##### Table of Contents





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 September 30, 2010

OR



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

Commission File Number: 001-16201





GLOBAL
CROSSING LIMITED

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|BERMUDA                                                        |  | 98-0407042                          
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer Identification No.)

WESSEX HOUSE

45 REID STREET

HAMILTON HM 12, BERMUDA

(Address Of Principal Executive Offices)

(441) 296-8600

(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  x    No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
submit and post such files).    Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer
or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                           |  |                      |  |                          |  |                             
|-------------------------- |  | -------------------- |  | ------------------------ |  | ----------------------------
|Large accelerated filer   ̈ |  | Accelerated filer  x |  | Non-accelerated filer   ̈ |  | Smaller reporting company   ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes   ̈    No  x

The number of shares of the Registrants common stock, par value $0.01 per share, outstanding as of October 27,
2010 was 60,497,709.









---

##### Table of Contents



GLOBAL CROSSING
LIMITED AND SUBSIDIARIES

INDEX



|                             |  |                                                                                       |  |      |    | 
|---------------------------- |  | ------------------------------------------------------------------------------------- |  | ---- | -- | 
|                             |  |                                                                                      
|                             |  |                                                                                       |  | Page |   
|PART I FINANCIAL INFORMATION |  |                                                                                       |  |     
|                             |  |                                                                                      
|Item 1.                      |  | Financial Statements                                                                  |  |      | 3  | 
|                             |  |                                                                                      
|Item 2.                      |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  |      | 24 | 
|                             |  |                                                                                      
|Item 3.                      |  | Quantitative and Qualitative Disclosures about Market Risk                            |  |      | 40 | 
|                             |  |                                                                                      
|Item 4.                      |  | Controls and Procedures                                                               |  |      | 40 | 
|                             | 
|PART II OTHER INFORMATION    |  |                                                                                       |  |     
|                             |  |                                                                                      
|Item 1.                      |  | Legal Proceedings                                                                     |  |      | 41 | 
|                             |  |                                                                                      
|Item 1A.                     |  | Risk Factors                                                                          |  |      | 41 | 
|                             |  |                                                                                      
|Item 6.                      |  | Exhibits                                                                              |  |      | 42 | 



2



---

##### Table of Contents



PART I. FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

GLOBAL CROSSING LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share and per
share information)



|                                                                                                                                                                                  |  |                    |        |   |                   |   |        |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ------ | - | ----------------- | - | ------ | -
|                                                                                                                                                                                  |  | September 30, 2010 |        |   | December 31, 2009 |  
|                                                                                                                                                                                  |  | (unaudited)        |        |   |                   |  
|ASSETS:                                                                                                                                                                           |  |                    |        |   |                   |   |        |  
|Current assets:                                                                                                                                                                   |  |                    |        |   |                   |   |        |  
|Cash and cash equivalents                                                                                                                                                         |  | $                  | 311    |   |                   | $ | 477    |  
|Restricted cash and cash equivalents - current portion                                                                                                                            |  |                    | 14     |   |                   |   | 9      |  
|Accounts receivable, net of allowances of $50 and $50                                                                                                                             |  |                    | 343    |   |                   |   | 328    |  
|Prepaid costs and other current assets                                                                                                                                            |  |                    | 90     |   |                   |   | 101    |  
|                                                                                                                                                                                  |  |                    |        |   |                   |   |        |  
|Total current assets                                                                                                                                                              |  |                    | 758    |   |                   |   | 915    |  
|                                                                                                                                                                                  |  |                    |        |   |                   |   |        |  
|Restricted cash and cash equivalents - long term                                                                                                                                  |  |                    | 5      |   |                   |   | 7      |  
|Property and equipment, net of accumulated depreciation of $1,442 and $1,216                                                                                                      |  |                    | 1,207  |   |                   |   | 1,280  |  
|Intangible assets, net (including goodwill of $178 and $175)                                                                                                                      |  |                    | 197    |   |                   |   | 198    |  
|Other assets                                                                                                                                                                      |  |                    | 75     |   |                   |   | 88     |  
|                                                                                                                                                                                  |  |                    |        |   |                   |   |        |  
|Total assets                                                                                                                                                                      |  | $                  | 2,242  |   |                   | $ | 2,488  |  
|                                                                                                                                                                                  |  |                    |        |   |                   |   |        |  
|                                                                                                                                                                                  |  |                   
|LIABILITIES:                                                                                                                                                                      |  |                    |        |   |                   |   |        |  
|Current liabilities:                                                                                                                                                              |  |                    |        |   |                   |   |        |  
|Accounts payable                                                                                                                                                                  |  | $                  | 238    |   |                   | $ | 312    |  
|Accrued cost of access                                                                                                                                                            |  |                    | 108    |   |                   |   | 87     |  
|Short term debt and current portion of long term debt                                                                                                                             |  |                    | 168    |   |                   |   | 37     |  
|Obligations under capital leases - current portion                                                                                                                                |  |                    | 54     |   |                   |   | 49     |  
|Deferred revenue - current portion                                                                                                                                                |  |                    | 172    |   |                   |   | 174    |  
|Other current liabilities                                                                                                                                                         |  |                    | 361    |   |                   |   | 384    |  
|                                                                                                                                                                                  |  |                    |        |   |                   |   |        |  
|Total current liabilities                                                                                                                                                         |  |                    | 1,101  |   |                   |   | 1,043  |  
|                                                                                                                                                                                  |  |                    |        |   |                   |   |        |  
|Long term debt                                                                                                                                                                    |  |                    | 1,172  |   |                   |   | 1,295  |  
|Obligations under capital leases                                                                                                                                                  |  |                    | 82     |   |                   |   | 90     |  
|Deferred revenue                                                                                                                                                                  |  |                    | 330    |   |                   |   | 334    |  
|Other deferred liabilities                                                                                                                                                        |  |                    | 59     |   |                   |   | 86     |  
|                                                                                                                                                                                  |  |                    |        |   |                   |   |        |  
|Total liabilities                                                                                                                                                                 |  |                    | 2,744  |   |                   |   | 2,848  |  
|                                                                                                                                                                                  |  |                    |        |   |                   |   |        |  
|                                                                                                                                                                                  |  |                   
|SHAREHOLDERS DEFICIT:                                                                                                                                                            |  |                    |        |   |                   |   |        |  
|Common stock, 110,000,000 shares authorized, $.01 par value, 60,477,709 and 60,219,817 shares issued and outstanding as of
September 30, 2010 and December 31, 2009, respectively |  |                    | 1      |   |                   |   | 1      |  
|Preferred stock with controlling shareholder, 45,000,000 shares authorized, $.10 par value, 18,000,000 shares issued and
outstanding                                              |  |                    | 2      |   |                   |   | 2      |  
|Additional paid-in capital                                                                                                                                                        |  |                    | 1,438  |   |                   |   | 1,427  |  
|Accumulated other comprehensive loss                                                                                                                                              |  |                    | (5     | ) |                   |   | (24    | )
|Accumulated deficit                                                                                                                                                               |  |                    | (1,938 | ) |                   |   | (1,766 | )
|                                                                                                                                                                                  |  |                    |        |   |                   |   |        |  
|Total shareholders deficit                                                                                                                                                       |  |                    | (502   | ) |                   |   | (360   | )
|                                                                                                                                                                                  |  |                    |        |   |                   |   |        |  
|Total liabilities and shareholders deficit                                                                                                                                       |  | $                  | 2,242  |   |                   | $ | 2,488  |  
|                                                                                                                                                                                  |  |                    |        |   |                   |   |        |  

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



3



---

##### Table of Contents



GLOBAL CROSSING
LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except share and per share information)

(unaudited)



|                                                                                   |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|---------------------------------------------------------------------------------- |  | -------------------------------- | ---------- | - | ------------------------------- | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                                                   |  | Three Months Ended September 30, |            |   | Nine Months Ended September 30, |  
|                                                                                   |  | 2010                             |            |   | 2009                            |   |            | 2010 |  |   | 2009       |  
|Revenue                                                                            |  | $                                | 648        |   |                                 | $ | 643        |      |  | $ | 1,926      |   |  | $ | 1,885      |  
|Cost of revenue (excluding depreciation and amortization, shown separately below): |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|Cost of access                                                                     |  |                                  | (289       | ) |                                 |   | (288       | )    |  |   | (870       | ) |  |   | (859       | )
|Real estate, network and operations                                                |  |                                  | (101       | ) |                                 |   | (106       | )    |  |   | (303       | ) |  |   | (301       | )
|Third party maintenance                                                            |  |                                  | (25        | ) |                                 |   | (26        | )    |  |   | (78        | ) |  |   | (77        | )
|Cost of equipment and other sales                                                  |  |                                  | (25        | ) |                                 |   | (23        | )    |  |   | (75        | ) |  |   | (68        | )
|                                                                                   |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|Total cost of revenue                                                              |  |                                  | (440       | ) |                                 |   | (443       | )    |  |   | (1,326     | ) |  |   | (1,305     | )
|                                                                                   |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|Gross margin                                                                       |  |                                  | 208        |   |                                 |   | 200        |      |  |   | 600        |   |  |   | 580        |  
|Selling, general and administrative                                                |  |                                  | (99        | ) |                                 |   | (109       | )    |  |   | (321       | ) |  |   | (321       | )
|Depreciation and amortization                                                      |  |                                  | (82        | ) |                                 |   | (89        | )    |  |   | (252       | ) |  |   | (250       | )
|                                                                                   |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|Operating income                                                                   |  |                                  | 27         |   |                                 |   | 2          |      |  |   | 27         |   |  |   | 9          |  
|Other income (expense):                                                            |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|Interest income                                                                    |  |                                  | -          |   |                                 |   | 2          |      |  |   | 1          |   |  |   | 7          |  
|Interest expense                                                                   |  |                                  | (44        | ) |                                 |   | (39        | )    |  |   | (141       | ) |  |   | (113       | )
|Other income (expense), net                                                        |  |                                  | 21         |   |                                 |   | (32        | )    |  |   | (37        | ) |  |   | 11         |  
|                                                                                   |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|Income (loss) before provision for income taxes                                    |  |                                  | 4          |   |                                 |   | (67        | )    |  |   | (150       | ) |  |   | (86        | )
|Provision for income taxes                                                         |  |                                  | (10        | ) |                                 |   | (6         | )    |  |   | (22        | ) |  |   | (18        | )
|                                                                                   |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|Net loss                                                                           |  |                                  | (6         | ) |                                 |   | (73        | )    |  |   | (172       | ) |  |   | (104       | )
|Preferred stock dividends                                                          |  |                                  | (1         | ) |                                 |   | (1         | )    |  |   | (3         | ) |  |   | (3         | )
|                                                                                   |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|Loss applicable to common shareholders                                             |  | $                                | (7         | ) |                                 | $ | (74        | )    |  | $ | (175       | ) |  | $ | (107       | )
|                                                                                   |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|                                                                                   |  |                                  |            |  
|Loss per common share, basic and diluted:                                          |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|Loss applicable to common shareholders                                             |  | $                                | (0.12      | ) |                                 | $ | (1.23      | )    |  | $ | (2.90      | ) |  | $ | (1.81      | )
|                                                                                   |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|Weighted average number of common shares                                           |  |                                  | 60,477,559 |   |                                 |   | 60,135,114 |      |  |   | 60,393,860 |   |  |   | 58,999,359 |  
|                                                                                   |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  

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



4



---

##### Table of Contents



GLOBAL CROSSING
LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)



|                                                                                |  |                                 |      |   |      |   |      |  
|------------------------------------------------------------------------------- |  | ------------------------------- | ---- | - | ---- | - | ---- | -
|                                                                                |  | Nine Months Ended September 30, |     
|                                                                                |  | 2010                            |      |   | 2009 |  
|Cash flows provided by (used in) operating activities:                          |  |                                 |      |   |      |   |      |  
|Net loss                                                                        |  | $                               | (172 | ) |      | $ | (104 | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                                 |      |   |      |   |      |  
|Loss on sale of marketable securities                                           |  |                                 | 2    |   |      |   | -    |  
|Gain on sale of property and equipment                                          |  |                                 | (1   | ) |      |   | -    |  
|Non-cash loss on extinguishment of debt                                         |  |                                 | -    |   |      |   | 15   |  
|Non-cash stock compensation expense                                             |  |                                 | 15   |   |      |   | 15   |  
|Depreciation and amortization                                                   |  |                                 | 252  |   |      |   | 250  |  
|Provision for doubtful accounts                                                 |  |                                 | 1    |   |      |   | 5    |  
|Amortization of prior period IRUs                                               |  |                                 | (19  | ) |      |   | (18  | )
|Change in long term deferred revenue                                            |  |                                 | 17   |   |      |   | 51   |  
|Other                                                                           |  |                                 | 59   |   |      |   | (27  | )
|Change in operating working capital:                                            |  |                                 |      |   |      |   |      |  
|- Changes in accounts receivable                                                |  |                                 | (21  | ) |      |   | 8    |  
|- Changes in accounts payable and accrued cost of access                        |  |                                 | (52  | ) |      |   | (78  | )
|- Changes in other current assets                                               |  |                                 | (2   | ) |      |   | (20  | )
|- Changes in other current liabilities                                          |  |                                 | (45  | ) |      |   | 38   |  
|                                                                                |  |                                 |      |   |      |   |      |  
|Net cash provided by operating activities                                       |  |                                 | 34   |   |      |   | 135  |  
|                                                                                |  |                                 |      |   |      |   |      |  
|                                                                                |  |                                
|Cash flows provided by (used in) investing activities:                          |  |                                 |      |   |      |   |      |  
|Purchases of property and equipment                                             |  |                                 | (120 | ) |      |   | (125 | )
|Purchases of marketable securities                                              |  |                                 | (10  | ) |      |   | -    |  
|Proceeds from sale of marketable securities                                     |  |                                 | 8    |   |      |   | 4    |  
|Change in restricted cash and cash equivalents                                  |  |                                 | (1   | ) |      |   | (2   | )
|                                                                                |  |                                 |      |   |      |   |      |  
|Net cash used in investing activities                                           |  |                                 | (123 | ) |      |   | (123 | )
|                                                                                |  |                                 |      |   |      |   |      |  
|                                                                                |  |                                
|Cash flows provided by (used in) financing activities:                          |  |                                 |      |   |      |   |      |  
|Proceeds from short and long term debt                                          |  |                                 | -    |   |      |   | 741  |  
|Repayment of capital lease obligations                                          |  |                                 | (41  | ) |      |   | (47  | )
|Repayment of long term debt (including current portion)                         |  |                                 | (9   | ) |      |   | (592 | )
|Premium paid on extinguishment of debt                                          |  |                                 | -    |   |      |   | (14  | )
|Finance costs incurred                                                          |  |                                 | (2   | ) |      |   | (24  | )
|Payment of employee taxes on share-based compensation                           |  |                                 | (1   | ) |      |   | (12  | )
|                                                                                |  |                                 |      |   |      |   |      |  
|Net cash provided by (used in) financing activities                             |  |                                 | (53  | ) |      |   | 52   |  
|                                                                                |  |                                 |      |   |      |   |      |  
|Effect of exchange rate changes on cash and cash equivalents                    |  |                                 | (24  | ) |      |   | 5    |  
|                                                                                |  |                                 |      |   |      |   |      |  
|Net increase (decrease) in cash and cash equivalents                            |  |                                 | (166 | ) |      |   | 69   |  
|Cash and cash equivalents, beginning of period                                  |  |                                 | 477  |   |      |   | 360  |  
|                                                                                |  |                                 |      |   |      |   |      |  
|Cash and cash equivalents, end of period                                        |  | $                               | 311  |   |      | $ | 429  |  
|                                                                                |  |                                 |      |   |      |   |      |  
|                                                                                |  |                                
|Non-cash investing and financing activites:                                     |  |                                 |      |   |      |   |      |  
|Capital lease and debt obligations incurred                                     |  | $                               | 49   |   |      | $ | 49   |  
|                                                                                |  |                                 |      |   |      |   |      |  

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



5



---

##### Table of Contents



GLOBAL CROSSING
LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except countries, cities, carriers, share and per share information)

(unaudited)

1.
BACKGROUND AND ORGANIZATION

Global Crossing Limited or GCL is a holding company with all of
its revenue generated by its subsidiaries and substantially all of its assets owned by its subsidiaries. GCL and its subsidiaries (collectively, the Company) are a global communications service provider. The Company offers a full range
of data, voice and collaboration services and delivers service to approximately 40 percent of the companies in the Fortune 500, as well as 700 carriers, mobile operators and Internet service providers around the world. The Company delivers converged
IP services to more than 700 cities in more than 70 countries around the globe. The Companys operations are based principally in North America, Europe, Latin America and a portion of the Asia/Pacific region. The vast majority of the
Companys revenue is generated from monthly services. The Company reports financial results based on three separate operating segments: (i) Global Crossing (U.K.) Telecommunications Ltd (GCUK) and its subsidiaries
(collectively, the GCUK Segment); (ii) GC Impsat Holdings I Plc (GC Impsat) and its subsidiaries (collectively, the GC Impsat Segment); and (iii) GCL and its other subsidiaries (collectively, the
Rest of World Segment or ROW Segment) (see Note 10).

2. BASIS OF PRESENTATION

Basis of Presentation and Use of Estimates

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America (U.S. GAAP) and pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). Certain information and disclosures normally included in
financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and related notes thereto included in the Companys 2009 annual report on Form 10-K. These unaudited condensed consolidated financial statements include the accounts of the Company over which it exercises
control. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of interim results for
the Company. The results of operations for any interim period are not necessarily indicative of results to be expected for the full year.

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the
date of the unaudited condensed consolidated financial statements, the disclosure of contingent assets and liabilities in the unaudited condensed consolidated financial statements and the accompanying notes, and the reported amounts of revenue and
expenses and cash flows during the periods presented. Actual amounts and results could differ from those estimates. The estimates the Company makes are based on historical factors, current circumstances and the experience and judgment of the
Companys management. The Company evaluates its assumptions and estimates on an ongoing basis and may employ third party experts to assist in the Companys evaluations.

Venezuelan Currency Risk

In Venezuela, the official bolivaresU.S. Dollar exchange rate established by the Venezuelan Central Bank (BCV) and the Venezuelan Ministry of Finance has historically attributed to
the bolivar a value significantly greater than the value that prevailed on the former unregulated parallel market. The official rate is the rate used by the Comisión de Administración de Divisas (CADIVI), an agency of the
Venezuelan government, to exchange bolivares pursuant to an official process that requires application and government approval. The Company uses the official rate to record the assets, liabilities and transactions of its Venezuelan subsidiary.
Effective January 12, 2010, the Venezuelan government devalued the Venezuelan bolivar. The official rate increased from 2.15 Venezuelan bolivares to the U.S. Dollar to 4.30 for goods and services deemed non-essential and 2.60
for goods and services deemed essential. This devaluation reduced the Companys net monetary assets (including unrestricted cash and cash equivalents) by approximately $27 based on the bolivares balances as of such date, resulting
in a corresponding foreign exchange loss, included in other expense, net in the Companys unaudited condensed consolidated statement of operations for the nine months ended September 30, 2010.

In an attempt to control inflation, on May 18, 2010, the Venezuelan government announced that the unregulated
parallel currency exchange market would be shut down and that the BCV would be given control over the previously unregulated portions of the exchange market. In June 2010, a new regulated currency trading system controlled by the BCV, the
Transaction System for Foreign Currency Denominated Securities (SITME), commenced operations and established an initial weighted average implicit exchange rate of approximately 5.30 bolivares to the U.S. Dollar. Subject to the
limitations and restrictions imposed by the BCV, entities domiciled in Venezuela may access the SITME by buying U.S. Dollar denominated securities through banks authorized by the BCV. The purpose of the new regulated system is to supplement the
CADIVI application and approval process with an additional process that allows for quicker and smaller exchanges.



6



---

##### Table of Contents



As
indicated above, the conversion of bolivares into foreign currencies is limited by the current exchange control regime. Accordingly, the acquisition of foreign currency by Venezuelan companies to honor foreign debt, pay dividends or otherwise
expatriate capital is subject to either the limitations and restrictions of the SITME or the CADIVI registration, application and approval process, and is also subject to the availability of foreign currency within the guidelines set forth by the
National Executive Power for the allocation of foreign currency. Approvals under the CADIVI process have become less forthcoming over time, resulting in a significant buildup of excess cash in the Companys Venezuelan subsidiary and a
significant increase in the Companys exchange rate and exchange control risks.

At September 30,
2010, the Company had $17 of obligations registered and subject to approval by CADIVI for the conversion of bolivares into foreign currencies. The Company cannot predict the timing and extent of any CADIVI approvals to honor foreign debt, distribute
dividends or otherwise expatriate capital using the official Venezuelan exchange rate. Some approvals have been issued within a few months while others have taken more than one year. During 2010 the Company received approvals from CADIVI to convert
bolivares to U.S. Dollars at both the essential and non-essential official rates. In the third quarter of 2010, the Company participated in a debt auction held by the Venezuelan government and used bolivares to purchase $10 of
U.S. Dollar-denominated bonds at par value in connection with the Companys currency exchange risk mitigation efforts. The Company received approval to purchase the bonds and sold these bonds immediately upon receipt at a price of $8 paid
in U.S. Dollars, which resulted in an approximate 25% discount. The loss of $2 was included in other income (expense), net in the Companys unaudited condensed consolidated statement of operations for the nine months ended September 30,
2010. To date, the Company has not executed any exchanges through SITME. If the Company were to successfully avail itself of the SITME process to convert the Companys Venezuelan subsidiarys cash balances into U.S. Dollars, it would incur
currency exchange losses in the period of conversion based on the difference between the official exchange rate and the SITME rate. Additionally, if the Company were to determine in the future that the SITME rate was the more appropriate rate to use
to measure bolivar-based assets, liabilities and transactions, reported results would be further adversely affected.

As of September 30, 2010, approximately $29 (valued at the fixed official CADIVI rate of 4.30 Venezuelan bolivares to the U.S. Dollar at September 30, 2010 (the CADIVI
rate)) of the Companys cash and cash equivalents was held in Venezuelan bolivares. For the three and nine months ended September 30, 2010, the Companys Venezuelan subsidiary generated approximately $13 and $38, respectively,
of the Companys consolidated revenue and $8 and $22, respectively, of the Companys consolidated OIBDA (see Note 10, Segment Reporting), in each case based on the CADIVI rate. As of September 30, 2010, the Companys
Venezuelan subsidiary had $35 of net monetary assets of which $13 and $22 were denominated in U.S. Dollars and Venezuelan bolivares, respectively, in each case based on the CADIVI rate. As of September 30, 2010, the Companys Venezuelan
subsidiary had $68 of net assets, which may not be transferred to GCL in the form of loans, advances or cash dividends without the consent of a third party (i.e., CADIVI or SITME).

Reclassifications

Certain amounts in the prior period unaudited condensed consolidated financial statements and accompanying footnotes have been reclassified to conform to the current year presentation.

Recently Issued and Recently Adopted Accounting Pronouncement

In October 2009, the Financial Standards Accounting Board (FASB) issued amendments to FASB Accounting
Standards Codification (ASC) Topic 605, with respect to accounting and reporting guidance for revenue-generating arrangements with multiple deliverables, which (a) amend the requirements entities must meet in order for elements to
be considered separate units of accounting; (b) eliminate the requirement that entities have objective and reliable evidence of fair value for undelivered items in order to separate them from other elements in the arrangements; and
(c) replace the residual method of allocating consideration with the relative selling price method. Under the relative selling price method for allocating consideration, entities must establish an estimated selling price for any units for which
objective and reliable evidence of fair value or third party evidence of selling price is not determinable. ASC Topic 605 expands the qualitative and (if adoption impacts are significant) quantitative information required to be disclosed concerning
revenue-generating arrangements with multiple deliverables.

This amended accounting guidance is effective for
fiscal years beginning after June 15, 2010, with early adoption, as of the first fiscal year beginning after issuance of the amendments, permitted. It may be adopted prospectively to all new or significantly modified arrangements or
retrospectively to all arrangements. The Company has elected to early adopt the new accounting guidance for revenue arrangements with multiple deliverables on a prospective basis as of January 1, 2010 and there was no significant impact to our
consolidated financial results for the three and nine months ended September 30, 2010.

