<PAGE>
 
===============================================================================
 
                   SECURITIES AND EXCHANGE COMMISSION
                         WASHINGTON, D.C. 20549


                                FORM 10-Q


        [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                  THE SECURITIES EXCHANGE ACT OF 1934.


            FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996


                                   OR

        [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                  THE SECURITIES EXCHANGE ACT OF 1934.


                      COMMISSION FILE NO. 0-21-265


              PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
         (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

 
             DELAWARE                                     54-1708481
   (STATE OR OTHER JURISDICTION OF          (I.R.S. EMPLOYER IDENTIFICATION NO.)
    INCORPORATION OR ORGANIZATION)                       
                                                      
    8180 GREENSBORO DR., MCLEAN, VA                          22102   
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                  (ZIP CODE) 
 
                                (703) 848-4625
             (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
 
 
     INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS 
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.  YES       NO     X
                                               -----      ----- 

      INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES
OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
 
                                                       OUTSTANDING AS OF
                CLASS                                  NOVEMBER 30, 1996
                -----                                  -----------------
     COMMON STOCK, $.01 PAR VALUE                          17,778,746

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

<PAGE>
 
                 PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED

                              INDEX TO FORM 10-Q


<TABLE>
<CAPTION>
                                                                 Page No.
                                                                 --------
<S>                                                               <C>

Part I.  FINANCIAL INFORMATION
 

     Item 1. FINANCIAL STATEMENTS
                                                               
             Consolidated Balance Sheets.......................... 1
                                                               
             Consolidated Statements of Operations................ 2
                                                               
             Consolidated Statements of Cash Flows................ 3
                                                               
             Notes to Consolidated Financial Statements........... 4
                                                               

     Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 
             CONDITION AND RESULTS OF OPERATIONS.................. 7
 

Part II.     OTHER INFORMATION
             

     Item 1. LEGAL PROCEEDINGS....................................11
                                                                 

     Item 2. CHANGES IN SECURITIES................................11
                                                                 

     Item 3. DEFAULTS UPON SENIOR SECURITIES......................11
                                                                 

     Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS..11
                                                                 

     Item 5. OTHER INFORMATION....................................11
                                                                 

     Item 6. EXHIBITS AND REPORTS ON FORM 8-K.....................11
                                                                 
SIGNATURE.........................................................12
 
EXHIBIT INDEX.....................................................13
 
</TABLE>


<PAGE>
 

PART I - FINANCIAL INFORMATION


ITEM 1 - FINANCIAL STATEMENTS

                 PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
                          CONSOLIDATED BALANCE SHEETS
                                (in thousands)


<TABLE>
<CAPTION>
                                                                                      SEPTEMBER 30,     DECEMBER 31,
                                                                                        1996               1995
                                                                                       (UNAUDITED)       (AUDITED)
                                                                                      -------------    -------------
<S>                                                                                   <C>              <C>
ASSETS
CURRENT ASSETS
  Cash and cash equivalents....................................................             $20,637        $ 2,296
  Accounts receivable (net of allowance of $2,130  (unaudited)
     at September 30, 1996 and $132 at December 31, 1995 ).....................              28,377            665
  Prepaid expenses and other current assets....................................               1,259            388
                                                                                            -------        -------
       Total current assets....................................................              50,273          3,349
PROPERTY AND EQUIPMENT - Net...................................................               7,224            949
INTANGIBLES - Net..............................................................              21,624             --
DEFERRED INCOME TAXES..........................................................               3,951             --
OTHER ASSETS...................................................................                 701            744
                                                                                            -------        -------
TOTAL ASSETS...................................................................             $83,773        $ 5,042
                                                                                            =======        =======
 
