UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 1999

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

For the Transition Period from __________________ to _________________

Commission File Number: 333-48371

FACILICOM INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 52-2065185
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

1401 New York Avenue, NW
9/th/ Floor
Washington, D.C. 20005
(202) 496-1100

(Address and telephone number of principal executive offices)

Indicate by check mark whether 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 [X] NO [ ]

As of August 10, 1999, there were 226,923 shares of common stock outstanding,
par value $.01 per share.

FACILICOM INTERNATIONAL, INC.

Form 10-Q

TABLE OF CONTENTS

PART I: FINANCIAL INFORMATION Page

Item 1: Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets as of June 30, 1999 and September 30, 1998............ 3

Condensed Consolidated Statements of Operations and Comprehensive Income for the
Three Months Ended June 30, 1999 and 1998 and the Nine Months Ended June 30, 1999
and 1998.................................................................................... 5

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended June 30,
1999 and 1998............................................................................... 6

Notes to Condensed Consolidated Financial Statements........................................ 8

Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations....... 9

Item 3: Quantitative and Qualitative Disclosures About Market Risk.................................. 16

PART II: OTHER INFORMATION

Item 1: Legal Proceedings........................................................................... 17

Item 2: Changes in Securities and Use of Proceeds................................................... 17

Item 3: Defaults upon Senior Securities............................................................. 17

Item 4: Submissions of Matters to a Vote of Security Holders........................................ 17

Item 5: Other Information........................................................................... 17

Item 6: Exhibits and Reports on Form 8-K............................................................ 17

Signatures........................................................................................... 18

Part I: Financial Information
Item 1: Financial Statements

FACILICOM INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
(Unaudited)

June 30, September
1999 30, 1998
---- --------

ASSETS
CURRENT ASSETS:
Cash and cash equivalents....................................................... $ 18,696 $ 68,129
Accounts receivable--net of allowance for doubtful accounts of $7,862 at
June 30, 1999 and $4,620 at September 30, 1998................................ 98,542 59,915
Marketable securities ($31,755 at June 30, 1999 and $31,394 at September 30,
1998 restricted).............................................................. 31,755 70,092
Prepaid expenses and other current assets....................................... 6,067 6,060
-------- --------
Total current assets.......................................................... 155,060 204,196
-------- --------
PROPERTY AND EQUIPMENT:
Transmission and communications equipment....................................... 121,838 97,849
Transmission and communications equipment--leased............................... 69,178 17,162
Furniture, fixtures and other................................................... 19,874 11,154
-------- --------
210,890 126,165
Less accumulated depreciation and amortization.................................. (25,122) (10,417)
-------- --------
Net property and equipment...................................................... 185,768 115,748
-------- --------
OTHER ASSETS:
Intangible assets, net of accumulated amortization of $2,846 at June 30, 1999
and $1,673 and September 30, 1998............................................. 4,949 5,630
Debt issue costs, net of accumulated amortization of $1,527 at June 30, 1999
and $744 and September 30, 1998................................................. 8,913 9,696
Advances to affiliates.......................................................... 550 490
Marketable securities-restricted................................................ 29,525 43,124
-------- --------
Total other assets............................................................ 43,937 58,940
-------- --------
TOTAL ASSETS...................................................................... $384,765 $378,884
======== ========

See notes to condensed consolidated financial statements.

FACILICOM INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
(Unaudited)

June 30, September
1999 30, 1998
---- --------

LIABILITIES AND CAPITAL ACCOUNTS
CURRENT LIABILITIES:
Accounts payable......................................................................... $ 95,269 $ 63,802
Accounts payable--transmission equipment................................................. 29,344 24,668
Accounts payable--related party.......................................................... 1,810 332
Accrued interest......................................................................... 14,938 7,109
Other current obligations................................................................ 23,538 12,610
Line of credit........................................................................... 10,000 --
Capital lease obligations due within one year............................................ 11,490 3,407
Long-term debt due within one year....................................................... 347 394
--------- ---------
Total current liabilities............................................................. 186,736 112,322
--------- ---------
OTHER LIABILITIES:
Capital lease obligations................................................................ 4,004 4,791
Long-term debt........................................................................... 300,162 300,346
--------- ---------
Total other liabilities............................................................... 304,166 305,137
--------- ---------

COMMITMENTS AND CONTINGENCIES

CAPITAL ACCOUNTS:
Common stock, $.01 par value--300,000 shares authorized; 226,923 and 225,741
issued and outstanding at June 30, 1999 and September 30, 1998, respectively.......... 2 2
Additional paid-in capital............................................................... 37,658 36,534
Stock-based compensation................................................................. 5,546 6,305
Holding gain on marketable securities.................................................... -- 24
Foreign currency translation adjustments................................................. (5,819) 3,450
Accumulated deficit...................................................................... (143,524) (84,890)
--------- ---------
Total capital accounts................................................................ (106,137) (38,575)
--------- ---------
TOTAL LIABILITIES AND CAPITAL ACCOUNTS..................................................... $ 384,765 $ 378,884
========= =========

See notes to condensed consolidated financial statements.