The Company
enters into managed service agreements with multiple deliverables, such as professional services as well as telecommunication services and solutions, which generally have minimum contract terms between two and seven years. Professional services are
generally delivered during initial stages of contracts and telecommunication services over the contract term. Until the adoption of new guidance, a delivered element was considered a separate unit of accounting when it had value to the customer on a



7



---

##### Table of Contents

standalone basis, there was objective and reliable evidence of its fair value in the arrangement, and delivery or performance of undelivered elements was considered probable and substantially
under our control. When the fair value of all elements could be determined, we allocated consideration to each undelivered unit of accounting using the relative fair value method, with unit values determined by internal or third-party analyses of
market based prices. Otherwise, the residual value method would be used to allocate consideration to the combined undelivered elements, which would be deferred until final arrangement performance. In all cases, revenue from such arrangements was
recognized when performance of the deliverable had occurred and all other revenue recognition criteria were met.

Upon adoption of the amended guidance for multiple element arrangements, we determine an estimated selling price for any elements for which objective and reliable evidence or third party evidence is not
available and then allocate consideration to all elements using the relative selling price method. We establish vendor specific objective evidence using the price charged for a deliverable when sold separately or using the price established by
management having the relevant authority. The best estimate of selling price is established considering internal factors, such as margin objectives and pricing practices. Revenue from these arrangements is recognized when performance of the
deliverable occurs and all other revenue recognition criteria are met. There was no substantial change to the units of accounting we typically identify in such multiple deliverable agreements. We do not expect a significant impact on the pattern and
timing of revenue recognition in the financial statements of future periods.

3. FINANCING ACTIVITIES

12% Senior Secured Notes

On September 22, 2009, the Company issued $750 in aggregate principal amount of 12% Senior Secured Notes due September 15, 2015 at an issue price of 97.944% of their par value. Interest on the
notes accrues at the rate of 12% per annum and is payable semi-annually in arrears on March 15 and September 15 of each year through maturity, commencing on March 15, 2010. The transaction was intended to simplify the
Companys capital structure and to improve the Companys liquidity and financial flexibility by effectively extending the May 2012 maturity of the Companys term loan agreement, reducing contractual restrictions on intercompany
transactions between the Companys GC Impsat and ROW Segments, and increasing the Companys consolidated cash balance.

The 12% Senior Secured Notes are guaranteed by a majority of the Companys direct and indirect subsidiaries other than the subsidiaries comprising the GCUK Segment and certain other subsidiaries as
described in the notes indenture (see Note 12, Guarantees of Parent Company Debt). The obligations of GCL and the guarantors in respect of the notes are senior obligations which rank equal in right of payment with all of their existing
and future senior indebtedness. In addition, the 12% Senior Secured Notes are secured by first-priority liens, subject to certain exceptions, on GCLs and certain of the guarantors existing and future assets. These assets generally
include the Specified Tangible Assets (defined in the notes indenture as cash and cash equivalents, accounts receivable from third parties and property, plant and equipment (other than property, plant and equipment under capital leases
and leasehold improvements)) of GCL and the Grantor Guarantors organized in Approved Jurisdictions (as such terms are defined in the notes indenture). The book value of such Specified Tangible Assets as of
September 30, 2010 was $1,059, which exceeds the $1,000 threshold required to incur indebtedness and make restricted payments pursuant to certain of the exceptions to the covenants in the notes indenture.

On July 1, 2010, the Company commenced an offer to exchange the notes issued on September 22, 2009 for an
identical series of notes that have been registered under the Securities Act of 1933, as amended (the Securities Act) with the Securities and Exchange Commission (the SEC). The exchange offer expired on July 30, 2010 and
settlement occurred promptly thereafter. All $750 aggregate outstanding principal amount of notes participated in the exchange offer. The exchange offer satisfied an obligation incurred by the Company under a registration rights agreement that the
Company entered into in connection with the original issuance of the notes.

Other Financing Activities

During the nine months ended September 30, 2010, the Company entered into various debt agreements
to finance various equipment purchases and software licenses. The total debt obligation resulting from these agreements was $11. These agreements have terms that range from 6 to 48 months with a weighted average effective interest rate of 9.8%. In
addition, the Company also entered into various capital leasing arrangements that aggregated $38. These agreements have terms that range from 12 to 48 months with a weighted average effective interest rate of 10.9%.

GCUK Notes Tender Offer

As required by the indenture governing the senior secured notes due 2014 (the GCUK Notes), within 120 days after the end of each twelve month period ending December 31, GCUK must offer
(the Excess Cash Offer) to purchase a portion of the GCUK Notes at a purchase price equal to 100% of their principal amount, plus accrued and unpaid interest, if any, to the purchase date, using 50% of Designated GCUK Cash
Flow from that period. Designated GCUK Cash Flow means GCUKs consolidated net income plus non-cash charges minus capital expenditures, calculated in accordance with the terms of the indenture governing the GCUK Notes. With
respect to the 2009 Excess Cash Offer, GCUK made an offer for $18 and purchased less than $1 in principal amount of the GCUK Notes, exclusive of accrued but unpaid interest.



8



---

##### Table of Contents



If the
current year-to-date results were the results for the full year to December 31, 2010, the Company would be obligated to make an Excess Cash Offer of $9, exclusive of accrued but unpaid interest. Any such offer is required to be made within 120
days of year-end, and the associated purchases are required to be completed within 150 days after year-end.

4. RESTRUCTURING ACTIVITIES

At September 30, 2010 and December 31, 2009, restructuring liabilities are included in other
current liabilities and other deferred liabilities in the Companys condensed consolidated balance sheets. Below is a description of the Companys significant restructuring plans:

2007 Restructuring Plan

During 2007, the Company adopted a restructuring plan as a result of the Impsat Fiber Networks, Inc. (Impsat) acquisition under which redundant Impsat employees were terminated. As a result,
the Company incurred cash restructuring costs of approximately $8 for severance and related benefits. The liabilities associated with this restructuring plan have been accounted for as part of the purchase price of Impsat. As of September 30,
2010 and December 31, 2009, the remaining liability of the 2007 restructuring plan was $4 and $7, respectively, all related to the GC Impsat Segment. In July 2009, the Company settled a claim initiated in October 2007 by a former director and
officer of Impsat to be paid out in installments through February 2011. In February 2010, the Company settled another claim initiated in November 2007 by a former officer of Impsat which was fully paid in April 2010.

2003 and Prior Restructuring Plans

Prior to the Companys emergence from bankruptcy on December 9, 2003, the Company adopted certain restructuring plans as a result of the slowdown of the economy and telecommunications industry,
as well as its efforts to restructure while under Chapter 11 bankruptcy protection. As a result of these activities, the Company eliminated employees and vacated facilities. All amounts incurred for employee separations were paid as of
December 31, 2004 and it is anticipated that the remainder of the restructuring liability, all of which relates to facility closings, will be paid through 2025.

The undiscounted facilities closing reserve, which represents estimated future cash flows, is composed of continuing
building lease obligations and broker commissions for the restructured sites (aggregating $78 as of September 30, 2010), offset by anticipated receipts from existing and future third-party subleases. As of September 30, 2010, anticipated
third-party sublease receipts were $68, representing $51 from subleases already entered into and $17 from subleases projected to be entered into in the future.

The table below reflects the activity associated with the restructuring reserve relating to the restructuring plans initiated during and prior to 2003 for the nine months ended September 30, 2010:



|                              |  |                  |    |  
|----------------------------- |  | ---------------- | -- | -
|                              |  | FacilityClosings |   
|Balance at December 31, 2009  |  | $                | 17 |  
|Change in estimated liability |  |                  | (1 | )
|Deductions                    |  |                  | (4 | )
|Foreign currency impact       |  |                  | (1 | )
|                              |  |                  |    |  
|Balance at September 30, 2010 |  | $                | 11 |  
|                              |  |                  |    |  



9



---

##### Table of Contents



5. OTHER CURRENT LIABILITIES

Other current liabilities consist of the following:



|                                                                    |  |                    |     |  |                   |   |     | 
|------------------------------------------------------------------- |  | ------------------ | --- |  | ----------------- | - | --- | 
|                                                                    |  | September 30, 2010 |     |  | December 31, 2009 |  
|                                                                    |  | (unaudited)        |     |  |                   |  
|Accrued taxes, including value added taxes in foreign jurisdictions |  | $                  | 101 |  |                   | $ | 117 | 
|Accrued payroll, bonus, commissions, and related benefits           |  |                    | 61  |  |                   |   | 58  | 
|Customer deposits                                                   |  |                    | 35  |  |                   |   | 34  | 
|Accrued preferred dividends(1)                                      |  |                    | 25  |  |                   |   | -   | 
|Accrued interest                                                    |  |                    | 22  |  |                   |   | 29  | 
|Accrued real estate and related costs                               |  |                    | 14  |  |                   |   | 22  | 
|Accrued third party maintenance costs                               |  |                    | 10  |  |                   |   | 10  | 
|Accrued restructuring costs - current portion                       |  |                    | 9   |  |                   |   | 12  | 
|Accrued professional fees                                           |  |                    | 8   |  |                   |   | 9   | 
|Income taxes payable                                                |  |                    | 6   |  |                   |   | 10  | 
|Accrued capital expenditures                                        |  |                    | 5   |  |                   |   | 4   | 
|Other                                                               |  |                    | 65  |  |                   |   | 79  | 
|                                                                    |  |                    |     |  |                   |   |     | 
|Total other current liabilities                                     |  | $                  | 361 |  |                   | $ | 384 | 
|                                                                    |  |                    |     |  |                   |   |     | 

(1)For further information see Note 9, Related Party Transactions.

6. COMPREHENSIVE LOSS

The components of comprehensive loss for the periods indicated are as follows:



|                                               |  |                                  |     |   |                                 |   |     |      |  |   |      |   |  |   |      |  
|---------------------------------------------- |  | -------------------------------- | --- | - | ------------------------------- | - | --- | ---- |  | - | ---- | - |  | - | ---- | -
|                                               |  | Three Months Ended September 30, |     |   | Nine Months Ended September 30, |  
|                                               |  | 2010                             |     |   | 2009                            |   |     | 2010 |  |   | 2009 |  
|                                               |  | (unaudited)                      |     |   | (unaudited)                     |  
|Net loss                                       |  | $                                | (6  | ) |                                 | $ | (73 | )    |  | $ | (172 | ) |  | $ | (104 | )
|Foreign currency translation adjustment        |  |                                  | (13 | ) |                                 |   | 22  |      |  |   | 19   |   |  |   | (6   | )
|Unrealized derivative loss on cash flow hedges |  |                                  | -   |   |                                 |   | -   |      |  |   | -    |   |  |   | (3   | )
|                                               |  |                                  |     |   |                                 |   |     |      |  |   |      |   |  |   |      |  
|Comprehensive loss                             |  | $                                | (19 | ) |                                 | $ | (51 | )    |  | $ | (153 | ) |  | $ | (113 | )
|                                               |  |                                  |     |   |                                 |   |     |      |  |   |      |   |  |   |      |  

7. LOSS PER COMMON SHARE

Basic loss per common share is computed as loss applicable to common shareholders divided by the weighted-average number of common shares outstanding for the period. Loss applicable to common shareholders
includes preferred stock dividends of $1 for each of the three months ended September 30, 2010 and 2009, and $3 for each of the nine months ended September 30, 2010 and 2009, respectively.

Diluted loss per common share reflects the potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock. However, since the Company had net losses for each of the three and nine months ended September 30, 2010 and 2009, diluted loss per common share is the same as basic loss per common
share.

Diluted loss per share for the three and nine months ended September 30, 2010 and 2009 does not include the
effect of the following potential shares, as they are anti-dilutive:



|                                                                                |      |                                  |            |      |                                 |  |            |  |  |      |            |  |  |  |            | 
|------------------------------------------------------------------------------- | ---- | -------------------------------- | ---------- | ---- | ------------------------------- |  | ---------- |  |  | ---- | ---------- |  |  |  | ---------- | 
|Potential common shares excluded from the calculation of diluted loss per share |      | Three Months Ended September 30, |            |      | Nine Months Ended September 30, | 
|                                                                                | 2010 |                                  |            | 2009 |                                 |  | 2010       |  |  | 2009 |           
|Preferred stock                                                                 |      |                                  | 18,000,000 |      |                                 |  | 18,000,000 |  |  |      | 18,000,000 |  |  |  | 18,000,000 | 
|Share based awards                                                              |      |                                  | 2,313,809  |      |                                 |  | 2,010,653  |  |  |      | 2,306,578  |  |  |  | 955,018    | 
|                                                                                |      |                                  |            |      |                                 |  |            |  |  |      |            |  |  |  |            | 
|Diluted weighted average number of common shares                                |      |                                  | 20,313,809 |      |                                 |  | 20,010,653 |  |  |      | 20,306,578 |  |  |  | 18,955,018 | 
|                                                                                |      |                                  |            |      |                                 |  |            |  |  |      |            |  |  |  |            | 



10



---

##### Table of Contents



Employee stock awards to purchase approximately 1 million shares for $10.16 or $15.39 per share were not included in
the dilutive income per share calculation for the nine months ended September 30, 2009 as the exercise price is greater than the average market price per share.

The 5% Convertible Notes which are convertible into approximately 6.3 million shares at a conversion price of $22.98
per share were not included in the dilutive income per share calculation as the conversion price is greater than the average market price per share.

8. CONTINGENCIES

Amounts accrued for contingent
liabilities are included in other current liabilities and other deferred liabilities at September 30, 2010 and December 31, 2009. In accordance with the accounting for contingencies as governed by ASC Topic 450, the Company makes a
provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Further, with respect to loss contingencies, where it is probable that a liability has been incurred and
there is a range in the expected loss and no amount in the range is more likely than any other amount, the Company accrues at the low end of the range. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of
negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case. Although the Company believes it has accrued for the following matters in accordance with ASC Topic 450, litigation is
inherently unpredictable and it is possible that cash flows or results of operations could be materially and adversely affected in any particular period by the unfavorable developments in, or resolution or disposition of, one or more of these
contingencies. The following is a description of the material legal proceedings involving the Company commenced or pending during the nine months ended September 30, 2010.

AT&T Corp. (SBC Communications) Claim

On November 17, 2004, AT&Ts local exchange carrier affiliates commenced an action against the Company and
other defendants in the U.S. District Court for the Eastern District of Missouri. The complaint and amended complaint allege that the Company, through certain unnamed intermediaries, which are characterized as least cost routers,
terminated long distance traffic to avoid the payment of interstate and intrastate access charges.

Plaintiffs
allege that they have been damaged in the amount of approximately $20 for the time period of February 2002 through August 2004. The complaint also seeks an injunction against the use of least cost routers and the avoidance of access
charges. On August 23, 2005, the Court referred a comparable case to the Federal Communications Commission (FCC) and the FCC has sought comments on the issues referred by the Court. The Company filed comments in the two declaratory
judgment proceedings occasioned by the Courts referral. On February 7, 2006, the Court entered an order: (a) dismissing AT&Ts claims against Global Crossing to the extent that such claims arose prior to December 9,
2003 by virtue of the injunction contained in the joint plan of reorganization (the Plan of Reorganization) of the Companys predecessor and a number of its subsidiaries (collectively, the GC Debtors) which became
effective on that date; and (b) staying the remainder of the action pending the outcome of the referral to the FCC described above. In an order dated September 25, 2009, the Court ordered the plaintiffs to provide the Court with a status
report on all FCC proceedings that relate to the litigation or address the question of the applicability of access charges on VOIP traffic by December 30, 2009 and ordered the parties to submit a case management order by January 8, 2010 in
the event that the Court lifts the stay currently governing this proceeding. The plaintiffs filed their status report with the Court and the parties filed a case management order. The parties disagree on whether, in the event that the Court lifts
the stay, the Court should permit discovery pending dispositive motions or rule on any such motions that may be filed.

Claim by the U.S. Department of Commerce

A claim was filed in the Companys bankruptcy proceedings by the U.S. Department of Commerce (the Commerce
Department) on October 30, 2002 asserting that an undersea cable owned by Pacific Crossing Ltd., a former subsidiary of the Company (PCL) violates the terms of a Special Use permit issued by the National Oceanic and
Atmospheric Administration (NOAA). The Company believes responsibility for the asserted claim rests entirely with the Companys former subsidiary. On November 7, 2003, the Company and the Global Crossing Creditors
Committee filed an objection to this claim with the Bankruptcy Court. Subsequently, the Commerce Department agreed to limit the size of the pre-petition portion of its claim to $14. An identical claim that had been filed in the bankruptcy
proceedings of PCL was settled in principle in September 2005 and was subsequently approved by the court as part of the PCL plan of reorganization confirmed in an order dated November 10, 2005. In 2009, NOAA agreed with the Global Crossing
Creditors Committee to accept an allowed unsecured claim of $2 in the Global Crossing bankruptcy. The claim has now been paid and the claim has been expunged.

Qwest Rights-of-Way Litigation

A large portion of
the Companys North American network comprises indefeasible rights of use purchased from Qwest Communications Corporation on a fiber-optic communication system constructed by Qwest within rights-of-way granted to certain railroads by various
landowners. In May 2001, a purported class action was commenced on behalf of such landowners in the U.S. District Court for the Southern District of Illinois against Qwest and three of the Companys subsidiaries, among other defendants. The
complaint alleges that the railroads had only limited rights-of-way granted to them that did not include permission to install



11



---

##### Table of Contents

fiber-optic cable for use by Qwest or any other entities. The action seeks actual damages in an unstated amount and alleges that the wrongs done by the Company involve fraud, malice, intentional
wrongdoing, willful or wanton conduct and/or reckless disregard for the rights of the plaintiff landowners. As a result, plaintiffs also request an award of punitive damages. The Company made a demand of Qwest to defend and indemnify the Company in
the lawsuit. In response, Qwest has appointed defense counsel to protect the Companys interests.

The
plaintiffs claims against the Company relating to periods of time prior to the Companys January 28, 2002 bankruptcy filing were discharged in accordance with the Companys Plan of Reorganization. By agreement between the
parties, the Plan of Reorganization preserved plaintiffs rights to pursue any post-confirmation claims of trespass or ejectment. If the plaintiffs were to prevail, the Company could lose its ability to operate large portions of its North
American network, although it believes that it would be entitled to indemnification from Qwest for any losses under the terms of the IRU agreement under which the Company originally purchased this capacity. As part of a global resolution of all
bankruptcy claims asserted against the Company by Qwest, Qwest agreed to reaffirm its obligations of defense and indemnity to the Company for the assertions made in this claim. Since then, attempts have been made to settle many of the class action
lawsuits that have been pending against Qwest regarding the rights of way issue.

In 2002, a proposed
settlement was submitted to the U.S. District Court for the Northern District of Illinois and was preliminarily approved by the District Court, but rejected by the Court of Appeals for the Seventh Circuit in 2004. During 2008, the parties to the
various class actions reached preliminary agreement to settle all of the pending cases and the parties submitted to the U.S. District Court for Massachusetts a motion for class certification and for approval of the proposed settlement. The
District Court granted preliminary approval of the settlement and a number of objections to the settlement were filed. In a memorandum and order dated September 10, 2009, the District Court concluded that it did not have subject matter
jurisdiction over the claims, denied final approval of the settlement and dismissed the case in its entirety. A number of the plaintiff groups then requested the Court to modify its decision. In a revised memorandum and order dated December 9,
2009, the Court reiterated its holding that the Court lacked subject matter jurisdiction over the claims and dismissed the case.

Foreign Tax Audit

A tax authority in South America
issued a preliminary notice of findings based on certain tax audits for calendar years 2001 and 2002. The examiners initial findings took the position that the Company incorrectly documented its importations and incorrectly deducted its
foreign exchange losses against its foreign exchange gains on loan balances. An official assessment of $27, including potential interest and penalties, was issued in 2005. Due to accrued interest and foreign exchange effects the total exposure has
increased to $67. The Company challenged the assessment and commenced litigation in September 2006 to resolve its dispute with the tax authority.

Employee Compensation Disputes

A number of former
employees of the GC Impsat Segment have asserted a variety of claims in litigation for separation pay, severance, commissions, pension benefits, unpaid vacation pay, breach of employment contracts, unpaid performance bonuses and related statutory
penalties, fines, costs and expenses as a result of their separation from the Company. The asserted claims (including accrued interest, attorneys fees and statutorily mandated inflation adjustments) aggregate approximately $39.

While the Company has asserted defenses to these claims in the court proceedings denying liability, the outcome of these
matters is uncertain.

Brazilian Tax Claims

In November 2002 and in October 2004, the Brazilian tax authorities of Parana and Sao Paulo, respectively, issued two tax
infraction notices against Impsat for the collection of the Import Duty and the Tax on Manufactured Products, plus fines and interest that amount to approximately $10. The notices informed Impsat Brazil that the taxes were levied because a specific
document (Declaração de NecessidadeStatement of Necessity) was not provided by Impsat Brazil at the time of importation, in breach of MERCOSUR rules. Oppositions were filed on behalf of Impsat Brazil arguing that the
Argentine exporter (Corning Cable Systems Argentina S.A.) complied with the MERCOSUR rules. In the case of the Sao Paulo infraction notice, a favorable first instance decision was granted. However, due to the amount involved, the case was remitted
to the official compulsory review by the Federal Taxpayers Council. In the case of the Parana infraction notice, an unfavorable administrative decision was granted, and the Company will take available judicial measures to appeal such decision.



12



---

##### Table of Contents



In
December 2004 and in March 2009, the tax authorities of the State of São Paulo, in Brazil, issued two infraction notices against Impsat Brazil for the collection of Tax on Distribution of Goods and Services (ICMS) supposedly due
on the lease of movable properties by comparing such activity to communications services, on which the ICMS state tax is actually levied. Both assessments plus fines and interest amount to approximately $25. A defense against the December 2004
assessment was filed on behalf of Impsat Brazil, arguing that the lease of assets could not be treated as a communication service subject to ICMS. The defense was rejected in the State Administrative Court; however, the Company will seek judicial
action to remove the tax assessment. A defense against the March 2009 assessment was also filed on behalf of Impsat Brazil, and the final administrative decision is still pending.

In addition, in April 2009, the tax authorities of the State of São Paulo issued an infraction notice against
Impsat Brazil for the collection of ICMS supposedly due on the sale of internet access services by comparing such activity to communications services, on which the ICMS state tax is actually levied. This assessment plus fines and interest amount to
approximately $8. Defenses were filed on behalf of Impsat Brazil, arguing that the provision of internet access services could not be treated as a communication service subject to ICMS. Final administrative decision is still pending.

The Company believes that there are reasonable grounds to have all of the Brazilian tax assessments cancelled.

Paraguayan Government Contract Claim

The National Telecommunications Commission of Paraguay (CONATEL) has commenced separate administrative
investigations against a joint venture between GC Impsats Argentine subsidiary and Electro Import S.A. (JV 1) and another joint venture between GC Impsats Argentine subsidiary and Loma Plata S.A. (JV 2), for
breach of contract and breach of licensees obligations by each of such joint ventures.

The first
investigation involves a contract awarded to JV 1 in December 2000 for the design, supply, installation, launch, operation and maintenance of a telecommunications system for public telephones and/or phone booths in certain specified locations in
Paraguay. In 2005, CONATEL initiated an administrative investigation due to an alleged breach of contract by JV 1. As a result of such investigation, CONATEL is seeking to terminate the contract, revoke JV 1s license, impose a fine and
take additional actions against JV 1. The case is currently pending in the Administrative Court.

The
second investigation involves a contract awarded to JV 2 in 2001, after a public bidding process, for the installation and deployment of public telephones and/or telephone booths in certain specified locations in Paraguay. JV 2 was required to
install and start operating all the required equipment within twelve months of the execution of the contract. In January 2003, JV 2 requested an extension of the twelve month term from CONATEL as a result of force majeure which prevented it from
completing the installation of the committed number of remote terminals within the agreed time period. CONATEL denied the request and decided to terminate the contract based on JV 2s default.

JV 2 then filed a claim before the Administrative Court requesting the annulment of the termination and seeking a stay of
the challenged administrative acts. The matter is in the evidentiary stage in the Administrative Court.