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable.............................................................             $30,803        $ 1,284
  Accrued expenses and other current liabilities...............................               6,047            668
  Deferred income taxes........................................................               4,479             --
  Current portion of long-term obligations.....................................              10,524            102
                                                                                            -------        -------
       Total current liabilities...............................................              51,853          2,054
LONG TERM OBLIGATIONS..........................................................               6,747            426
                                                                                            -------        -------
     Total liabilities.........................................................              58,600          2,480
                                                                                            -------        -------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
  Preferred stock, $.01 par value ---2,455,000 shares
     authorized; issued and outstanding, 455,000 shares of
     Series A Convertible (unaudited) at September 30, 1996....................                   5             --
  Common stock, $.01 par value - authorized 40,000,000 (unaudited)
     shares September 30, 1996; 16,905,000 shares
     December 31, 1995; issued and outstanding, 10,490,391 shares (unaudited)
     at September 30, 1996; 7,063,491 shares December 31, 1995.................                 105             71
  Additional paid-in capital...................................................              33,775          5,496
  Accumulated deficit..........................................................              (8,656)        (3,003)
  Cumulative translation adjustment............................................                 (56)            (2)
                                                                                            -------        -------
     Total stockholders' equity................................................              25,173          2,562
                                                                                            -------        -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.....................................             $83,773        $ 5,042
                                                                                            =======        =======
</TABLE>

                See notes to consolidated financial statements.

                                       1

<PAGE>
 
                 PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                   (in thousands, except per share amounts)
                                  (unaudited)


<TABLE>
<CAPTION>

                                        Three Months Ended      Nine Months Ended   
                                            September 30,         September 30,     
                                        -------------------  -----------------------
                                           1996      1995        1996        1995   
                                        ---------- --------  ------------ ----------
<S>                                     <C>        <C>       <C>          <C>       
NET REVENUE                               $51,819     $276      $117,234       $497 
COST OF REVENUE                            47,210      299       107,372        502 
                                        ---------- --------  ------------ ----------
                                                                                    
GROSS MARGIN (DEFICIT)                      4,609      (23)        9,862         (5)
OPERATING EXPENSES                                                                  
   Selling, general and administrative      6,194      624        12,901      1,337 
   Depreciation and amortization              637       39         1,435        104 
                                        ---------- --------  ------------ ----------
                                                                                    
       Total operating expenses             6,831      663        14,336      1,441 
                                                                                    
LOSS FROM OPERATIONS                       (2,222)    (686)       (4,474)    (1,446)
INTEREST EXPENSE                             (258)     (12)         (593)       (45)
INTEREST INCOME                               158        9           243         10 
OTHER INCOME (EXPENSE)                        (42)       -          (310)         -   
                                        ---------- --------  ------------ ----------
                                                                                    
LOSS BEFORE INCOME TAXES                   (2,364)    (689)       (5,134)    (1,481)
INCOME TAXES                                   57        -           519          -   
                                        ---------- --------  ------------ ----------
                                                                                    
NET LOSS                                  ($2,421)   ($689)      ($5,653)   ($1,481)
                                        ========== ========  ============ ==========
                                                                                    
                                                                                    
                                                                                    
NET LOSS PER COMMON AND                                                             
   COMMON SHARE EQUIVALENTS                ($0.18)  ($0.06)       ($0.44)    ($0.14)
                                        ========== ========  ============ ==========
                                                                                    
WEIGHTED AVERAGE NUMBER OF                                                          
   COMMON AND COMMON SHARE                                                          
   EQUIVALENTS OUTSTANDING                  13,442   11,011        12,807     10,816
                                        ========== ========  ============ ==========

</TABLE>
 


                See notes to consolidated financial statements.


                                       2

<PAGE>
 

                 PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (in thousands)
                                  (unaudited)


<TABLE>
<CAPTION>

                                                                Nine Months Ended  
                                                                   September 30,   
                                                                --------- ---------
                                                                  1996      1995   
                                                                --------- ---------
<S>                                                             <C>       <C>      
CASH FLOWS FROM OPERATING ACTIVITIES:                                              
  Net loss                                                       ($5,653)  ($1,481)
  Adjustments to reconcile net loss to net                                         
     cash used in operating activities:                                            
     Depreciation and amortization                                 1,435       104 
     Sales allowance                                               1,162        47 
     Foreign currency transaction loss                               310      -    
     Deferred income taxes                                           300      -    
     Changes in assets and liabilities:                                            
         (Increase) decrease in accounts receivable              (11,985)     (352)
         (Increase) decrease in prepaid expenses and                               
           other current assets                                     (168)      (62)
         (Increase) decrease in other assets                        (798)      (74)
         Increase (decrease) in accounts payable                  10,061       193 
         Increase (decrease) in accrued expense and                                
           other liabilities                                       3,129       496 
                                                                --------- ---------
                                                                                   
