing by Us or other person as We may nominate from
            time to time, which approval may be revoked, amended or varied by Us
            at any time with immediate effect; and

      (e)   not use or register or attempt to use or register any trade mark or
            business, trading or company name which is similar to or so nearly
            resembles a Trade Mark as to be likely to deceive or cause
            confusion; and

      (f)   not incorporate a Trade Mark in any other trade mark, trade name,
            device or logo; and

      (g)   not without Our prior written consent, display any Trade Mark in
            conjunction with a trade mark applicable to goods or services not
            marketed or supplied by Us or Our nominees; and

      (h)   not authorize, permit or otherwise allow any other person to use the
            Trade Marks without specific approval in writing from Us.

2.3   You must not use a Trade Mark as part of Your corporate, business or
      trading name.

2.4   You must, at Our request:

      (a)   during normal business hours, permit Us to enter Your premises to
            inspect and remove for testing any packaging, stationery or
            Merchandising Material used or proposed to be used by You; and

      (b)   provide Us with, at Your expense, samples of any packaging,
            stationery or Merchandising Material used or proposed to be used by
            You.

<PAGE>
 
- --------------------------------------------------------------------------------

3     SPECIFIC DUTIES CONCERNING CONFIDENTIAL INFORMATION
- --------------------------------------------------------------------------------

3.1   You must not without our prior written consent:

      (a)   use Confidential Information except solely to carry out Your duties;
            or

      (b)   communicate to any other person all or any Confidential Information
            except as permitted by this agreement; or

      (c)   permit unauthorized persons to have access to places where
            Confidential Information is displayed, reproduced or stored; or

      (d)   make or assist any person to make any unauthorized use of
            Confidential Information.

3.2   You must take all reasonable steps to ensure that the Confidential
      Information is not disclosed to any other person by Your officers,
      servants, agents, contractors or subcontractors. This includes obtaining,
      at Our request confidentiality undertakings in a form approved by Us from
      Your Key Dealer Personnel and other officers, employees, agents,
      contractors and subcontractors who have or may have access to the
      Confidential Information.
    
3.3   If any of Your employees, officers, agents, contractors or subcontractors
      breach the confidentiality obligations contained in this agreement You
      must immediately notify Us in writing and provide assistance as We may
      reasonably ask in concerning any action taken or remedy sought by Us
      concerning that breach.     

4     SPECIFIC DUTIES CONCERNING THE BALLOT PROCESS
- --------------------------------------------------------------------------------
4.1   During the Ballot process. We are obliged to follow certain rules about
      advertising Our Services. These rules also apply to You while acting as
      Our dealer. If, at any time, We ask You to comply with those rules then
      during the period and in the geographical areas that We nominate, You must
      not undertake:

      (a)   media advertising which:

            (i)    specifically refers to the Ballot process; or

            (ii)   specifically refers to or promotes the designation by
                   customers of Us as the customer's Preferred Carrier; or

            (iii)  specifically refers to or discourages the designation by the
                   customers of Optus as the customer's Preferred Carrier; or

            (iv)   refers to or promotes Preselectable Services where the
                   promotion of or reference to those Preselectable Services is
                   specifically linked to or associated with the preselection or
                   the Ballot process; or

      (b)   direct mailing campaigns or pamphlet distribution where those
            activities specifically:

            (i)    refer to the Ballot process; or

            (ii)   refer to or promote the designation by Customers of Us as the
                   Customers Preferred Carrier; or

            (iii)  refer to or discourage the designation by
                   Customers of Optus as the Customer's Preferred Carrier; or

            (iv)   refer to or promote Our Preselectable Services; or

            (v)    refer to the Preselectable Services of Optus; or

      (c)   telemarketing campaigns which:

            (i)    specifically refer to the Ballot process; or

            (ii)   specifically refer to or promote the designation by Customers
                   of Us as the Customer's Preferred Carrier; or

            (iii)  specifically refer to or discourage the designation by the
                   Customers of Optus as the Customer's Preferred Carrier; or

<PAGE>
 
            (iv)   refer to or promote Preselectable Services where the
                   promotion of or reference to those Preselectable Services is
                   specifically linked to or associated with the preselection or
                   the Ballot process.

      (d)   canvass Customers by telephone to solicit or initiate telephone
            discussion with them about the designation of Us as Preferred
            Carrier.

4.2   You must also comply with the Ballot Guidelines in schedule 6. Those
      guidelines contain a Code of Conduct and Service Representative Guidelines
      and may be amended from time to time by Us.

4.3   If there is any inconsistency between Your duties in paragraph 4.1 of this
      schedule and the Ballot Guidelines, the Ballot Guidelines will prevail.

N.B.  This schedule may be varied by Us, from time to time, by notice to You.

      This schedule is current at 8/1/96.

<PAGE>
 
- --------------------------------------------------------------------------------
                                   Schedule 2

                The Commission Structure - Solution Plus Dealer


1     GENERAL EXPLANATION
- --------------------------------------------------------------------------------
1.1   For each continuous Connection of a Service procured or arranged by You,
      We will pay You commission. The commission is set out in the table on the
      next page and may consist of a combination of one or more of the
      following.

      (a)    A flat rate commission, which is calculated for each Connection and
             earned on the Connection Date.

      (b)    A percentage commission, which is based on Revenue calculated and
             billed by Us to the Customer for IDD and STD Services. Percentage
             commission is only payable for Services with the capacity for
             Calling Line Identification. Thre may be other conditions applying
             to the percentage commission for a particular Service. These are
             set out in the table on the next page.

      (c)    A six month bonus commission, which is earned if the Service
             remains in Connection for a continuous six month period from the
             Connection Date. There may be other conditions applying to the six
             month bonus commission for a particular Service. These are set out
             in the table on the next page.

      There are circumstances in which You will not be entitled to:

      (a)    any commission (flat rate, percentage or bonus) for the Connection
             of a Service; and

      (b)    any further commission (percentage or bonus).

      These circumstances are set out in paragraph 3.

1.3   There are also circumstances in which You have to refund Us the flat rate
      commission.  These circumstances are set out in paragraph 3.

<PAGE>
 

<TABLE>
<CAPTION> 

2     COMMISSION SCHEDULE
- ----------------------------------------   --------------------------------------   ----------------------------------------------
A     For Former Customers
- ----------------------------------------------------------------------------------------------------------------------------------
SERVICE          SERVICE                                                              COMMISSION        
CATEGORY         SUB-CATEGORY                                                                           
                                               -----------------------------------------------------------------------------------
                                                  Flat Rate Commission                     Percentage Commission     
                                                                               (only payable for Services with the capacity for 
                                                                                         Calling Line Identification)
- ----------------------------------------------------------------------------------------------------------------------------------
<S>              <C>                           <C>                            <C> 
Flexi-Plans      Business Saver Plus Flexi-    $15.00 for each Connection.    For an initial Business Saver Plus Flexi-Plan,
                 Plan, Corporate Centre                                       Corporate Centre Long Distance Flexi-Plan and
                 Long Distance Flexi-Plan,                                    Smart Saver Flexi-Plan:   
                 Long Distance 4 Flexi-                                                                 
                 Plan and Smart Saver                                         (a)  for the first 12 months of continuous           
                 Flexi-Plan only                                                   Connection (starting on and from the        
                                                                                   Connection Date), 5% of the Preselectable
                                                                                   Services Revenue that the Flexi-Plan applies
                                                                                   to, then              
 
                                                                              (b)  for the second 12 months of continuous
                                                                                   Connection, 3% of the Preselectable Services  
                                                                                   Revenue that the Flexi-Plan applies to, then
 
                                                                              (c)  for the third 12 months of continuous
                                                                                   Connection, 3% of the Preselectable Services 
                                                                                   Revenue that the Flexi-Plan applies to, then 
 
                                                                              (d)  for the fourth 12 months of continuous
                                                                                   Connection, 2% of the Preselectable Services
                                                                                   Revenue that the Flexi-Plan applies to.  
                                                                                         
                                                                              The payments over the four year period assumes the
                                                                              agreement runs for a four year period.  If it does
                                                                              not then see paragraphs 3.21, 3.22 and 3.23.     
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
 


<TABLE> 
<CAPTION> 

- -----------------------------------------------------------
SERVICE                                    
CATEGORY                                   


- -----------------------------------------------------------
                      6 Month Bonus Commission         
                                           
- -----------------------------------------------------------
<S>                <C> 
Flexi-Plans        $10.00 for each Connection that is,
                   after six months from the relevant
                   Connection Date, a continuing         
                   Connection. 