FACILICOM INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands)
(Unaudited)

Three Months Ended Nine Months Ended
June 30, June 30,
---------------------------- -----------------------------
1999 1998 1999 1998
------------- ------------- -------------- -------------

Revenues..................................... $106,438 $ 46,192 $279,695 $117,146
Cost of revenues............................. 96,443 47,987 257,253 114,473
-------- -------- -------- --------
Gross margin................................. 9,995 (1,795) 22,442 2,673
-------- -------- -------- --------
Operating Expenses:
Selling, general and administrative...... 13,354 8,678 38,073 20,917
Stock-based compensation expense......... 119 192 364 5,706
Related party expense.................... 1,079 448 2,281 917
Depreciation and amortization............ 6,458 2,460 16,895 5,314
-------- -------- -------- --------
Total operating expenses............ 21,010 11,778 57,613 32,854
-------- -------- -------- --------
Operating loss............................... (11,015) (13,573) (35,171) (30,181)
-------- -------- -------- --------
Other income (expense):
Interest expense-related party........... -- (15) -- (195)
Interest expense......................... (8,783) (8,095) (25,690) (14,344)
Interest income.......................... 884 3,089 3,646 5,594
Gain on settlement agreement............. -- 791 -- 791
Foreign exchange (loss) gain............. (56) (261) (1,346) (655)
-------- -------- -------- --------
Total other income (expense)........ (7,955) (4,491) (23,390) (8,809)
-------- -------- -------- --------
Loss before income taxes..................... (18,970) (18,064) (58,561) (38,990)
Income tax benefit........................... 1,106 3,249 6,682 6,475
-------- -------- -------- --------
Net loss..................................... (17,864) (14,815) (51,879) (32,515)
Other comprehensive income:
Foreign currency translation adjustment.. (3,465) 178 (9,269) 561
-------- -------- -------- --------
Total comprehensive loss..................... $(21,329) $(14,637) $(61,148) $(31,954)
======== ======== ======== ========

See notes to condensed consolidated financial statements.

FACILICOM INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)

Nine Months Ended
June 30,
------------------------
1999 1998
----------- -----------

Cash flows from operating activities:
Net loss....................................................... $(51,879) $ (32,515)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization.................................. 16,895 5,314
Non-cash stock-based compensation.............................. 364 5,706
Non-cash income tax benefit.................................... (6,753) (6,569)
Amortization of bond discount.................................. (1,789) 762
Changes in operating assets and liabilities:
Accounts receivable.......................................... (38,627) (19,881)
Prepaid expenses and other current assets.................... (7) (7,595)
Accounts payable and other current liabilities............... 50,224 30,720
Accounts payable--related party.............................. 1,478 (228)
Advance to affiliate......................................... (196) (2,018)
-------- ---------
Net cash used in operating activities.......................... (30,290) (26,304)
-------- ---------

Cash flows from investing activities:
Purchase of investments in subsidiaries........................ -- (4,652)
Purchase of investments in available-for-sale securities....... (7,407) (64,234)
Maturities of available-for-sale securities.................... 13,378 1,769
Sales of available-for-sale securities......................... 32,798 4,037
Purchase of investments in held-to-maturity securities......... (1,164) (86,549)
Maturities of investments in held-to-maturity securities....... 16,120 --
Purchases of property and equipment............................ (72,288) (35,877)
Other.......................................................... 331 44
-------- ---------
Net cash used in investing activities.......................... (18,232) (185,462)
-------- ---------

Cash flows (used in) provided by financing activities:
Excess capital contributions................................... -- 13,750
Proceeds from debt issuance.................................... -- 300,000
Proceeds from line of credit................................... 10,000 --
Payment of debt issuance costs................................. -- (10,305)
Payments of long-term debt and capital leases.................. (10,742) (12,823)
-------- ---------
Net cash (used in) provided by financing activities............ (742) 290,622
-------- ---------

Effect of exchange rate changes on cash........................... (169) 561
-------- ---------
(Decrease) increase in cash and cash equivalents.................. (49,433) 79,417
Cash and cash equivalents, beginning of period.................... 68,129 1,016
-------- ---------
Cash and cash equivalents, end of period.......................... $ 18,696 $ 80,433
======== =========

Supplemental cash flow information:
Interest paid.................................................. $ 17,861 $ 1,181
======== =========

(Footnotes on following page)

See notes to condensed consolidated financial statements.

________
NONCASH TRANSACTIONS:
(a) For the nine months ended June 30, 1998, the majority owner converted $6,250
of loans into capital and a $162 receivable was forgiven as part of the
purchase of minority interest which reduced prepaid expenses and other
current assets and increased goodwill.
(b) FCI received property and equipment under capital leases and financing
agreements, which increased property and equipment and long-term obligations
$17,807 and $10,755 in the nine months ended June 30, 1999 and 1998,
respectively. In addition, for the nine months ended June 30, 1999 and 1998,
FCI received equipment, which increased property and equipment and accounts
payable transmission equipment by $4,676 and $25,774, respectively.
(c) FCI recognized a tax benefit of $6,753 and $6,569 for the nine months ended
June 30, 1999 and 1998, respectively. In accordance with the tax sharing
agreement with Armstrong Holdings, Inc. ("AHI") entered into on December 22,
1997, FCI recorded a dividend to AHI for the amount of the benefit to be
realized by AHI.