             Net cash used in operating activities                (2,207)   (1,129)
                                                                --------- ---------
                                                                                   
CASH FLOWS FROM INVESTING ACTIVITIES:                                              
  Purchase of property and equipment                              (3,330)     (191)
  Cash used in business acquisition, net of cash acquired         (1,700)     -    
                                                                --------- ---------
                                                                                   
             Net cash used in investing activities                (5,030)     (191)
                                                                --------- ---------
                                                                                   
CASH FLOWS FROM FINANCING ACTIVITIES:                                              
  Principal payments on capital lease                                (73)      (49)
  Sale of common stock, net of transaction costs                  23,177     2,679 
  Proceeds from notes payable                                      2,306      -    
                                                                --------- ---------
                                                                                   
             Net cash provided by financing activities            25,410     2,630
                                                                --------- ---------
                                                                                   
EFFECTS OF EXCHANGE RATE CHANGES ON CASH                                        
  AND CASH EQUIVALENTS                                               168      -    
                                                                --------- ---------
                                                                                   
NET INCREASE IN CASH AND CASH EQUIVALENTS                         18,341     1,310 
CASH AND CASH EQUIVALENTS, BEGINNING OF                                            
  PERIOD                                                           2,296       221 
                                                                --------- ---------
                                                                                   
CASH AND CASH EQUIVALENTS, END OF PERIOD                         $20,637    $1,531 
                                                                 ========  ======== 



</TABLE>
 
                See notes to consolidated financial statements.



                                       3

<PAGE>
 
                 PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



  (1)   Basis of Presentation
        ---------------------
      
        The accompanying unaudited consolidated financial statements have been
        prepared in accordance with generally accepted accounting principles for
        interim financial reporting and Securities Exchange Commission ("SEC")
        regulations. Certain information and footnote disclosures normally
        included in the financial statements prepared in accordance with
        generally accepted accounting principles have been condensed or omitted
        pursuant to such rules and regulations. In the opinion of management,
        the financial statements reflect all adjustments (of normal and
        recurring nature) which are necessary to present fairly the financial
        position, results of operations and cash flows for the interim periods.
        The results for the three month and nine month periods ended September
        30, 1996 are not necessarily indicative of the results that may be
        expected for the year ending December 31, 1996.
      
        The financial statements should be read in conjunction with the
        Company's audited consolidated financial statements included in the most
        recently filed Registration Statement.

   (2)  Acquisition of Axicorp
        ----------------------

        On March 1, 1996, the Company completed the acquisition of the
        outstanding capital stock of Axicorp Pty., Ltd. ("Axicorp").  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 notes to the sellers.  One
        note is for $4.1 million payable to Fujitsu Australia Limited which
        is due in February 1997.  The other notes are for a total of $4.0
        million payable to the individual shareholder sellers and 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 notes
        issued to the individual shareholder sellers due in February 1997 can
        be extended for an additional year at the Company's option.  If the
        option is exercised, the notes will begin to accrue interest at the
        prime rate plus 1%.

        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.
       
        The following unaudited pro forma operating results give effect to the
        March 1, 1996 acquisition of Axicorp in each case as if it had occurred
        on January 1, 1995. The pro forma operating results for the three months
        ended September 30, 1996 and the nine months ended September 30, 1996
        and 1995, are as follows (in thousands, except per share):
       

<TABLE>
<CAPTION>
                              THREE MONTHS ENDED              NINE MONTHS ENDED
                          --------------------------    -----------------------------
                                  SEPTEMBER 30,         SEPTEMBER 30,   SEPTEMBER 30,
                                     1995                  1996             1995
                          ---------------------------   -------------   ------------- 
<S>                               <C>                   <C>             <C>
      Net Revenue                   $ 37,469               $143,602        $ 85,399
      Cost of Revenue               $ 34,366               $131,128        $ 77,507
      Gross Margin                  $  3,103               $ 12,474        $  7,892
      Net Loss                       ($1,205)               ($5,720)        ($3,156)
      Loss Per Share                  ($0.11)                ($0.45)         ($0.29)
 