Customer
Bankruptcy Claim

During 2007 the Company commenced default and disconnect procedures against a
customer for breach of a sales contract based on the nature of the customers traffic, which renders the contract highly unprofitable to the Company. After the process was begun, the customer filed for bankruptcy protection, thereby barring the
Company from taking further disconnection actions against the customer. The Company commenced an adversary proceeding in the bankruptcy court, asserting a claim for damages for the customers alleged breaches of the contract and for a
declaration that, as a result of these breaches, the customer may not assume the contract in its reorganization proceedings. The Company is incurring significant legal expenses in connection with this matter.

The customer has filed several counterclaims against the Company alleging various breaches of contract for attempting
improperly to terminate service, for improperly blocking international traffic, for violations of the Communications Act of 1934 and related tort-based claims. The Company notified the customer that the Company would be raising its rates and the
Company subsequently filed a motion with the court seeking additional adequate assurance, or an order allowing the Company to terminate the customers service, based upon the rate change. The customer amended its counter claims to assert claims
for breach of contract based upon the rate increase.

After the filing of motions and responses, the Court
issued an opinion on these matters on July 3, 2008. The Court held that the agreement did not permit the Company to increase the rates in the manner the Company did and that the Company: (a) breached the sales contract in so doing; and
(b) was therefore not entitled to additional adequate assurance. The Court did, however, permit the Company to amend the Companys complaint to plead a rescission claim, which the Company filed on July 14, 2008.

While the customer has alleged damages in amounts that would be very material to the Company, the Company believes that
it has valid defenses to limit the amount of these damages. The Company also moved to dismiss the customers bankruptcy case for failure to comply with the small business provisions of the Bankruptcy Code.



13



---

##### Table of Contents



By
order dated November 25, 2009, the Court dismissed the customers bankruptcy but decided to retain the adversary proceeding. After the dismissal of the bankruptcy, the Company terminated service to the customer on December 26, 2009.
The adversary proceeding continues and the matter is in discovery. The Company amended its complaint to include allegations relating to the manipulation of traffic data, so called ANI stripping, and the customer filed its amended answer,
affirmative defenses and counterclaims. The Court has established January 15, 2011 as the cut-off date for all discovery. The Company cannot predict the outcome of these proceedings.

Municipality of Rio de Janeiro Telecommunications Services Fee

In April and May 2010, the Company received a collection notification from the municipality of Rio de Janeiro in Brazil
regarding a fee in the amount of approximately $80 for the use of public space (including both air space and underground space) relating to ducts containing telecommunications cables. The Company is challenging the fee on multiple grounds, including
the lack of objective criteria for the calculation of the fee, the existence of prior court injunctions barring collection of the fee and the unconstitutionality of the assessment. The Company has requested the municipality to suspend collection of
the fee until final resolution of the objections asserted. On August 26, 2010, a justice of the Brazilian Supreme Court ruled that a decree of the municipality which purported to tax the use of public air space and subsoil, for the installation
and passage of equipment utilized to provide telecommunication services, was unconstitutional. An appeal has been filed requesting a review by the full Brazilian Supreme Court. In light of the issuance of decrees (or similar executive orders or
legislation) in the municipalities of Sao Paulo, Fortaleza and Campinas that are similar to the decrees in Rio de Janeiro that gave rise to the aforementioned collection notification, those other municipalities may attempt to assess similar fees
against our Brazilian affiliates in the future.

9. RELATED PARTY TRANSACTIONS

Commercial and other relationships between the Company and Singapore Technologies Telemedia Pte Ltd (ST Telemedia)

During the nine months ended September 30, 2010, the Company provided approximately $1 of
telecommunications services to subsidiaries and affiliates of ST Telemedia. During the three and nine months ended September 30, 2010, the Company received approximately $2 and $5, respectively, of collocation services from affiliates of ST
Telemedia. During the three and nine months ended September 30, 2009, the Company received approximately $1 and $4, respectively, of collocation services from affiliates of ST Telemedia. Additionally, during the three and nine months ended
September 30, 2010 and 2009, the Company accrued dividends of $1 and $3, respectively, related to preferred stock held by affiliates of ST Telemedia.

At September 30, 2010 and December 31, 2009, the Company had approximately $26 and $24, respectively, due to ST Telemedia and its subsidiaries and affiliates, and in each case nothing due from
ST Telemedia and its subsidiaries and affiliates. The amounts due to ST Telemedia and its subsidiaries and affiliates primarily relate to dividends accrued on the Companys 2% cumulative senior convertible preferred stock, and are included in
accrued preferred dividends at September 30, 2010 and in other deferred liabilities at December 31, 2009 in the accompanying condensed consolidated balance sheets.

10. SEGMENT REPORTING

Operating segments are defined in ASC Topic 280 as components of public entities that engage in business activities from which they may earn revenues and incur expenses for which separate financial
information is available and which is evaluated regularly by the Companys chief operating decision makers (CODMs) in deciding how to assess performance and allocate resources. The Companys CODMs assess performance and
allocate resources based on three separate operating segments which management operates and manages as strategic business units: (i) the GCUK Segment; (ii) the GC Impsat Segment; and (iii) the ROW Segment.

The GCUK Segment is a provider of managed network communications services providing a wide range of telecommunications
services, including data, IP and voice services to government and other public sector organizations, major corporations and other communications companies in the United Kingdom (U.K.). The GC Impsat Segment is a provider of
telecommunication services including IP, voice, data center and information technology services to corporate and government clients in Latin America. The ROW Segment represents all the operations of Global Crossing Limited and its subsidiaries
excluding the GCUK and GC Impsat Segments and comprises operations primarily in North America, with smaller operations in Europe, Latin America, and a portion of the Asia/Pacific region and includes our subsea fiber network, serving many of the
worlds largest corporations and many other telecommunications carriers with a full range of managed telecommunication services including data, IP and voice products. The services provided by all the Companys segments support a migration
path to a fully converged IP environment.

The CODMs measure and evaluate the Companys reportable
segments based on operating income (loss) before depreciation and amortization (OIBDA). OIBDA, as defined by the Company, is operating income (loss) before depreciation and amortization. OIBDA differs from operating income (loss), as
calculated in accordance with U.S. GAAP and reflected in the Companys condensed consolidated financial statements, in that it excludes depreciation and amortization. Such excluded expenses primarily reflect the non-cash impacts of historical
capital investments, as opposed to the cash impacts of capital expenditures made in recent periods. In addition, OIBDA does not give effect to cash used for debt service requirements and thus does not reflect available funds for reinvestment,
distributions or other discretionary uses.



14



---

##### Table of Contents



OIBDA
is an important part of the Companys internal reporting and planning processes and a key measure to evaluate profitability and operating performance, make comparisons between periods, and to make resource allocation decisions.

There are material limitations to using non-U.S. GAAP financial measures. The Companys calculation of OIBDA may
differ from similarly titled measures used by other companies, and may not be comparable to those other measures. Additionally, OIBDA does not include certain significant items such as depreciation and amortization, interest income, interest
expense, income taxes, other non-operating income or expense items, and preferred stock dividends. OIBDA should be considered in addition to, and not as a substitute for, other measures of financial performance reported in accordance with U.S. GAAP.

The Company believes that OIBDA is a relevant indicator of operating performance, especially in a
capital-intensive industry such as telecommunications. OIBDA provides the Company with an indication of the underlying performance of its everyday business operations. It excludes the effect of items associated with the Companys capitalization
and tax structures, such as interest income, interest expense and income taxes, and of other items not associated with the Companys everyday operations.

The following tables provide operating financial information for the Companys three reportable segments and a reconciliation of segment results to consolidated results.



|                                 |  |                                  |     |   |                                 |   |     |      |  |   |       |   |  |   |       |  
|-------------------------------- |  | -------------------------------- | --- | - | ------------------------------- | - | --- | ---- |  | - | ----- | - |  | - | ----- | -
|                                 |  | Three months ended September 30, |     |   | Nine months ended September 30, |  
|                                 |  | 2010                             |     |   | 2009                            |   |     | 2010 |  |   | 2009  |  
|                                 |  | (unaudited)                      |     |   | (unaudited)                     |  
|Revenues from external customers |  |                                  |     |   |                                 |   |     |      |  |   |       |   |  |   |       |  
|GCUK                             |  | $                                | 113 |   |                                 | $ | 120 |      |  | $ | 348   |   |  | $ | 345   |  
|GC Impsat                        |  |                                  | 143 |   |                                 |   | 127 |      |  |   | 408   |   |  |   | 364   |  
|ROW                              |  |                                  | 392 |   |                                 |   | 396 |      |  |   | 1,170 |   |  |   | 1,176 |  
|                                 |  |                                  |     |   |                                 |   |     |      |  |   |       |   |  |   |       |  
|Total consolidated               |  | $                                | 648 |   |                                 | $ | 643 |      |  | $ | 1,926 |   |  | $ | 1,885 |  
|                                 |  |                                  |     |   |                                 |   |     |      |  |   |       |   |  |   |       |  
|                                 |  |                                  |     |  
|Intersegment revenues            |  |                                  |     |   |                                 |   |     |      |  |   |       |   |  |   |       |  
|GC Impsat                        |  | $                                | 3   |   |                                 | $ | 2   |      |  | $ | 7     |   |  | $ | 6     |  
|ROW                              |  |                                  | 3   |   |                                 |   | 1   |      |  |   | 11    |   |  |   | 5     |  
|                                 |  |                                  |     |   |                                 |   |     |      |  |   |       |   |  |   |       |  
|Total                            |  | $                                | 6   |   |                                 | $ | 3   |      |  | $ | 18    |   |  | $ | 11    |  
|                                 |  |                                  |     |   |                                 |   |     |      |  |   |       |   |  |   |       |  
|                                 |  |                                  |     |  
|Total segment operating revenues |  |                                  |     |   |                                 |   |     |      |  |   |       |   |  |   |       |  
|GCUK                             |  | $                                | 113 |   |                                 | $ | 120 |      |  | $ | 348   |   |  | $ | 345   |  
|GC Impsat                        |  |                                  | 146 |   |                                 |   | 129 |      |  |   | 415   |   |  |   | 370   |  
|ROW                              |  |                                  | 395 |   |                                 |   | 397 |      |  |   | 1,181 |   |  |   | 1,181 |  
|Less: intersegment revenues      |  |                                  | (6  | ) |                                 |   | (3  | )    |  |   | (18   | ) |  |   | (11   | )
|                                 |  |                                  |     |   |                                 |   |     |      |  |   |       |   |  |   |       |  
|Total consolidated               |  | $                                | 648 |   |                                 | $ | 643 |      |  | $ | 1,926 |   |  | $ | 1,885 |  
|                                 |  |                                  |     |   |                                 |   |     |      |  |   |       |   |  |   |       |  
|                                 |  |                                 
|                                 |  | Three months ended September 30, |     |   | Nine months ended September 30, |  
|                                 |  | 2010                             |     |   | 2009                            |   |     | 2010 |  |   | 2009  |  
|                                 |  | (unaudited)                      |     |   | (unaudited)                     |  
|OIBDA                            |  |                                  |     |   |                                 |   |     |      |  |   |       |   |  |   |       |  
|GCUK                             |  | $                                | 22  |   |                                 | $ | 25  |      |  | $ | 72    |   |  | $ | 69    |  
|GC Impsat                        |  |                                  | 49  |   |                                 |   | 44  |      |  |   | 130   |   |  |   | 127   |  
|ROW                              |  |                                  | 38  |   |                                 |   | 22  |      |  |   | 77    |   |  |   | 63    |  
|                                 |  |                                  |     |   |                                 |   |     |      |  |   |       |   |  |   |       |  
|Total segments                   |  | $                                | 109 |   |                                 | $ | 91  |      |  | $ | 279   |   |  | $ | 259   |  
|                                 |  |                                  |     |   |                                 |   |     |      |  |   |       |   |  |   |       |  

A reconciliation of OIBDA to income (loss) applicable to common shareholders follows:



|                                                |  |                                       |     |   |           |   |     |             |  |   |              |   |  |                    |    |   |  |   |     |  
|----------------------------------------------- |  | ------------------------------------- | --- | - | --------- | - | --- | ----------- |  | - | ------------ | - |  | ------------------ | -- | - |  | - | --- | -
|                                                |  | Three Months Ended September 30, 2010 |    
|                                                |  | GCUK                                  |     |   | GC Impsat |   |     | ROW         |  |   | Eliminations |   |  | Total Consolidated |   
|                                                |  |                                       |     |   |           |   |     | (unaudited) |  |   |              |   |  |                    |   
|OIBDA                                           |  | $                                     | 22  |   |           | $ | 49  |             |  | $ | 38           |   |  | $                  | -  |   |  | $ | 109 |  
|Depreciation and amortization                   |  |                                       | (15 | ) |           |   | (18 | )           |  | $ | (49          | ) |  |                    | -  |   |  |   | (82 | )
|                                                |  |                                       |     |   |           |   |     |             |  |   |              |   |  |                    |    |   |  |   |     |  
|Operating income (loss)                         |  |                                       | 7   |   |           |   | 31  |             |  |   | (11          | ) |  |                    | -  |   |  |   | 27  |  
|Interest income                                 |  |                                       | 1   |   |           |   | 1   |             |  |   | 5            |   |  |                    | (7 | ) |  |   | -   |  
|Interest expense                                |  |                                       | (14 | ) |           |   | (3  | )           |  |   | (34          | ) |  |                    | 7  |   |  |   | (44 | )
|Other income (expense), net                     |  |                                       | 9   |   |           |   | (1  | )           |  |   | 13           |   |  |                    | -  |   |  |   | 21  |  
|Provision for income taxes                      |  |                                       | -   |   |           |   | (10 | )           |  |   | -            |   |  |                    | -  |   |  |   | (10 | )
|Preferred stock dividends                       |  |                                       | -   |   |           |   | -   |             |  |   | (1           | ) |  |                    | -  |   |  |   | (1  | )
|                                                |  |                                       |     |   |           |   |     |             |  |   |              |   |  |                    |    |   |  |   |     |  
|Income (loss) applicable to common shareholders |  | $                                     | 3   |   |           | $ | 18  |             |  | $ | (28          | ) |  | $                  | -  |   |  | $ | (7  | )
|                                                |  |                                       |     |   |           |   |     |             |  |   |              |   |  |                    |    |   |  |   |     |  
|                                                | 
|                                                |  | Three Months Ended September 30, 2009 |    
|                                                |  | GCUK                                  |     |   | GC Impsat |   |     | ROW         |  |   | Eliminations |   |  | Total Consolidated |   
|                                                |  |                                       |     |   |           |   |     | (unaudited) |  |   |              |   |  |                    |   
|OIBDA                                           |  | $                                     | 25  |   |           | $ | 44  |             |  | $ | 22           |   |  | $                  | -  |   |  | $ | 91  |  
|Depreciation and amortization                   |  |                                       | (18 | ) |           |   | (22 | )           |  |   | (49          | ) |  |                    | -  |   |  |   | (89 | )
|                                                |  |                                       |     |   |           |   |     |             |  |   |              |   |  |                    |    |   |  |   |     |  
|Operating income (loss)                         |  |                                       | 7   |   |           |   | 22  |             |  |   | (27          | ) |  |                    | -  |   |  |   | 2   |  
|Interest income                                 |  |                                       | 3   |   |           |   | 2   |             |  |   | -            |   |  |                    | (3 | ) |  |   | 2   |  
|Interest expense                                |  |                                       | (14 | ) |           |   | (8  | )           |  |   | (20          | ) |  |                    | 3  |   |  |   | (39 | )
|Other expense, net                              |  |                                       | (8  | ) |           |   | (13 | )           |  |   | (11          | ) |  |                    | -  |   |  |   | (32 | )
|Provision for income taxes                      |  |                                       | -   |   |           |   | (6  | )           |  |   | -            |   |  |                    | -  |   |  |   | (6  | )
|Preferred stock dividends                       |  |                                       | -   |   |           |   | -   |             |  |   | (1           | ) |  |                    | -  |   |  |   | (1  | )
|                                                |  |                                       |     |   |           |   |     |             |  |   |              |   |  |                    |    |   |  |   |     |  
|Loss applicable to common shareholders          |  | $                                     | (12 | ) |           | $ | (3  | )           |  | $ | (59          | ) |  | $                  | -  |   |  | $ | (74 | )
|                                                |  |                                       |     |   |           |   |     |             |  |   |              |   |  |                    |    |   |  |   |     |  



15



---

##### Table of Contents



|                                                |  |                                      |     |   |           |   |     |             |  |   |              |   |  |                    |     |   |  |   |      |  
|----------------------------------------------- |  | ------------------------------------ | --- | - | --------- | - | --- | ----------- |  | - | ------------ | - |  | ------------------ | --- | - |  | - | ---- | -
|                                                |  | Nine Months Ended September 30, 2010 |    
|                                                |  | GCUK                                 |     |   | GC Impsat |   |     | ROW         |  |   | Eliminations |   |  | Total Consolidated |    
|                                                |  |                                      |     |   |           |   |     | (unaudited) |  |   |              |   |  |                    |    
|OIBDA                                           |  | $                                    | 72  |   |           | $ | 130 |             |  | $ | 77           |   |  | $                  | -   |   |  | $ | 279  |  
|Depreciation and amortization                   |  |                                      | (47 | ) |           |   | (62 | )           |  |   | (143         | ) |  |                    | -   |   |  |   | (252 | )
|                                                |  |                                      |     |   |           |   |     |             |  |   |              |   |  |                    |     |   |  |   |      |  
|Operating income (loss)                         |  |                                      | 25  |   |           |   | 68  |             |  |   | (66          | ) |  |                    | -   |   |  |   | 27   |  
|Interest income                                 |  |                                      | 5   |   |           |   | 2   |             |  |   | 15           |   |  |                    | (21 | ) |  |   | 1    |  
|Interest expense                                |  |                                      | (42 | ) |           |   | (16 | )           |  |   | (104         | ) |  |                    | 21  |   |  |   | (141 | )
|Other expense, net                              |  |                                      | (5  | ) |           |   | (28 | )           |  |   | (4           | ) |  |                    | -   |   |  |   | (37  | )
|Provision for income taxes                      |  |                                      | -   |   |           |   | (22 | )           |  |   | -            |   |  |                    | -   |   |  |   | (22  | )
|Preferred stock dividends                       |  |                                      | -   |   |           |   | -   |             |  |   | (3           | ) |  |                    | -   |   |  |   | (3   | )
|                                                |  |                                      |     |   |           |   |     |             |  |   |              |   |  |                    |     |   |  |   |      |  
|Income (loss) applicable to common shareholders |  | $                                    | (17 | ) |           | $ | 4   |             |  | $ | (162         | ) |  | $                  | -   |   |  | $ | (175 | )
|                                                |  |                                      |     |   |           |   |     |             |  |   |              |   |  |                    |     |   |  |   |      |  



|                                                |  |                                      |     |   |           |   |     |             |  |   |              |   |  |                    |    |   |  |   |      |  
|----------------------------------------------- |  | ------------------------------------ | --- | - | --------- | - | --- | ----------- |  | - | ------------ | - |  | ------------------ | -- | - |  | - | ---- | -
|                                                |  | Nine Months Ended September 30, 2009 |    
|                                                |  | GCUK                                 |     |   | GC Impsat |   |     | ROW         |  |   | Eliminations |   |  | Total Consolidated |   
|                                                |  |                                      |     |   |           |   |     | (unaudited) |  |   |              |   |  |                    |   
|OIBDA                                           |  | $                                    | 69  |   |           | $ | 127 |             |  | $ | 63           |   |  | $                  | -  |   |  | $ | 259  |  
|Depreciation and amortization                   |  |                                      | (49 | ) |           |   | (63 | )           |  |   | (138         | ) |  |                    | -  |   |  |   | (250 | )
|                                                |  |                                      |     |   |           |   |     |             |  |   |              |   |  |                    |    |   |  |   |      |  
|Operating income (loss)                         |  |                                      | 20  |   |           |   | 64  |             |  |   | (75          | ) |  |                    | -  |   |  |   | 9    |  
|Interest income                                 |  |                                      | 6   |   |           |   | 5   |             |  |   | 5            |   |  |                    | (9 | ) |  |   | 7    |  
|Interest expense                                |  |                                      | (39 | ) |           |   | (25 | )           |  |   | (58          | ) |  |                    | 9  |   |  |   | (113 | )
|Other income (expense), net                     |  |                                      | 17  |   |           |   | (1  | )           |  |   | (5           | ) |  |                    | -  |   |  |   | 11   |  
|Provision for income taxes                      |  |                                      | (1  | ) |           |   | (15 | )           |  |   | (2           | ) |  |                    | -  |   |  |   | (18  | )
|Preferred stock dividends                       |  |                                      | -   |   |           |   | -   |             |  |   | (3           | ) |  |                    | -  |   |  |   | (3   | )
|                                                |  |                                      |     |   |           |   |     |             |  |   |              |   |  |                    |    |   |  |   |      |  
|Income (loss) applicable to common shareholders |  | $                                    | 3   |   |           | $ | 28  |             |  | $ | (138         | ) |  | $                  | -  |   |  | $ | (107 | )
|                                                |  |                                      |     |   |           |   |     |             |  |   |              |   |  |                    |    |   |  |   |      |  



|                                                 |  |                    |       |   |                   |   |       |  
|------------------------------------------------ |  | ------------------ | ----- | - | ----------------- | - | ----- | -
|                                                 |  | September 30, 2010 |       |   | December 31, 2009 |  
|                                                 |  | (unaudited)        |       |   |                   |  
|Total Assets                                     |  |                    |       |   |                   |   |       |  
|GCUK                                             |  | $                  | 602   |   |                   | $ | 601   |  
|GC Impsat                                        |  |                    | 783   |   |                   |   | 807   |  
|ROW                                              |  |                    | 1,431 |   |                   |   | 1,654 |  
|                                                 |  |                    |       |   |                   |   |       |  
|Total segments                                   |  |                    | 2,816 |   |                   |   | 3,062 |  
|Less: Intercompany loans and accounts receivable |  |                    | (574  | ) |                   |   | (574  | )
|                                                 |  |                    |       |   |                   |   |       |  
|Total consolidated assets                        |  | $                  | 2,242 |   |                   | $ | 2,488 |  
|                                                 |  |                    |       |   |                   |   |       |  



|                                     |  |                    |     |  |                   |   |     | 
|------------------------------------ |  | ------------------ | --- |  | ----------------- | - | --- | 
|                                     |  | September 30, 2010 |     |  | December 31, 2009 |  
|                                     |  | (unaudited)        |     |  |                   |  
|Unrestricted Cash                    |  |                    |     |  |                   |   |     | 
|GCUK                                 |  | $                  | 67  |  |                   | $ | 60  | 
|GC Impsat                            |  |                    | 130 |  |                   |   | 154 | 
|ROW                                  |  |                    | 114 |  |                   |   | 263 | 
|                                     |  |                    |     |  |                   |   |     | 
|Total consolidated unrestricted cash |  | $                  | 311 |  |                   | $ | 477 | 
|                                     |  |                    |     |  |                   |   |     | 
|                                     |  |                   
|                                     |  | September 30, 2010 |     |  | December 31, 2009 |  
|                                     |  | (unaudited)        |     |  |                   |  
|Restricted Cash                      |  |                    |     |  |                   |   |     | 
|GC Impsat                            |  | $                  | 10  |  |                   | $ | -   | 
|ROW                                  |  |                    | 9   |  |                   |   | 16  | 
|                                     |  |                    |     |  |                   |   |     | 
|Total consolidated restricted cash   |  | $                  | 19  |  |                   | $ | 16  | 
|                                     |  |                    |     |  |                   |   |     | 

Eliminations include intersegment eliminations and other reconciling items.

The Company accounts for intersegment sales of products and services at current market prices.



16



---

##### Table of Contents



11. FINANCIAL INSTRUMENTS

The carrying amounts for cash and cash equivalents, restricted cash and cash equivalents, accounts
receivable, accrued expenses and obligations under capital leases approximate their fair value (see Note 2, Basis of Presentation regarding the January 12, 2010 devaluation of the Venezuelan bolivar by the Venezuelan government).
The fair values of the Companys debt instruments are based on market quotes and management estimates. Management believes the carrying value of other debt approximates fair value as of September 30, 2010.