- -----------------------------------------------------------
</TABLE>
 

<PAGE>
 

<TABLE>
<CAPTION> 


- ----------------------------------------------------------------------------------------------------------------------------------
B     For New Customers
- ----------------------------------------------------------------------------------------------------------------------------------
SERVICE          SERVICE                                                              COMMISSION        
CATEGORY         SUB-CATEGORY                                                                           
                                               -----------------------------------------------------------------------------------
                                                  Flat Rate Commission                     Percentage Commission     
                                                                               (only payable for Services with the capacity for 
                                                                                         Calling Line Identification)
- ----------------------------------------------------------------------------------------------------------------------------------
<S>              <C>                           <C>                            <C> 
Flexi-Plan       Business Saver Plus Flexi-    $10.00 for each Connection.    For an initial Business Saver Plus Flexi-Plan,
                 Plan, Corporate Centre                                       Corporate Centre Long Distance Flexi-Plan and
                 Long Distance Flexi-Plan,                                    Smart Saver Flexi-Plan:   
                 and Smart Saver Flexi-                                                                 
                 Plan only                                                    (a)  for the first 12 months of continuous           
                                                                                   Connection (starting on and from the        
                                                                                   Connection Date), 2% of the Preselectable
                                                                                   Services Revenue that the Flexi-Plan applies
                                                                                   to, then              
 
                                                                              (b)  for the second 12 months of continuous
                                                                                   Connection, 3% of the Preselectable Services  
                                                                                   Revenue that the Flexi-Plan applies to, then
 
                                                                              (c)  for the third 12 months of continuous
                                                                                   Connection, 3% of the Preselectable Services 
                                                                                   Revenue that the Flexi-Plan applies to, then 
 
                                                                              (d)  for the fourth 12 months of continuous
                                                                                   Connection, 3% of the Preselectable Services
                                                                                   Revenue that the Flexi-Plan applies to.  
                                                                                         
                                                                              The payments over the four year period assumes the
                                                                              agreement runs for a four year period.  If it does
                                                                              not then see paragraphs 3.21, 3.22 and 3.23.     
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
 


<TABLE> 
<CAPTION> 
- -----------------------------------------------------------
- -----------------------------------------------------------
SERVICE                                    
CATEGORY                                   


- -----------------------------------------------------------
                      6 Month Bonus Commission         
                                           
- -----------------------------------------------------------
<S>                <C> 
Flexi-Plan         Nil                                


- -----------------------------------------------------------
</TABLE>
 

<PAGE>
 

<TABLE> 
<CAPTION> 

- ----------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------- 
<S>                 <C>           <C>                           <C> 
Telstra Carrier     New           $10.00 for each Connection    (a)  For the first 12 months of continuous Connection     
Selection           Service                                          (starting on and from the Connection Date), 2% of the       
                                                                     Preselectable Services Revenue from the relevant 
(Ballot area)                                                        Connections, then  
                                                                      
                                                                (b)  for the second 12 months of continuous Connection,
                                                                     2% of the Preselectable Services Revenue from the
                                                                     relevant Connections, then

                                                                (c)  for the third 12 months of continuous Connection, 2%
                                                                     of the Preselectable Services Revenue that the Flexi-
                                                                     Plan applies to, then
 
                                                                (d)  for the fourth 12 months of continuous Connection, 
                                                                     2% of the Preselectable Services Revenue that
                                                                     the Flexi-Plan applies to.
 
                                                                The payments over the four year period assumes the agreement 
                                                                runs for a four year period. If it does not then see paragraphs 
                                                                3.21, 3.22 and 3.23.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>




<TABLE> 
<CAPTION> 

- --------------------------------------------------------------
- --------------------------------------------------------------
<S>                    <C> 
Telstra Carrie         If the Service has the capacity for
Selection              Calling Line Identification, nil.
              
(Ballot area)          If the Service does not have the
                       capacity for Calling Line
                       Identification, $10.00.

- --------------------------------------------------------------
</TABLE>
 

<PAGE>
 

<TABLE> 
<CAPTION> 

- ----------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------- 
<S>                 <C>                      <C>                                                                                
In Place      $10.00 for each Connection     (a)  For the first 12 months of continuous Connection        If the Service has the
                                                  (starting on and from the Connection Date), 2% of the   capacity for Calling Line
                                                  Preselectable Services Revenue from the relevant        Identification, nil.  
                                                  Connections, then                                                             
                                                                                                          If the Service does not
                                             (b)  for the second 12 months of continuous Connection,      have the capacity for 
                                                  2% of the Preselectable Services Revenue from the       Calling Line 
                                                  relevant Connections, then                              Identification, $10.00.
                      
                                             (c)  for the third 12 months of continuous Connection, 2%                          
                                                  of the Preselectable Services Revenue that the Flexi-                         
                                                  Plan applies to, then                                                         
                                                                                                                                
                                             (d)  for the fourth 12 months of continuous Connection,                            
                                                  2% of the Preselectable Services Revenue that                                 
                                                  the Flexi-Plan applies to.                                                    
                                                                                                                                
                                             The payments over the four year period assumes the agreement                       
                                             runs for a four year period. If it does not then see paragraphs                    
                                             3.21, 3.22 and 3.23.                                                               
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>
 

<TABLE> 
<CAPTION> 

- ---------------------------------------------------------------------------------------------------------------------------------- 
- ---------------------------------------------------------------------------------------------------------------------------------- 
<S>                 <C>                      <C>                                                                                
Win-back      $20.00 for each Connection     (a)  For the first 12 months of continuous Connection        $20.00 for each       
(see          as long as:                         (starting on and from the Connection Date), 2% of the   Connection that is,      
comments                                          Preselectable Services Revenue from the relevant        after six months      
in            (a) You have also Connected         Connections, then                                       from the relevant     
paragraph         the Customer to at least                                                                Connection Date, a     
3.19)             one of the following -     (b)  for the second 12 months of continuous Connection,      continuing Connection.
                  Business Saver Plus             3% of the Preselectable Services Revenue from the                     
                  Flexi-Plan, Corporate           relevant Connections, then                                                     
                  Centre Long Distance
                  Flexi-Plan; and            (c)  for the third 12 months of continuous Connection, 3%                          
                                                  of the Preselectable Services Revenue that the Flexi-                         
              (b) the Customer is not a           Plan applies to, then                                                         
                  Former Customer.                                                                                              
                                             (d)  for the fourth 12 months of continuous Connection,                            
                                                  3% of the Preselectable Services Revenue that                                 
                                                  the Flexi-Plan applies to.                                                    
                                                                                                                                
                                             The payments over the four year period assumes the agreement                       
                                             runs for a four year period. If it does not then see paragraphs                    
                                             3.21, 3.22 and 3.23.                                                               
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>
 

<TABLE> 
<CAPTION> 
- ------------------------------------------------------------------------------------------------------------------------------------
 C      All Customers
- ------------------------------------------------------------------------------------------------------------------------------------
  SERVICE        SERVICE                                                          COMMISSION
  CATEGORY       SUB-CATEGORY                 
                                            ----------------------------------------------------------------------------------------
                                                Flat Rate Commission          Percentage Commission         6 Month Bonus Commission
                                                                          (only payable for Services with 
                                                                           the capacity for Calling Line
                                                                                  Identification)
- ------------------------------------------------------------------------------------------------------------------------------------
<S>              <C>                          <C>                                    <C>                    <C> 
 Faxstream       New Faxstream Connection      $25.00 for each Faxstream              Nil                   $15.00 for each 
                                               Connection                                                   continuing Connection, 
                                                                                                            if Our Revenue on that
                                                                                                            Faxstream Connection,
                                                                                                            for the six month
                                                                                                            period from the relevant
                                                                                                            Connection Date, is
                                                                                                            $150,000 or more.
               ---------------------------------------------------------------------------------------------------------------------
                 "Never Busy Fax" Facility    $20.00 for each Faxstream              Nil                    $10.00 for each
                                              Connection                                                    Connection that is, 
                                                                                                            after six months from 
                                                                                                            the relevant Connection
                                                                                                            Date, a continuing
                                                                                                            Connection.
               ---------------------------------------------------------------------------------------------------------------------
                 Conversion of a PSTN line    $20.00 for each Faxstream              Nil                            Nil
                 to Faxstream                 Connection         
- ------------------------------------------------------------------------------------------------------------------------------------
 Easycall                                     $5.00 for each facility, except        Nil                    $3.00 for each 
                                              where We provide that facility free                           Connection that is, 
                                              of charge (in which case, nil).                               after six months from
                                                                                                            the relevant Connection
                                                                                                            Date, a continuing 
                                                                                                            Connection, except where
                                                                                                            We provide that facility
                                                                                                            free of charge (in which
                                                                                                            case, nil).
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
 


 . Mallesons Stephen Jaques

<PAGE>
 

<TABLE> 

- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<S>            <C>                        <C>                                   <C>               <C> 
Freecall 1800                             $50.00 for each Connection.            Nil              $50.00 for each continuing
                                                                                                  Connection, if Our Revenue
                                                                                                  on that Freecall 1 800
                                                                                                  Connection, for the six month
                                                                                                  period from the relevant
                                                                                                  Connection Date, is 
                                                                                                  $1,000.00 or more.
- -----------------------------------------------------------------------------------------------------------------------------------
Business Links                            $14.00 for each Connection.            Nil              $7.00 for each Connection 
                                                                                                  that is, after six months from
                                                                                                  the relevant Connection Date,
                                                                                                  a continuing Connection.
- -----------------------------------------------------------------------------------------------------------------------------------
MessageBank                               $4.00 for each Connection.             Nil              $4.00 for each Connection
                                                                                                  that is, after six months from
                                                                                                  the relevant Connection Date,
                                                                                                  a continuing Connection.
- -----------------------------------------------------------------------------------------------------------------------------------
Centel                                    $20.00 for each Connection.            Nil              $13.00 for each Connection
                                                                                                  that is, after six months from
                                                                                                  the relevant Connection Date,
                                                                                                  a continuing Connection.
- -----------------------------------------------------------------------------------------------------------------------------------
Centel Plus    If upgrading from an       $10.00 for each Connection.            Nil              $15.00 for each Connection
                                                                                                  that is, after six months from
                                                                                                  the relevant Connection Date,
                                                                                                  a continuing Connection.
              ---------------------------------------------------------------------------------------------------------------------
               If the Customer did not    $30.00 for each Connection.            Nil              $15.00 for each Connection
               have an existing Centel                                                            that is, after six months from
               Service.                                                                           the relevant Connection Date,
                                                                                                  a continuing Connection.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
 

<PAGE>
 
                                                                             10
- ---------------------------------------------------------------------------  

3.11 On or before the start of this agreement, You must, if We ask, deliver a
     bank guarantee to Us for the amount set out in the Agreement Details.  By
     bank guarantee, We mean one or more unconditional undertakings to pay on
     demand a specified amount by a bank and on terms both acceptable to Us
     acting reasonably.

3.12 If You do not comply with Your clause 3.10 obligations, then We may
     call on the bank guarantee without notice to You.