</TABLE>


                                       4

<PAGE>
 
   (3)  Private Equity Placements
        -------------------------


        On July 31, 1996, the Company completed the sale of 965,999 shares of
        Common Stock to four investment funds affiliated with each other for
        an aggregate purchase price of approximately $8 million, and for an
        additional $8 million issued warrants for an additional $10 million
        of common stock (measured on the basis of fair market value on the
        date of exercise) plus up to another 627,899 shares of Common Stock.
      
        In February 1996, the Company completed a private placement of 1,771,194
        shares of Common Stock which raised approximately $4.7 million, net of
        transaction costs. The Company also issued 278,899 shares of Common
        Stock for services rendered in conjunction with this offering.



   (4)  Long Term Obligations
        ---------------------

        Long-term obligations consist of the following (in thousands):


<TABLE>
<CAPTION>
                                                              SEPTEMBER 30,     DECEMBER 31,
                                                            ----------------  ---------------
                                                                  1996            1995
                                                            ----------------  ---------------
                                                               (UNAUDITED)
<S>                                                           <C>               <C> 
           Obligations under capital leases                       $    609          $ 528
           Equipment financing                                       2,681             --
           Notes payable                                             2,000             --
           Notes payable relating to Axicorp                         8,420             --
            acquisition
           Settlement obligation                                     3,561             --
                                                            ----------------  ---------------

               Subtotal                                             17,271            528
           Less: Current portion of long - term obligations        (10,524)          (102)
                                                            ----------------  ---------------
                                                                  $  6,747          $ 426
                                                            ================  ===============
 
</TABLE>


        Equipment financing represents vendor financing for the purchase of
        network switching equipment for use in the Australian network. 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 September 30, 1996, the
        Corporate Overdraft Reference Rate was 10.35%. 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, Inc., 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 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%.
       
        In addition, in conjunction with the Axicorp acquisition, the Company
        accrued approximately $3.6 million to settle a pre-acquisition
        contingency between Axicorp and one of its competitors. In settlement of
        the pre-acquisition contingency, $394,000 is payable November 1996 and
        $1,583,000 is payable December 1996. Beginning in February 1997, 12
        monthly payments of $132,000 are due.

   (5)  Subsequent Event
        ----------------

        On November 7, 1996, the Company completed an initial public offering of
        5,000,000 shares of its Common Stock and on November 21, 1996 sold an
        additional 750,000 shares to satisfy the Underwriter's overallotment.
        The net proceeds to the Company (after deducting Underwriter

                                       5

<PAGE>
 
        discounts and offering expenses) from the offering were $54.4 million.
        The Company expects to use the net proceeds from the offering to expand
        its network, including purchasing transmission equipment facilities and
        support systems, international fiber capacity and satellite earth
        station facilities for new and existing routes, to fund operating
        losses, and for working capital and other general corporate purposes.

        In connection with the Company's initial public offering, effective
        November 7, 1996 all outstanding Preferred Stock was converted into
        Common Stock; the Company's Amended and Restated Certificate of
        Incorporation was amended to increase the authorized shares of Common
        Stock to 40 million shares; and all shares of Common Stock were split
        at a ratio of 3.381 to one.  All common shares have been restated to
        give effect to the common stock split.

                                       6

<PAGE>
 

 
    ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
              AND RESULTS OF OPERATIONS

     OVERVIEW

     Primus is a multinational telecommunications company that focuses on the
     provision of international and domestic long distance services.  The
     Company has targeted North America, Asia-Pacific and Europe as it primary
     service regions.  The Company currently provides services in the United
     States, Australia and the United Kingdom.  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.  The Australian operations are the
     result of the Company's March 1, 1996 acquisition of Axicorp.  The Company
     is making significant investments to build its own telecommunications
     network.  These include the purchase of telephone switches, transmission
     equipment and international fiber cable capacity.