See notes to condensed consolidated financial statements.

FACILICOM INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements, in the
opinion of management, include all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the financial information set
forth therein, in accordance with generally accepted accounting principles for
interim financial reporting and Securities and Exchange Commission regulations.
The results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for any future period. Certain
information and footnote disclosures normally contained in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. These condensed consolidated financial statements should
be read in conjunction with the consolidated financial statements and notes
thereto contained in FaciliCom International, Inc.'s (the "Company" or "FCI")
Form 10-K for the year ended September 30, 1998.

2. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income," which establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general purpose financial statements and requires an enterprise
to report a total for comprehensive income in condensed financial statements of
interim periods. The Company adopted SFAS No. 130 in fiscal 1999 and has
elected to display the components of comprehensive income within the Condensed
Consolidated Statements of Operations and Comprehensive Loss.

3. LONG-TERM DEBT

In May 1998, the Company entered into a Memorandum of Understanding with Qwest
Communications Corporation ("Qwest"). The agreement provides Qwest with
international direct dial termination service to various destinations and
provides the Company an Indefeasible Right of Use ("IRU") for domestic and
international fiber optic capacity. The IRU is for twenty-five years, for which
the Company has agreed to pay $24 million. Delivery of two of the capacity
segments occurred during the nine months ended June 30, 1999. The delivery of
the remaining capacity is expected within the next three months. The Company
has recorded a liability of $17.8 million related to the two capacity segments
that were delivered during the nine months ended June 30, 1999.

4. CREDIT FACILITY

On May 24, 1999, the Company entered into a $35.0 million revolving credit
facility with Key Corporate Capital, Inc. (Key) which will mature on May 23,
2000. As of June 30, 1999, the Company had $10.0 million outstanding under the
credit facility. The facility will be used to fund working capital needs as
well as general corporate purposes and has certain restrictive covenants. The
credit facility contains interest rate options based upon LIBOR or Prime, plus
applicable margin percentages.

5. LITIGATION

The Company is involved in various claims and possible actions arising in the
normal course of its business. Although the ultimate outcome of these claims
cannot be ascertained at this time, it is the opinion of the Company's
management, based on its knowledge of the facts and advice of counsel, that the
resolution of such claims and actions will not have a material adverse effect on
the Company's financial position or results of operations.

Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations

This document contains various "forward-looking statements," as defined in the
Private Securities Litigation Reform Act of 1995, that are based on management's
beliefs as well as assumptions made by and information currently available to
management. Such statements are subject to various risks and uncertainties
which could cause actual results to vary materially from those contained in such
forward-looking statements. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those anticipated, estimated, expected or projected.
Certain of these risks and uncertainties are described in the Company's
Registration Statement on Form S-4 filed under the Securities Act of 1933, as
amended, and declared effective on June 2, 1998, including the section entitled
"Risk Factors".

Overview

FCI is a rapidly growing multinational carrier focused on providing
international wholesale telecommunications services to other carriers worldwide.
As a facilities-based carrier, the Company seeks primarily to provide service
over its facilities and international transmission capacity owned or leased on a
fixed-cost basis ("on-net"). The Company believes that it is better able to
control the quality and the termination costs of on-net traffic and that
increasing the proportion of on-net traffic significantly improves the Company's
gross margins. For the nine months ended June 30, 1999, 41.7% of the Company's
wholesale international traffic was terminated on-net and 58.3% was terminated
by other long distance carriers pursuant to resale and operating agreements
between the Company and such carriers ("off-net"). The Company's expanding
facility-based network will enable the Company to increase the percentage of on-
net traffic.

The Company provides its services over a carrier-grade international network
consisting of international gateway switches, transmission capacity owned or
leased on a fixed-cost basis and various multinational termination agreements
and resale arrangements with other long distance providers. FCI began generating
revenues in July 1995 through it's acquisition of FCI-Sweden, formerly Nordiska
Tele8 AB. Since that time the Company has installed or acquired 16 additional
international gateway switches in the United States (New York, New Jersey, Los
Angeles and Miami) and Europe (United Kingdom, The Netherlands, Germany, Sweden,
Finland, Denmark, France, Norway, Switzerland, Italy, Austria, Spain and
Belgium).

The Company's strategy is to invest in network facilities as it expands its
customer base, allowing it to enhance service quality and increase gross margins
on particular routes. However, this approach also causes the Company's gross
margins to fluctuate with changes in network utilization due to the Company's
fixed-cost investment in its network.