3.13 We must return the bank Guarantee to You:

     (a)  if You owe us a refund under clause 3.9 - within 28 days after You
          have paid Us the refund; and

     (b)  if You do not owe Us money under clause 3.9 - within 14 days after the
          Resale Connection Cut Off Date.

Percentage commission for Former Customers

3.14 For percentage commission to accrue for a Former Customer three things
     must happen:

     (a)  You must connect each Former Customer to the most suitable Flexi-Plan
          in table A; and

     (b)  You must procure the Former Customer to make a request to Us to be
          transferred to a direct legal relationship with Us; and

     (c)  We must process the Former Customer's transfer request; and

     (d)  the Former Customer must, after the transfer, use the services
          attached to the relevant Flexi-Plan.

3.15 Because We are not able to process the requests for transfer straight away,
     We will pay You a flat rate commission (on the terms set out below) so that
     You are not disadvantaged.

3.16 The first monthly payment is due on the first day of the month following
     the Commission Prepayment Date and the last monthly payment will be made on
     the first day of the month that is six months after the Commission
     Prepayment Date.  We will make the monthly payments within 14 days of the
     payment becoming due.

3.17 The monthly payment will be calculated on 5:00 pm on the last day of the
     month before the relevant payment month.  So, for the payment month of 1
     April, the monthly payment will be calculated on 5:00 pm on 31 March.  For
     the monthly payment You will be entitled to:
      
     (a)  for Former Customers who, on 5:00 pm on the last day of the month
          before the relevant payment month;       

          (i)    are residential customers (these are customers who pay the
                 residential tariff); and

          (ii)   have both been Connected to a Flexi-Plan in table A and have
                 made a request to Us to be transferred to a direct legal
                 relationship with Us (You must prove this request to Our
                 reasonable satisfaction); but
         
          (iii)  We have not processed the request for transfer:      

          $2.10 for each of those customers; and
    
     (b)  for Former Customers who, on 5:00 pm on the last day of the month
          before the relevant payment month;       

          (i)    are business customers (these are customers who pay the
                 business tariff); and

          (ii)   have both been Connected to a Flexi-Plan in table A and have
                 made a request to Us to be transferred to a direct legal
                 relationship with Us (You must prove this request to Our
                 reasonable satisfaction); but
        
          (iii)  We have not processed the request for transfer:       

          $14.25 for each of those customers.

3.18 Paragraphs 3.11 to 3.13 apply to the payments under paragraph 3.17.

<PAGE>
 
                                                                             11
- ---------------------------------------------------------------------------

Win-back commission

3.19 If You are entitled to commission for a Win-back Connection, then You
     cannot claim commission (flat rate, percentage or bonus) for the Connection
     of the underlying Flexi-Plan (in other words You are only entitled to one
     lot of commission).

Percentage commission - Calling Line Identification

3.2O You are only entitled to percentage commission for the Connection of
     Services with the capacity for Calling Line Identification.

Percentage and bonus commission - only payable during the term

3.21 You are only entitled to percentage and bonus commission during the term of
     this agreement, including a renewal under clause 7.28 of the agreement.

What happens if this agreement is cancelled or expires?

3.22 If this agreement is cancelled (for whatever reason) or expires, We will
     stop paying You commission (flat rate, percentage or bonus) immediately
     for:

     (a)  Connections made after the cancellation or expiry; and
     
     (b)  Connections that are current at the date of cancellation or expiry (in
          other words, You do not get paid commission for any period after the
          agreement has been cancelled or expires);        

     however, We will pay You percentage commission earned up to the date of
     cancellation, but bonus commission is not paid on a pro-rata basis.

Example

3.23 The following examples show the application of paragraphs 3.21 and 3.22.

     Former Customers

     Example one

     The agreement starts on 1 January 1996 and will end on 31 December 1997.

     You connect a Former Customer to Business Saver Plus Flexi-Plan on 1 March
     1996.  You will be entitled to the flat rate commission according to
     paragraph 3.8 and assuming the Connection remains current You will be
     entitled to:

        (a)  to the six months bonus on 1 September 1996; and

        (b)  to percentage commission:

             (i)  for the first 12 month period - 12 month's worth of commission
                  at the rate of 5%, taking You up to 29 February 1997; and

             (ii) for the second 12 month period - only ten month's worth of
                  commission at the rate of 3% taking You up to 31 December
                  1997.

     If We give You a non-renewal notice under clause 7.28 the agreement will
     expire and You will not be entitled to any further commission for this
     Connection.

     If We do not give You a notice under clause 7.28 of the agreement, the
     agreement will be extended for a further two year period from 1 January
     1998 to 31 December 1999. If this happens You will be entitled to
     percentage commission;

        (a)  for the second 12 month period - the remaining two month's worth of
             commission at the rate of 3%, taking You to 28 February 1998; and

<PAGE>
 
                                                                             12
- ---------------------------------------------------------------------------

        (b)  for the second 12 month period - 12 months worth of commission at
             the rate of 3%, taking You up to 28 February 1999; and

        (c)  for the fourth 12 month period - 10 month's worth of commission at
             the rate of 2% taking You up to 31 December 1998. You are not
             entitled to the remaining two month's worth of commission for the
             fourth year because this period is after the expiry of the
             agreement.

New Customers

Example one

The agreement starts on 1 January 1996 and will end on 31 December 1997.

You connect a New Customer to Business Saver Plus Flexi-Plan on 1 January 1996.
You will be entitled to the flat rate commission on 1 February 1996 and assuming
the Connection remains current You will be entitled to percentage commission:

        (a)  for the first 12 month period - 12 month's worth of commission at
             the rate of 2%, taking You up to 31 December 1996; and

        (b)  for the second 12 month period - 12 month's worth of commission at
             the rate of 3%, taking You up to 31 December 1997.

If We give You a non-renewal under clause 7.28 the agreement will expire and You
will not be entitled to any further commission for this Connection.

Example two

The agreement starts on 1 January 1996 and will end on 31 December 1997.

You connect a New Customer to Business Saver Plus Flexi-Plan on 1 June 1996.
You will be entitled to the flat rate commission on 1 July 1996 and assuming the
Connection remains current You will be entitled to percentage commission:

        (a)  for the first 12 month period - 12 month's worth of commission at
             the rate of 2%, taking You up to 31 May 1997; and

        (b)  for the second 12 month period - only six month's worth of
             commission at the rate of 3%, taking You up to 31 December 1997.

If We give You a non-renewal notice under clause 7.28 the agreement will expire
and You will not be entitled to any further commission for this Connection.

If We do not give You a notice under clause 7.28 of the agreement, the agreement
will be extended for a further two year period from 1 January 1998 to 31
December 1999.  If this happens You will be entitled to percentage:

        (a)  for the second 12 month period - the remaining six month's worth of
             commission at the rate of 3%, taking You to 31 May 1999; and

        (b)  for the third 12 month period - 12 month's worth of commission at
             the rate of 3% taking You up to 31 June 1999; and

        (c)  for the fourth 12 month period - only six month's worth of
             commission at the rate of 3% taking You up to 31 December 1999, You
             are not entitled to the remaining two months worth of commission
             for the fourth year because this period is after the expiry of the
             agreement.

Example three

In example two above We cancel the agreement under clause 4 on 31 December 1998.
We will pay You for up to 31 December 1998 but You will not be entitled to any
commission for the balance of the third year or for the fourth year.

<PAGE>
 
                                                                              13
- ------------------------------------------------------------------------------

What happens if a Service is connected through or acquired from a Service
Provider?

3.24 You are entitled to commission only for Services sold as Our commissioned
     representative. No commission (flat rate, percentage or bonus) is payable
     to You for any Service connected through or acquired from a Service
     Provider, whether or not You are the agent or representative of the Service
     Provider.

What happens if You fail to keep adequate records?

3.25 If, in Our reasonable opinion, You do not maintain and keep sufficient
     records and accounts to justify and substantiate a claim on Us for
     commission. You are not entitled to that commission (whether it be a claim
     for flat rate, percentage or bonus commission).

3.26 If You fail to permit persons authorized by Us to inspect and take copies
     at all reasonable times of any records or accounts You have. You are not
     entitled to any commission (whether it be a claim for flat rate, percentage
     or bonus commission).

Misrepresentation

3.27 If We reasonably believe that You procured a Connection through misleading
     or deceptive conduct or misrepresentation. You are not entitled to any
     commission for that Connection (flat rate, percentage or bonus commission).

Subsequent or multiple Connections to a Flexi-Plan

3.28 Flexi-Plan commissions will only be paid for the initial sale of the
     relevant Flexi-Plan. Subsequent applications of the relevant Flexi-Plan
     will not attract commission (flat rate, percentage or bonus).

3.29 If the Flexi-Plan is already connected to a Customer's account, any New
     Services or In Place Connections that are added to the account will be
     consolidated and no Flexi-Plan commission is payable to You for procuring
     or arranging that Connection.

Consolidated accounts

3.30 For Customers with consolidated accounts, We will only pay You one lot of
     flat rate commission for the initial Connection of that Customer with a
     Flexi-Plan. In other words, We will not pay You any flat rate commission
     for the migration of the remaining services in the consolidated account to
     subsequent Flexi-Plans. By a consolidated account We mean an account under
     which a Customer acquires more than one Service.

3.31 You must provide Us with information that We ask for in connection with
     Your Former Customers to enable Us to calculate Your commission.

What happens if a Service is cancelled, discontinued etc?

3.32 If a Connection is cancelled, discontinued, suspended or connected through
     a Service Provider or a Carrier (not being Us), We will stop paying You
     percentage commission for that Service.  You are not entitled to percentage
     commission that has accrued up to this time.

3.33 If that cancellation, discontinuation, suspension or connection occurs
     within 12 months of the Connection Date and the Customer subsequently
     connects to a Service Provider or Carrier (other than Us), You will also
     have to refund to Us the flat rate commission that We paid You for that
     Service ("Refund").