The fair values of our debt instruments are as follows:



|                          |  |                    |     |  |                   |   |     |                |  |   |           |  |  |   |     | 
|------------------------- |  | ------------------ | --- |  | ----------------- | - | --- | -------------- |  | - | --------- |  |  | - | --- | 
|                          |  | September 30, 2010 |     |  | December 31, 2009 |  
|                          |  | CarryingAmount     |     |  | FairValue         |   |     | CarryingAmount |  |   | FairValue | 
|                          |  | (unaudited)        |     |  |                   |   |     |                | 
|12% Senior Secured Notes  |  | $                  | 736 |  |                   | $ | 848 |                |  | $ | 735       |  |  | $ | 816 | 
|GCUK Senior Secured Notes |  |                    | 436 |  |                   |   | 448 |                |  |   | 441       |  |  |   | 441 | 
|5% Convertible Notes      |  |                    | 137 |  |                   |   | 145 |                |  |   | 130       |  |  |   | 139 | 
|Other debt                |  |                    | 31  |  |                   |   | 31  |                |  |   | 26        |  |  |   | 26  | 

12. GUARANTEES OF PARENT COMPANY
DEBT

On September 22, 2009, GCL issued $750 in aggregate principal amount of 12% Senior Secured Notes
due September 15, 2015 (the Original Notes). The Original Notes were guaranteed by a majority of the Companys direct and indirect subsidiaries (the Guarantors), and were not registered under the Securities Act. As
required under a registration rights agreement, the Company registered an identical series of notes (the Exchange Notes) under the Securities Act with the SEC and offered to exchange those Exchange Notes for the Original Notes. All $750
aggregate outstanding principal amount of Original Notes were exchanged for Exchange Notes in the exchange offer. The Exchange Notes are also guaranteed by the Guarantors. In connection with the registration of the Exchange Notes and related
guarantees, GCL is required to provide the financial information set forth under Rule 3-10 of Regulation S-X, Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered (Rule 3-10).

The condensed consolidating financial information below has been prepared and presented pursuant to Rule
3-10. The column labeled Parent Company represents GCLs stand alone results and its investment in all of its subsidiaries accounted for using the equity method. The Guarantors and the non-Guarantor subsidiaries are presented in separate
columns and represent all the applicable subsidiaries on a combined basis. Intercompany eliminations are shown in a separate column.



17



---

##### Table of Contents



|                                                        |  |                    |      |   |                       |   |       |                           |  |   |              |   |  |              |        |   |  |   |       |  
|------------------------------------------------------- |  | ------------------ | ---- | - | --------------------- | - | ----- | ------------------------- |  | - | ------------ | - |  | ------------ | ------ | - |  | - | ----- | -
|                                                        |  | September 30, 2010 |     
|                                                        |  | ParentCompany      |      |   | GuarantorSubsidiaries |   |       | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |       
|                                                        |  |                    |      |   |                       |   |       | (unaudited)               |  |   |              |   |  |              |       
|ASSETS:                                                 |  |                    |      |   |                       |   |       |                           |  |   |              |   |  |              |        |   |  |   |       |  
|Current assets:                                         |  |                    |      |   |                       |   |       |                           |  |   |              |   |  |              |        |   |  |   |       |  
|Cash and cash equivalents                               |  | $                  | 2    |   |                       | $ | 222   |                           |  | $ | 87           |   |  | $            | -      |   |  | $ | 311   |  
|Restricted cash and cash equivalents - current portion  |  |                    | -    |   |                       |   | 4     |                           |  |   | 10           |   |  |              | -      |   |  |   | 14    |  
|Accounts receivable, net of allowances                  |  |                    | -    |   |                       |   | 239   |                           |  |   | 104          |   |  |              | -      |   |  |   | 343   |  
|Accounts and loans receivable from affiliates           |  |                    | 329  |   |                       |   | 197   |                           |  |   | 255          |   |  |              | (781   | ) |  |   | -     |  
|Prepaid costs and other current assets                  |  |                    | -    |   |                       |   | 44    |                           |  |   | 46           |   |  |              | -      |   |  |   | 90    |  
|                                                        |  |                    |      |   |                       |   |       |                           |  |   |              |   |  |              |        |   |  |   |       |  
|Total current assets                                    |  |                    | 331  |   |                       |   | 706   |                           |  |   | 502          |   |  |              | (781   | ) |  |   | 758   |  
|                                                        |  |                    |      |   |                       |   |       |                           |  |   |              |   |  |              |        |   |  |   |       |  
|                                                        |  |                    |      |   |                      
|Restricted cash and cash equivalents - long term        |  |                    | -    |   |                       |   | 5     |                           |  |   | -            |   |  |              | -      |   |  |   | 5     |  
|Property and equipment, net of accumulated depreciation |  |                    | 1    |   |                       |   | 849   |                           |  |   | 357          |   |  |              | -      |   |  |   | 1,207 |  
|Intangible assets, net                                  |  |                    | -    |   |                       |   | 147   |                           |  |   | 50           |   |  |              | -      |   |  |   | 197   |  
|Investments in subsidiaries                             |  |                    | (558 | ) |                       |   | (195  | )                         |  |   | -            |   |  |              | 753    |   |  |   | -     |  
|Loans receivable from affiliates                        |  |                    | 653  |   |                       |   | 116   |                           |  |   | 52           |   |  |              | (821   | ) |  |   | -     |  
|Other assets                                            |  |                    | 26   |   |                       |   | 35    |                           |  |   | 14           |   |  |              | -      |   |  |   | 75    |  
|                                                        |  |                    |      |   |                       |   |       |                           |  |   |              |   |  |              |        |   |  |   |       |  
|Total assets                                            |  | $                  | 453  |   |                       | $ | 1,663 |                           |  | $ | 975          |   |  | $            | (849   | ) |  | $ | 2,242 |  
|                                                        |  |                    |      |   |                       |   |       |                           |  |   |              |   |  |              |        |   |  |   |       |  
|                                                        |  |                    |      |   |                      
|LIABILITIES:                                            |  |                    |      |   |                       |   |       |                           |  |   |              |   |  |              |        |   |  |   |       |  
|Current liabilities:                                    |  |                    |      |   |                       |   |       |                           |  |   |              |   |  |              |        |   |  |   |       |  
|Accounts payable                                        |  | $                  | 1    |   |                       | $ | 162   |                           |  | $ | 75           |   |  | $            | -      |   |  | $ | 238   |  
|Accrued cost of access                                  |  |                    | -    |   |                       |   | 85    |                           |  |   | 23           |   |  |              | -      |   |  |   | 108   |  
|Accounts and loans payable to affiliates                |  |                    | 27   |   |                       |   | 565   |                           |  |   | 189          |   |  |              | (781   | ) |  |   | -     |  
|Short term debt and current portion of long term debt   |  |                    | 137  |   |                       |   | 9     |                           |  |   | 22           |   |  |              | -      |   |  |   | 168   |  
|Obligations under capital leases - current portion      |  |                    | -    |   |                       |   | 38    |                           |  |   | 16           |   |  |              | -      |   |  |   | 54    |  
|Deferred revenue - current portion                      |  |                    | -    |   |                       |   | 108   |                           |  |   | 64           |   |  |              | -      |   |  |   | 172   |  
|Other current liabilities                               |  |                    | 46   |   |                       |   | 176   |                           |  |   | 139          |   |  |              | -      |   |  |   | 361   |  
|                                                        |  |                    |      |   |                       |   |       |                           |  |   |              |   |  |              |        |   |  |   |       |  
|Total current liabilities                               |  |                    | 211  |   |                       |   | 1,143 |                           |  |   | 528          |   |  |              | (781   | ) |  |   | 1,101 |  
|                                                        |  |                    |      |   |                       |   |       |                           |  |   |              |   |  |              |        |   |  |   |       |  
|                                                        |  |                    |      |   |                      
|Loans payable to affiliates                             |  |                    | 8    |   |                       |   | 705   |                           |  |   | 108          |   |  |              | (821   | ) |  |   | -     |  
|Long term debt                                          |  |                    | 736  |   |                       |   | 7     |                           |  |   | 429          |   |  |              | -      |   |  |   | 1,172 |  
|Obligations under capital leases                        |  |                    | -    |   |                       |   | 61    |                           |  |   | 21           |   |  |              | -      |   |  |   | 82    |  
|Deferred revenue                                        |  |                    | -    |   |                       |   | 263   |                           |  |   | 67           |   |  |              | -      |   |  |   | 330   |  
|Other deferred liabilities                              |  |                    | -    |   |                       |   | 42    |                           |  |   | 17           |   |  |              | -      |   |  |   | 59    |  
|                                                        |  |                    |      |   |                       |   |       |                           |  |   |              |   |  |              |        |   |  |   |       |  
|Total liabilities                                       |  |                    | 955  |   |                       |   | 2,221 |                           |  |   | 1,170        |   |  |              | (1,602 | ) |  |   | 2,744 |  
|                                                        |  |                    |      |   |                       |   |       |                           |  |   |              |   |  |              |        |   |  |   |       |  
|                                                        |  |                    |      |   |                      
|SHAREHOLDERS DEFICIT:                                  |  |                    |      |   |                       |   |       |                           |  |   |              |   |  |              |        |   |  |   |       |  
|Total shareholders deficit                             |  |                    | (502 | ) |                       |   | (558  | )                         |  |   | (195         | ) |  |              | 753    |   |  |   | (502  | )
|                                                        |  |                    |      |   |                       |   |       |                           |  |   |              |   |  |              |        |   |  |   |       |  
|Total liabilities and shareholders deficit             |  | $                  | 453  |   |                       | $ | 1,663 |                           |  | $ | 975          |   |  | $            | (849   | ) |  | $ | 2,242 |  
|                                                        |  |                    |      |   |                       |   |       |                           |  |   |              |   |  |              |        |   |  |   |       |  



18



---

##### Table of Contents



|                                                        |  |                   |      |   |                       |   |       |                           |  |   |              |   |  |              |        |   |  |   |       |  
|------------------------------------------------------- |  | ----------------- | ---- | - | --------------------- | - | ----- | ------------------------- |  | - | ------------ | - |  | ------------ | ------ | - |  | - | ----- | -
|                                                        |  | December 31, 2009 |     
|                                                        |  | ParentCompany     |      |   | GuarantorSubsidiaries |   |       | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |       
|ASSETS:                                                 |  |                   |      |   |                       |   |       |                           |  |   |              |   |  |              |        |   |  |   |       |  
|Current assets:                                         |  |                   |      |   |                       |   |       |                           |  |   |              |   |  |              |        |   |  |   |       |  
|Cash and cash equivalents                               |  | $                 | 95   |   |                       | $ | 293   |                           |  | $ | 89           |   |  | $            | -      |   |  | $ | 477   |  
|Restricted cash and cash equivalents - current portion  |  |                   | -    |   |                       |   | 9     |                           |  |   | -            |   |  |              | -      |   |  |   | 9     |  
|Accounts receivable, net of allowances                  |  |                   | -    |   |                       |   | 241   |                           |  |   | 87           |   |  |              | -      |   |  |   | 328   |  
|Accounts and loans receivable from affiliates           |  |                   | 316  |   |                       |   | 77    |                           |  |   | 242          |   |  |              | (635   | ) |  |   | -     |  
|Prepaid costs and other current assets                  |  |                   | 1    |   |                       |   | 54    |                           |  |   | 46           |   |  |              | -      |   |  |   | 101   |  
|                                                        |  |                   |      |   |                       |   |       |                           |  |   |              |   |  |              |        |   |  |   |       |  
|Total current assets                                    |  |                   | 412  |   |                       |   | 674   |                           |  |   | 464          |   |  |              | (635   | ) |  |   | 915   |  
|                                                        |  |                   |      |   |                       |   |       |                           |  |   |              |   |  |              |        |   |  |   |       |  
|                                                        |  |                   |      |   |                      
|Restricted cash and cash equivalents - long term        |  |                   | -    |   |                       |   | 7     |                           |  |   | -            |   |  |              | -      |   |  |   | 7     |  
|Property and equipment, net of accumulated depreciation |  |                   | 2    |   |                       |   | 891   |                           |  |   | 387          |   |  |              | -      |   |  |   | 1,280 |  
|Intangible assets, net                                  |  |                   | -    |   |                       |   | 145   |                           |  |   | 53           |   |  |              | -      |   |  |   | 198   |  
|Investments in subsidiaries                             |  |                   | (511 | ) |                       |   | (190  | )                         |  |   | -            |   |  |              | 701    |   |  |   | -     |  
|Loans receivable from affiliates                        |  |                   | 678  |   |                       |   | 94    |                           |  |   | 80           |   |  |              | (852   | ) |  |   | -     |  
|Other assets                                            |  |                   | 27   |   |                       |   | 45    |                           |  |   | 16           |   |  |              | -      |   |  |   | 88    |  
|                                                        |  |                   |      |   |                       |   |       |                           |  |   |              |   |  |              |        |   |  |   |       |  
|Total assets                                            |  | $                 | 608  |   |                       | $ | 1,666 |                           |  | $ | 1,000        |   |  | $            | (786   | ) |  | $ | 2,488 |  
|                                                        |  |                   |      |   |                       |   |       |                           |  |   |              |   |  |              |        |   |  |   |       |  
|                                                        |  |                   |      |   |                      
|LIABILITIES:                                            |  |                   |      |   |                       |   |       |                           |  |   |              |   |  |              |        |   |  |   |       |  
|Current liabilities:                                    |  |                   |      |   |                       |   |       |                           |  |   |              |   |  |              |        |   |  |   |       |  
|Accounts payable                                        |  | $                 | 4    |   |                       | $ | 211   |                           |  | $ | 97           |   |  | $            | -      |   |  | $ | 312   |  
|Accrued cost of access                                  |  |                   | -    |   |                       |   | 74    |                           |  |   | 13           |   |  |              | -      |   |  |   | 87    |  
|Accounts and loans payable to affiliates                |  |                   | 30   |   |                       |   | 450   |                           |  |   | 155          |   |  |              | (635   | ) |  |   | -     |  
|Short term debt and current portion of long term debt   |  |                   | -    |   |                       |   | 3     |                           |  |   | 34           |   |  |              | -      |   |  |   | 37    |  
|Obligations under capital leases- current portion       |  |                   | -    |   |                       |   | 36    |                           |  |   | 13           |   |  |              | -      |   |  |   | 49    |  
|Deferred revenue - current portion                      |  |                   | -    |   |                       |   | 113   |                           |  |   | 61           |   |  |              | -      |   |  |   | 174   |  
|Other current liabilities                               |  |                   | 39   |   |                       |   | 197   |                           |  |   | 148          |   |  |              | -      |   |  |   | 384   |  
|                                                        |  |                   |      |   |                       |   |       |                           |  |   |              |   |  |              |        |   |  |   |       |  
|Total current liabilities                               |  |                   | 73   |   |                       |   | 1,084 |                           |  |   | 521          |   |  |              | (635   | ) |  |   | 1,043 |  
|                                                        |  |                   |      |   |                       |   |       |                           |  |   |              |   |  |              |        |   |  |   |       |  
|                                                        |  |                   |      |   |                      
|Loans payable to affiliates                             |  |                   | 8    |   |                       |   | 713   |                           |  |   | 131          |   |  |              | (852   | ) |  |   | -     |  
|Long term debt                                          |  |                   | 865  |   |                       |   | 7     |                           |  |   | 423          |   |  |              | -      |   |  |   | 1,295 |  
|Obligations under capital leases                        |  |                   | -    |   |                       |   | 66    |                           |  |   | 24           |   |  |              | -      |   |  |   | 90    |  
|Deferred revenue                                        |  |                   | -    |   |                       |   | 262   |                           |  |   | 72           |   |  |              | -      |   |  |   | 334   |  
|Other deferred liabilities                              |  |                   | 22   |   |                       |   | 45    |                           |  |   | 19           |   |  |              | -      |   |  |   | 86    |  
|                                                        |  |                   |      |   |                       |   |       |                           |  |   |              |   |  |              |        |   |  |   |       |  
|Total liabilities                                       |  |                   | 968  |   |                       |   | 2,177 |                           |  |   | 1,190        |   |  |              | (1,487 | ) |  |   | 2,848 |  
|                                                        |  |                   |      |   |                       |   |       |                           |  |   |              |   |  |              |        |   |  |   |       |  
|                                                        |  |                   |      |   |                      
|SHAREHOLDERS DEFICIT:                                  |  |                   |      |   |                       |   |       |                           |  |   |              |   |  |              |        |   |  |   |       |  
|Total shareholders deficit                             |  |                   | (360 | ) |                       |   | (511  | )                         |  |   | (190         | ) |  |              | 701    |   |  |   | (360  | )
|                                                        |  |                   |      |   |                       |   |       |                           |  |   |              |   |  |              |        |   |  |   |       |  
|Total liabilities and shareholders deficit             |  | $                 | 608  |   |                       | $ | 1,666 |                           |  | $ | 1,000        |   |  | $            | (786   | ) |  | $ | 2,488 |  
|                                                        |  |                   |      |   |                       |   |       |                           |  |   |              |   |  |              |        |   |  |   |       |  



19



---

##### Table of Contents



|                                                      |  |                                       |     |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|----------------------------------------------------- |  | ------------------------------------- | --- | - | --------------------- | - | ---- | ------------------------- |  | - | ------------ | - |  | ------------ | --- | - |  | - | ---- | -
|                                                      |  | Three Months Ended September 30, 2010 |    
|                                                      |  | ParentCompany                         |     |   | GuarantorSubsidiaries |   |      | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |    
|                                                      |  |                                       |     |   |                       |   |      | (unaudited)               |  |   |              |   |  |              |    
|Revenue                                               |  | $                                     | -   |   |                       | $ | 482  |                           |  | $ | 166          |   |  | $            | -   |   |  | $ | 648  |  
|Revenue - affiliates                                  |  |                                       | -   |   |                       |   | 18   |                           |  |   | 24           |   |  |              | (42 | ) |  |   | -    |  
|                                                      |  |                                       |     |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|Total revenue                                         |  |                                       | -   |   |                       |   | 500  |                           |  |   | 190          |   |  |              | (42 | ) |  |   | 648  |  
|                                                      |  |                                       |     |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|                                                      |  |                                       |     |   |                      
|Cost of revenue                                       |  |                                       | (3  | ) |                       |   | (326 | )                         |  |   | (111         | ) |  |              | -   |   |  |   | (440 | )
|Cost of revenue - affiliates                          |  |                                       | -   |   |                       |   | (24  | )                         |  |   | (18          | ) |  |              | 42  |   |  |   | -    |  
|                                                      |  |                                       |     |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|Total cost of revenue                                 |  |                                       | (3  | ) |                       |   | (350 | )                         |  |   | (129         | ) |  |              | 42  |   |  |   | (440 | )
|                                                      |  |                                       |     |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|Gross margin                                          |  |                                       | (3  | ) |                       |   | 150  |                           |  |   | 61           |   |  |              | -   |   |  |   | 208  |  
|                                                      |  |                                       |     |   |                      
|Selling, general and administrative                   |  |                                       | (2  | ) |                       |   | (73  | )                         |  |   | (24          | ) |  |              | -   |   |  |   | (99  | )
|Depreciation and amortization                         |  |                                       | (1  | ) |                       |   | (57  | )                         |  |   | (24          | ) |  |              | -   |   |  |   | (82  | )
|                                                      |  |                                       |     |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|Operating income (loss)                               |  |                                       | (6  | ) |                       |   | 20   |                           |  |   | 13           |   |  |              | -   |   |  |   | 27   |  
|                                                      |  |                                       |     |   |                      
|Other income (expense):                               |  |                                       |     |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|Interest income - affiliates                          |  |                                       | -   |   |                       |   | 1    |                           |  |   | 2            |   |  |              | (3  | ) |  |   | -    |  
|Interest expense                                      |  |                                       | (29 | ) |                       |   | (1   | )                         |  |   | (14          | ) |  |              | -   |   |  |   | (44  | )
|Interest expense - affiliates                         |  |                                       | -   |   |                       |   | (2   | )                         |  |   | (1           | ) |  |              | 3   |   |  |   | -    |  
|Other expense, net                                    |  |                                       | -   |   |                       |   | 13   |                           |  |   | 8            |   |  |              | -   |   |  |   | 21   |  
|Income from equity investments in subsidiaries        |  |                                       | 29  |   |                       |   | 7    |                           |  |   | -            |   |  |              | (36 | ) |  |   | -    |  
|                                                      |  |                                       |     |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|Income (loss) before provision for income taxes       |  |                                       | (6  | ) |                       |   | 38   |                           |  |   | 8            |   |  |              | (36 | ) |  |   | 4    |  
|                                                      |  |                                       |     |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|                                                      |  |                                       |     |   |                      
|Provision for income taxes                            |  |                                       | -   |   |                       |   | (9   | )                         |  |   | (1           | ) |  |              | -   |   |  |   | (10  | )
|Net income (loss)                                     |  |                                       | (6  | ) |                       |   | 29   |                           |  |   | 7            |   |  |              | (36 | ) |  |   | (6   | )
|                                                      |  |                                       |     |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|                                                      |  |                                       |     |   |                      
|Preferred stock dividends                             |  |                                       | (1  | ) |                       |   | -    |                           |  |   | -            |   |  |              | -   |   |  |   | (1   | )
|                                                      |  |                                       |     |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|Income (loss) applicable to common shareholders       |  | $                                     | (7  | ) |                       | $ | 29   |                           |  | $ | 7            |   |  | $            | (36 | ) |  | $ | (7   | )
|                                                      |  |                                       |     |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|                                                      | 
|                                                      |  | Three Months Ended September 30, 2009 |    
|                                                      |  | ParentCompany                         |     |   | GuarantorSubsidiaries |   |      | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |    
|                                                      |  |                                       |     |   |                       |   |      | (unaudited)               |  |   |              |   |  |              |    
|Revenue                                               |  | $                                     | -   |   |                       | $ | 476  |                           |  | $ | 167          |   |  | $            | -   |   |  | $ | 643  |  
|Revenue - affiliates                                  |  |                                       | -   |   |                       |   | 10   |                           |  |   | 8            |   |  |              | (18 | ) |  |   | -    |  
|                                                      |  |                                       |     |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|Total revenue                                         |  |                                       | -   |   |                       |   | 486  |                           |  |   | 175          |   |  |              | (18 | ) |  |   | 643  |  
|                                                      |  |                                       |     |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|                                                      |  |                                       |     |   |                      
|Cost of revenue                                       |  |                                       | (3  | ) |                       |   | (337 | )                         |  |   | (103         | ) |  |              | -   |   |  |   | (443 | )
|Cost of revenue - affiliates                          |  |                                       | -   |   |                       |   | (8   | )                         |  |   | (10          | ) |  |              | 18  |   |  |   | -    |  
|                                                      |  |                                       |     |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|Total cost of revenue                                 |  |                                       | (3  | ) |                       |   | (345 | )                         |  |   | (113         | ) |  |              | 18  |   |  |   | (443 | )
|                                                      |  |                                       |     |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|Gross margin                                          |  |                                       | (3  | ) |                       |   | 141  |                           |  |   | 62           |   |  |              | -   |   |  |   | 200  |  
|                                                      |  |                                       |     |   |                      
|Selling, general and administrative                   |  |                                       | (5  | ) |                       |   | (85  | )                         |  |   | (19          | ) |  |              | -   |   |  |   | (109 | )
|Depreciation and amortization                         |  |                                       | -   |   |                       |   | (61  | )                         |  |   | (28          | ) |  |              | -   |   |  |   | (89  | )
|                                                      |  |                                       |     |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|Operating income (loss)                               |  |                                       | (8  | ) |                       |   | (5   | )                         |  |   | 15           |   |  |              | -   |   |  |   | 2    |  
|                                                      |  |                                       |     |   |                      
|Other income (expense):                               |  |                                       |     |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|Interest income                                       |  |                                       | -   |   |                       |   | 1    |                           |  |   | 1            |   |  |              | -   |   |  |   | 2    |  
|Interest income - affiliates                          |  |                                       | -   |   |                       |   | 2    |                           |  |   | 2            |   |  |              | (4  | ) |  |   | -    |  
|Interest expense                                      |  |                                       | (13 | ) |                       |   | (10  | )                         |  |   | (16          | ) |  |              | -   |   |  |   | (39  | )
|Interest expense - affiliates                         |  |                                       | -   |   |                       |   | (2   | )                         |  |   | (2           | ) |  |              | 4   |   |  |   | -    |  
|Other expense, net                                    |  |                                       | (13 | ) |                       |   | (12  | )                         |  |   | (7           | ) |  |              | -   |   |  |   | (32  | )
|Intercompany debt forgiveness income (expense)        |  |                                       | -   |   |                       |   | (29  | )                         |  |   | 29           |   |  |              | -   |   |  |   | -    |  
|Income (loss) from equity investments in subsidiaries |  |                                       | (39 | ) |                       |   | 21   |                           |  |   | -            |   |  |              | 18  |   |  |   | -    |  
|                                                      |  |                                       |     |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|Income (loss) before provision for income taxes       |  |                                       | (73 | ) |                       |   | (34  | )                         |  |   | 22           |   |  |              | 18  |   |  |   | (67  | )
|                                                      |  |                                       |     |   |                      
|Provision for income taxes                            |  |                                       | -   |   |                       |   | (5   | )                         |  |   | (1           | ) |  |              | -   |   |  |   | (6   | )
|                                                      |  |                                       |     |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|Net income (loss)                                     |  |                                       | (73 | ) |                       |   | (39  | )                         |  |   | 21           |   |  |              | 18  |   |  |   | (73  | )
|                                                      |  |                                       |     |   |                      
|Preferred stock dividends                             |  |                                       | (1  | ) |                       |   | -    |                           |  |   | -            |   |  |              | -   |   |  |   | (1   | )
|                                                      |  |                                       |     |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|Income (loss) applicable to common shareholders       |  | $                                     | (74 | ) |                       | $ | (39  | )                         |  | $ | 21           |   |  | $            | 18  |   |  | $ | (74  | )
|                                                      |  |                                       |     |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  