     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
     Company's service region, which allows the Company to offer competitive
     pricing to its customers.  In Australia, net revenue is currently derived
     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 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
     Company's service areas.

     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 investments.

     Although the Company's functional currency is the U.S. dollar, a
     significant portion of the Company's net revenue is derived from its sales
     and operations outside the United States.  In the future, the Company
     expects to continue to derive a significant portion of its net revenue and
     incur a significant portion of its operating costs outside the United
     States and changes in exchange rates may have a significant effect on the
     Company's results of operations.  The Company historically has not engaged
     in hedging transactions.

     OTHER OPERATING DATA

     The following information for the three months ended September 30, 1996 is
     provided for informational purposes and should be read in conjunction with
     the unaudited Consolidated Financial 

                                       7

<PAGE>
 
     Statements and Notes provided herein and the Consolidated Financial
     Statements presented with the Company's most recently filed Registration
     Statement. Net revenue is comprised of domestic and international long
     distance for all geographical regions. Additionally, Australian net revenue
     includes local, cellular, access and other services and dealership income.

                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                  Minutes of Long Distance Use
                         Net    -------------------------------
                       Revenue  International  Domestic   Total
                     ---------  -------------  --------  ------
      
     <S>               <C>      <C>            <C>       <C>
     United States     $ 4,895          9,199     3,972  13,171
     United Kingdom      1,573          1,713     1,512   3,225
     Australia          45,351          1,967    56,932  58,899
                     ---------  -------------  --------  ------
 
     Total             $51,819         12,879    62,416  75,295
                     =========  =============  ========  ======
</TABLE>

     RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AS
     COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 1995
     
     Net revenue increased $51.5 million, from $0.3 million for the three months
     ended September 30, 1995 to $51.8 million for the three months ended
     September 30, 1996.  Of the increase, $45.4 million was associated with
     Axicorp which was acquired as of March 1, 1996, and the remaining $6.1 was
     associated primarily with the Company's operations in the United States and
     the United Kingdom.

     Cost of revenue increased $46.9 million, from $0.3 million for the three
     months ended September 30, 1995 to $47.2 million for the three months ended
     September 30, 1996 as a direct result of the increased net revenue.
     Axicorp's cost of revenue for the three months ended September 30, 1996 was
     $41.2 million, or 91% of Axicorp's net revenue during the period, while the
     non-Australian cost of revenue for the three months ended September 30,
     1996 was $6.0 million or 92% of the non-Australian net revenue.   The
     Australian cost of revenue as a percentage of net revenue reflects the
     current status of the Company as a  switchless reseller in the Australia
     market.

     Selling, general and administrative expenses increased from $0.6 million to
     $6.2 million for the three months ended September 30, 1995 to September 30,
     1996.  Approximately $3.7 million of the increase was attributable to the
     three months of activity associated with Axicorp and the remaining $1.9
     million related to the non-Australia operations as a result of increased
     staffing levels, increased sales and marketing activity and network
     operations costs.  The non-Australian selling, general and administrative
     costs as a percentage of net revenue for the three months ended September
     30, 1996 was 38%, which is reflective of the growth in the infrastructure
     necessary to support future net revenue.  The Australian selling, general
     and administrative expense as a percentage of net revenue was 8% for the
     three months ended September 30, 1996.

     Depreciation and amortization increased from $0.04 million for the three
     months ended September 30, 1995 to $0.6 million for the three months ended
     September 30, 1996.  The majority of the increase is a result of the
     acquisition of Axicorp and is comprised of amortization of goodwill and
     customer lists which totaled $0.4 million.  The remaining depreciation is
     related primarily to Axicorp's assets and increased depreciation expense
     for the Company as a result of additional capital expenditures for
     switching and network related equipment.

     Other income (expense) for the three months ended September 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 of the appreciation of the Australian
     dollar against the U.S. dollar during the period.

     Income taxes were fully attributable to the operations of Axicorp and
     represents the amount of expense for Australian federal government taxes.