Currently, the Company's revenues are generated through the sale of
international long distance services on a wholesale basis to telecommunications
carriers and through the sale of domestic and international long distance
services on a retail basis in Sweden, Denmark, Norway and Finland. The Company
records revenues from the sale of telecommunications services at the time of
customer usage. The Company earns revenues based on the number of minutes it
bills to and collects from its customers. The Company's agreements with its
wholesale customers are short-term in duration and are subject to significant
traffic variability. The rates charged to customers are subject to change from
time to time, generally requiring seven days' notice to the customer.

The Company believes its services are competitively priced in each country in
which the Company offers its services. Prices for wholesale and retail
telecommunications services in many of the Company's markets have declined in
recent years as a result of deregulation and increased competition. The Company
believes that worldwide deregulation and increased competition are likely to
continue to reduce the Company's wholesale and retail revenues per billed minute
of use. The Company believes, however, that any decrease in wholesale and retail
revenues per minute will be at least partially offset by an increase in billed
minutes by the Company's wholesale and retail customers, and by a decreased cost
per billed minute.

The Company has made since its inception, and expects to continue to make,
investments to expand its network. Increased capital expenditures in the future
can be expected to affect the Company's operating results due to increased
depreciation charges and interest expense in connection with borrowings to fund
such expenditures.

Results of Operations

The following table sets forth, for the periods indicated, certain
unaudited financial data and related percentage of revenues (dollars in
thousands):

Three Months Ended June 30, Nine Months Ended June 30,
--------------------------- --------------------------
1999 1998 1999 1998
-------------------------------------------------------------------------------
$ % $ % $ % $ %
-------------------------------------------------------------------------------

Revenues.............................. $106,438 100.0% $ 46,192 100.0% $279,695 100.0% $117,146 100.0%
Cost of revenues...................... 96,443 90.6 47,987 103.9 257,253 92.0 114,473 97.7
-------- ------ -------- ------ -------- ------ -------- ------
Gross margin.......................... 9,995 9.4 (1,795) (3.9) 22,442 8.0 2,673 2.3
-------- ------ -------- ------ -------- ------ -------- ------
Operating Expenses:
Selling, general and
Administrative (including
related party)................. 14,433 13.5 9,126 19.8 40,354 14.5 21,834 18.6
Stock-based compensation
Expense........................ 119 0.1 192 0.4 364 0.1 5,706 4.9
Depreciation and amortization..... 6,458 6.1 2,460 5.3 16,895 6.0 5,314 4.5
-------- ------ -------- ------ -------- ------ -------- ------
Total operating expenses..... 21,010 19.7 11,778 25.5 57,613 20.6 32,854 28.1
-------- ------ -------- ------ -------- ------ -------- ------
Operating loss........................ (11,015) (10.3) (13,573) (29.4) (35,171) (12.6) (30,181) (25.8)
-------- ------ -------- ------ -------- ------ -------- ------
Other income (expense):
Interest expense (including
related party)................. (8,783) (8.3) (8,110) (17.6) (25,690) (9.2) (14,539) (12.4)
Interest income................... 884 0.8 3,089 6.7 3,646 1.3 5,594 4.8
Gain on settlement agreement...... -- 791 1.7 791 0.7
Foreign exchange (loss) gain...... (56) (0.0) (261) (0.6) (1,346) (0.5) (655) (0.6)
-------- ------ -------- ------ -------- ------ -------- ------
Total other income (expense). (7,955) (7.5) (4,491) (9.7) (23,390) (8.4) (8,809) (7.5)
-------- ------ -------- ------ -------- ------ -------- ------
Loss before income taxes.............. (18,970) (17.8) (18,064) (39.1) (58,561) (21.0) (38,990) (33.3)
Income tax benefit.................... 1,106 1.0 3,249 7.0 6,682 2.4 6,475 5.5
-------- ------ -------- ------ -------- ------ -------- ------
Net loss.............................. $(17,864) (16.8)% $(14,815) (32.1)% $(51,879) (18.6)% $(32,515) (27.8)%
======== ====== ======== ====== ======== ====== ======== ======

For the Three Months Ended June 30, 1999 as Compared to the Three Months Ended
June 30, 1998

Revenues increased by $60.2 million to $106.4 million for the three months
ended June 30, 1999, from $46.2 million for the three months ended June 30,
1998. The growth in revenues resulted primarily from an increase in billed
customer minutes of use generated from an increase in wholesale customers in the
U.S. and Europe. Many of the new wholesale customers relate to newly deployed
and activated switch facilities in Europe. Offsetting the growth in billed
customer minutes of use during this period was a decrease in the price per
billed minute to $0.181 for the three months ended June 30, 1999, from $0.219
for the three months ended June 30, 1998. The unit revenue decrease is the
combined result of increases in the percentage of on-net traffic and increased
competition. For the three months ended June 30, 1999, U.S. revenues totaled
$45.7 million or 42.9% of the Company's consolidated revenues and European
revenues totaled $60.8 million, or 57.1% of consolidated revenues. Billed
minutes of use increased by 371.9 million, to 582.6 million minutes of use for
the three months ended June 30, 1999, from 210.7 million minutes of use for the
three months ended June 30, 1998.