20



---

##### Table of Contents



|                                                      |  |                                      |      |   |                       |   |        |                           |  |   |              |   |  |              |     |   |  |   |        |  
|----------------------------------------------------- |  | ------------------------------------ | ---- | - | --------------------- | - | ------ | ------------------------- |  | - | ------------ | - |  | ------------ | --- | - |  | - | ------ | -
|                                                      |  | Nine Months Ended September 30, 2010 |     
|                                                      |  | ParentCompany                        |      |   | GuarantorSubsidiaries |   |        | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |    
|                                                      |  |                                      |      |   |                       |   |        | (unaudited)               |  |   |              |   |  |              |    
|Revenue                                               |  | $                                    | -    |   |                       | $ | 1,425  |                           |  | $ | 501          |   |  | $            | -   |   |  | $ | 1,926  |  
|Revenue - affiliates                                  |  |                                      | -    |   |                       |   | 29     |                           |  |   | 54           |   |  |              | (83 | ) |  |   | -      |  
|                                                      |  |                                      |      |   |                       |   |        |                           |  |   |              |   |  |              |     |   |  |   |        |  
|Total revenue                                         |  |                                      | -    |   |                       |   | 1,454  |                           |  |   | 555          |   |  |              | (83 | ) |  |   | 1,926  |  
|                                                      |  |                                      |      |   |                       |   |        |                           |  |   |              |   |  |              |     |   |  |   |        |  
|                                                      |  |                                      |      |   |                      
|Cost of revenue                                       |  |                                      | (9   | ) |                       |   | (989   | )                         |  |   | (328         | ) |  |              | -   |   |  |   | (1,326 | )
|Cost of revenue - affiliates                          |  |                                      | -    |   |                       |   | (54    | )                         |  |   | (29          | ) |  |              | 83  |   |  |   | -      |  
|                                                      |  |                                      |      |   |                       |   |        |                           |  |   |              |   |  |              |     |   |  |   |        |  
|Total cost of revenue                                 |  |                                      | (9   | ) |                       |   | (1,043 | )                         |  |   | (357         | ) |  |              | 83  |   |  |   | (1,326 | )
|                                                      |  |                                      |      |   |                       |   |        |                           |  |   |              |   |  |              |     |   |  |   |        |  
|Gross margin                                          |  |                                      | (9   | ) |                       |   | 411    |                           |  |   | 198          |   |  |              | -   |   |  |   | 600    |  
|                                                      |  |                                      |      |   |                      
|Selling, general and administrative                   |  |                                      | (12  | ) |                       |   | (229   | )                         |  |   | (80          | ) |  |              | -   |   |  |   | (321   | )
|Depreciation and amortization                         |  |                                      | (2   | ) |                       |   | (175   | )                         |  |   | (75          | ) |  |              | -   |   |  |   | (252   | )
|                                                      |  |                                      |      |   |                       |   |        |                           |  |   |              |   |  |              |     |   |  |   |        |  
|Operating income (loss)                               |  |                                      | (23  | ) |                       |   | 7      |                           |  |   | 43           |   |  |              | -   |   |  |   | 27     |  
|                                                      |  |                                      |      |   |                      
|Other income (expense):                               |  |                                      |      |   |                       |   |        |                           |  |   |              |   |  |              |     |   |  |   |        |  
|Interest income                                       |  |                                      | -    |   |                       |   | 1      |                           |  |   | -            |   |  |              | -   |   |  |   | 1      |  
|Interest income - affiliates                          |  |                                      | -    |   |                       |   | 4      |                           |  |   | 5            |   |  |              | (9  | ) |  |   | -      |  
|Interest expense                                      |  |                                      | (85  | ) |                       |   | (11    | )                         |  |   | (45          | ) |  |              | -   |   |  |   | (141   | )
|Interest expense - affiliates                         |  |                                      | -    |   |                       |   | (5     | )                         |  |   | (4           | ) |  |              | 9   |   |  |   | -      |  
|Other expense, net                                    |  |                                      | -    |   |                       |   | (29    | )                         |  |   | (8           | ) |  |              | -   |   |  |   | (37    | )
|Loss from equity investments in subsidiaries          |  |                                      | (64  | ) |                       |   | (11    | )                         |  |   | -            |   |  |              | 75  |   |  |   | -      |  
|                                                      |  |                                      |      |   |                       |   |        |                           |  |   |              |   |  |              |     |   |  |   |        |  
|Loss before provision for income taxes                |  |                                      | (172 | ) |                       |   | (44    | )                         |  |   | (9           | ) |  |              | 75  |   |  |   | (150   | )
|                                                      |  |                                      |      |   |                      
|Provision for income taxes                            |  |                                      | -    |   |                       |   | (20    | )                         |  |   | (2           | ) |  |              | -   |   |  |   | (22    | )
|                                                      |  |                                      |      |   |                       |   |        |                           |  |   |              |   |  |              |     |   |  |   |        |  
|Net loss                                              |  |                                      | (172 | ) |                       |   | (64    | )                         |  |   | (11          | ) |  |              | 75  |   |  |   | (172   | )
|                                                      |  |                                      |      |   |                      
|Preferred stock dividends                             |  |                                      | (3   | ) |                       |   | -      |                           |  |   | -            |   |  |              | -   |   |  |   | (3     | )
|                                                      |  |                                      |      |   |                       |   |        |                           |  |   |              |   |  |              |     |   |  |   |        |  
|Loss applicable to common shareholders                |  | $                                    | (175 | ) |                       | $ | (64    | )                         |  | $ | (11          | ) |  | $            | 75  |   |  | $ | (175   | )
|                                                      |  |                                      |      |   |                       |   |        |                           |  |   |              |   |  |              |     |   |  |   |        |  
|                                                      | 
|                                                      |  | Nine Months Ended September 30, 2009 |     
|                                                      |  | ParentCompany                        |      |   | GuarantorSubsidiaries |   |        | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |    
|                                                      |  |                                      |      |   |                       |   |        | (unaudited)               |  |   |              |   |  |              |    
|Revenue                                               |  | $                                    | -    |   |                       | $ | 1,399  |                           |  | $ | 486          |   |  | $            | -   |   |  | $ | 1,885  |  
|Revenue - affiliates                                  |  |                                      | -    |   |                       |   | 21     |                           |  |   | 34           |   |  |              | (55 | ) |  |   | -      |  
|                                                      |  |                                      |      |   |                       |   |        |                           |  |   |              |   |  |              |     |   |  |   |        |  
|Total revenue                                         |  |                                      | -    |   |                       |   | 1,420  |                           |  |   | 520          |   |  |              | (55 | ) |  |   | 1,885  |  
|                                                      |  |                                      |      |   |                       |   |        |                           |  |   |              |   |  |              |     |   |  |   |        |  
|                                                      |  |                                      |      |   |                      
|Cost of revenue                                       |  |                                      | (10  | ) |                       |   | (986   | )                         |  |   | (309         | ) |  |              | -   |   |  |   | (1,305 | )
|Cost of revenue - affiliates                          |  |                                      | -    |   |                       |   | (34    | )                         |  |   | (21          | ) |  |              | 55  |   |  |   | -      |  
|                                                      |  |                                      |      |   |                       |   |        |                           |  |   |              |   |  |              |     |   |  |   |        |  
|Total cost of revenue                                 |  |                                      | (10  | ) |                       |   | (1,020 | )                         |  |   | (330         | ) |  |              | 55  |   |  |   | (1,305 | )
|                                                      |  |                                      |      |   |                       |   |        |                           |  |   |              |   |  |              |     |   |  |   |        |  
|Gross margin                                          |  |                                      | (10  | ) |                       |   | 400    |                           |  |   | 190          |   |  |              | -   |   |  |   | 580    |  
|                                                      |  |                                      |      |   |                      
|Selling, general and administrative                   |  |                                      | (15  | ) |                       |   | (221   | )                         |  |   | (85          | ) |  |              | -   |   |  |   | (321   | )
|Depreciation and amortization                         |  |                                      | (1   | ) |                       |   | (170   | )                         |  |   | (79          | ) |  |              | -   |   |  |   | (250   | )
|                                                      |  |                                      |      |   |                       |   |        |                           |  |   |              |   |  |              |     |   |  |   |        |  
|Operating income (loss)                               |  |                                      | (26  | ) |                       |   | 9      |                           |  |   | 26           |   |  |              | -   |   |  |   | 9      |  
|                                                      |  |                                      |      |   |                      
|Other income (expense):                               |  |                                      |      |   |                       |   |        |                           |  |   |              |   |  |              |     |   |  |   |        |  
|Interest income                                       |  |                                      | -    |   |                       |   | 6      |                           |  |   | 1            |   |  |              | -   |   |  |   | 7      |  
|Interest income - affiliates                          |  |                                      | -    |   |                       |   | 3      |                           |  |   | 5            |   |  |              | (8  | ) |  |   | -      |  
|Interest expense                                      |  |                                      | (36  | ) |                       |   | (33    | )                         |  |   | (44          | ) |  |              | -   |   |  |   | (113   | )
|Interest expense - affiliates                         |  |                                      | -    |   |                       |   | (5     | )                         |  |   | (3           | ) |  |              | 8   |   |  |   | -      |  
|Other income (expense), net                           |  |                                      | (14  | ) |                       |   | 11     |                           |  |   | 14           |   |  |              | -   |   |  |   | 11     |  
|Intercompany debt forgiveness income (expense)        |  |                                      | -    |   |                       |   | (33    | )                         |  |   | 33           |   |  |              | -   |   |  |   | -      |  
|Income (loss) from equity investments in subsidiaries |  |                                      | (28  | ) |                       |   | 29     |                           |  |   | -            |   |  |              | (1  | ) |  |   | -      |  
|                                                      |  |                                      |      |   |                       |   |        |                           |  |   |              |   |  |              |     |   |  |   |        |  
|Income (loss) before provision for income taxes       |  |                                      | (104 | ) |                       |   | (13    | )                         |  |   | 32           |   |  |              | (1  | ) |  |   | (86    | )
|                                                      |  |                                      |      |   |                      
|Provision for income taxes                            |  |                                      | -    |   |                       |   | (15    | )                         |  |   | (3           | ) |  |              | -   |   |  |   | (18    | )
|                                                      |  |                                      |      |   |                       |   |        |                           |  |   |              |   |  |              |     |   |  |   |        |  
|Net income (loss)                                     |  |                                      | (104 | ) |                       |   | (28    | )                         |  |   | 29           |   |  |              | (1  | ) |  |   | (104   | )
|                                                      |  |                                      |      |   |                      
|Preferred stock dividends                             |  |                                      | (3   | ) |                       |   | -      |                           |  |   | -            |   |  |              | -   |   |  |   | (3     | )
|                                                      |  |                                      |      |   |                       |   |        |                           |  |   |              |   |  |              |     |   |  |   |        |  
|Income (loss) applicable to common shareholders       |  | $                                    | (107 | ) |                       | $ | (28    | )                         |  | $ | 29           |   |  | $            | (1  | ) |  | $ | (107   | )
|                                                      |  |                                      |      |   |                       |   |        |                           |  |   |              |   |  |              |     |   |  |   |        |  



21



---

##### Table of Contents



|                                                             |  |                                      |      |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|------------------------------------------------------------ |  | ------------------------------------ | ---- | - | --------------------- | - | ---- | ------------------------- |  | - | ------------ | - |  | ------------ | --- | - |  | - | ---- | -
|                                                             |  | Nine Months Ended September 30, 2010 |     
|                                                             |  | ParentCompany                        |      |   | GuarantorSubsidiaries |   |      | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |    
|                                                             |  |                                      |      |   |                       |   |      | (unaudited)               |  |   |              |   |  |              |    
|Cash flows provided by (used in) operating activities        |  | $                                    | (116 | ) |                       | $ | 118  |                           |  | $ | 32           |   |  | $            | -   |   |  | $ | 34   |  
|                                                             |  |                                      |      |   |                      
|Cash flows provided by (used in) investing activities:       |  |                                      |      |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|Purchases of property and equipment                          |  |                                      | -    |   |                       |   | (85  | )                         |  |   | (35          | ) |  |              | -   |   |  |   | (120 | )
|Purchases of marketable securities                           |  |                                      | -    |   |                       |   | (10  | )                         |  |   | -            |   |  |              | -   |   |  |   | (10  | )
|Proceeds from sale of marketable securities                  |  |                                      | -    |   |                       |   | 8    |                           |  |   | -            |   |  |              | -   |   |  |   | 8    |  
|Loans made to affiliates                                     |  |                                      | (1   | ) |                       |   | (20  | )                         |  |   | -            |   |  |              | 21  |   |  |   | -    |  
|Loan repayments from affiliates                              |  |                                      | 26   |   |                       |   | -    |                           |  |   | -            |   |  |              | (26 | ) |  |   | -    |  
|Investment in subsidiaries                                   |  |                                      | -    |   |                       |   | (1   | )                         |  |   | -            |   |  |              | 1   |   |  |   | -    |  
|Change in restricted cash and cash equivalents               |  |                                      | -    |   |                       |   | 7    |                           |  |   | (8           | ) |  |              | -   |   |  |   | (1   | )
|                                                             |  |                                      |      |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|Net cash flows provided by (used in) investing activities    |  |                                      | 25   |   |                       |   | (101 | )                         |  |   | (43          | ) |  |              | (4  | ) |  |   | (123 | )
|                                                             |  |                                      |      |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|                                                             |  |                                      |      |   |                      
|Cash flows provided by (used in) financing activities:       |  |                                      |      |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|Repayment of capital lease obligations                       |  |                                      | -    |   |                       |   | (31  | )                         |  |   | (10          | ) |  |              | -   |   |  |   | (41  | )
|Repayment of long term debt (including current portion)      |  |                                      | -    |   |                       |   | (6   | )                         |  |   | (3           | ) |  |              | -   |   |  |   | (9   | )
|Finance costs incurred                                       |  |                                      | (2   | ) |                       |   | -    |                           |  |   | -            |   |  |              | -   |   |  |   | (2   | )
|Payment of employee taxes on share-based compensation        |  |                                      | -    |   |                       |   | (1   | )                         |  |   | -            |   |  |              | -   |   |  |   | (1   | )
|Proceeds from affiliate loans                                |  |                                      | -    |   |                       |   | 1    |                           |  |   | 20           |   |  |              | (21 | ) |  |   | -    |  
|Repayment of loans from affiliates                           |  |                                      | -    |   |                       |   | (26  | )                         |  |   | -            |   |  |              | 26  |   |  |   | -    |  
|Capital contributions from parent                            |  |                                      | -    |   |                       |   | -    |                           |  |   | 1            |   |  |              | (1  | ) |  |   | -    |  
|                                                             |  |                                      |      |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|Net cash flows provided by (used in) financing activities    |  |                                      | (2   | ) |                       |   | (63  | )                         |  |   | 8            |   |  |              | 4   |   |  |   | (53  | )
|                                                             |  |                                      |      |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|Effect of exchange rate changes on cash and cash equivalents |  |                                      | -    |   |                       |   | (25  | )                         |  |   | 1            |   |  |              | -   |   |  |   | (24  | )
|                                                             |  |                                      |      |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|Net decrease in cash and cash equivalents                    |  |                                      | (93  | ) |                       |   | (71  | )                         |  |   | (2           | ) |  |              | -   |   |  |   | (166 | )
|Cash and cash equivalents, beginning of period               |  |                                      | 95   |   |                       |   | 293  |                           |  |   | 89           |   |  |              | -   |   |  |   | 477  |  
|                                                             |  |                                      |      |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|Cash and cash equivalents, end of period                     |  | $                                    | 2    |   |                       | $ | 222  |                           |  | $ | 87           |   |  | $            | -   |   |  | $ | 311  |  
|                                                             |  |                                      |      |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  



|                                                             |  |                                      |      |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|------------------------------------------------------------ |  | ------------------------------------ | ---- | - | --------------------- | - | ---- | ------------------------- |  | - | ------------ | - |  | ------------ | --- | - |  | - | ---- | -
|                                                             |  | Nine Months Ended September 30, 2009 |     
|                                                             |  | ParentCompany                        |      |   | GuarantorSubsidiaries |   |      | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |    
|                                                             |  |                                      |      |   |                       |   |      | (unaudited)               |  |   |              |   |  |              |    
|Cash flows provided by (used in) operating activities        |  | $                                    | (246 | ) |                       | $ | 338  |                           |  | $ | 43           |   |  | $            | -   |   |  | $ | 135  |  
|                                                             |  |                                      |      |   |                      
|Cash flows provided by (used in) investing activities:       |  |                                      |      |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|Purchases of property and equipment                          |  |                                      | -    |   |                       |   | (101 | )                         |  |   | (24          | ) |  |              | -   |   |  |   | (125 | )
|Proceeds from sale of marketable securities                  |  |                                      | 4    |   |                       |   | -    |                           |  |   | -            |   |  |              | -   |   |  |   | 4    |  
|Loans made to affiliates                                     |  |                                      | -    |   |                       |   | (15  | )                         |  |   | -            |   |  |              | 15  |   |  |   | -    |  
|Loan repayments from affiliates                              |  |                                      | -    |   |                       |   | 12   |                           |  |   | -            |   |  |              | (12 | ) |  |   | -    |  
|Change in restricted cash and cash equivalents               |  |                                      | -    |   |                       |   | (2   | )                         |  |   | -            |   |  |              | -   |   |  |   | (2   | )
|                                                             |  |                                      |      |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|Net cash flows provided by (used in) investing activities    |  |                                      | 4    |   |                       |   | (106 | )                         |  |   | (24          | ) |  |              | 3   |   |  |   | (123 | )
|                                                             |  |                                      |      |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|                                                             |  |                                      |      |   |                      
|Cash flows provided by (used in) financing activities:       |  |                                      |      |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|Proceeds from short and long term debt                       |  |                                      | 735  |   |                       |   | 2    |                           |  |   | 4            |   |  |              | -   |   |  |   | 741  |  
|Repayment of capital lease obligations                       |  |                                      | -    |   |                       |   | (35  | )                         |  |   | (12          | ) |  |              | -   |   |  |   | (47  | )
|Repayment of long term debt (including current portion)      |  |                                      | (344 | ) |                       |   | (232 | )                         |  |   | (16          | ) |  |              | -   |   |  |   | (592 | )
|Premium paid on extinguishment of debt                       |  |                                      | (3   | ) |                       |   | (11  | )                         |  |   | -            |   |  |              | -   |   |  |   | (14  | )
|Finance costs incurred                                       |  |                                      | (24  | ) |                       |   | -    |                           |  |   | -            |   |  |              | -   |   |  |   | (24  | )
|Payment of employee taxes on share-based compensation        |  |                                      | -    |   |                       |   | (10  | )                         |  |   | (2           | ) |  |              | -   |   |  |   | (12  | )
|Proceeds from affiliate loans                                |  |                                      | -    |   |                       |   | -    |                           |  |   | 15           |   |  |              | (15 | ) |  |   | -    |  
|Repayment of loans from affiliates                           |  |                                      | -    |   |                       |   | -    |                           |  |   | (12          | ) |  |              | 12  |   |  |   | -    |  
|                                                             |  |                                      |      |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|Net cash flows provide by (used) in financing activities     |  |                                      | 364  |   |                       |   | (286 | )                         |  |   | (23          | ) |  |              | (3  | ) |  |   | 52   |  
|                                                             |  |                                      |      |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|                                                             |  |                                      |      |   |                      
|Effect of exchange rate changes on cash and cash equivalents |  |                                      | -    |   |                       |   | 2    |                           |  |   | 3            |   |  |              | -   |   |  |   | 5    |  
|                                                             |  |                                      |      |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|Net increase (decrease) in cash and cash equivalents         |  |                                      | 122  |   |                       |   | (52  | )                         |  |   | (1           | ) |  |              | -   |   |  |   | 69   |  
|Cash and cash equivalents, beginning of period               |  |                                      | 2    |   |                       |   | 285  |                           |  |   | 73           |   |  |              | -   |   |  |   | 360  |  
|                                                             |  |                                      |      |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  
|Cash and cash equivalents, end of period                     |  | $                                    | 124  |   |                       | $ | 233  |                           |  | $ | 72           |   |  | $            | -   |   |  | $ | 429  |  
|                                                             |  |                                      |      |   |                       |   |      |                           |  |   |              |   |  |              |     |   |  |   |      |  



22



---

##### Table of Contents



13. SUBSEQUENT EVENT

Business Acquisition

On October 29, 2010, the Company acquired 100% of the capital stock of Genesis Networks Inc. (Genesis), a
privately held company providing high performance rich media and video-based applications, serving many of the worlds major broadcasters, producers and aggregators of specialized programming. The Company paid a purchase price for Genesis of
approximately $8 and repaid a portion of the debt and other liabilities assumed as part of the acquisition for an aggregate consideration of $27. The purchase price is subject to adjustment to the extent that Genesiss final closing date
working capital varies from the $8 deficit assumed at the acquisition date.

The Genesis network connects 70
cities on five continents and links important international media centers through 225 on-net points. The acquisition of Genesis will enable us to provide value-added solutions to address specialized video requirements across multiple industries. The
results of Genesiss operations will be included in the Companys consolidated financial statements starting on the acquisition date.



23



---

##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion of our results of operations and current financial position. This discussion should be read
in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this report and the audited consolidated financial statements and related notes included in our annual report on Form 10-K for the
year ended December 31, 2009.

As used in this quarterly report on Form 10-Q, references to the
Company, we, us, our or similar terms include Global Crossing Limited and its consolidated subsidiaries.