                                       8

<PAGE>
 
     RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AS
     COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 1995

     Net revenue increased $116.7 million, from $0.5 million for the nine months
     ended September 30, 1995 to $117.2 million for the nine months ended
     September 30, 1996.  Of the increase, $104.6 million was associated with
     Axicorp, while the remaining $12.1 million of net revenue growth was
     associated primarily with the commencement and expansion of the Company's
     operations in the United States and the United Kingdom.

     Cost of revenue increased  $106.9 million, from $0.5 million for the nine
     months ended September 30, 1995 to $107.4 million for the nine months ended
     September 30, 1996 as a direct result of the increased net revenue.
     Axicorp's cost of revenue for the nine months ended September 30, 1996 was
     $94.4 million, or 90% of Axicorp's net revenue during the period, while the
     non-Australian cost of revenue for the nine months ended September 30, 1996
     was $13.0 million.

     Selling, general and administrative expenses increased $11.6 million, from
     $1.3 million to $12.9 million for the nine months ended September 30, 1995
     to September 30, 1996.  Approximately $7.7 million of the increase was
     attributable to the seven months of activity associated with Axicorp and
     the remaining $3.9 million related to the non-Australia operations as a
     result of increased staffing levels, increased sales and marketing activity
     and network operations costs.  The non-Australian selling, general and
     administrative costs as a percentage of net revenue for the nine months
     ended September 30, 1996 was 41% which is reflective of the growth in the
     infrastructure necessary to support future net revenues.  The Australian
     selling, general and administrative expense as a percentage of net revenue
     was 7% for the nine months ended September 30, 1996.

     Depreciation and amortization increased from $0.1 million for the nine
     months ended September 30, 1995 to $1.4 million for the nine months ended
     September 30, 1996.  The majority of the increase is a result of the
     acquisition of Axicorp and is comprised of amortization of goodwill and the
     customer lists which totaled $0.9 million.  The remaining depreciation is
     related primarily to Axicorp's assets and increased depreciation expense
     for the Company as a result of additional capital expenditures for
     switching and network related equipment.

     Other income (expense) for the nine months ended September 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 of the appreciation of the Australian dollar against
     the U.S. dollar during the period.

     Income taxes were fully attributable to the operations of Axicorp for the
     seven months from the date of purchase, and represents the amount of
     expense for Australian federal government taxes.

     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.
     The Company has historically financed its growth, including its capital
     expenditures, through private placements of its common stock, and capital
     lease financing.  In November 1996, the Company completed an initial public
     offering of its Common Stock and generated approximately $54.4 million
     (after deducting Underwriters discounts and offering expenses).

     Net cash used in operating activities was $2.2 million for the nine months
     ended September 30, 1996 and $1.1million for the nine months ended
     September 30, 1995.  The increased cash usage was the result of an increase
     in the net loss partially offset by increases in accounts payable and
     accrued expenses.

                                       9

<PAGE>
 
     Net cash used in investing activities was $5.0 million for the nine months
     ended September 30, 1996 and $0.2 million for the nine months ended
     September 30, 1995.  The cash utilized during the nine months ended
     September 30, 1996 includes $3.3 million for expansion of the network and
     $1.7 million for the purchase of Axicorp net of cash acquired.

     Net cash provided by financing activities was $25.4 million for the nine
     months ended September 30, 1996 and $2.6 million for the nine months ended
     September 30, 1995.  Cash provided by financing activities resulted
     primarily from private placements of its common stock.

     The Company is currently negotiating a $25 million bank line of credit to
     provide it with additional funding, and intends to continue to use capital
     lease financings. The Company believes that the net proceeds from the
     initial public offering, together with the net proceeds from the July 1996
     private equity sale, borrowing capacity under the expected line of credit
     and future capital lease 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.

                                       10

<PAGE>
 

P
ART II. OTHER INFORMATION




ITEM 1.  LEGAL PROCEEDINGS

         Not applicable.


ITEM 2.  CHANGES IN SECURITIES

         Not applicable.


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         Not applicable.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         Not applicable.


ITEM 5.  OTHER INFORMATION

         Not applicable.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)  Exhibits (see index on page 13)

         (b)  Reports on Form 8-K

         Not applicable.