Wholesale customers increased by 106 or 93.0%, to 220 wholesale customers
at June 30, 1999 from 114 wholesale customers at June 30, 1998. As of June 30,
1999 there were approximately 51,726 retail customers in Sweden, Denmark,
Finland and Norway.

Cost of revenues increased by $48.5 million to $96.4 million for the three
months ended June 30, 1999, from $48.0 million for the three months ended June
30, 1998. As a percentage of revenues, cost of revenues decreased to 90.6% for
the three months ended June 30, 1999, from 103.9% for the three months ended
June 30, 1998, primarily as a result of increased minutes of use on the
Company's network, improved efficiencies of network fiber facilities due to
higher traffic volumes and reductions in rates charged by the Company's carrier
suppliers. Cost of revenues as a percentage of revenues is expected to decrease
as a result of improved efficiencies of network fiber facilities due to higher
traffic volumes as well as from an anticipated increase in the percentage of on-
net traffic.

Gross margin increased by $11.8 million to $10.0 million for the three
months ended June 30, 1999, from ($1.8) million for the three months ended June
30, 1998. As a percentage of revenues, gross margin increased to 9.4% for the
three months ended June 30, 1999, from (3.9%) for the three months ended June
30, 1998.

Selling, general and administrative expenses increased by $5.2 million to
$14.6 million for the three months ended June 30, 1999, from $9.3 million for
the three months ended June 30, 1998, primarily as a result of the Company's
increased sales and an increase in customer service, billing, collections and
accounting staff required to support revenues growth. As a percentage of
revenues, selling, general and administrative expenses decreased to 13.6% for
the three months ended June 30, 1999, from 20.2% for the three months ended June
30, 1998. Bad debt expense was $1.8 million, or 1.7% of revenues for the three
months ended June 30, 1999 compared with $882,000, or 1.9% of revenues for the
three months ended June 30, 1998. Although selling, general and administrative
expenses are expected to increase on an absolute basis in order to support
expansion of the Company's operations, the Company expects that selling, general
and administrative expenses as a percentage of revenues will continue to
decrease over time.

Depreciation and amortization increased by $4.0 million to $6.5 million for
the three months ended June 30, 1999, from $2.5 million for the three months
ended June 30, 1998, primarily due to increased capital expenditures incurred in
connection with the deployment and expansion of the Company's network.

Interest expense increased by $0.7 million to $8.8 million for the three
months ended June 30, 1999, from $8.1 million for the three months ended June
30, 1998, primarily due to an increase in the total amount of capital lease and
other debt obligations.

Interest income decreased by $2.2 million to $884,000 for the three months
ended June 30, 1999, from $3.1 million for the three months ended June 30, 1998
as the proceeds from the Senior Notes offering have been used to service
interest payments and fund capital expenditures.

Foreign exchange loss decreased by $205,000 to $56,000 for the three months
ended June 30, 1999, from $261,000 for the three months ended June 30, 1998.

Income tax benefit of $951,000 and $3.2 million was recorded for the three
months ended June 30, 1999 and 1998, respectively, related principally to
estimated tax benefits utilized by Armstrong Holdings, Inc. ("AHI").

For the Nine Months Ended June 30, 1999 as Compared to the Nine Months Ended
June 30, 1998

Revenues increased by $162.5 million to $279.7 million for the nine months
ended June 30, 1999, from $117.1 million for the nine months ended June 30,
1998. The growth in revenues resulted primarily from an increase in billed
customer minutes of use generated from an increase in wholesale customers in the
U.S. and Europe. Many of the new wholesale customers relate to newly deployed
and activated switch facilities in Europe. Offsetting the growth in billed
customer minutes of use during this period was a decrease in the price per
billed minute to $0.194 for the nine months ended June 30, 1999, from $0.233 for
the nine months ended June 30, 1998. The unit revenue decrease is the combined
result of increases in the percentage of on-net traffic and increased
competition. For the nine months ended June 30, 1999, U.S. revenues totaled
$121.6 million or 43.5% of the Company's consolidated revenues and European
revenues totaled $158.1 million, or 56.5% of consolidated revenues. Billed
minutes of use increased by 935.3 million, to 1,438.7 million minutes of use for
the nine months ended June 30, 1999, from 503.3 million minutes of use for the
nine months ended June 30, 1998.

Cost of revenues increased by $142.8 million to $257.3 million for the nine
months ended June 30, 1999, from $114.5 million for the nine months ended June
30, 1998. As a percentage of revenues, cost of revenues decreased to 92.0% for
the nine months ended June 30, 1999, from 97.7% for the nine months ended June
30, 1998, primarily as a result of increased minutes of use on the Company
network, improved efficiencies of network fiber facilities due to higher traffic
volumes and reductions in rates charged by the Company's carrier suppliers.
Cost of revenues as a

percentage of revenues is expected to decrease as a result of improved
efficiencies of network fiber facilities due to higher traffic volumes as well
as from an anticipated increase in the percentage of on-net traffic.