Cautionary Note Regarding Forward-Looking Statements

Our disclosure and analysis in this quarterly report on Form 10-Q contains certain forward-looking statements,
as such term is defined in Section 21E of the Exchange Act of 1934. These statements set forth anticipated results based on managements plans and assumptions. From time to time, we also provide forward looking statements in other
materials we release to the public as well as oral forward-looking statements. Such statements give our current expectations or forecasts of future events; they do not relate strictly to historical or current facts. We have attempted to identify
such statements by using words such as anticipate, estimate, expect, project, intend, plan, believe, will, could and similar expressions in
connection with any discussion of future events or future operating or financial performance or strategies. Such forward-looking statements include, but are not limited to, statements regarding:



| |  |  | our services, including the development and deployment of data products and services based on internet protocol (IP) and other
technologies and strategies to expand our targeted customer base and broaden our sales channels and the opening and expansion of our data center and collocation services;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the operation of our network, including with respect to the development of IP-based services and data center and collocation services;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our liquidity and financial resources, including anticipated capital expenditures, funding of capital expenditures, anticipated levels of
indebtedness, and the ability to raise capital through financing activities, including capital leases and similar financings;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | trends related to and managements expectations regarding results of operations, required capital expenditures, integration of acquired
businesses, revenues from existing and new lines of business and sales channels, Free Cash Flow, OIBDA, gross margin, order volumes, expenses and cash flows, including but not limited to those statements set forth in this Item 2; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | sales efforts, expenses, interest rates, foreign exchange rates, and the outcome of contingencies, such as regulatory, legal and tax proceedings and
audits.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------

We cannot guarantee that any forward-looking statement will be realized.
Achievement of future results is subject to risks, uncertainties and potentially inaccurate assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary
materially from past results and those anticipated, estimated or projected. Investors should bear this in mind as they consider forward-looking statements.

We undertake no obligation to update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on
related subjects in our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Also note that we provide the following cautionary discussion of risks and uncertainties related to our businesses. These are
factors that we believe, individually or in the aggregate, could cause our actual results to differ materially from expected and historical results. We note these factors for investors as permitted by Section 21E of the Exchange Act of 1934.
You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties.

Our forward-looking statements are subject to a variety of factors that could cause actual results to differ
significantly from current beliefs and expectations. In addition to the risk factors identified under the captions below, the operation and results of our business are subject to risks and uncertainties identified elsewhere in this quarterly report
on Form 10-Q as well as general risks and uncertainties such as those relating to general economic conditions and demand for telecommunications services.

Risks Related to Liquidity and Financial Resources



| |  |  | We face a number of risks related to current global economic conditions and global credit markets. Turbulence in the U.S. and international markets
and economies and prolonged declines in business and consumer spending may adversely affect our liquidity and financial condition.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | For most periods since our inception, we have incurred substantial operating losses and there can be no assurance that our business will generate
sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to fund our liquidity needs.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



24



---

##### Table of Contents



| |  |  | We may not be able to achieve anticipated economies of scale, which could prevent us from realizing necessary improvements in profitability and cash
flows.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The sale of IRUs and similar prepayments for services are an important but volatile source of cash flows for us. If customers that traditionally
prepay for services were to switch to monthly payment plans due to adverse economic and credit market conditions or otherwise, our liquidity would be adversely affected.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Cost of access represents our single largest expense and gives rise to material current liabilities. If demands from access vendors that we pay for
services on a more timely basis continue to a greater degree than anticipated, or if access vendors were to insist on significant security deposits, we could be prevented from meeting our cash flow projections and our long-term liquidity
requirements.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The covenants in our major debt instruments limit our financial and operational flexibility. Such debt instruments generally contain covenants and
events of default that are customary for high-yield debt facilities. These covenants also impose significant restrictions on the ability of entities in our ROW and GC Impsat Segments from making intercompany funds transfers to entities in our GCUK
Segment and vice versa. Additionally, the certificate of designations governing our 2% cumulative preferred shares requires the holders approval for certain major corporate actions by us and/or our subsidiaries.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our international corporate structure limits the availability of our consolidated cash resources for intercompany funding purposes and reduces our
financial flexibility. Legal restrictions arising out of our international corporate structure include foreign exchange controls on the expatriation of funds that are particularly prevalent in Latin America. Also see Risks related to our
Operations, below.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We cannot predict our future tax liabilities. If we become subject to increased levels of taxation or if tax contingencies are resolved adversely,
our results of operations could be adversely affected.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | GCL and its Bermuda incorporated subsidiaries have received an exemption, until March 2016, from the imposition of income and similar taxes under
Bermuda law, although such exemption does not apply to Bermuda residents or to taxes payable in relation to land leased in Bermuda. There can be no assurance that such exemption will extend beyond 2016.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We and certain of our subsidiaries are Bermuda-based companies, and we believe that a significant portion of our income will not be subject to tax
in Bermuda or in other countries in which we conduct activities or in which our customers are located. This position is subject to review and possible challenge by taxing authorities and to possible changes in law that may have a retroactive effect.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Certain North American and European hourly and salaried employees are covered by our defined benefit pension plans that may require additional
funding and negatively impact our cash flows.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Risks Related to our Operations



| |  |  | Our revenue and operating results may vary significantly from quarter to quarter due to a number of factors, many of which are outside of our
control. Results in future quarters may be below analysts and investors expectations, as well as our own forecasts.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our rights to the use of the fiber that make up our network may be affected by the financial health of our fiber providers.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | We may not be able to continue to connect our network to incumbent carriers networks or maintain Internet peering arrangements on favorable
terms.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Network Security Agreement imposes significant requirements on us. A violation of the agreement could have severe consequences.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | It is expensive and difficult to switch new customers to our network, and lack of cooperation of incumbent carriers can slow the new customer
connection process.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The operation, administration, maintenance and repair of our systems require significant expenses and are subject to risks that could lead to
disruptions in our services and the failure of our systems to operate as intended for their full design life.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We may not be able to retain our key management personnel or attract additional skilled management personnel which could have a material adverse
effect on our business, results of operations and financial condition.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our recent capital expenditure levels may not be sustainable in the future, particularly as our business continues to grow. Our ability to fund
future capital expenditures may be limited by our ability to generate sufficient cash flow, including raising any necessary financings.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Intellectual property and proprietary rights of others could prevent us from using necessary technology.
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | We may not be successful in making or integrating acquisitions with our business or may not be able to realize the benefits we anticipate from such
acquisitions.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We have substantial international operations and face political, legal, tax, regulatory and other risks from our operations in foreign
jurisdictions.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We are subject to the Foreign Corrupt Practices Act (FCPA) and other anticorruption laws, and our failure to comply therewith could
result in penalties which could harm our reputation and have a material adverse effect on our business, results of operations and financial condition. Also see Part II, Item 1A of this quarterly report on Form 10-Q.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



25



---

##### Table of Contents



| |  |  | We are exposed to significant currency transfer restrictions and currency exchange rate risks and our net loss may suffer due to currency
translations as certain of our current and prospective customers derive their revenue in currencies other than U.S. Dollars but are invoiced by us in U.S. Dollars. The obligations of customers with substantial revenue in foreign currencies may be
subject to unpredictable and indeterminate increases in the event that such currencies depreciate in value relative to the U.S. Dollar. Also see Part II, Item 1A of this quarterly report on Form 10-Q.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Economic and political conditions in Latin America pose numerous risks to our operations.
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | Inflation and certain government measures to curb inflation in some Latin American countries may have adverse effects on their economies, our
business and our operations.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Many of our most important government customers have the right to terminate their contracts with us if a change of control occurs or to reduce the
services they purchase from us for any reason.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Many countries in the European Union, including, among others, the U.K., have announced austerity measures aimed at reducing costs in a wide range
of areas, including telecommunications. The implementation of pricing actions and the reduction of spending by governmental entities could have a negative effect on our future revenue performance, in particular, that of the GCUK Segment.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Risks Related to Competition and our Industry



| |  |  | The prices that we charge for our services have been decreasing, and we expect that these decreases will continue over time.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | Technological advances and regulatory changes are eroding traditional barriers between formerly distinct telecommunications markets, which could
increase the competition we face and put downward pressure on prices.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Many of our existing and potential competitors have significant competitive advantages, which could place us at a cost and price disadvantage.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Failure to develop and introduce new services could affect our ability to compete in the industry.
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | Our selection of technology could prove to be incorrect, ineffective or unacceptably costly, which would limit our ability to compete effectively.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our operations are subject to evolving regulation in each of the countries in which we operate and require us to obtain and maintain a number of
governmental licenses and permits. If we fail to comply with regulatory requirements or to obtain and maintain those licenses and permits, we may not be able to conduct our business.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Terrorist attacks and other acts of violence or war may adversely affect the financial markets and our business and operations.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------

Risks Related to our Common Stock



| |  |  | We have a very substantial overhang of common stock and a majority shareholder that owns a substantial portion of our common stock and preferred
stock convertible into common stock. Future sales of our common stock by our majority shareholder could significantly increase the market supply of such shares and future acquisitions by our majority shareholder will decrease the liquidity of our
common stock, each of which may negatively affect the market price of our shares and impact our ability to raise capital.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A subsidiary of Singapore Technologies Telemedia Pte. Ltd (ST Telemedia) is our majority stockholder and the voting rights of other
stockholders are therefore limited in practical effect.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Other than ownership by ST Telemedia and its affiliates, which cannot exceed 66.25% without prior Federal Communications Commission
(FCC) approval, federal law generally prohibits more than 25% of our capital stock from being owned by foreign persons.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Other Risks



| |  |  | We are exposed to legal proceedings and contingent liabilities, including those related to Impsat that could result in material losses that we have
not reserved against.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our real estate restructuring reserve represents a material liability, the calculation of which involves significant estimation.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------

For a more detailed description of many of these risks and important additional risk factors, see
Item 1A, BusinessCautionary Factors That May Affect Future Results, in our annual report on Form 10-K for the year ended December 31, 2009.



26



---

##### Table of Contents



Executive
Summary

Overview

We are a global communications service provider. We offer a full range of data, voice and collaboration services and deliver service to approximately 40 percent of the companies in the Fortune 500, as
well as 700 carriers, mobile operators and Internet service providers around the world. We deliver converged IP services to more than 700 cities in more than 70 countries around the globe. Our operations are based principally in North America,
Europe, Latin America and a portion of the Asia/Pacific region.

We report our financial results based on
three separate operating segments: (i) Global Crossing (U.K.) Telecommunications Ltd (GCUK) and its subsidiaries (collectively, the GCUK Segment) which provides services to customers primarily based in the U.K.;
(ii) GC Impsat Holdings I Plc (GC Impsat) and its subsidiaries (collectively, the GC Impsat Segment) which provides services to customers in Latin America; and (iii) GCL and its other subsidiaries (collectively, the
Rest of World Segment or ROW Segment) which represents all our operations outside of the GCUK Segment and the GC Impsat Segment and operates primarily in North America, with smaller operations in Europe, Latin America, and a
portion of the Asia/Pacific region and includes our subsea fiber network. See below in this Item 2 and Note 10, Segment Reporting, to our condensed consolidated financial statements included in this quarterly report on Form 10-Q for
further information regarding our operating segments.

Third Quarter 2010 Highlights

Revenue from our enterprise, carrier data and indirect sales channel, which is the primary focus of our business strategy,
increased $15 million, or 3%, to $568 million in the third quarter of 2010 compared to $553 million in the same period in 2009. This increase was primarily due to growth in the existing customer base and the acquisition of new customers in specific
enterprise and carrier target markets, partially offset by $8 million of adverse foreign currency movements in the three months ended September 30, 2010 compared with the same period of 2009. Revenue in the three months ended September 30,
2009 included $4 million for one customers buyout of certain long term obligations in our enterprise, carrier data and indirect sales channel business.

Consolidated OIBDA, which is a key measure we use to evaluate our profitability and operating performance, was $109 million in the third quarter of 2010 compared to $91 million in the same period in 2009
(see Use of Certain non-GAAP Measures below in this Item 2 for further information about OIBDA). Consolidated OIBDA increased primarily as a result of: (i) revenue growth and improved sales mix; (ii) lower non-income
taxes; (iii) lower real estate costs; (iv) lower accrued incentive compensation; and (v) a decrease in bad debt expenses.

Our consolidated Free Cash Flow, which is a relevant indicator of our ability to generate cash to pay debt and a key measure we use to evaluate our liquidity, decreased $53 million to negative $1 million
in the third quarter of 2010 compared to $52 million in the same period in 2009 (see Use of Certain non-GAAP Measures below in this Item 2 for further information about Free Cash Flow). This decrease was primarily due to higher cash
interest payments and a significant improvement in the collection of receivables in the prior year quarter, partially offset by lower capital expenditures in the current period.

Use of Certain non-GAAP Measures

OIBDA

The Companys chief operating decision makers
(CODMs) measure and evaluate our reportable segments based on operating income (loss) before depreciation and amortization (OIBDA). OIBDA differs from operating income (loss), as calculated in accordance with accounting
principles generally accepted in the United States of America (U.S. GAAP) and reflected in our condensed consolidated financial statements, in that it excludes depreciation and amortization. Such excluded expenses primarily reflect the
non-cash impacts of historical capital investments, as opposed to the cash impacts of capital expenditures made in recent periods. In addition, OIBDA does not give effect to cash used for debt service requirements and thus does not reflect available
funds for reinvestment, distributions or other discretionary uses.

OIBDA is an important part of our internal
reporting and planning processes and a key measure to evaluate profitability and operating performance, make comparisons between periods, and to make resource allocation decisions.



27



---

##### Table of Contents



There
are material limitations to using non-U.S. GAAP financial measures. Our calculation of OIBDA may differ from similarly titled measures used by other companies, and may not be comparable to those other measures. Additionally, OIBDA does not include
certain significant items such as depreciation and amortization, interest income, interest expense, income taxes, other non-operating income or expense items, and preferred stock dividends. OIBDA should be considered in addition to, and not as a
substitute for, other measures of financial performance reported in accordance with U.S. GAAP.

We believe
that OIBDA is a relevant indicator of operating performance, especially in a capital-intensive industry such as telecommunications. OIBDA provides us with an indication of the underlying performance of our everyday business operations. It excludes
the effect of items associated with our capitalization and tax structures, such as interest income, interest expense and income taxes, and of other items not associated with our everyday operations.

See Note 10, Segment Reporting, to the accompanying unaudited condensed consolidated financial statements for
a reconciliation of OIBDA to income (loss) applicable to common shareholders.

Free Cash Flow

We define Free Cash Flow as net cash provided by (used in) operating activities less purchases of property and equipment
as disclosed in the condensed consolidated statements of cash flows. Free Cash Flow differs from the net change in cash and cash equivalents in the condensed consolidated statements of cash flows in that it excludes the cash impact of: (i) all
investing activities (other than capital expenditures, which are a fundamental and recurring part of our business); (ii) all financing activities; and (iii) exchange rate changes on cash and cash equivalents balances.

We use Free Cash Flow as a relevant indicator of our ability to generate cash to pay debt. Free Cash Flow also is an
important part of our internal reporting and a key measure used by us to evaluate liquidity from period to period. We believe that the investment community uses similar performance measures to compare performance of competitors in our industry.

There are material limitations to using non-U.S. GAAP financial measures. Our calculation of Free Cash Flow
may differ from similarly titled measures used by other companies, and may not be comparable to those other measures. Moreover, we do not currently pay a significant amount of income taxes due to net operating losses, and we therefore generate
higher Free Cash Flow than comparable businesses that do pay income taxes. Additionally, Free Cash Flow is subject to variability quarter over quarter as a result of the timing of payments related to accounts receivable and accounts payable and
capital expenditures. Free Cash Flow also does not include certain significant cash items such as purchases and sales out of the ordinary course of business, proceeds from financing activities, repayments of capital lease obligations and other debt,
and the effect of exchange rate changes on cash and cash equivalents balances. Free Cash Flow should be considered in addition to, and not as a substitute for, net change in cash and cash equivalents in the condensed consolidated statements of cash
flows reported in accordance with U.S. GAAP.

We believe that Free Cash Flow is useful to our investors as it
provides an indication of the underlying cash position of our everyday business operations and the ability to pay debt.

The
following table provides a reconciliation of Free Cash Flow, for the three months ended September 30, 2010 and 2009, which is considered a non-U.S. GAAP financial measure, to net cash provided by operating activities:



|                                          |  |                                  |    |   |                        |   |    |                        |  |   |     |   |  |       
|----------------------------------------- |  | -------------------------------- | -- | - | ---------------------- | - | -- | ---------------------- |  | - | --- | - |  | ------
|                                          |  | Three Months Ended September 30, |    |   | $ 
Increase/(Decrease) |   |    | % 
Increase/(Decrease)
|                                          |  | 2010                             |    |   | 2009                   |   |    |                       
|                                          |  |                                  |    |   | (in millions)          |   |    |                        |  |   |    
|Free cash flow                            |  | $                                | (1 | ) |                        | $ | 52 |                        |  | $ | (53 | ) |  | (102%)
|Purchases of property and equipment       |  |                                  | 30 |   |                        |   | 33 |                        |  |   | (3  | ) |  | (9%)  
|                                          |  |                                  |    |   |                        |   |    |                        |  |   |     |   |  |       
|Net cash provided by operating activities |  | $                                | 29 |   |                        | $ | 85 |                        |  | $ | (56 | ) |  | (66%) 
|                                          |  |                                  |    |   |                        |   |    |                        |  |   |     |   |  |       

Business Acquisition

On October 29, 2010, we acquired 100% of the capital stock of Genesis Networks Inc. (Genesis), a privately
held company providing high performance rich media and video-based applications, serving many of the worlds major broadcasters, producers and aggregators of specialized programming. We paid a purchase price for Genesis of approximately $8
million and repaid a portion of the debt and other liabilities assumed as part of the acquisition for an aggregate consideration of $27 million. The purchase price is subject to adjustment to the extent that Genesiss final closing date working
capital varies from the $8 million deficit assumed at the acquisition date. We expect that Genesis will require modest funding in respect of this deficit and its ongoing operating requirements.

The Genesis network connects 70 cities on five continents and links important international media centers through 225
on-net points. The acquisition of Genesis will enable us to provide value-added solutions to address specialized video requirements across multiple industries. The results of Genesiss operations will be included in our consolidated financial
statements starting on the acquisition date.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon the accompanying unaudited
condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of financial



28



---

##### Table of Contents

statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the
related disclosures at the date of the financial statements and during the reporting period. Although these estimates are based on our knowledge of current events, our actual amounts and results could differ from those estimates. The estimates made
are based on historical factors, current circumstances, and the experience and judgment of our management, who continually evaluate the judgments, estimates and assumptions and may employ outside experts to assist in the evaluations.

Certain of our accounting policies are deemed critical, as they are both most important to the financial
statement presentation and require managements most difficult, subjective or complex judgments as a result of the need to make estimates about the effect of matters that are inherently uncertain. For a full description of our significant
accounting policies, see Note 2, Basis of Presentation and Significant Accounting Policies, in our annual report on Form 10-K for the year ended December 31, 2009. Management believes that there have been no significant changes
regarding our critical accounting policies since such time.

New Accounting Pronouncements

See Note 2, Basis of Presentation to our unaudited condensed consolidated financial statements for a full
description of recently issued and recently adopted accounting pronouncements including the date of adoption and effects on our results of operations and financial position, where applicable.



29



---

##### Table of Contents



Unaudited results of operations for
the three and nine months ended September 30, 2010 compared to the three and nine months ended September 30, 2009:

Consolidated Results



|                                                                                   |  |                                  |      |   |                        |   |      |                        |  |                                 |     |   |                        |        |  |                        |        |   |  |   |        |   |  |   |     |   |  |      
|---------------------------------------------------------------------------------- |  | -------------------------------- | ---- | - | ---------------------- | - | ---- | ---------------------- |  | ------------------------------- | --- | - | ---------------------- | ------ |  | ---------------------- | ------ | - |  | - | ------ | - |  | - | --- | - |  | -----
|                                                                                   |  | Three Months 
EndedSeptember 30, |      |   | $ 
Increase/(Decrease) |   |      | % 
Increase/(Decrease) |  | Nine Months 
EndedSeptember 30, |     |   | $ 
Increase/(Decrease) |        |  | % 
Increase/(Decrease)
|                                                                                   |  | 2010                             |      |   | 2009                   |   |      |                        |  | 2010                            |     |   | 2009                   |        |  |                       
|                                                                                   |  |                                  |      |   | (in millions)          |   |      |                        |  |                                 |     |   |                        |        |  | (in millions)          |        |   |  |   |        |  
|Revenue                                                                            |  | $                                | 648  |   |                        | $ | 643  |                        |  | $                               | 5   |   |                        | 1%     |  | $                      | 1,926  |   |  | $ | 1,885  |   |  | $ | 41  |   |  | 2%   
|Cost of revenue (excluding depreciation and amortization, shown separately below): |  |                                  |      |   |                        |   |      |                        |  |                                 |     |   |                        |        |  |                        |        |   |  |   |        |   |  |   |     |   |  |      
|Cost of access                                                                     |  |                                  | (289 | ) |                        |   | (288 | )                      |  |                                 | 1   |   |                        | NM     |  |                        | (870   | ) |  |   | (859   | ) |  |   | 11  |   |  | 1%   
|Real estate, network and operations                                                |  |                                  | (101 | ) |                        |   | (106 | )                      |  |                                 | (5  | ) |                        | (5%)   |  |                        | (303   | ) |  |   | (301   | ) |  |   | 2   |   |  | 1%   
|Third party maintenance                                                            |  |                                  | (25  | ) |                        |   | (26  | )                      |  |                                 | (1  | ) |                        | (4%)   |  |                        | (78    | ) |  |   | (77    | ) |  |   | 1   |   |  | 1%   
|Cost of equipment and other sales                                                  |  |                                  | (25  | ) |                        |   | (23  | )                      |  |                                 | 2   |   |                        | 9%     |  |                        | (75    | ) |  |   | (68    | ) |  |   | 7   |   |  | 10%  
|                                                                                   |  |                                  |      |   |                        |   |      |                        |  |                                 |     |   |                        |        |  |                        |        |   |  |   |        |   |  |   |     |   |  |      
|Total cost of revenue                                                              |  |                                  | (440 | ) |                        |   | (443 | )                      |  |                                 |     |   |                        |        |  |                        | (1,326 | ) |  |   | (1,305 | ) |  |   |     |   |  |      
|                                                                                   |  |                                  |      |   |                        |   |      |                        |  |                                 |     |   |                        |        |  |                        |        |   |  |   |        |   |  |   |     |   |  |      
|Gross margin                                                                       |  |                                  | 208  |   |                        |   | 200  |                        |  |                                 |     |   |                        |        |  |                        | 600    |   |  |   | 580    |   |  |   |     |   |  |      
|Selling, general and administrative                                                |  |                                  | (99  | ) |                        |   | (109 | )                      |  |                                 | (10 | ) |                        | (9%)   |  |                        | (321   | ) |  |   | (321   | ) |  |   | -   |   |  | NM   
|Depreciation and amortization                                                      |  |                                  | (82  | ) |                        |   | (89  | )                      |  |                                 | (7  | ) |                        | (8%)   |  |                        | (252   | ) |  |   | (250   | ) |  |   | 2   |   |  | 1%   
|                                                                                   |  |                                  |      |   |                        |   |      |                        |  |                                 |     |   |                        |        |  |                        |        |   |  |   |        |   |  |   |     |   |  |      
|Operating income                                                                   |  |                                  | 27   |   |                        |   | 2    |                        |  |                                 |     |   |                        |        |  |                        | 27     |   |  |   | 9      |   |  |   |     |   |  |      
|Other income (expense):                                                            |  |                                  |      |   |                        |   |      |                        |  |                                 |     |   |                        |        |  |                        |        |   |  |   |        |   |  |   |     |   |  |      
|Interest income                                                                    |  |                                  | -    |   |                        |   | 2    |                        |  |                                 | (2  | ) |                        | (100%) |  |                        | 1      |   |  |   | 7      |   |  |   | (6  | ) |  | (86%)
|Interest expense                                                                   |  |                                  | (44  | ) |                        |   | (39  | )                      |  |                                 | 5   |   |                        | 13%    |  |                        | (141   | ) |  |   | (113   | ) |  |   | 28  |   |  | 25%  
|Other income (expense), net                                                        |  |                                  | 21   |   |                        |   | (32  | )                      |  |                                 | 53  |   |                        | 166%   |  |                        | (37    | ) |  |   | 11     |   |  |   | (48 | ) |  | NM   
|                                                                                   |  |                                  |      |   |                        |   |      |                        |  |                                 |     |   |                        |        |  |                        |        |   |  |   |        |   |  |   |     |   |  |      
|Income (loss) before provision for income taxes                                    |  |                                  | 4    |   |                        |   | (67  | )                      |  |                                 |     |   |                        |        |  |                        | (150   | ) |  |   | (86    | ) |  |   |     |   |  |      
|Provision for income taxes                                                         |  |                                  | (10  | ) |                        |   | (6   | )                      |  |                                 | 4   |   |                        | 67%    |  |                        | (22    | ) |  |   | (18    | ) |  |   | 4   |   |  | 22%  
|                                                                                   |  |                                  |      |   |                        |   |      |                        |  |                                 |     |   |                        |        |  |                        |        |   |  |   |        |   |  |   |     |   |  |      
|Net loss                                                                           |  |                                  | (6   | ) |                        |   | (73  | )                      |  |                                 |     |   |                        |        |  |                        | (172   | ) |  |   | (104   | ) |  |   |     |   |  |      
|Preferred stock dividends                                                          |  |                                  | (1   | ) |                        |   | (1   | )                      |  |                                 | -   |   |                        | NM     |  |                        | (3     | ) |  |   | (3     | ) |  |   | -   |   |  | NM   
|                                                                                   |  |                                  |      |   |                        |   |      |                        |  |                                 |     |   |                        |        |  |                        |        |   |  |   |        |   |  |   |     |   |  |      
|Loss applicable to common shareholders                                             |  | $                                | (7   | ) |                        | $ | (74  | )                      |  |                                 |     |   |                        |        |  | $                      | (175   | ) |  | $ | (107   | ) |  |   |     |   |  |      
|                                                                                   |  |                                  |      |   |                        |   |      |                        |  |                                 |     |   |                        |        |  |                        |        |   |  |   |        |   |  |   |     |   |  |      



NMzero balances and comparisons from positive to negative numbers are not meaningful.

