INVESTMENT AGREEMENT



         INVESTMENT AGREEMENT (this "Agreement"), dated as of February 7, 2001,

between STAR Telecommunications, Inc., a Delaware corporation (the "Company"),

and IDT Investments Inc., a Nevada corporation ("IDT").



         WHEREAS, on February 1, 2001, the Company issued and sold 2,398,082

shares (the "Initial Shares") of Common Stock, par value $0.001 per share, of

the Company (the "Common Stock") to IDT at a price of $0.417 per share of Common

Stock.



         WHEREAS, IDT desires to purchase additional shares of Common Stock and

the Company desires to issue and sell additional shares of Common Stock to IDT,

upon the terms and subject to the conditions set forth in this Agreement; and



         WHEREAS, IDT desires to acquire warrants to purchase shares of Common

Stock and the Company desires to grant to IDT warrants to purchase shares of

Common Stock, subject to the conditions set forth in this Agreement.



         NOW, THEREFORE, the Company and IDT hereby agree as follows:



Section 1. Subscription and Grant of Warrants

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



         1.1. Subscription for Common Stock. Upon the terms and subject to the

conditions of this Agreement, the Company hereby agrees to issue and sell and

IDT hereby agrees to purchase from the Company (i) 3,074,149 shares of Common

Stock, at a price of $0.417 per share of Common Stock and (ii) 3,227,856 shares

of Common Stock, at a price of $0.397 per share of Common Stock (together, the

"Shares"), subject to post-closing adjustments as provided in Section 1.5.



         1.2. Grant of Warrants. At the Closing (as defined below) the Company

will deliver to IDT, in connection with purchase of the Shares, warrants, in the

form attached hereto as Annex A (the "Warrant Certificate"), to purchase (the

"Warrants") 3,389,249 shares of Common Stock, subject to adjustments as provided

by the terms of the Warrants, at a price per share equal to $0.833, subject to

adjustments as provided by the terms of the Warrants.



         1.3. Issuance of Common Stock; Delivery of Warrant Certificate;

Execution of Additional Agreements. At the Closing upon the terms and subject to

the conditions of this Agreement:



              (a) Against delivery of the share certificate(s) referred to in

clause (b) below, IDT will pay to the Company cash in immediately available

funds in the amount of $2,563,840, representing payment in full of the aggregate

purchase price for the Shares (the "Purchase Price"), subject to the

post-closing adjustments as provided in Section 1.5, to a bank account specified

by the Company not later than two Business Days prior



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to the date of the Closing. "Business Day" for purposes of this Agreement means

a day other than a Saturday, Sunday or day on which banks in the States of

California or New York are authorized to close.



              (b) Against payment of the Purchase Price, the Company will issue

and deliver to IDT (i) a share certificate or certificates representing the

Shares and (ii) the Warrant Certificate representing the Warrants, each

registered in IDT's name.



              (c) The Company and IDT shall execute and deliver to each other

the Registration Rights Agreement relating to the Initial Shares, the Shares,

the shares of Common Stock to be issued pursuant the Warrants (the "Warrant

Shares") and other shares of Common Stock currently beneficially owned by IDT

and its affiliates, in the form attached as Annex B hereto (the "Registration

Rights Agreement").



         1.4. Closing. The issuance and delivery of the Shares by the Company to

IDT and the delivery of the Purchase Price by IDT to the Company (the

"Closing"), will take place at the offices of Sullivan & Cromwell, 125 Broad

Street, New York, New York, at 10:00 A.M. on February 7, 2001, subject to the

satisfaction or waiver of the conditions set forth in Sections 5 and 6, or at

such other time and place as the Company and IDT may agree orally or in writing.



         1.5. Post-Closing Adjustments.

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



              (a) Closing Adjustments. In the event the Post Closing Market

Price (as defined below) is less than $0.397 per share, the Company shall

provide to IDT for no additional consideration the number of shares necessary to

cause the average price per share for the shares purchased pursuant to Section

1.1(ii) above and such additional shares to be not higher than the Post Closing

Market Price.



              The "Post Closing Market Price" shall mean the multiple of (i) 95%

and (ii) the lowest reported last sale price per share (rounded down to nearest

1/100 of a cent) in the regular trading session on the principal national

securities exchange or inter-dealer quotation system on which the Common Stock

is listed or admitted to trading, or if not listed or admitted to trading on any

national securities exchange or inter-dealer quotation system, during the 30

days following the date of the Closing.



              (b) Gotel Closing Adjustments. Upon consummation of the Purchase

Agreement and the related transactions between the Company and Gotel Investments

Ltd. (the "Gotel Signing"), the Company shall promptly provide IDT with a copy

of the transaction documents related to the Gotel Signing. Following the

expiration and/or exercise of all or any portion of the warrants issued to Gotel

Investments Ltd. in connection with the Gotel Signing (the "Gotel Closing"), the

following adjustments shall be made:





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              (i) If the weighted average purchase price per share of Common

         Stock paid by Gotel Investments Ltd. to the Company in the Gotel

         Closing (the "Gotel Purchase Price") is less than $0.417 per share, the

         Company shall provide IDT for no additional consideration the number of

         shares necessary to cause the average price per share for the shares

         purchased by IDT pursuant to Section 1.1(i) above and such additional

         shares to be not higher than the Gotel Purchase Price.