3.34 If You owe Us a Refund and We owe You an amount, We may set-off against
     that amount the whole or part of the Refund.  Otherwise, the Refund (and in
     the case of a partial set-off, the balance of the Refund within five
     Business Days of Our request.

<PAGE>
 
                                                                              14
- ------------------------------------------------------------------------------

What happens if an application form is not processed through the Vendor Service
Centre

3.35 If You do not process application forms through the Vendor Service Centre.
     You will not be entitled to any commission (flat rate, percentage or bonus)
     for those forms.

Replacement Services

3.36 If We withdraw one of the Services and We agree with You to replace it with
     another service, then the percentage commission for the new service may not
     be less than the percentage commission payable for the old service.

NB.  This Schedule may be varied by Us from time to time, by notice to You.

     This Schedule is current at 8/1/96.

<PAGE>
 
                                                                             1
- ---------------------------------------------------------------------------

                                  Schedule 3

                          Key Performance Indicators

The KPI's

1    All application forms must be received within five working days of signing
     by the Customer.

2    Of the application forms received by Us, 95% of them must be correct and
     must also not need any re-work.

Meaning of Conversion Rate
    
In this agreement "Conversion Rate" means that by the Resale Supply Cut Off Date
80% of the Former Customers (excluding Axicorp Pty. Ltd. customers managed by
its agents) must have transferred to a direct legal relationship with Us. You
will use your best endeavors to ensure that Former Customers who are Axicorp
Pty. Ltd. customers managed by its agents redirect their direct legal
relationship to Us.    


         

     This Schedule is current at 8/1/96

<PAGE>
 
                                                                             1
- ---------------------------------------------------------------------------

                                  Schedule 4

                           The Trade Marks Schedule

These are the only Trade Marks of Ours which You are entitled to use, and then
only as permitted by this agreement:

Telstra
                                    [TELSTRA LOGO APPEARS HERE]


STD(R)
                                    Telstra



In addition,

if Flexi-Plan is a Service:            Flexi-Plan/TM/, Business Saver Plus/TM/, 
                                       Smart Saver/TM/  

if Faxstream is a Service:             Faxstream/TM/

if Easycall is a Service:              Easycall/TM/

if Freecall 1800 is a Service:         Freecall/TM/

if MessageBank is a Service:           MessageBank/TM/



N.B. This schedule may be varied by Us from time to time by notice to You.

     This schedule is current at #.

<PAGE>
 
                                                                             1
- ---------------------------------------------------------------------------

                                   Schedule 5

                           The Advertising Procedures

                                 To be included


N.B. This schedule may be varied by Us from time to time, by notice to You.

     This schedule is current at #.

<PAGE>
 
                                                                             1
- ---------------------------------------------------------------------------

                                   Schedule 6

                             The Ballot Guidelines



       Attached is the 14 page document comprising the Ballot Guidelines.



N.B. This schedule may be varied by Us from time to time, by notice to You.

     This schedule is current at 8/1/96

<PAGE>
 
                                CODE OF CONDUCT
                    ---------------------------------------

- --------------------------------------------------------------------------------
                                CODE OF CONDUCT
- --------------------------------------------------------------------------------

INTRODUCTION

The customer preselection process will be conducted area by area over an
extended period beginning mid 1993.

There are three different time periods relevant to the ballot process in each
area.

(i)   The first is the period leading up to the mail out of ballot forms by the
      Ballot Administrator to customers

      ("Pre Ballot Period").

(ii)  The second phase applies from the date the ballot forms are mailed by the
      Ballot Administrator until the end of the final ballot period (essentially
      75 days depending on the area) ("Ballot Period").

(iii) The third phase commences once the balloting in a particular area has
      closed ("Post Ballot Period").

BASIC PRINCIPLES

      Nothing in the Code of Conduct or the Service Representative Preselection
      Guidelines shall be interpreted as being inconsistent with or derogating
      from any of the provisions of Schedule 13. The working of Schedule 13
      shall have precedence at all times.

      The key objectives of the ballot process which provide the underlying
      philosophy and principles of this Code of Conduct are:

(a)   to promote competition between Telecom and Optus;

(b)   to make sure that customers are aware of the competitive environment
      before they make a choice:

(c)   to encourage customers to make their choice as early as possible; and

(d)   to make sure that the costs of the process are kept to a minimum.

3.    In implementing the ballot process:

(a)   both Telecom and Optus and the staff of Telecom and Optus:

      (i)   when dealing with customers about the ballot process or designation
            of a preferred carrier, should not provide inaccurate or misleading
            information or make denigrating remarks or otherwise criticise the
            other;

      (ii)  should not undermine or otherwise criticise the ballot process or
            the ballot forms or a customer's selection;
    
      (iii) should act in a manner consistent with this Code of Conduct;      

(b)   each of Telecom and Optus will encourage compliance with the principles
      underlying Schedule 13 and this Code of Conduct by employees and agents;

                    ---------------------------------------
                                       1

<PAGE>
 
                                Code of Conduct

                    ---------------------------------------
 
(c)   each of Telecom and Optus in encouraging compliance, will endeavour to
      ensure that to the extent possible all dealing with customers will be in
      accordance with the Service Representative Preselection Guidelines
      ("SRG's") and this Code of Conduct).

4.    Rules concerning advertising and marketing activities of Telecom and Optus
      have been formulated by Austel and will form pan of this Code of Conduct
      to be observed by all staff.

5.    Each of Telecom and Optus acknowledge that this Code of Conduct may need
      to be expanded as the ballot process progresses.

- --------------------------------------------------------------------------------
CUSTOMER CONTACT
- --------------------------------------------------------------------------------

1.    GENERAL GUIDELINES

When dealing with customers during the first two phases, Optus and Telecom
should:

(a)   make staff aware of the different time periods relevant to the ballot
      process, and in particular the ballot period:

(b)   observe the general principles underlying this Code of Conduct.

2. CUSTOMER INITIATED CONTACT

2.1   Service Representative Preselection Guidelines ("SRG's") have been
      prepared jointly by both Carriers and will be made available to staff of
      Optus and Telecom as agreed guidelines for use by staff in dealing with
      customers. Those SRG's recognise the different time periods that flow from
      the ballot process.

2.2   All staff will be provided with access at their workplace to the SRG's and
      will be advised of the general requirement to observe the SRG's when
      dealing with customers.

2.3   The following staff, in particular, will be provided with the full text of
      the SRG's:

(a)   operators of all telephone enquiry lines;

(b)   all telemarketing or direct marketing operators.

2.4   Telecom and Optus will disclose each of the three alternative choices to
      customers when either the alternatives of opting out or of not returning
      the ballot form is mentioned. Those alternatives must be given to
      customers in neutral terms and the options of opting out or not returning
      a ballot will not be encouraged by staff in preference to the other
      options.

2.5   Where issues are raised that are not covered by the SRG's to the extent
      that those discussions relate to preselection staff should respond
      consistently with the basic principles of this Code of Conduct, stated
      above.

2.6   To the extent possible each Carrier will provide information requested by
      a Customer where the request relates to the provision of, or availability
      of services.

3.    TELECOM AND OPTUS INITIATED CONTACT

3.1   When dealing with issues that are addressed by the SRG's Telecom and Optus
      will, endeavour to ensure compliance, by encouraging staff to use the
      SRG's as guidelines. In those areas covered by the SRG's carrier
      neutrality will be encouraged.


                    ---------------------------------------
                                       2

<PAGE>
 
                                Code of Conduct
                 --------------------------------------------


3.2   When dealing with customers about issues not covered by the SRG's on
      matters related to preselection Optus and Telecom will observe the basic
      principles of this Code of Conduct as stated above.

3.3   The basic principles of this Code of Conduct will be observed by Telecom
      and Optus in preparing direct mailing, telemarketing and pamphlets for
      distribution to customers, canvassing by telephone and canvassing in
      person.

3.4   Guidelines formulated and issued by Austel about media advertising in a
      ballot area (during the freeze), form part of this Code of Conduct and
      should be observed by staff of Telecom and Optus.

4.    ACTIVITIES OF AGENTS                

4.1   Agents and Dealers will be advised of the basic principles underlying the
      ballot process and this Code of Conduct.
                                        
- -------------------------------------------------------------------------------
MINIMISING INCORRECT ASSIGNMENT                                               
- --------------------------------------------------------------------------------
                                                                              
1.    Telecom and Optus will refer any queries from customers about incorrect
      implementation of a designation of a carrier in the ballot process during
      the second phase, to the Ballot administrator. Silent line customers will
      be referred to Telecom.

2.    Telecom and Optus will each refer any queries from customers about
      incorrect destination of Carrier as that customers preferred Carrier to
      the Ballot Administrator who will check its records as to which Carrier
      was designated by that customer.

3.    The Ballot Administrator is entitled to exercise its discretion to
      determine whether an incorrect designation was made by the Ballot
      Administrator, a Carrier or the customer.

4.    If a customer is incorrectly assigned to a Carrier as the preferred
      Carrier, as a result of an action of the Ballot administrator, or either
      Carrier, the Ballot Administrator will ensure that the relevant Carrier
      rectifies the mistake as soon as possible and without any charge to the
      customer.

5.    The Ballot Administrator Steering Committee will be provided by the Ballot
      Administrator, at each meeting, a summary of all enquiries made by the
      customers in relation to incorrect designations during the period between
      the date of that meeting and the previous meeting.


                    ---------------------------------------
                                       3

<PAGE>
 
                                Code of Conduct
                    ---------------------------------------

- --------------------------------------------------------------------------------
DEALINGS WITH BALLOT                                                          

ADMINISTRATOR - BALLOT PERIOD                                                   
- --------------------------------------------------------------------------------

No staff of Telecom or Optus are to contact the Ballot Administrator, other than
in accordance with the agreed Preselection Working Group guidelines.