Discussion of all significant variances:

Revenue.



|                                                    |  |                                  |     |  |                        |   |     |                        |  |                                 |     |   |                        |       |  |                        |       |  |  |   |       |  |  |   |     |   |  |      
|--------------------------------------------------- |  | -------------------------------- | --- |  | ---------------------- | - | --- | ---------------------- |  | ------------------------------- | --- | - | ---------------------- | ----- |  | ---------------------- | ----- |  |  | - | ----- |  |  | - | --- | - |  | -----
|                                                    |  | Three Months 
EndedSeptember 30, |     |  | $ 
Increase/(Decrease) |   |     | % 
Increase/(Decrease) |  | Nine Months 
EndedSeptember 30, |     |   | $ 
Increase/(Decrease) |       |  | % 
Increase/(Decrease)
|                                                    |  | 2010                             |     |  | 2009                   |   |     |                        |  | 2010                            |     |   | 2009                   |       |  |                       
|                                                    |  |                                  |     |  | (in millions)          |   |     |                        |  |                                 |     |   |                        |       |  | (in millions)          |       |  |  |   |       | 
|Enterprise, carrier data and indirect sales channel |  | $                                | 568 |  |                        | $ | 553 |                        |  | $                               | 15  |   |                        | 3%    |  | $                      | 1,677 |  |  | $ | 1,602 |  |  | $ | 75  |   |  | 5%   
|Carrier voice                                       |  |                                  | 79  |  |                        |   | 89  |                        |  |                                 | (10 | ) |                        | (11%) |  |                        | 247   |  |  |   | 281   |  |  |   | (34 | ) |  | (12%)
|Other                                               |  |                                  | 1   |  |                        |   | 1   |                        |  |                                 | -   |   |                        | NM    |  |                        | 2     |  |  |   | 2     |  |  |   | -   |   |  | NM   
|                                                    |  |                                  |     |  |                        |   |     |                        |  |                                 |     |   |                        |       |  |                        |       |  |  |   |       |  |  |   |     |   |  |      
|Consolidated revenues                               |  | $                                | 648 |  |                        | $ | 643 |                        |  | $                               | 5   |   |                        | 1%    |  | $                      | 1,926 |  |  | $ | 1,885 |  |  | $ | 41  |   |  | 2%   
|                                                    |  |                                  |     |  |                        |   |     |                        |  |                                 |     |   |                        |       |  |                        |       |  |  |   |       |  |  |   |     |   |  |      

Our consolidated revenue is separated into two businesses based on our target
markets and sales structure: (i) enterprise, carrier data and indirect sales channel and (ii) carrier voice.

The enterprise, carrier data and indirect sales channel business consists of: (i) the provision of voice, data and collaboration services to all customers other than carriers and consumers;
(ii) the provision of data products, including IP, transport and capacity services, to carrier customers; and (iii) the provision of voice, data and managed services to or through business relationships with other carriers, sales agents
and system integrators. The carrier voice business consists of the provision of predominantly United States domestic and international long distance voice services to carrier customers.

Our consolidated revenue increased in the three months ended September 30, 2010 compared with the same period in
2009 primarily due to additional enterprise, carrier data and indirect channel sales driven by growth in the existing customer base and the acquisition of new customers in specific enterprise and carrier target markets. This increase in revenue was
partially offset by: (i) a decline in our carrier voice business driven by pricing actions to optimize margin performance; and (ii) $8 million of adverse foreign currency movements. Revenue in the three months ended September 30, 2009
included $4 million for one customers buyout of certain long term obligations in our enterprise, carrier data and indirect sales channel business.

Our consolidated revenue increased in the nine months ended September 30, 2010 compared with the same period in 2009 primarily due to: (i) $25 million of beneficial foreign currency movements;
and (ii) additional enterprise, carrier data and indirect channel sales driven by growth in the existing customer base and the acquisition of new customers in specific enterprise and carrier target markets. This increase was partially offset by
a decline in our carrier voice business. In addition, revenue in the nine months ended September 30, 2009 included $12 million for one customers buyout of certain long term obligations.

Our sales order levels are a key indicator of continuing strength in customer demand for our services. The average
monthly estimated gross value for sales orders was $4.4 million in the three months ended September 30, 2010, compared with $4.6 million in the three months ended June 30, 2010. This metric is used by management as a leading business
indicator offering insight into near term revenue trends. The gross values of these monthly recurring orders are estimated based on new business acquired, and they exclude the effects of the replacement of existing services with new services,
credits and attrition (defined as customer disconnects, price reductions on contract renegotiations and customer usage declines). Other key metrics used by management are revenue attrition and pricing trends for products in our enterprise, carrier
data and indirect sales channel. Revenue attrition in the third quarter of 2010 was in line with our recent historical average. Revenue attrition generally results from market dynamics and not customer dissatisfaction. Pricing for our



30



---

##### Table of Contents

collaboration, VPN and managed services products continues to decline at a relatively modest rate, while pricing for specific data products such as high-speed transit and capacity services
(specifically internet access arrangements used by content delivery and broadband service providers) is declining at a greater rate.

See Segment Results in this Item 2 for further discussion of results by segment.

Cost of revenue.

Cost of revenue primarily includes
the following: (i) cost of access, including usage-based voice charges paid to local exchange carriers and interexchange carriers to originate and/or terminate switched voice traffic and charges for leased lines for dedicated facilities and
local loop (last mile) charges from both domestic and international carriers; (ii) real estate, network and operations charges which include (a) employee-related costs such as salaries and benefits, incentive compensation and
stock-related expenses for employees directly attributable to the operation of our network, (b) real estate expenses for all non-restructured technical sites, and (c) other non-employee related costs incurred to operate our network, such
as license and permit fees and professional fees; (iii) third party maintenance costs incurred in connection with maintaining the network; and (iv) cost of equipment sales and other, which includes third party professional services,
software, hardware and equipment sold to our customers.

Cost of access.



|                                                   |  |                                  |     |  |                        |   |     |                        |  |                                 |    |   |                        |    |  |                        |     |  |  |   |     |  |  |   |     |   |  |      
|-------------------------------------------------- |  | -------------------------------- | --- |  | ---------------------- | - | --- | ---------------------- |  | ------------------------------- | -- | - | ---------------------- | -- |  | ---------------------- | --- |  |  | - | --- |  |  | - | --- | - |  | -----
|                                                   |  | Three Months 
EndedSeptember 30, |     |  | $ 
Increase/(Decrease) |   |     | % 
Increase/(Decrease) |  | Nine Months 
EndedSeptember 30, |    |   | $ 
Increase/(Decrease) |    |  | % 
Increase/(Decrease)
|                                                   |  | 2010                             |     |  | 2009                   |   |     |                        |  | 2010                            |    |   | 2009                   |    |  |                       
|                                                   |  |                                  |     |  | (in millions)          |   |     |                        |  |                                 |    |   |                        |    |  | (in millions)          |     |  |  |   |     | 
|Enterprise, carrier data andindirect sales channel |  | $                                | 213 |  |                        | $ | 214 |                        |  | $                               | (1 | ) |                        | NM |  | $                      | 647 |  |  | $ | 609 |  |  | $ | 38  |   |  | 6%   
|Carrier voice                                      |  |                                  | 76  |  |                        |   | 74  |                        |  |                                 | 2  |   |                        | 3% |  |                        | 222 |  |  |   | 250 |  |  |   | (28 | ) |  | (11%)
|Other                                              |  |                                  | -   |  |                        |   | -   |                        |  |                                 | -  |   |                        | NM |  |                        | 1   |  |  |   | -   |  |  |   | 1   |   |  | NM   
|                                                   |  |                                  |     |  |                        |   |     |                        |  |                                 |    |   |                        |    |  |                        |     |  |  |   |     |  |  |   |     |   |  |      
|Consolidated cost of access                        |  | $                                | 289 |  |                        | $ | 288 |                        |  | $                               | 1  |   |                        | NM |  | $                      | 870 |  |  | $ | 859 |  |  | $ | 11  |   |  | 1%   
|                                                   |  |                                  |     |  |                        |   |     |                        |  |                                 |    |   |                        |    |  |                        |     |  |  |   |     |  |  |   |     |   |  |      

Cost of access increased in the three months ended September 30, 2010
compared with the same period in 2009. The increase in our consolidated cost of access was driven by: (i) higher enterprise, carrier data and indirect channel sales revenue; and (ii) a $6 million favorable regulatory ruling related to a
reduction in access charges in the U.K. recorded in the third quarter of 2009. The increase in our consolidated cost of access was partially offset by: (i) $3 million of beneficial foreign currency movements; and (ii) cost reduction
initiatives to optimize access network costs and effectively lower unit prices.

Cost of access increased in
the nine months ended September 30, 2010 compared with the same period in 2009. The increase in our consolidated cost of access was driven by: (i) higher enterprise, carrier data and indirect channel sales revenue; (ii) $5 million of
adverse foreign currency movements; and (iii) a $6 million favorable regulatory ruling related to a reduction in access charges in the U.K. mentioned above. In addition, our consolidated cost of access for the nine months ended
September 30, 2010 included $3 million of costs associated with a subsea cable repair. The increase in our consolidated cost of access was partially offset as a result of lower carrier voice sales revenue and cost reduction initiatives.

Real estate, network and operations. Real estate, network and operations decreased in the three months
ended September 30, 2010 compared with the same period in 2009 primarily due to: (i) $2 million of beneficial foreign currency movements; (ii) $1 million lower accrued incentive compensation; and (iii) $2 million of lower real
estate costs driven by a $5 million retroactive property tax assessment ($3 million and $2 million, respectively in our GCUK and ROW Segments) recorded in the third quarter of 2009, partially offset by higher facilities rent and maintenance.

Real estate, network and operations increased in the nine months ended September 30, 2010 compared with
the same period in 2009 primarily due to: (i) $4 million of adverse foreign currency movements; and (ii) $3 million of higher employee incentive compensation costs primarily due to accruing annual employee incentive compensation at a
higher rate in 2010. Real estate costs were essentially flat with higher facilities rent, maintenance and utilities largely offset by: (i) the $5 million retroactive property tax assessment recorded in the third quarter of 2009 mentioned above;
and (ii) a $6 million property tax refund in the U.K. included in the nine months ended September 30, 2010. The increase in real estate, network and operations was partially offset by a $5 million decrease in other expenses principally
driven by a $4 million insurance recovery in the U.K.

Cost of equipment and other sales.Cost of
equipment and other sales increased in the three and nine months ended September 30, 2010 compared with the same periods in 2009 primarily due to higher equipment sales and professional services costs.

Selling, general and administrative expenses (SG&A).SG&A consist of:
(i) employee-related costs such as salaries and benefits, incentive compensation and stock-related expenses for employees not directly attributable to the operation of our network; (ii) real estate expenses for all non-restructured
administrative sites; (iii) bad debt expense; (iv) non-income taxes, including property taxes on owned real estate and taxes such as gross receipts taxes, franchise taxes and capital taxes; (v) restructuring costs; and
(vi) regulatory costs, insurance, telecommunications costs, professional fees and license and maintenance fees for internal software and hardware.



31



---

##### Table of Contents



The
decrease in SG&A in the three months ended September 30, 2010 compared with the same period in 2009 was primarily due to: (i) $5 million of lower non-income taxes; (ii) a $2 million decrease in bad debt expense; (iii) $2
million of beneficial foreign currency movements; and (iv) $2 million lower accrued incentive compensation.

SG&A in the nine months ended September 30, 2010 compared with the same period in 2009 was essentially flat. SG&A was increased by: (i) $5 million of higher salaries and benefits driven
by unpaid leave savings in 2009 and higher employee severance charges in 2010; (ii) $4 million of adverse foreign exchange movements; (iii) a $4 million increase in travel expenses, third party sales commissions and other expenses; and
(iv) $3 million of higher employee incentive compensation costs primarily due to accruing annual employee incentive compensation at a higher rate in 2010. SG&A decreased due to: (i) $5 million of lower real estate costs driven by lower
facilities rent, maintenance and utilities; (ii) a $4 million decrease in bad debt expense; (iii) a $3 million reduction in real estate restructuring reserves; and (iv) $2 million of lower professional fees.

Depreciation and amortization.Depreciation and amortization consists of depreciation of property and
equipment, including assets recorded under capital leases, amortization of cost of access installation costs and amortization of identifiable intangibles.

Depreciation and amortization decreased in the three months ended September 30, 2010 compared with the same period in 2009 primarily due to beneficial foreign currency movements and the expiration of
the useful life of certain assets acquired as part of the Impsat acquisition.

Depreciation and amortization
increased in the nine months ended September 30, 2010 compared with the same period in 2009 primarily due to an increased asset base as a result of fixed asset additions, including assets recorded under capital leases, as well as by adverse
foreign currency movements, partially offset by the expiration of the useful life of certain assets acquired as part of the Impsat acquisition.

Interest income. Interest income decreased in the nine months ended September 30, 2010 compared with the same period in 2009 primarily as a result of the refund of a vendor deposit plus
accrued interest in the nine months ended September 30, 2009.

Interest expense. Interest expense
includes interest related to indebtedness for money borrowed, capital lease obligations, certain tax liabilities, amortization of deferred finance costs and interest on late payments to vendors. The increase in interest expense in the three and nine
months ended September 30, 2010 compared with the same periods in 2009 was primarily a result of: (i) an increase in the amount of debt outstanding as a result of the issuance of the 12% Senior Secured Notes on September 22, 2009, of
which a substantial portion of the proceeds was used to retire other debt; and (ii) higher interest in the year-to-date comparison period related to our pound sterling denominated GCUK Notes due to adverse foreign currency movements. See the
2009 Highlights section of Item 7 of our annual report on Form 10-K for the year ended December 31, 2009 filed with the SEC for a discussion of the debt refinancing in connection with which the 12% Senior Secured Notes were
issued.

Other income (expense), net.Other expense, net consists of foreign currency impacts on
transactions, gains and losses on the sale of assets including property and equipment, marketable securities and other assets and other non-operating items.

Other income, net increased in the three months ended September 30, 2010 compared with the same period in 2009 primarily as a result of: (i) recording foreign exchange gains in the three months
ended September 30, 2010 as compared to foreign exchange losses recorded in the same period of the prior year; and (ii) recording a $29 million loss in the third quarter of 2009 on the early extinguishment of the GC Impsat Notes and the
Senior Secured Term Loans. The increase in other income, net was partially offset by recording a $2 million loss on the sale of U.S. Dollar-denominated Venezuelan bonds in the third quarter of 2010 (see Currency Risk below).

Other expense, net increased in the nine months ended September 30, 2010 compared with the same period in 2009
primarily as a result of: (i) recording foreign exchange losses in the nine months ended September 30, 2010 as compared to foreign exchange gains recorded in the same period of the prior year; and (ii) recording a $2 million loss on
the sale of U.S. Dollar-denominated Venezuelan bonds in the third quarter of 2010 (see Currency Risk below). The foreign exchange losses in the nine months ended September 30, 2010 included a $27 million foreign exchange loss as a result
of the devaluation of the Venezuelan bolivar in the first quarter of 2010. The increase in other expense, net in the nine months ended September 30, 2010 compared with the same period in 2009 was partially offset by recording a $29 million loss
in the third quarter of 2009 on the early extinguishment of the GC Impsat Notes and the Senior Secured Term Loans.

Provision for Income Taxes. Provision for income taxes increased in the three and nine months ended September 30, 2010 compared with the same periods in 2009 primarily as a result of an
increase in deferred tax expense in our Brazilian operating subsidiary. During the fourth quarter of 2009, we reduced the valuation allowance against our Brazilian deferred tax assets by $20 million; consequently during 2010 we have been recording
deferred tax expense in that subsidiary.



32



---

##### Table of Contents



Segment Results

Our CODMs assess performance and allocate resources based on three separate operating segments which we operate and manage
as strategic business units: (i) the GCUK Segment; (ii) the GC Impsat Segment; and (iii) the ROW Segment.

The GCUK Segment is a provider of managed network communications services providing a wide range of telecommunications services, including data, IP and voice services to government and other public sector
organizations, major corporations and other communications companies in the U.K. The GC Impsat Segment is a provider of telecommunication services including IP, voice, data center and information technology services to corporate and government
clients in Latin America. The ROW Segment represents all our operations outside the GCUK and GC Impsat Segments and operates primarily in North America, with smaller operations in Europe, Latin America and a portion of the Asia/Pacific region and
includes our subsea fiber network, serving many of the worlds largest corporations and many other telecommunications carriers with a full range of managed telecommunication services, including data, IP and voice products. The services provided
by all our segments support a migration path to a fully converged IP environment. As of September 30, 2010, the GCUK Segment, the GC Impsat Segment and the ROW Segment employed approximately 170, 232, and 461, respectively, sales and sales
support employees worldwide.

Our CODMs measure and evaluate our reportable segments based on OIBDA (see
Use of Certain non-GAAP Measures above in this Item 2 for further information about OIBDA).

GCUK
Segment

Revenue



|                                                    |  |                                  |     |  |                        |   |     |                        |  |      |                                 |   |      |                        |       |  |                        |   |     |  |  |   |     |  |  |   |    |   |  |  |       | 
|--------------------------------------------------- |  | -------------------------------- | --- |  | ---------------------- | - | --- | ---------------------- |  | ---- | ------------------------------- | - | ---- | ---------------------- | ----- |  | ---------------------- | - | --- |  |  | - | --- |  |  | - | -- | - |  |  | ----- | 
|                                                    |  | Three Months Ended September 30, |     |  | $ 
Increase/(Decrease) |   |     | % 
Increase/(Decrease) |  |      | Nine Months Ended September 30, |   |      | $ 
Increase/(Decrease) |       |  | % 
Increase/(Decrease) |  
|                                                    |  | 2010                             |     |  | 2009                   |   |     |                        |  | 2010 |                                 |   | 2009 |                        |       | 
|                                                    |  |                                  |     |  | (in millions)          |   |     |                        |  |      |                                 |   |      |                        |       |  | (in millions)          |   |     |  |  |   |     | 
|GCUK                                                |  |                                  |     |  |                        |   |     |                        |  |      |                                 |   |      |                        |       |  |                        |   |     |  |  |   |     |  |  |   |    |   |  |  |       | 
|Enterprise, carrier data and indirect sales channel |  | $                                | 112 |  |                        | $ | 117 |                        |  | $    | (5                              | ) |      |                        | (4%)  |  |                        | $ | 344 |  |  | $ | 337 |  |  | $ | 7  |   |  |  | 2%    | 
|Carrier voice                                       |  |                                  | 1   |  |                        |   | 3   |                        |  |      | (2                              | ) |      |                        | (67%) |  |                        |   | 4   |  |  |   | 8   |  |  |   | (4 | ) |  |  | (50%) | 
|                                                    |  |                                  |     |  |                        |   |     |                        |  |      |                                 |   |      |                        |       |  |                        |   |     |  |  |   |     |  |  |   |    |   |  |  |       | 
|                                                    |  | $                                | 113 |  |                        | $ | 120 |                        |  | $    | (7                              | ) |      |                        | (6%)  |  |                        | $ | 348 |  |  | $ | 345 |  |  | $ | 3  |   |  |  | 1%    | 
|                                                    |  |                                  |     |  |                        |   |     |                        |  |      |                                 |   |      |                        |       |  |                        |   |     |  |  |   |     |  |  |   |    |   |  |  |       | 

Revenue for our GCUK Segment decreased in the three months ended
September 30, 2010 compared with the same period of 2009 primarily as a result of $8 million of adverse foreign currency movements. Revenue for our GCUK Segment increased in the nine months ended September 30, 2010 compared with the same
period of 2009 primarily as a result of $2 million of beneficial foreign currency movements. Our GCUK Segment sales organization was supplemented in the first half of the year, although the additional resources have not yet resulted in appreciable
revenue growth. In the third quarter of 2010, GCUK experienced some softness in short-interval demand related to purchases of equipment and professional services and also experienced an increase in sales credits. The UK market continues to be
highly competitive with significant pricing pressure, and we expect that competitive environment to continue.

One of our principal customer relationships is with the U.K. Foreign and Commonwealth Office (FCO), to whom
we provide an international telecommunications network known as the FTN. Our contract to provide the FTN expired in May 2010. We have entered into transition arrangements in respect of the FCOs migration to a network to be provided by a
competitor as the replacement for the FTN. We do not expect this to have a significant impact on our 2010 results and estimate our 2011 revenue to be adversely impacted by between $10 million to $15 million. In addition, we continue to pursue other
ordinary course commercial opportunities with the FCO. Another principal customer relationship with Network Rail, whose contract was set to expire in 2010, has been extended for an additional three years.

OIBDA



|      |  |                                  |    |  |                        |   |    |                        |  |      |                                 |   |      |                        |       |  |                        |   |    |  |  |   |    |  |  |   |   |  |  |  |    | 
|----- |  | -------------------------------- | -- |  | ---------------------- | - | -- | ---------------------- |  | ---- | ------------------------------- | - | ---- | ---------------------- | ----- |  | ---------------------- | - | -- |  |  | - | -- |  |  | - | - |  |  |  | -- | 
|      |  | Three Months Ended September 30, |    |  | $ 
Increase/(Decrease) |   |    | % 
Increase/(Decrease) |  |      | Nine Months Ended September 30, |   |      | $ 
Increase/(Decrease) |       |  | % 
Increase/(Decrease) |  
|      |  | 2010                             |    |  | 2009                   |   |    |                        |  | 2010 |                                 |   | 2009 |                        |       | 
|      |  |                                  |    |  | (in millions)          |   |    |                        |  |      |                                 |   |      |                        |       |  | (in millions)          |   |    |  |  |   |    | 
|GCUK  |  |                                  |    |  |                        |   |    |                        |  |      |                                 |   |      |                        |       |  |                        |   |    |  |  |   |    |  |  |   |   |  |  |  |    | 
|OIBDA |  | $                                | 22 |  |                        | $ | 25 |                        |  | $    | (3                              | ) |      |                        | (12%) |  |                        | $ | 72 |  |  | $ | 69 |  |  | $ | 3 |  |  |  | 4% | 

OIBDA
in the GCUK Segment decreased in the three months ended September 30, 2010 compared with the same period of 2009 primarily as a result of: (i) $2 million of adverse foreign currency movements; and (ii) $4 million of higher access
charges driven by a $6 million favorable regulatory ruling related to a reduction in access charges in the U.K. recorded in the third quarter of 2009. This decrease in GCUK Segment OIBDA was partially offset by a $3 million retroactive property tax
assessment recorded in the third quarter of 2009.