Gross margin increased by $19.8 million to $22.4 million for the nine
months ended June 30, 1999, from $2.7 million for the nine months ended June 30,
1998. As a percentage of revenues, gross margin increased to 8.0% for the nine
months ended June 30, 1999, from 2.3% for the nine months ended June 30, 1998.

Selling, general and administrative expenses increased by $13.2 million to
$40.7 million for the nine months ended June 30, 1999, from $27.5 million for
the nine months ended June 30, 1998, primarily as a result of the Company's
increased sales, an increase in customer service, billing, collections and
accounting staff required to support revenues growth. Offsetting these
increased expenses was a reduction in stock-based compensation related to the
Company's stock options. As a percentage of revenues, selling, general and
administrative expenses decreased to 14.6% for the nine months ended June 30,
1999, from 23.5% for the nine months ended June 30, 1998. Bad debt expense was
$4.6 million, or 1.6% of revenues for the nine months ended June 30, 1999
compared with $1.8 million, or 1.5% of revenues for the nine months ended June
30, 1998. Although selling, general and administrative expenses are expected to
increase on an absolute basis in order to support expansion of the Company's
operations, the Company expects that selling, general and administrative
expenses as a percentage of revenues will continue to decrease over time.

Depreciation and amortization increased by $11.6 million to $16.9 million
for the nine months ended June 30, 1999, from $5.3 million for the nine months
ended June 30, 1998, primarily due to increased capital expenditures incurred in
connection with the deployment and expansion of the Company's network.

Interest expense increased by $11.2 million to $25.7 million for the nine
months ended June 30, 1999, from $14.5 million for the nine months ended June
30, 1998, primarily due to interest obligations on the Company's 10-1/2% Senior
Notes due 2008 ("Senior Notes") in the aggregate principal amount of $300
million, which were issued on January 28, 1998.

Interest income decreased by $1.9 million to $3.6 million for the nine
months ended June 30, 1999, from $5.6 million for the nine months ended June 30,
1998 as the proceeds from the Senior Notes offering have been used to service
interest payments and fund capital expenditures.

Foreign exchange loss increased by $0.7 million to $1.3 million for the
nine months ended June 30, 1999, from $655,000 for the nine months ended June
30, 1998.

Income tax benefit of $6.7 million and $6.5 million was recorded for the
nine months ended June 30, 1999 and 1998, respectively, related principally to
the estimated tax benefits utilized by AHI.

Liquidity and Capital Resources

The Company has incurred significant operating losses and negative cash
flows as a result of the development and operation of its network, including the
acquisition and maintenance of switches and undersea fiber optic capacity. The
Company has financed its growth primarily through equity, a credit facility
provided by Armstrong International Telecommunications, Inc. ("AIT"), credit
facilities with two equipment vendors, capital lease financing, the proceeds
from the $300 million offering of Senior Notes and proceeds from a line of
credit.

Net cash provided by (used in) operating activities was ($30.3) million for
the nine months ended June 30, 1999 due principally to a net loss of $51.9
million offset in part by depreciation and amortization expense of $16.9
million.

Net cash provided by (used in) investing activities was ($18.2) million for
the nine months ended June 30, 1999. Net cash used in investing activities in
this period resulted from an increase in capital expenditures to expand the
Company's network offset in part by the sale of marketable securities.

Net cash provided by (used in) financing activities was ($742,000) for the
nine months ended June 30, 1999. Net cash used in financing activities for the
nine months ended June 30, 1999 resulted from payments on existing long-term
debt and capital leases offset in part by proceeds from the recent line of
credit bank facility.

In May 1999, the Company obtained a one-year, $35 million credit facility
with Key Corporate Capital, Inc. The Company uses the proceeds of this credit
facility for working capital and for general corporate purposes. At June 30,
1999, the Company had $10.0 million in borrowings under this credit facility.

Non-cash financing activities for the nine months ended June 30, 1999
resulted from the financing of fiber circuits provided by Qwest
Communications Corporation ("Qwest").

The Company's business strategy contemplates aggregate capital expenditures
of approximately $100 million during fiscal year 1999. Such capital expenditures
are expected to be used primarily for international gateway switches, points of
presence ("PoPs"), transmission equipment, undersea and international fiber
circuits (including Indefeasible Right of Use ("IRUs") and Minimum Assignable
Ownership Units ("MAOUs")) for new and existing routes and other support
systems.

In May 1998, the Company entered into a Memorandum of Understanding with
Qwest. The agreement provides Qwest with international direct dial termination
service to various destinations and provides the Company an IRU for domestic and
international fiber optic capacity. The IRU is for twenty-five years, for which
the Company has agreed to pay $24 million within three years of delivery of the
fiber optic capacity. Delivery of two of the capacity segments occurred during
the nine months ended June 30, 1999. The delivery of the remaining fiber optic
capacity is expected within the next three months.

In addition, the Company has entered into an agreement that provides the
Company with an IRU for international fiber optic capacity for the Pacific Rim.
Delivery of the capacity under the agreement is expected prior to April 2000.
The IRU is for 15 years, for which the Company has agreed to pay $20.0 million
through September 30, 2002, of which $2.5 million has already been paid as a
deposit and an additional $2.5 million is expected to be paid on April 30, 2000.
The Company has also agreed to acquire additional capacity in Europe for
approximately $1.1 million. Deliveries and payment for the fiber capacity under
this agreement is expected by September 30, 1999.