- ---------------------------------------
PUBLIC COMMENT AND CONDUCT WITH MEDIA                                   
- ---------------------------------------  
                                         
GENERAL PRINCIPLES                       
                                         
        In dealing with the media and in making any public comments, Telecom and
        Optus will observe the general principles governing this Code of
        Conduct.

        Telecom and Optus will not use public comments, media statements and
        appearances, etc. in a way that undermines the ballot process.

CONDUCTING BETWEEN THE BALLOT MAIL OUT DATE AND BALLOT CLOSING DATE IN A BALLOT 
AREA

        During Phase Two only the Preselection Working Group or Preselection
        Implementation Steering Committee will provide agreed statements to the
        media about progressive results of the ballot process.

CONDUCT AFTER CLOSE OF BALLOT

        Any statement to the media about the role of the Ballot Administrator in
        the ballot process, or any findings of the Ballot Administrator in the
        course of the ballot process, will be agreed and released by the
        Preselection Working Group orPreselection Implementation Steering
        Committee. The Carriers will not make independent statements in this
        context, about progressive results of the ballot process.

                    ---------------------------------------
                                       4

<PAGE>
 
                                Code of Conduct

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


- -------------------------------------------------------------------------------
PHASE I - PRE BALLOT 
- -------------------------------------------------------------------------------


 .  Pre ballot can be considered as the period that dial "I" access is introduced
   into an area.

 .  Period in which ballot nomination date given.

 .  Dial "I" access available to preselectable services.

 .  Normal marketing guidelines to be followed.

 .  Customers can be informed of their choices regarding ballot process.

 .  Letters of Advice (LOA's) can be accepted from customers.

   Ballot areas within an Inter Carrier Charging Area (ICCA) are nominated.

 .  Neither Carrier to undermine, undervalue or criticize the voting process.

- -------------------------------------------------------------------------------
PHASE I - SRG'S
- -------------------------------------------------------------------------------

1. WHAT IS PRESELECTION?

Preselection is the process by which customers will be able to choose the
company they want to automatically supply their national and international
calls.

The method considered to be most equitable to Telecom and Optus is a balloting
process in which customers complete a ballot to choose their preferred company.

Choosing a company will eliminate the need to dial "I" before each call for
those customers wishing to use Optus.

2. WHICH CUSTOMERS WILL BE AFFECTED BY PRESELECTION?

Preselection will affect all customers who have the dial "I" capability on their
telephone service.

3. IS IT AUSTRALIA WIDE?

The Ballot process will occur progressively throughout the country.

The process will be completed by 1997 when all customers in Australia will have
access to more than one long distance phone company.

4. WHO DECIDED IT WAS NECESSARY? ISN'T THIS A WASTE OF PUBLIC MONEY?

                    ---------------------------------------
                                       1

<PAGE>
 
                                Code of Conduct

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

The Government decided all customers should have the opportunity to choose the
company they want to carry their national and international calls.

Telecom And Optus have been represented in negotiations with AUSTEL to ensure
the conditions for Protection are fair to all customers and both companies.

This process is one of the many changes taking place in the telecommunications
industry to make the industry more competitive in the interests of better
service and lower prices. Preselection will be funded jointly by Telecom and
Optus.

                    ---------------------------------------
                                       2

<PAGE>
 
                                Code of Conduct

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

5. WHY CHANGE A SYSTEM THAT WORKS WELL NOW?

The Federal Government has decided that providing customers with a choice will
promote competition.  The current dial "1" arrangement was implemented to
introduce competition into the telecommunications industry.

6. WHEN WILL THE BALLOT TAKE PLACE?  WHEN WILL IT HAPPEN?

Most areas will be balloted approximately five to nine months after they have
received dial "1" access, all areas will be balloted by 1997.

7. WHO IS IN CHARGE OF THE BALLOT PROCESS?

To ensure integrity and confidentiality, the ballots will be conducted by an
independent Administrator jointly appointed by Telecom and Optus.

8. WHAT TYPE OF SERVICES ARE AFFECTED BY PRESELECTION?

Services that are "preselectable" are national long distance calls,
international direct calls and operator assisted services associated with
national and international calls.

Preselection will progressively affect all customer lines with the dial "1"
capability.

For an exchange to have dial "1" capability, the exchanges must have CLI
(Calling Line Identification) capability.

9.   WHAT ARE THE CUSTOMER'S OPTIONS?

Preselection is all about who carries national and international telephone
calls.  Customer's choices are:

 .  To complete and return the ballot selecting either Telecom or Optus as the
   national and international call provider. All numbers will be listed on the
   ballot form and selection can be made on an individual or total line basis.

 .  To inform the Ballot Administrator that they do not wish to be part of the
   ballot process.

 .  To not return the ballot papers, a response is not compulsory. All services
   will be designated with Telecom.

10.  WILL CUSTOMERS STILL HAVE ACCESS TO DIAL "1"?

No, on completion of the ballot in an area, dial "l" access will be removed.
In place of dial "1" a four digit access code will be available in order to
access either Telecom or Optus.

Two codes will be available.  One enables access to Telecom of Optus has been
chosen, the other enables access to Optus if Telecom has been chosen.

11.   WHAT DO CUSTOMERS NEED TO DO IF THEY DON'T WANT TO RECEIVE A BALLOT?


                    ---------------------------------------
                                       3

<PAGE>
 
                                Code of Conduct

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

Customers need to complete an opt out form and return that to the Ballot
Administrator. If a customer chooses not to participate Telecom will be
designated as their Preferred Carrier for long distance calls. Opt out forms are
available from the Ballot Administrator.

12. AFTER CUSTOMERS HAVE VOTED, DO THEY HAVE TO STAY WITH THEIR CHOSEN COMPANY?

A customer's vote is not binding.  Customers can change companies at any time.

13. WHAT IF THE CUSTOMER WANTS TO CHANGE? IS THE CHOICE FOREVER?

At any time after the ballot, customers may exercise their right to change
companies. One change within six months of the ballot will be carried out free
of charge, additional changes or changes after the six month period may incur a
charge.

14. WHAT INFORMATION WILL BE RELAYED BETWEEN THE CARRIERS AND THE BALLOT
    ADMINISTRATOR?

Prior to the ballot, unless authorized not to do so, Telecom must supply Optus
and the Ballot Administrator the following information:

Telephone number

Customer name and service address

Billing name and address

Main Billing number

Account contact person

Private/Non-business/Business indicator

    .  Privacy laws apply to all parties.

    .  These conditions do not apply to Silent Lines.

15. WILL PRESELECTION AFFECT THE CALL CONCESSION THAT PENSIONERS CURRENTLY
    RECEIVE FROM TELECOM?

No. The concession applies to local calls only, preselection only affects
national and international calls. Eligible customers will continue to receive
the concession.


16. DOES PRESELECTION AFFECT THE TELEPHONE?


No. Customers will continue to have a choice as to who supplies their rental
or sale telephone.

17.   WILL SILENT NUMBERS BE AFFECTED BY THE BALLOT?


                    ---------------------------------------
                                       4

<PAGE>
 
                                Code of Conduct

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

Silent, or as sometimes called, unlisted lines will receive special treatment
to ensure that privacy agreements are maintained.

Silent line customers will still be able to participate in the ballot process
and have the opportunity to receive and respond to the ballot.

Telecom, as the keep of all information on Silent Lines, will send the ballot
information to all Silent Line customers on behalf of the Ballot Administrator.
Silent line customers who select Optus as their national and international
company will have their information (name, address etc.) supplied to Optus and
the Ballot Administrator.

18. WHEN WILL A CUSTOMER RECEIVE THEIR BALLOT?

Customers can call the Administrator to find out the ballot date in their area
and when they should expect to receive a ballot. The Administrator can be
contacted on 008-062-333.

19. WHAT ARE THE OPTIONS FOR MULTI-LINE CUSTOMERS?

Multi-line customers have a number of additional options. The same options
available to single line customers apply:

 .   To complete and return the ballot selecting either Optus or Telecom as the
    national and international call provider.

    All numbers will be listed on the ballot form and selection can be made on
    an individual or total line basis.

 .   To inform the Ballot Administrator that they do not wish to be part of the
    ballot process.

 .   To not return the ballot papers, a response is not compulsory. All services
    will be designated with Telecom.

FURTHERMORE:

Multi-line customers have the opportunity to customize the ballot papers. In
order to do this they must notify the Ballot Administrator before the ballot
period commences. This means that a customer may receive their customized ballot
encompassing all their services rather than a ballot form for each individual
service.

- -------------------------------------------------------------------------------
ADDITIONAL OPTIONS FOR MULTI-LINE, MULTI-ICCA CUSTOMERS
- -------------------------------------------------------------------------------


Customers who have lines in more than one ballot are can supply the Ballot
     Administrator with a Letter of Advice (LOA) nominating either Telecom or
     Optus.

Both Optus and Telecom are free to canvass LOA's from multi-line customers prior
to any ballot.  Customers with lines in more than one ballot area can nominate
their choice at any time.

One person from the organization can be nominated to sign a Letter of Advice
before the ballot occurs. This will eliminate the need to vote for each billing
address or each telephone line throughout the organization.

Organizations need to ensure that one properly authorized decision maker speaks
and acts for the entire organization.

20.  CAN A VOTE FOR DIFFERENT COMPANIES BE MADE FOR DIFFERENT LINES?

                    ---------------------------------------
                                       5

<PAGE>
 
                                Code of Conduct
                    ---------------------------------------

Yes. This will require a vote on a line-by-line basis as the ballots are
conducted throughout the various locations and areas of the business. One
telephone company per line will need to be specified.