                                       11

<PAGE>
 

SIGNATURE



Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                           PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED



Date December 20, 1996    By:  /s/ Neil L. Hazard
     -----------------        --------------------

                          Neil L. Hazard
                          (Executive Vice President and Chief Financial Officer)

                                       12

<PAGE>
 
EXHIBIT INDEX



  Exhibit
  Number     Description                                           Page
  --------   -----------                                           ----


 

   11.1      Statement re computation of per share earnings         14
 
   27        Financial Data Schedule                                15

                                       13





<PAGE>
 
                                                                    Exhibit 11.1

                 PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED

                      COMPUTATIONS OF EARNINGS PER SHARE




<TABLE>
<CAPTION>
 
                                                     THREE MONTHS ENDED          NINE MONTHS ENDED
                                                        SEPTEMBER 30,              SEPTEMBER 30,
                                                  ------------------------    ------------------------
                                                      1996         1995          1996          1995
                                                  -----------  -----------   ------------  ----------- 
<S>                                               <C>           <C>          <C>           <C>
Weighted average common shares           
 outstanding:                            
                                         
Average shares outstanding during period           11,713,746    5,071,503    10,420,177     4,876,010
                                         
Cheap stock (1)                                        66,552    4,282,380       727,976     4,282,380
                                         
Cheap options (1)                                   1,661,733    1,657,372     1,658,836     1,657,371
                                                  -----------  -----------   ------------  ----------- 
                                         
         Total primary weighted average  
         common shares                             13,442,031   11,011,255    12,806,989    10,815,761
                                                  ===========  ===========   ===========   ===========
Non Cheap Options                                      86,216       78,608        86,216        78,608
                                                  -----------  -----------   ------------  ----------- 
         Total fully diluted weighted    
          average common shares                    13,528,247   11,089,863    12,893,205    10,894,369
                                                  ===========  ===========   ===========   ===========
                                         
                                         
Net loss applicable to common shares     
                                         
Net loss                                          ($2,421,000)   ($689,000)  ($5,653,000)  ($1,481,000)
                                                  ===========  ===========   ===========   =========== 
                                         
Loss per common share and                
      common share equivalent - Primary                ($0.18)      ($0.06)       ($0.44)       ($0.14)
                                                  ===========  ===========   ===========   ===========  
Loss per common share and common 
      share equivalent - Fully Diluted                 ($0.18)      ($0.06)       ($0.44)       ($0.14)
                                                  ===========  ===========   ===========   ===========
</TABLE>


(1) Pursuant to Staff Accounting Bulletin Number 83, stock options granted and
    stock issued within one year of the initial public offering have been
    included in the calculation of the weighted average common shares
    outstanding using the treasury stock method based on an initial public
    offering price of $10.50 and have been treated
 as outstanding for all
    reported periods.



<TABLE> <S> <C>


<PAGE>
 
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the balance sheet of
Primus Telecommunications Group, Incorporated at September 30, 1996 and the
income statement for the nine months ended September 30, 1996 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   9-MOS
<FISCAL-YEAR-END>                          DEC-31-1996
<PERIOD-START>                             JAN-01-1996
<PERIOD-END>                               SEP-30-1996
<CASH>                                          20,637
<SECURITIES>                                         0
<RECEIVABLES>                                   30,507
<ALLOWANCES>                                     2,130
<INVENTORY>                                          0
<CURRENT-ASSETS>                                50,273
<PP&E>                                           8,167
<DEPRECIATION>                                     943
<TOTAL-ASSETS>                                  83,773
<CURRENT-LIABILITIES>                           51,853
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          5
<COMMON>                                           105
<OTHER-SE>                                      25,063
<TOTAL-LIABILITY-AND-EQUITY>                    83,773
<SALES>                                              0
<TOTAL-REVENUES>                               117,234
<CGS>                                                0
<TOTAL-COSTS>                                  107,372
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                 1,162
<INTEREST-EXPENSE>                                 593
<INCOME-PRETAX>                                 (5,134)
<INCOME-TAX>                                       519
<INCOME-CONTINUING>                             (5,653)
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    (5,653)
<EPS-PRIMARY>                                    (0.44)
<EPS-DILUTED>                                    (0.44)
        

</TABLE>