The Company continuously reviews opportunities to further its business
strategy through strategic alliances with, investments in, or acquisitions of
companies that are complementary to the Company's operations. The Company may
finance such alliances, investments or acquisitions with cash flow from
operations or through additional bank debt, vendor financing or one or more
public offerings or private placements of securities.

The Company believes that the net proceeds from the offering of the Senior
Notes, vendor or bank financing and cash from operations will provide the
Company with sufficient capital to fund planned capital expenditures and
anticipated losses and to make interest payments on the Senior Notes for at
least the next twelve months. There can be no assurance, however, that the
Company will achieve or, if achieved, will sustain profitability or positive
cash flow from operating activities in the future.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measuring those instruments at fair value,
with the potential effect on operations dependent upon certain conditions being
met. The statement is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000. The Company has yet to determine any impact the
implementation of the standard will have on the Company's financial position or
results of operations.

Impact of the Year 2000 Issue

The Year 2000 issue is the result of computer programs having been written
using two digits rather than four to define the applicable year, resulting in
date-sensitive software having the potential, among other things, to recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculations

causing disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices, or engage in similar normal
business activities, which could have material adverse operational and financial
consequences. Currently, the Company believes that a disruption in the operation
of its networks, billing system and financial and accounting systems and/or an
inability to access interconnections with other telecommunications carriers, are
the major risks associated with the inability of systems and software to process
Year 2000 data correctly. If the systems of other companies on whose services
the Company depends, including AHI, or with whom the Company's systems interface
are not Year 2000 compliant, there could be a material adverse effect on the
Company's business, financial position and results of operations.

State of Readiness

FCI, in conjunction with AHI, formed a task team in February 1998. The task
team's program comprised three phases: (i) assessment of Year 2000 compliance of
FCI's equipment, software and systems, (ii) a detailed inventory of these items
and (iii) building and implementing a workplan and contingency plan, which
includes assessing the cost in dollars and the necessary manpower, upgrading or
replacing the item, and scheduling the date of compliance. As of June 30, 1999,
the Company had substantially completed all phases of the program with total
completion expected to be completed by September 30, 1999. Included in the task
team's assessment was a review of the Year 2000 compliance efforts of FCI's key
suppliers. Below is a more detailed breakdown of their efforts.

Internal Issues

Network elements--The Company's main concern is the switching equipment and
peripherals, and other vendor components that are time and date sensitive. The
Company has upgraded all of its networks with the compliant software, except for
one switch in Finland, which the Company plans to replace the switch with a new
Year 2000 compliant switch by October 31, 1999. In addition, the Company has
completed the software upgrade for its Passport equipment which allows the
Company to compress its traffic thereby allowing more traffic to be carried over
a single fiber optic cable. The Company's transmission equipment is currently
Year 2000 "Friendly", which means the manufacturer has represented that the
software releases will not experience any service-affecting issues upon rollover
into the new millennium. Although the Company expects that it will be able to
resolve Year 2000 problems with workarounds, there can be no assurance that such
workarounds will be successful.

Billing System and Accounting System--The Company's billing system was
developed by AHI's programmers and operates on an IBM AS400. The Company
believes that the billing system and the IBM AS400 are Year 2000 compliant.
However, the production of accurate and timely customer invoices depends upon
the generation of accurate and timely underlying data by the Company's switches.
Though the switch manufacturer has represented that the Company's switches are
Year 2000 compliant, there can be no assurance that such billing problems will
not occur. The Company is in the process of converting its accounting system.
The manufacturer has represented that this system is Year 2000 compliant and its
implementation is expected to be completed by September 30, 1999.

Information Systems--The Company's upgrade of its information systems is in
progress. The Company believes that all of the Company's hardware equipment,
including the equipment it relies upon at AHI, is Year 2000 compliant. All of
the Company's software products are Year 2000 compliant. Substantially all
software applications have been modified or upgraded for Year 2000 compliance.
Additionally, all the Company's workstations and laptops have been upgraded for
Year 2000 compliance.

Third Party Issues

Vendor Issues--In general, FCI's product vendors have made available either
Year 2000 compliant versions of their products or new compliant products as
replacements for discontinued offerings. In most cases, statements made by the
Company herein as to the degree of compliance of the products in question are
based on vendor-provided information, which remains subject to FCI's testing and
verification activities. Testing and verification are expected to be completed
by September 30, 1999. The Company is in the process of requesting information
from utilities and similar service providers.

Customer Issues--FCI's customers are interested in the progress of FCI's
Year 2000 efforts, and FCI anticipates increased demand for information,
including detailed testing data and company-specific responses. When requested
by customers, the Company provides Year 2000 compliance information. At this
time, the Company has not performed an analysis of its potential liability to
customers in the event of Year 2000 related problems.