21.  AUSTRALIAN ASSOCIATED PRESS (AAP) IS A CUSTOMER'S CURRENT CARRIER, WHAT
     HAPPENS TO THEM?

The ballot is occurring between Telecom and Optus only.  The services they
have with AAP are unaffected.

- -------------------------------------------------------------------------------
LETTER OF ADVICE FOR MULTI-ICCA CUSTOMERS
- -------------------------------------------------------------------------------

22.  WHAT IS THE SIMPLEST METHOD OF VOTING IF A CUSTOMER DOESN'T WANT TO VOTE ON
     A LINE BY LINE BASIS?

By signing a Letter of Advice, customers will be able to make the decision for
their entire organization rather than voting for each line.

23.  WHO CAN SIGN THE LETTER OF ADVICE?

The Letter of Advice will need to be signed by a key decision maker, with the
appropriate authority, in the organization. This may be a CEO, Managing Director
etc. Ultimately, it is an issue to be raised intermittently within the company.

24.  COULD THE COMPANY DECIDE TO OVER-RIDE THE LETTER OF ADVICE?

The Letter of Advice can be over-ridden, providing the company's nominee
(or replacement) has given authorization.

25.  WHAT IF SOMEONE ELSE IN THE COMPANY VOTES FOR THE OTHER CARRIER?

The Letter of Advice represents a company's decision and ballot will not be sent
by the administrator after receipt of the LOA.
    
26.  WHEN SHOULD A LETTER OF ADVICE BE SENT TO THE BALLOT ADMINISTRATOR?      

If all numbers are within the one ballot area, the LOA must be sent during
or before the ballot period.

If numbers are located in more than one ballot area, the LOA can be sent at
any time.

Information on ballot areas can be obtained from the Ballot Administrator,
Telecom or Optus.

27.  WHERE SHOULD THE LETTER OF ADVICE BE SENT?

The Letter of Advice should be sent to the Ballot Administrator.  G.P.O.
Box 7777, Sydney 2001.

                    ---------------------------------------
                                       6

<PAGE>
 
                                Code of Conduct
                    ---------------------------------------

- -------------------------------------------------------------------------------
PHASE 2 - DURING BALLOT
- -------------------------------------------------------------------------------

 .    Promotion freeze applies.

 .    Staff telephone canvassing, can only supply information to customers
     relating to Preselection or ballot process in response to customer
     initiated questions.

 .    Votes for preferred carrier cannot be accepted over the phone. Special
     facilities will be available for people with disabilities.

 .    New customers moving into the ballot area are informed there is a choice of
     carriers for their national and international calls.

 .    Questions relating to the actual ballot must be referred to the
     Administrator.

     Dial "1" access still available.

 .    44-90 days duration depending on number of ballot rounds.

 .    Depending on response rate in first ballot round, a second ballot may be
     conducted.

 .    Customers not returning a ballot will be designated to their current
     carrier as their preferred carrier. In the majority of cases this will be
     Telecom.

- -------------------------------------------------------------------------------
PHASE 2 - SRG'S
- -------------------------------------------------------------------------------

1.   WHO WILL RECEIVE A BALLOT?

      Preselection will affect all customers with the dial "1" capability.

2.   DO CUSTOMERS HAVE TO VOTE?

      We encourage all our customers to vote, but voting is not compulsory.

3.   WHY ARE CUSTOMERS VOTING?

      The ballot process was deemed by AUSTEL as the most equitable method for
      customers to select the company they wish to usually carry their national
      and international calls.

4.   WHY CHANGE A SYSTEM THAT WORKS WELL NOW?

      The Federal Government has decided that providing customers with a choice
      will promote competition. The current dial "I" arrangement was implemented
      to introduce competition into the telecommunications industry. It was not
      intended to be permanent. The new system means customers can access their
      chosen phone company without having to dial a prefix.

                    ---------------------------------------
                                       7

<PAGE>
 
                                Code of Conduct
                    ---------------------------------------

5.   WHAT IS A SECOND BALLOT?

      An area may be reballoted if less than 65% of customers within that area
      complete and return a ballot paper. Only customers who do not vote or vote
      invalidly in the first ballot will receive a second ballot form.

6.   WHAT HAPPENS IF A CUSTOMER DOESN'T RESPOND THE SECOND TIME?

      They will be designated to their current carrier as their preferred
      carrier. In the majority of cases this will be Telecom.

7.   HOW WILL CUSTOMERS KNOW IF BALLOT HAS BEEN RECEIVED?

      Customers can dial 12711 to find out which carrier their line is selected
      to, or alternatively contact the Ballot Administrator.

8.   AFTER SELECTING A CARRIER CAN THE CUSTOMER MAKE CALLS THROUGH THE OTHER
     CARRIER'S NETWORK?

      Customers will have the option to use the company they didn't choose, on a
      call-by-call basis by dialing a 4 digit access number prior to the number
      they are calling. This will direct the calls via the other company's
      network. No charges apply for the use of this facility. The "4" digit code
      replaces the dial "1" that currently enables access to Optus.

9.   ONCE THE BALLOT IS COMPLETED, HOW LONG BEFORE THE CUSTOMER IS CONNECTED TO
     THEIR PREFERRED CARRIER?

      A target has been set to action all responses within 14 working days of
      the Administrators advice to Telecom of your carrier choice.

10.  WHAT ARE THE PROCEDURES FOR CUSTOMERS WHO HAVE NO RECEIVED A BALLOT?

      Customer is to be referred to the Ballot Administrator.  The Hotline
      telephone number is 008-062-333.

11.  WHAT ARE THE PROCEDURES FOR AMENDING INCORRECTLY ADDRESSED BALLOT PAPERS?

      Customer is to be referred to the Ballot Administrator on 008-062-333.

12.  WHAT IF THE CUSTOMER HAS LOST THEIR BALLOT?

      Customer is to be referred to the Ballot Administrator on 008-062-333.

13.  HOW ARE THE BALLOT PREFERENCES PROCESSED?

      Ballot preferences are received and collated by the Ballot Administrator.
      The Administrator will ensure your choice is actioned and that automatic
      connection to your preferred carrier occurs promptly.

                    ---------------------------------------
                                       8

<PAGE>
 
                                Code of Conduct
                    ---------------------------------------

14.  THE CUSTOMER HAS RECEIVED SOME MATERIAL RELATING TO TELECOM AND OPTUS IN
     THE MAIL.  WHAT IS IT?

      The information they have received indicates their area is currently
      undergoing Preselection.  Preselection is the process by which customers
      can choose who they would like to automatically supply their national and
      international calls.

      Customers are encouraged to complete and return the ballot form according
      to the instructions in the package.  For any further queries regarding
      the "kit" customers should call the Ballot Administrator on 008-062-333.

15.  WHAT ARE CUSTOMERS OPTIONS?

      Preselection is all about who carries national and international telephone
      calls.  Customer choices are:

     .    To complete and return the ballot selecting either Optus or Telecom as
          the national and international call provider. All numbers will be
          listed on the ballot form and selection can be made on an individual
          or total line basis.

     .    To inform the Ballot Administrator that they do not wish to be part of
          the ballot process.

     .    To not return the ballot papers, a response is not compulsory.  All
          services will be designated with Telecom.

16.  DO CUSTOMERS HAVE TO VOTE?

      Customers are encouraged to vote, but are under no obligation to vote.  If
      no response is received, their current carrier will be designated as their
      preferred carrier.  In the majority of cases this will be Telecom.

17.  WHAT ARE THE PROCEDURES FOR CUSTOMERS WHO CHANGE THEIR MIND AFTER THEY HAVE
     VOTED?

      Customer is to be referred to Ballot Administrator's Hotline on 
      008-062-333.

18.  CAN A CUSTOMER VOTE ON A BALLOT PAPER NOT ADDRESSED TO THEM?

      The customer should be referred to the Ballot Administrator on 
      008-062-333.

19.  CAN CUSTOMER PREFERENCES BE ACCEPTED OVER THE PHONE?

      No. Customers can only vote by completing the ballot paper.  Special
      facilities will be provided for people with disabilities.

20.  WHAT SERVICES ARE SUBJECT TO PRESELECTION?

      Services that are "preselectable" are national long distance calls,
      international direct calls and operator assisted services associated with
      national and international calls.


                    ---------------------------------------
                                       9

<PAGE>
 
                                Code of Conduct
                    ---------------------------------------

      Preselection will be available to customer lines with the dial "1"
      capability.

21.   DOES THIS AFFECT MOBILE TELEPHONE SERVICES?

      No.

22.   WHAT MEASURES ARE BEING TAKEN TO ENSURE ALL CUSTOMERS HAVE THE MEANS TO
      PRESELECT (e.g. CUSTOMERS WITH DISABILITIES)?

      Refer to Ballot Administrator, 008-062-333.

23.   HOW DO CUSTOMERS KNOW WHEN THEY ARE CONNECTED TO THEIR CHOSEN CARRIER?

      By dialing 12711 the customer will automatically be told who they are
      connected to.

24.   CAN A CUSTOMER VOTE ON SOMEBODY ELSE'S BEHALF?

      Customer is to be referred to Ballot Administrator on 008-062-333.

25.   THE CUSTOMERS PARTNER OR LODGER RETURNED THE BALLOT, YET THEY DO NOT PAY
      FOR THE SERVICE, WHAT SHOULD THE CUSTOMER DO?

      Customer is to be referred to Ballot Administrator on 008-062-333.

26.   CAN A CUSTOMER'S BUSINESS BE SELECTED TO ONE CARRIER AND THEIR RESIDENCE
      TO THE OTHER??

      Yes.

27.   HOW CAN CUSTOMERS AVOID VOTING ON EACH OF THEIR SERVICES?

      The ballot form for a multi-line account allows a customer to vote all
      their lines to one or the other company with one tick.

28.   CAN VERBAL DESIGNATIONS BE ACCEPTED?

      No. but special consideration will be given to Customers with 
      disabilities. Refer to Ballot Administrator, 008-062-333.