              (ii) If the Gotel Purchase Price is less than $0.397 per share,

         the Company shall provide IDT for no additional consideration the

         number of shares necessary to cause the average price per share for the

         shares purchased by IDT pursuant to Section 1.1(ii) above and such

         additional shares to be not higher than the Gotel Purchase Price.



         Section 2. Representations, Warranties and Acknowledgments of IDT. IDT

hereby represents, warrants and acknowledges to the Company, as follows:



         2.1. No Registration of Shares, Warrants and Warrant Shares. IDT is

aware that the Initial Shares, the Shares, the Warrants and Warrant Shares

(collectively, the "Investor Securities") have not been registered under the

Securities Act of 1933, as amended (the "Act"), that such offer and sale are

intended to be exempt from registration under the Act and the rules promulgated

thereunder by the Securities and Exchange Commission (the "SEC"), and that the

Investor Securities cannot be offered, sold, assigned, transferred, or otherwise

disposed of unless they are subsequently registered under the Act or an

exemption from such registration is available. IDT is also aware that sales or

transfers of the Investor Securities are further restricted by state securities

laws and that the certificates for the Investor Securities will bear appropriate

legends restricting their transfer pursuant to applicable laws.



         2.2. Suitability of Investment. (a) IDT is an "accredited investor"

within the meaning of Rule 501 of Regulation D of the Act as presently in effect

and is acquiring the Investor Securities for its own account, or for the account

of another "accredited investor" who is an affiliate of IDT and who can make all

of the representations contained herein, for investment purposes only and not

with a view to the resale or distribution thereof;



              (b) IDT will not, directly or indirectly, offer, sell, transfer,

assign, exchange or otherwise dispose of all or any part of the Investor

Securities, except in accordance with applicable federal and state securities

laws, to the extent applicable, and the provisions of the Registration Rights

Agreement;



              (c) IDT has such knowledge and experience in financial, business

and tax matters that IDT is capable of evaluating the merits and risks relating

to IDT's investment in the Investor Securities and making an investment decision

with respect to the Company;





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              (d) IDT has been given the opportunity to obtain information and

documents relating to the Company and to ask questions of and receive answers

from representatives of the Company concerning the Company and the investment in

the Investor Securities; and



              (e) IDT is aware that there are substantial risks incident to an

investment in the Investor Securities, particularly in light of the Company's

current financial condition.



         2.3. Corporate Authority. IDT has all requisite corporate power and

authority and has or will have taken all corporate and other action necessary in

order to execute, deliver and perform its obligations under this Agreement and

the Registration Rights Agreement. Each of this Agreement and the Registration

Rights Agreement is a valid and binding agreement of IDT enforceable against it

in accordance with its terms, subject as to enforcement to bankruptcy,

insolvency, fraudulent transfer, reorganization, moratorium and similar laws of

general applicability relating to or affecting creditors' rights and to general

equity principles.



         Section 3. Representations, Warranties and Acknowledgments of the

Company. The Company hereby represents, warrants and acknowledges to IDT on the

date hereof and as of the date of the Closing as follows:



         3.1. Organization, Good Standing and Qualification. Each of the Company

and each of its "significant subsidiaries" (each an "STAR Subsidiary") within

the meaning of Rule 1-02(w) of Regulation S-X promulgated by the SEC, is a

corporation duly organized, validly existing and in good standing under the laws

of its respective jurisdiction of organization and has all requisite corporate

or similar power and authority to own, lease and operate its properties and

assets and to carry on its business as currently conducted. Each of the Company

and each STAR Subsidiary is qualified to do business and is in good standing as

a foreign corporation in each jurisdiction where the ownership, lease or

operation of its assets or properties or conduct of its business requires such

qualification, except where the failure to be so qualified or in good standing,

when taken together with all other such failures, is not reasonably likely to

have a Company Material Adverse Effect (as defined below).



         As used in this Agreement, the term "Company Material Adverse Effect"

means a material adverse effect on the financial condition, properties, assets,

business, results of operations or prospects of the Company and its subsidiaries

taken as a whole; provided, however, that any such effect resulting from any

change that affects companies in the telecommunications industry generally

(provided that the Company is not disproportionately impacted by such change),

shall not be considered when determining if a Company Material Adverse Effect

has occurred.



         3.2. Corporate Authority. The Company has all requisite corporate power

and authority and has taken all corporate action necessary in order to execute,

deliver and



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perform its obligations under this Agreement, the Registration Rights Agreement

and the Warrants (collectively, the "Equity Documents") and to consummate the

transactions contemplated hereby. The Company has duly executed and delivered

the Equity Documents. Each of the Equity Documents is a valid and binding

agreement of the Company enforceable against the Company in accordance with its

terms, subject as to enforcement to bankruptcy, insolvency, fraudulent transfer,

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