Interconnecting Carriers--FCI's network operations interconnect with
domestic and international networks of other carriers. If one of these
interconnecting carriers should fail or suffer adverse consequences due to a
Year 2000 problem, the Company's customers could experience impairment of
services. In addition, since many of these interconnecting carriers are also the
Company's customers, a Year 2000 problem by one of these customers could result
in a loss of revenues due to its inability to send traffic to the Company's
network. The Company is in the process of sending correspondence to its major
interconnecting carriers to determine the status of their Year 2000 compliance
review.

Costs

Although total costs to implement the plan cannot be precisely estimated,
the Company has not incurred costs to date in excess of those normally
associated with business planning and implementation. The Company anticipates
that future costs will not be material, in as much as the Company began to
acquire products after the Year 2000 issue was identified and manufacturers had
begun to remediate the problem. However, there can be no assurance that material
costs will not be incurred. The Company cannot estimate the future cost related
to the interoperability of third party products. These costs will be expensed as
incurred, unless new systems are purchased that should be capitalized in
accordance with generally accepted accounting principles.

Risks

The failure to correct a material Year 2000 problem could cause an
interruption or failure of certain of the Company's normal business functions or
operations, which could have a material adverse effect on the Company's
business, financial position and results of operations. Due to the uncertainty
inherent in other Year 2000 issues that are ultimately beyond the Company's
control, including, for example, the Year 2000 readiness of the Company's
suppliers, customers and interconnecting carriers, the Company is unable to
determine at this time the likelihood of a material impact on the Company's
business, financial position and results of operation, due to such Year 2000
issues. However, based upon risk assessment work conducted thus far, the
Company believes that the most reasonably likely worst case scenario of the
failure by the Company, its suppliers or other telecommunications carriers with
which the Company interconnects to resolve Year 2000 issues would be an
inability by the Company (i) to provide telecommunications services to the
Company's customers, (ii) to route and deliver telephone calls originating from
or terminating with other telecommunications carriers, and (iii) to timely and
accurately bill its customers. In addition to lost earnings, these failures
could also result in loss of customers due to service interruptions and billing
errors, substantial claims by customers and increased expenses associated with
Year 2000 litigation, stabilization of operations and executing mitigation and
contingency plans. While the Company believes that it is taking appropriate
measures to mitigate these risks, there can be no assurance that such measures
will be successful.

Contingency Plan

At this time, the Company has prepared the conceptual framework for its
contingency plan. Completion of the plan is expected by September 30, 1999.

Item 3: Quantitative and Qualitative Disclosures about Market Risk

Currency Risk

Although the Company's reporting currency is the U.S. dollar, the Company
expects to derive an increasing percentage of its revenues from international
operations. Accordingly, changes in currency exchange rates may have a
significant effect on the Company's results of operations. For example, the
accounting rate under operating

agreements is often defined in monetary units other than U.S. dollars, such as
"special drawing rights" or "SDRs." To the extent that the U.S. dollar declines
relative to units such as SDRs, the dollar equivalent accounting rate would
increase. In addition, as the Company expands into foreign markets, its exposure
to foreign currency rate fluctuations is expected to increase. Although the
Company does not currently engage in exchange rate hedging strategies, it may
choose to limit such exposure by purchasing forward foreign exchange contracts
or other similar hedging strategies. The Company's board of directors (the
"Board of Directors") periodically reviews and approves the overall interest
rate and foreign exchange risk management policy and transaction authority
limits. Specific hedging contracts, if any, will be subject to approval by
certain specified officers of FCI acting within the Board of Directors' overall
policies and limits. The Company intends to limit its hedging activities to the
extent of its foreign currency exposure. There can be no assurance that any
currency hedging strategy would be successful in avoiding currency exchange-
related losses.

Interest Rate Risk

The Company also has market risk exposure related to interest rate risk as
the Company maintains Senior Notes at a fixed interest rate and a credit
facility at a variable interest rate. The Company manages its interest rate risk
in order to balance its exposure between fixed and variable rates while
attempting to minimize its interest costs.

Part II: Other Information

Item 1: Legal Proceedings:

The Company makes routine filings and is a party to customary
regulatory proceedings with the FCC relating to its operations. The
Company is not a party to any lawsuit or proceeding which, in the
opinion of management, is likely to have a material adverse effect on
the Company's business, financial position and results of operations.

Item 2: Changes in Securities and Use of Proceeds:

Not applicable.

Item 3: Defaults upon Senior Securities:

Not applicable.

Item 4: Submissions 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

Exhibit No. Exhibits
-----------

10.22 Loan Agreement between FaciliCom International,
L.L.C. and Key Corporate Capital, Inc. dated May
24, 1999
27 Financial Data Schedule

B. Reports on Form 8-K

There were no reports on Form 8-K filed during the period.

SIGNATURES

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.

FaciliCom International, Inc.

Dated: August 16, 1999 By: /s/
---------------------------
Christopher S. King
Vice President--Finance and
Administration, Chief Financial
Officer (Authorized Officer, Principal
Financial Officer and Principal
Accounting Officer)