29.   CAN VERBAL CHANGE OF CARRIERS BE ACCEPTED?

      If a customer wishes to change their original vote during the ballot they
      are to be referred to the Ballot Administrator.

30.   CAN A LOA BE ACCEPTED DURING THIS PHASE?

      Yes.  However, the LOA must be sent to the Ballot Administrator.

                    ---------------------------------------
                                      10

<PAGE>
 
                                Code of Conduct
                    ---------------------------------------



                    ---------------------------------------
                                      11

<PAGE>
 
                                Code of Conduct
                    ---------------------------------------

- -------------------------------------------------------------------------------
PHASE 3 - POST BALLOT
- -------------------------------------------------------------------------------

 .    Normal marketing guidelines to be followed.

 .    Staff free to advise customer of all options.

 .    New customers advised they have choice of carrier.

 .    12711 number available for customer to determine who their carrier is.

 .    Six month grace period where one free change of carrier is given,
     subsequent change may be subject to a charge.

 .    Dial "1" access removed Recorded Voice Announcement (RVA) will be received
     on dial "1".

- -------------------------------------------------------------------------------
PHASE 3 - SRG'S
- -------------------------------------------------------------------------------

1.  DO I HAVE TO TELL THE CUSTOMER THEY HAVE A CHOICE OF CARRIER?

     Yes. All newly connected customers are to be informed they have a choice of
     who carries their national and international long distance calls.

2.  CAN A CHANGE IN THE CUSTOMER'S PREFERRED CARRIER BE ACCEPTED OVER PHONE?

     No. Customers must complete a change of carrier from which is available
     from either carrier.

3.  HOW DO CUSTOMERS KNOW WHICH CARRIER THEY ARE CONNECTED TO?

     A special number, 12711, has been connected to enable customers to
     determine who automatically carries their national and international calls.

     That number is connected to a recorded service that informs callers who
     their carrier is and also gives the 4 digit over-ride number that allows
     customers to manually access the other carrier.

4.  WHY DID A CUSTOMER WHO VOTED FOR OPTUS GET A TELECOM BILL?

     Optus provides their national and international calls. Telecom continues to
     provide their local call service and the line to connect them to the
     network.

5.  A CUSTOMER VOTED FOR OPTUS YESTERDAY, WHY ARE THEY STILL CONNECTED TO
    TELECOM?

     It takes around 14 working days for the changes to be made and additional
     time may be incurred with mail times etc.

                    ---------------------------------------
                                      12

<PAGE>
 
                                   Schedule 7

                             Your Former Customers


                                To be included


This schedule is current at #.
    
     To be nominated by You by 1 February 1996.  It is intended to include 
40,000-50,000 accounts of Axicorp Pty. Ltd.      



<PAGE>
 
RIDER 1
    
In the event that any Person Associated with You ceases to be a Person
Associated with You on a particular date ("Relevant Date"), the period shall be
12 months from the Relevant Date.  This clause 5.1(b) does not prohibit any 
director or shareholder of You becoming a director or shareholder of Axicorp 
Pty. Ltd. or Primus Pty. Ltd.  In the event that the proposed acquisition of 
Axicorp Pty. Ltd. or its assets by Primus Pty. Ltd. is not completed on or 
before 1 March 1996, this clause 5.1(b) will be re-negotiated by the parties. 
     


RIDER 2

In the event that any Person Associated with You ceases to be a Person
Associated with You on a particular date ("Relevant Date"), the period shall be
6 months from the Relevant Date.


RIDER 3

In the event that any Person Associated with You ceases to be a Person
Associated with You on a particular date ("Relevant Date"), the period shall be
3 months from the Relevant Date.

<PAGE>
 
- -------------------------------------------------------------------------------


                                   Acceptance

        The parties accept the terms and conditions of this agreement.


Accepted by Telstra Corporation Limited            
ACN 051 775 556
by its authorised representative

/s/  Andrew M. Wall
- -------------------------------------------------

ANDREW MARK WALL
- -------------------------------------------------
Print name                    
Date:  8/1/96                 

Accepted on behalf of the Dealer

/s/  Campbell C. Burns
- -------------------------------------------------
(The authorised person warrants that he or she has 
authority to bind the Dealer.)

CAMPBELL CORIN BURNS
- -------------------------------------------------
Print name
Date:  8/1/96
- -------------------------------------------------------------------------------

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

       Acceptance by Key Dealer Personnel and Persons Associated With You

Key Dealer Personnel and Persons Associated With You must sign here.  In
consideration of Telstra entering into this agreement with the Dealer.
(a)  the Key Dealer Personnel agree to be bound by the obligations in clauses
     3.6 to 3.9; and
(b)  the Persons Associated With You agree to be bound by clauses 3.6 to 3.9,
     clauses 5.1 to 5.4 and paragraph 1.5 of schedule 1.

    
Signed by                           
[INTENTIONALLY LEFT BLANK]     
- -------------------------------------------------

(Where an individual sign personally 
and where a company sign by an authorised person.      
The authorised person warrants that he or she has 
authority to bind the company.)            

- -------------------------------------------------
Print name                    

- -------------------------------------------------
State in what capacity        

(write in "Key Dealer Personnel" or "Person 
Associated With You" or Both "Key Dealer 
Personnel" or "Person Associated With You")  

- -------------------------------------------------
Print address                 

Date:   /  /
    
Signed by
[INTENTIONALLY LEFT BLANK]     
- -------------------------------------------------

(Where an individual sign personally 
and where a company sign by an authorised person.    
The authorised person warrants that he or she has 
authority to bind the company.)

- -------------------------------------------------
Print name

- -------------------------------------------------
State in what capacity

(write in "Key Dealer Personnel" or "Person 
Associated With You"  or Both "Key Dealer 
Personnel" or "Person Associated With You") 

- -------------------------------------------------
Print address

Date:   /  /
- -------------------------------------------------------------------------------



<PAGE>
 

                                                             EXHIBIT 10.14

                                                             CONFIDENTIAL

                          Hardpatch Transit Agreement
             Between Teleglobe And Global Telecommunications, Inc.
                             For Services To India

The Service:
- -----------

        Teleglobe will arrange to provide Global Telecommunications, Inc. at its
designated and agreed upon operating center, with hardpatch transit
international half-circuits to India via the following configuration, whereby
GTI will arrange foreign-end service in cooperation with VSNL (India). The
provision of these facilities will be on satellite facilities now, or in the
future, in operation.

        This agreement, contingent upon the mutual agreement of VSNL and GTI to 
transition their Teleglobe-provided switched service to hardpatched facilities 
may occur following GTI's request and subject to capacity and concurrence and 
readiness by Teleglobe and VSNL to effectuate service transition. No penalties
or charges would be incurred by in GTI requesting and implementing this
transition.

Configuration:
- -------------

        The configuration for this hardpatch service would depend upon which 
option GTI selected, whether clear or derived and whether via satellite or 
cable.  Please note that the configuration depicted is representative and that 
cable availability
 is contingent upon pending availability of TAT 12:

                           [FLOW CHART APPEARS HERE]

                    Canada/US Border


60 Hudson                                                 Transoceanic Cable or
New York, NY                                                Satellite Routing 
                    -------------          --------
   ---------------- Moorer's Fork -------- Montreal ------------------ 
                    -------------          -------- 

                                                      New Delhi or
                                                      Bombay India
                                                      respectively
 
Invoicing:
- ---------

        Teleglobe will invoice GTI monthly for the services.  All invoice 
amounts are due 30 days from invoice date.  The service commencement date will 
be the "in service" date of the international facilities.

        Teleglobe reserves the right to terminate service with thirty (30) days 
written notice for accounts with past due balances.

Operational:
- -----------

        The service performance will be commensurate with Teleglobe's backbone 
network, which meets and exceeds the standards of the industry.

        DCME or low-rate encoded compression will be used to no more than 4:1 
on the routes.


- --------------------------------------------------------------------------------
                                       1                  Teleglobe USA Inc.





<PAGE>
 
                                                                    CONFIDENTIAL
Liability:
- ---------

        TELEGLOBE shall not be liable for any loss or damage sustained by GTI, 
its interconnecting carriers or its end users, by reason of any failure in or 
breakdown of the communication facilities associated with the circuits under 
this agreement or for any interruption or degradation of service whatsoever 
shall be the cause of such failure, breakdown, interruption or degradation and 
however long it shall last.

        TELEGLOBE will not be responsible for any direct, indirect, 
consequential, or any other damages resulting from any action that might be 
taken by VSNL which would result in the cancellation of service or cause a 
disruption of service.

Confidentiality:
- ---------------

        GTI will treat this agreement, all product information, descriptions and
prices, methods of operation and their terms and conditions as strictly 
confidential.  GTI will not disclose any of this information or any of these 
materials to any person who is not a party to this agreement.  Notwithstanding 
the foregoing, GTI may disclose, on a limited basis, agreement terms as 
necessary or required by regulatory authorities, auditors, attorneys or 
government agents.

Term:
- ----

        The term for this service will be 12 months, commencing upon the 
"in-service" date of the international hardpatch facilities, following service 
transition from switched transit when and if such is requested by and subject to
any potential restrictions as identified in "The Service."

Pricing:
- -------

        The monthly charge for the following service options are in $USD.  Any 
installation charges for line connections from Washington, DC to the US/Canadian
border, not to exceed $5,000 per line, would be passed through as assessed:



                Clear 2.048 MB, Satellite     US$25,000   [ ]  
                                                              ---------------
                                                              Initial

                Derived 512 KB, Cable         US$14,200   [ ] ---------------
                                                              Initial

                Clear 512 KB, Cable           US$26,850   [ ] ---------------
                                                              Initial

                Clear 1.024 MB, Cable         US$47,049   [ ] ---------------
                                                              Initial


Force Majeure:
- -------------

        No failure or omission by either party to carry out or observe any of 
the terms and conditions of this Agreement shall give rise to any claim against 
the party in question or be deemed a breach of this Agreement if such failure or
omission arises from a cause or force majeure, an act of Government or any other
cause beyond the reasonable control of that party.



- -------------------------------------------------------------------------------
                                       2                Teleglobe USA Inc.

<PAGE>
 
                                                                    CONFIDENTIAL

Termination:
- -----------

        If, before the expiration of the contracted terms, the service is 
canceled by GTI for any reason, GTI shall pay a termination charge of one 
hundred percent (100%) of the total monthly charges for the unexpired portion of
the contracted term, unless GTI signs a new, mutually agreeable commitment that 
would provide Teleglobe with revenues that would be equal to or exceeding those
of the original requirement remaining dollar commitment over an equivalent
period.

Approval:
- --------

        The parties have executed this Agreement through their duly authorized 
representatives.


TELEGLOBE                               GLOBAL TELECOMMUNICATIONS, INC.
    
/s/ Marc Van Doorn                      /s/ K. Paul Singh 
- -------------------------               --------------------------
Name                                    Name

 Chief Financial Officer                 CEO & President
- -------------------------               --------------------------
Title                                   Title


   10/5/95                                10/5/95  
- -------------------------               --------------------------
Date                                    Date
     





- -------------------------------------------------------------------------------
                                       3             Teleglobe USA Inc.




<PAGE>
 
                                                                    EXHIBIT 11.1
                                                                    ------------

                 Primus Telecommunications Group, Incorporated
                               and Subsidiaries

                       Computation of Per Share Earnings


<TABLE>     
<CAPTION> 

                                                                                                   Six Months Ended 
                                                    Period from                                        June 30,
                                                 February 4, 1994           Year Ended            -----------------
PRIMARY EARNINGS PER SHARE                     to December 31, 1994      December 31, 1995         1995       1996
- --------------------------------------         --------------------      -----------------         ----       ----
<S>                                            <C>                       <C>                   <C>         <C> 

Historical net loss                              $         (577,280)       $    (2,425,238)    $ (793,080)  $(3,232,426)

Modified treasury stock earnings
 (loss) - adjustment                                        146,682                200,020        100,010       169,084
                                                 ------------------        ---------------     ----------   -----------
Adjusted net loss                                $         (430,598)       $    (2,225,218)    $ (693,070)  $(3,063,342)
                                                 ==================        ===============     ==========   ===========

Weighted average number of Common
 Shares outstanding                                       2,620,374              5,019,139      4,777,188     9,766,285

Add:  Common Share equivalents (as
 determined using the modified treasury
 stock method as described in Note 2
 of the Consolidated Financial 
 Statements)                                              7,393,658              7,319,174      7,393,658     3,731,183
                                                 ------------------        ---------------     ----------    ----------
Weighted average number of Common
 Shares used in calculation of
 primary loss per share                                  10,014,032             12,338,313     12,170,846    13,497,468
                                                 ==================        ===============     ==========    ==========
Loss per share - Primary                         $             (.04)       $          (.18)    $     (.06)   $     (.23)
                                                 ==================        ===============     ==========    ==========

FULLY DILUTED EARNINGS PER SHARE
- --------------------------------

Historical net loss                              $         (577,280)       $    (2,425,238)   $  (793,080)   (3,232,426)
                                                                                                            
Modified treasury stock earnings                                                                            
 (loss) - adjustment                                        146,682                200,020        100,010       169,084
                                                 ------------------        ---------------    -----------    ----------
Adjusted net loss                                $         (430,598)       $    (2,225,218)   $  (693,070)   (3,063,342)
                                                 ==================        ===============    ===========    ==========
                                                                                                            
Weighted average number of Common                                                                           
 Shares outstanding                                       2,620,374              5,019,139      4,777,188     9,766,285
                                                                                                            
Add: Common
 Share equivalents (as                                                                           
 determined using the modified                                                                              
 treasury stock method as described in                                                                      
 Note 2 of the Consolidated Financial                                                                       
 Statements).                                             7,393,658              7,392,077      7,472,266     3,817,399
                                                 ------------------        ---------------    -----------    ----------
Weighted average numbers of Common                                                                          
 Shares used in calculation of fully                                                                        
 diluted loss per share                                  10,014,032             12,411,216     12,249,454    13,583,684
                                                 ==================        ===============    ===========    ==========
                                                                                                            
Loss per share - Fully Diluted                   $             (.04)       $          (.18)   $      (.06)   $     (.23)
                                                 ==================        ===============    ===========    ==========
</TABLE>
      




<TABLE> <S> <C>


<PAGE>
 
 
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED FINANCIAL STATEMENTS OF PRIMUS TELECOMMUNICATIONS
GROUP, INCORPORATED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
       
<S>                             <C>                     
<PERIOD-TYPE>                   YEAR                   
<FISCAL-YEAR-END>                          DEC-31-1995  
<PERIOD-START>                             JAN-01-1995  
<PERIOD-END>                               DEC-31-1995  
<CASH>                                       2,295,843  
<SECURITIES>                                         0  
<RECEIVABLES>                                  797,050  
<ALLOWANCES>                                  (132,353)  
<INVENTORY>                                          0  
<CURRENT-ASSETS>                             3,348,803<F1>
<PP&E>                                       1,098,590  
<DEPRECIATION>                                (149,714)  
<TOTAL-ASSETS>                               5,041,611<F2>
<CURRENT-LIABILITIES>                        2,053,893  
<BONDS>                                              0  
<PREFERRED-MANDATORY>                                0  
<PREFERRED>                                          0  
<COMMON>                                        70,635  
<OTHER-SE>                                   2,491,217<F3>
<TOTAL-LIABILITY-AND-EQUITY>                 5,041,611<F4>
<SALES>                                              0  
<TOTAL-REVENUES>                             1,167,058  
<CGS>                                        1,383,763  
<TOTAL-COSTS>                                3,568,170<F5>
<OTHER-EXPENSES>                                     0  
<LOSS-PROVISION>                                     0  
<INTEREST-EXPENSE>                             (58,732)  
<INCOME-PRETAX>                             (2,425,238)<F6>
<INCOME-TAX>                                         0  
<INCOME-CONTINUING>                         (2,425,238)  
<DISCONTINUED>                                       0  
<EXTRAORDINARY>                                      0  
<CHANGES>                                            0  
<NET-INCOME>                                (2,425,238)  
<EPS-PRIMARY>                                     (.17) 
<EPS-DILUTED>                                     (.17)  
<FN>
<F1>INCLUDES PREPAID EXPENSES AND OTHER CURRENT ASSETS
<F2>INCLUDES INTANGIBLES, DEFERRED INCOME TAXES AND OTHER ASSETS
<F3>INCLUDES ADDITIONAL PAID-IN CAPITAL, ACCUMULATED DEFICIT AND CUMULATIVE
    TRANSLATION ADJUSTMENT
<F4>INCLUDES LONG-TERM OBLIGATIONS
<F5>INCLUDES COST OF GOODS SOLD AND TOTAL OPERATING EXPENSES
<F6>INCLUDES INTEREST INCOME, OTHER INCOME (EXPENSES)
</FN>
        


</TABLE>






<TABLE> <S> <C>


<PAGE>
 
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED FINANCIAL STATEMENTS OF PRIMUS TELECOMMUNICATIONS
GROUP, INCORPORATED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
       
<S>                             <C>                     
<PERIOD-TYPE>                   6-MOS
<FISCAL-YEAR-END>               DEC-31-1996
<PERIOD-START>                  JAN-01-1996
<PERIOD-END>                    JUN-30-1996
<CASH>                            4,397,604
<SECURITIES>                              0
<RECEIVABLES>                    26,454,266
<ALLOWANCES>                     (1,605,570)
<INVENTORY>                               0
<CURRENT-ASSETS>                 29,803,403<F1>
<PP&E>                            5,983,098
<DEPRECIATION>                     (412,868)
<TOTAL-ASSETS>                   62,296,810<F2>
<CURRENT-LIABILITIES>            44,194,522
<BONDS>                                   0
<PREFERRED-MANDATORY>                     0
<PREFERRED>                           4,550
<COMMON>                             95,244
<OTHER-SE>                       11,700,342<F3>
<TOTAL-LIABILITY-AND-EQUITY>     62,296,810<F4>
<SALES>                                   0
<TOTAL-REVENUES>                 65,414,924
<CGS>                            60,162,429
<TOTAL-COSTS>                    67,667,223<F5>
<OTHER-EXPENSES>                   (268,120)
<LOSS-PROVISION>                          0
<INTEREST-EXPENSE>                 (334,775)
<INCOME-PRETAX>                  (2,770,003)<F6>
<INCOME-TAX>                       (462,423)
<INCOME-CONTINUING>              (3,232,426)
<DISCONTINUED>                            0
<EXTRAORDINARY>                           0
<CHANGES>                                 0
<NET-INCOME>                     (3,232,426)
<EPS-PRIMARY>                          (.21)
<EPS-DILUTED>                          (.21)
<FN>
<F1>INCLUDES PREPAID EXPENSES AND OTHER CURRENT ASSETS
<F2>INCLUDES INTANGIBLES, DEFERRED INCOME TAXES AND OTHER ASSETS
<F3>INCLUDES ADDITIONAL PAID-IN CAPITAL, ACCUMULATED DEFICIT AND CUMULATIVE
    TRANSLATION ADJUSTMENT
<F4>INCLUDES LONG-TERM OBLIGATIONS
<F5>INCLUDES COST OF GOODS SOLD AND TOTAL OPERATING EXPENSES
<F6>INCLUDES INTEREST INCOME, OTHER INCOME (EXPENSES)
</FN>
        

 


</TABLE>