OIBDA in the GCUK Segment increased in the nine months
ended September 30, 2010 compared with the same period of 2009 primarily as a result of: (i) lower real estate costs driven by a $6 million U.K. property tax refund recorded in the first quarter of 2010 and a $3 million retroactive
property tax assessment recorded in the third quarter of 2009; and (ii) lower other expenses driven by a $4 million insurance recovery. The increase in GCUK Segment OIBDA was partially offset by: (i) higher sales commissions and other
payroll costs resulting from increased sales resource headcount; (ii) higher employee incentive compensation costs primarily due to accruing annual employee incentive compensation at a higher rate in 2010; and (iii) higher access charges
driven by a $6 million favorable regulatory ruling related to a reduction in access charges in the U.K. recorded in the third quarter of 2009.



33



---

##### Table of Contents



GC Impsat
Segment

Revenue



|                                                   |  |                                  |     |  |                        |   |     |                        |  |      |                                 |   |      |                        |       |  |                        |   |     |  |  |   |     |  |  |   |    |   |  |  |       | 
|-------------------------------------------------- |  | -------------------------------- | --- |  | ---------------------- | - | --- | ---------------------- |  | ---- | ------------------------------- | - | ---- | ---------------------- | ----- |  | ---------------------- | - | --- |  |  | - | --- |  |  | - | -- | - |  |  | ----- | 
|                                                   |  | Three Months Ended September 30, |     |  | $ 
Increase/(Decrease) |   |     | % 
Increase/(Decrease) |  |      | Nine Months Ended September 30, |   |      | $ 
Increase/(Decrease) |       |  | % 
Increase/(Decrease) |  
|                                                   |  | 2010                             |     |  | 2009                   |   |     |                        |  | 2010 |                                 |   | 2009 |                        |       | 
|                                                   |  |                                  |     |  | (in millions)          |   |     |                        |  |      |                                 |   |      |                        |       |  | (in millions)          |   |     |  |  |   |     | 
|GC Impsat                                          |  |                                  |     |  |                        |   |     |                        |  |      |                                 |   |      |                        |       |  |                        |   |     |  |  |   |     |  |  |   |    |   |  |  |       | 
|Enterprise, carrier data andindirect sales channel |  | $                                | 142 |  |                        | $ | 125 |                        |  | $    | 17                              |   |      |                        | 14%   |  |                        | $ | 401 |  |  | $ | 355 |  |  | $ | 46 |   |  |  | 13%   | 
|Carrier voice                                      |  |                                  | 1   |  |                        |   | 2   |                        |  |      | (1                              | ) |      |                        | (50%) |  |                        |   | 7   |  |  |   | 9   |  |  |   | (2 | ) |  |  | (22%) | 
|Intersegment revenues                              |  |                                  | 3   |  |                        |   | 2   |                        |  |      | 1                               |   |      |                        | 50%   |  |                        |   | 7   |  |  |   | 6   |  |  |   | 1  |   |  |  | 17%   | 
|                                                   |  |                                  |     |  |                        |   |     |                        |  |      |                                 |   |      |                        |       |  |                        |   |     |  |  |   |     |  |  |   |    |   |  |  |       | 
|                                                   |  | $                                | 146 |  |                        | $ | 129 |                        |  | $    | 17                              |   |      |                        | 13%   |  |                        | $ | 415 |  |  | $ | 370 |  |  | $ | 45 |   |  |  | 12%   | 
|                                                   |  |                                  |     |  |                        |   |     |                        |  |      |                                 |   |      |                        |       |  |                        |   |     |  |  |   |     |  |  |   |    |   |  |  |       | 

Revenue for our GC Impsat Segment increased in the three and nine months ended
September 30, 2010 compared with the same periods of 2009 primarily as a result of continuing demand for our broadband lease, managed services, data center products and IP services and $3 million and $24 million, respectively, of beneficial
foreign currency movements. Market trends continue to reflect increasing demand for converged information and communications technologies to enable productivity gains and cost savings for enterprises. Sales orders and revenue continue to show
healthy growth in most Latin American countries, particularly in Brazil and Colombia. Our Brazilian business has expanded significantly and continues to lead GC Impsat operations in revenue contribution.

OIBDA





|          |  |                                  |    |  |                        |   |    |                        |  |      |                                 |  |      |                        |     |  |                        |   |     |  |  |   |     |  |  |   |   |  |  |  |    | 
|--------- |  | -------------------------------- | -- |  | ---------------------- | - | -- | ---------------------- |  | ---- | ------------------------------- |  | ---- | ---------------------- | --- |  | ---------------------- | - | --- |  |  | - | --- |  |  | - | - |  |  |  | -- | 
|          |  | Three Months Ended September 30, |    |  | $ 
Increase/(Decrease) |   |    | % 
Increase/(Decrease) |  |      | Nine Months Ended September 30, |  |      | $ 
Increase/(Decrease) |     |  | % 
Increase/(Decrease) |  
|          |  | 2010                             |    |  | 2009                   |   |    |                        |  | 2010 |                                 |  | 2009 |                        |     | 
|          |  |                                  |    |  | (in millions)          |   |    |                        |  |      |                                 |  |      |                        |     |  | (in millions)          |   |     |  |  |   |     | 
|GC Impsat |  |                                  |    |  |                        |   |    |                        |  |      |                                 |  |      |                        |     |  |                        |   |     |  |  |   |     |  |  |   |   |  |  |  |    | 
|OIBDA     |  | $                                | 49 |  |                        | $ | 44 |                        |  | $    | 5                               |  |      |                        | 11% |  |                        | $ | 130 |  |  | $ | 127 |  |  | $ | 3 |  |  |  | 2% | 

OIBDA
in the GC Impsat Segment increased in the three months ended September 30, 2010 compared with the same period of 2009 primarily as a result of continuing demand for our broadband lease, managed services, data center products and IP services,
and lower accrued incentive compensation. The increase in OIBDA was partially offset by: (i) higher payroll costs as a result of higher headcount, employee severance charges and inflation-related salary adjustments; and (ii) higher access
charges driven by an increase in revenue.

OIBDA in the GC Impsat Segment increased in the nine months ended
September 30, 2010 compared with the same period of 2009 primarily as a result of continuing demand for our broadband lease, managed services, data center products and IP services. In addition, beneficial foreign currency movements increased GC
Impsat Segment OIBDA by $10 million in the nine months ended September 30, 2010 compared with the same period of 2009. The increase in OIBDA was partially offset by:(i) higher access charges driven by increased revenues; (ii) higher
payroll costs as a result of higher headcount, employee severance charges and inflation-related salary adjustments; (iii) higher real estate costs driven by higher facilities rent, maintenance and utilities; (iv) higher employee incentive
compensation costs primarily due to accruing annual employee incentive compensation at a higher rate in 2010; (v) an increase in other expenses driven by increased travel and allocated corporate overhead costs; (vi) higher cost of
equipment sales; and (vii) higher third party maintenance costs (including $1 million of costs associated with a subsea cable repair). Our Brazilian business has expanded significantly and continues to lead GC Impsat operations in OIBDA
contribution.

ROW Segment

Revenue



|                                                    |  |                                  |     |  |                        |   |     |                        |  |                                 |    |   |                        |      |  |                        |       |  |  |   |       |  |  |   |     |   |  |  |       | 
|--------------------------------------------------- |  | -------------------------------- | --- |  | ---------------------- | - | --- | ---------------------- |  | ------------------------------- | -- | - | ---------------------- | ---- |  | ---------------------- | ----- |  |  | - | ----- |  |  | - | --- | - |  |  | ----- | 
|                                                    |  | Three Months Ended September 30, |     |  | $ 
Increase/(Decrease) |   |     | % 
Increase/(Decrease) |  | Nine Months Ended September 30, |    |   | $ 
Increase/(Decrease) |      |  | % 
Increase/(Decrease) |      
|                                                    |  | 2010                             |     |  | 2009                   |   |     |                        |  | 2010                            |    |   | 2009                   |      |  |                       
|                                                    |  |                                  |     |  | (in millions)          |   |     |                        |  |                                 |    |   |                        |      |  | (in millions)          |       |  |  |   |       |  | 
|ROW                                                 |  |                                  |     |  |                        |   |     |                        |  |                                 |    |   |                        |      |  |                        |       |  |  |   |       |  |  |   |     |   |  |  |       | 
|Enterprise, carrier data and indirect sales channel |  | $                                | 314 |  |                        | $ | 311 |                        |  | $                               | 3  |   |                        | 1%   |  | $                      | 932   |  |  | $ | 910   |  |  | $ | 22  |   |  |  | 2%    | 
|Carrier voice                                       |  |                                  | 77  |  |                        |   | 84  |                        |  |                                 | (7 | ) |                        | (8%) |  |                        | 236   |  |  |   | 264   |  |  |   | (28 | ) |  |  | (11%) | 
|Other                                               |  |                                  | 1   |  |                        |   | 1   |                        |  |                                 | -  |   |                        | NM   |  |                        | 2     |  |  |   | 2     |  |  |   | -   |   |  |  | NM    | 
|Intersegment revenues                               |  |                                  | 3   |  |                        |   | 1   |                        |  |                                 | 2  |   |                        | 200% |  |                        | 11    |  |  |   | 5     |  |  |   | 6   |   |  |  | 120%  | 
|                                                    |  |                                  |     |  |                        |   |     |                        |  |                                 |    |   |                        |      |  |                        |       |  |  |   |       |  |  |   |     |   |  |  |       | 
|                                                    |  | $                                | 395 |  |                        | $ | 397 |                        |  | $                               | (2 | ) |                        | (1%) |  | $                      | 1,181 |  |  | $ | 1,181 |  |  | $ | -   |   |  |  | NM    | 
|                                                    |  |                                  |     |  |                        |   |     |                        |  |                                 |    |   |                        |      |  |                        |       |  |  |   |       |  |  |   |     |   |  |  |       | 

Revenue our ROW Segment decreased in the three months ended September 30,
2010, and was essentially flat in the nine months ended September 30, 2010 compared with the same periods of 2009, primarily as a result of a decline in carrier voice revenue. The decline in carrier voice revenue was driven by pricing actions
to optimize margin performance. Revenue in the three and nine months ended September 30, 2009 included $4 million and $12 million, respectively, for one customers contract buyout of certain long term obligations in our enterprise, carrier
data and indirect sales channel business. In addition, ROW Segment revenue decreased in the three months ended September 30, 2010 compared with the same period of 2009 due to $3 million of adverse foreign currency movements. These decreases in
ROW Segment revenue were partially offset by sales growth in enterprise voice, conferencing, managed services and IP services.

OIBDA



|      |  |                                  |    |  |                        |   |    |                        |  |      |                                 |  |      |                        |     |  |                        |   |    |  |  |   |    |  |  |   |    |  |  |  |     | 
|----- |  | -------------------------------- | -- |  | ---------------------- | - | -- | ---------------------- |  | ---- | ------------------------------- |  | ---- | ---------------------- | --- |  | ---------------------- | - | -- |  |  | - | -- |  |  | - | -- |  |  |  | --- | 
|      |  | Three Months Ended September 30, |    |  | $ 
Increase/(Decrease) |   |    | % 
Increase/(Decrease) |  |      | Nine Months Ended September 30, |  |      | $ 
Increase/(Decrease) |     |  | % 
Increase/(Decrease) |  
|      |  | 2010                             |    |  | 2009                   |   |    |                        |  | 2010 |                                 |  | 2009 |                        |     | 
|      |  |                                  |    |  | (in millions)          |   |    |                        |  |      |                                 |  |      |                        |     |  | (in millions)          |   |    |  |  |   |    | 
|ROW   |  |                                  |    |  |                        |   |    |                        |  |      |                                 |  |      |                        |     |  |                        |   |    |  |  |   |    |  |  |   |    |  |  |  |     | 
|OIBDA |  | $                                | 38 |  |                        | $ | 22 |                        |  | $    | 16                              |  |      |                        | 73% |  |                        | $ | 77 |  |  | $ | 63 |  |  | $ | 14 |  |  |  | 22% | 



34



---

##### Table of Contents



OIBDA
in our ROW Segment increased in the three months ended September 30, 2010 compared with the same period of 2009 primarily as a result of: (i) improved sales mix; (ii) a decrease in bad debt expenses; (iii) lower accrued incentive
compensation; (iv) lower non-income taxes; and (v) $2 million of beneficial foreign currency movements. The increase in ROW Segment OIBDA was partially offset by a decrease in the net benefits from the customer contract buyout described
previously.

OIBDA in our ROW Segment increased in the nine months ended September 30, 2010 compared with
the same period of 2009 primarily as a result of: (i) improved sales mix; (ii) lower payroll costs driven by lower benefit contributions, sales commissions and higher employee severance charges recorded in the third quarter of 2009,
partially offset by unpaid leave savings recorded in 2009; (iii) a reduction in real estate restructuring reserves; (iv) lower professional fees; (v) a decrease in bad debt expenses; (vi) lower non-income taxes; and
(vii) lower real estate costs driven by a $2 million retroactive property tax assessment recorded in the third quarter of 2009, partially offset by higher rent and utilities costs. The increase in ROW Segment OIBDA was partially offset by
higher employee incentive compensation costs primarily due to accruing annual employee incentive compensation at a higher rate in 2010.

Liquidity and Capital Resources

Financial Condition and State of Liquidity

Our
ability to make payments on and to refinance our indebtedness and to fund planned capital expenditures will depend on our ability to generate cash in the future. This depends to a degree on general economic, financial, competitive, legislative,
regulatory and other factors (such as satisfactory resolution of contingent liabilities) that are beyond our control.

Based on our current level of operations, expected revenue growth trends and anticipated cost management and operating improvements, we believe our future cash flow from operations, available cash and
cash available from financing activities will be adequate to meet our future liquidity needs for at least the next twelve months.

There can be no assurance, however, that our business will generate sufficient cash flow from operations, that currently anticipated operating improvements will be realized on schedule or that future
borrowings will be available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness on or before maturity. We cannot provide assurances
that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all. Furthermore, we cannot provide any assurances that ongoing adverse general economic conditions will not have a material adverse impact on our
future operations and cash flows.

We monitor our capital structure on an ongoing basis and from time to time
we consider financing and refinancing options to improve our capital structure and to enhance our financial flexibility. Our ability to enter into new financing arrangements is subject to restrictions in our outstanding debt instruments (as
described below under Indebtedness) and to the rights of ST Telemedia under our outstanding preferred shares. At any given time we may pursue a variety of financing opportunities, and our decision to proceed with any financing will
depend, among other things, on prevailing market conditions, near term maturities and available terms.

From
time to time we review our operations and may consider opportunities to strategically enhance, expand or change our operations and leverage our capabilities. Initiatives that may result from such reviews may include, among others, plans to reduce
our operating expenses and/or optimize existing operating resources, expansion of existing or entry into complementary lines of business, additional capital investment in our network and service infrastructure and opportunistic acquisitions. At any
given time in connection with the foregoing we may be engaged in varying levels of analyses or negotiations with potential counterparties. If we pursue any such initiatives or transactions, we may require additional equity or debt financing to
consummate those transactions, and there can be no assurance that we will be able to obtain such financing on favorable terms or at all. If we undertake such initiatives, it may place greater demands on our cash flows due to increased capital and
operating expenses and debt service.

At September 30, 2010, our available liquidity consisted of $311
million of unrestricted cash and cash equivalents. In addition, at September 30, 2010, we held $19 million in restricted cash and cash equivalents. Our restricted cash and cash equivalents comprise cash collateral for letters of credit or
performance bonds issued in favor of certain of our vendors and deposits securing real estate obligations.

Effective January 12, 2010, the Venezuelan government devalued the Venezuelan bolivar. The official rate increased
from 2.15 Venezuelan bolivares to the U.S. Dollar to 4.30 for goods and services deemed non-essential and 2.60 for goods and services deemed essential. This devaluation reduced our unrestricted cash and cash equivalents
during the three months ended March 31, 2010 by approximately $27 million (see Currency Risk below in this Item 2 for further information related to foreign currency exchange restrictions and the impact of the devaluation of
the Venezuelan bolivar).

In the long term, we expect our operating results and cash flows to continue to
improve as a result of the continued growth of our higher margin enterprise, carrier data and indirect sales channel business, including the economies of scale expected to result from such growth, and from ongoing cost management initiatives,
including initiatives to optimize the access network and effectively lower unit prices. Thus, in the long term, we expect to generate positive cash flow from operating activities in an amount sufficient to fund all investing and financing
requirements, subject to the possible need to refinance our existing major debt instruments as described below. However, our ability to improve cash flows is subject to the risks and uncertainties described above in this Item 2 under
Cautionary Note Regarding Forward-Looking Statements as well as the variability of quarterly liquidity discussed below.

Compared to periods prior to 2010, operating cash flows will be adversely impacted by approximately $55 million of incremental annual interest payments primarily resulting from the issuance of the 12%
Senior Secured Notes and the associated refinancing. We also anticipate lower sales of IRUs and prepaid services in 2010 than realized in 2009 and we currently have lowered expectations for 2010 revenue in our GCUK Segment and in usage-driven
conferencing services in North America. As a result of these factors, and in light of improvements in underlying operating results in other areas, we currently expect cash provided by operating activities (including IRUs and other prepaid sales) to
roughly equate to purchases of property and equipment for the full year 2010. This expectation is based in part on raising financing for such property and equipment from vendors and others in amounts somewhat lower than those arranged in 2009. Our
ability to arrange such financings is subject to negotiating acceptable terms from equipment



35



---

##### Table of Contents

vendors and financing parties. In addition, our short-term liquidity and more specifically our quarterly cash flows are subject to considerable variability as a result of the timing of interest
payments as well as the following factors:



| |  |  | Working capital variability significantly impacts our cash flows and causes our intra-quarter cash balances to drop to levels significantly lower
than those prevailing at the end of a quarter.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We rely on the sale of IRUs and prepaid services, which often involve large dollar amounts and are difficult to predict. During the three and nine
months ended September 30, 2010, we received $31 million and $77 million, respectively, of cash receipts from the sale of IRUs and prepaid services compared to $33 million and $92 million, respectively, in the same periods of 2009. Our
forecasted cash flows for 2010 contemplate lower sales of IRUs and prepaid services as compared to the $130 million in 2009.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Adverse general economic conditions could cause customer buying patterns with us to change as a result of their cash conservation efforts, which
could have an adverse impact on our cash flows. Such adverse conditions could also adversely impact our working capital to the extent suppliers seek more timely payment from us or customers pay us on a less timely basis.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We have exposure to significant currency exchange rate risks. We conduct a significant portion of our business using the British
Pound Sterling, the Euro and the Brazilian Real. Appreciation of the U.S. Dollar adversely impacts our consolidated revenue. Since we tend to incur costs in the same currency in which we realize revenue, the impact on operating income and
operating cash flow is largely mitigated. In addition, the appreciation of the U.S. Dollar relative to foreign currencies reduces the U.S. Dollar value of cash balances held in those currencies.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Restrictions on the conversion of the Venezuelan bolivar into U.S. Dollars have resulted in the buildup of a material excess bolivar cash balance,
which is carried on our books at the official exchange rate, attributing to the bolivar a value that is greater than the value using the SITME exchange rate, which itself values the bolivar at a greater rate than that which we believe would prevail
in an unregulated open market. If we were required to convert our Venezuelan subsidiarys cash balances into U.S. Dollars using the SITME, we would incur currency exchange losses in the period of conversion. Additionally, if we further
determined that the SITME conversion rate should be used in the future to measure assets, liabilities and transactions, reported results could be further adversely affected. See below in this Item 2 under Currency Risk for further
information.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our liquidity may also be adversely affected if we settle or are found liable in respect of contingent legal, tax and other liabilities, and the
amount and timing of the resolution of these contingencies remain uncertain.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Cash outlays for purchases of property and equipment can vary significantly from quarter to quarter due primarily to the timing of major network
upgrades. Although we have the flexibility to reduce expected capital expenditures in future periods to conserve cash, the majority of our capital expenditures are directly related to customer requirements and therefore ultimately generate long-term
cash flows.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The vast majority of our long-term debt and capital lease obligations mature
after 2010. However, we have approximately $229 million related to various debt agreements that are due and payable in the next twelve months, including the $144 million original principal amount of our 5% Convertible Notes which mature in May 2011
(subject to earlier conversion into GCL common stock at the conversion price of approximately $22.98 per share) and any Excess Cash Offer related to the year ended December 31, 2010 (see GCUK Notes Tender Offer below). We continue to monitor
market conditions and we currently expect to refinance our 5% Convertible Notes prior to their maturity. In addition to this $229 million, we have $25 million of other current liabilities representing accrued dividends on our 2%
cumulative senior convertible preferred stock. Payment of the preferred dividend is predicated on our achieving a certain earnings-related objective as demonstrated by audited financial statements, which objective we anticipate achieving during
2010. With regard to our other major debt instruments, (i) the $434 million principal amount of the GCUK Notes matures in 2014 (less any amounts purchased as a result of any Excess Cash Offer); and (ii) the $750 million original principal
amount of the 12% Senior Secured Notes matures in 2015. If cash on hand at the time any of these debt instruments mature is insufficient to satisfy these and our other debt repayment obligations, we would need to access the capital markets to meet
our liquidity requirements. Such access would depend on market conditions and our credit profile at the time.

As a holding
company, all of our revenue is generated by our subsidiaries and substantially all of our assets are owned by our subsidiaries. As a result, we are dependent upon intercompany transfers of funds from our subsidiaries to meet our debt service and
other payment obligations. Our subsidiaries are incorporated and operate in various jurisdictions throughout the world and are subject to legal and contractual restrictions affecting their ability to make intercompany funds transfers. Such legal
restrictions include prohibitions on paying dividends in excess of retained earnings (or similar concepts under applicable law), which prohibition applies to most of our subsidiaries given their history of operating losses, as well as foreign
exchange controls on the use of certain mechanisms to convert and expatriate funds that are particularly prevalent in Latin America. Contractual restrictions on intercompany funds transfers include limitations in our major debt instruments on the
ability of our subsidiaries to make dividend and other payments on equity securities, as well as limitations on our subsidiaries ability to make intercompany loans or to upstream funds in any other manner. These contractual restrictions arise
under our major debt instruments. However, the 12% Senior Secured Notes indenture does not restrict the ability of our subsidiaries in the ROW and GC Impsat Segments to transfer funds to GCL, although such restrictions do apply to our GCUK Segment
due to restrictions in the GCUK Notes indenture.



36



---

##### Table of Contents



At
September 30, 2010, unrestricted cash and cash equivalents were $67 million, $130 million, and $114 million at our GCUK, GC Impsat and ROW Segments, respectively (see below in this Item 2 under Currency Risk for information
related to the devaluation of the Venezuelan bolivar on January 12, 2010). Operational constraints require us to maintain significant minimum cash balances in each of our segments. On March 30, 2010, GCUK Segment borrowed $20 million from
the ROW Segment to ensure cash balances were at prudent levels upon completion of the annual Excess Cash Offer for the GCUK Notes. We believe that this loan, which is payable September 2013, and likely future intersegment funds transfers in amounts
permitted by our debt instruments will be sufficient to enable each of our segments to reach the point of sustained recurring positive cash flow from operating and investing activities. Most of our assets have been pledged to secure our
indebtedness. Failure to comply with the covenants in any of our debt instruments could result in an event of default, which, if not cured or waived, could result in an acceleration of all such debts. Such acceleration would adversely affect our
rights under certain commercial agreements and have a material adverse effect on our business, results of operations, financial condition and liquidity. If the indebtedness under any of our loan instruments were to be accelerated, there can be no
assurance that our assets would be sufficient to repay such indebtedness in full. In such event, we would have to raise funds from alternative sources, which may not be available on favorable terms, on a timely basis or at all. Moreover, a default
by any of our subsidiaries under a capital lease obligation or debt obligation totaling more than $2.5 million, as well as the bankruptcy or insolvency of any of our subsidiaries, could trigger cross-default provisions under certain debt
instruments.

Indebtedness

At September 30, 2010, we had $1.48 billion of indebtedness outstanding (including long and short term debt and
capital lease obligations), consisting of $736 million of 12% Senior Secured Notes ($750 million aggregate principal less $14 million of unamortized discount), $436 million of GCUK Notes ($434 million aggregate principal plus $2 million of net
unamortized premium), $137 million of 5% Convertible Notes ($144 million aggregate principal less $7 million of unamortized discount) and $167 million of capital lease obligations and other debt.

We are in compliance with all covenants under our material debt agreements and expect to continue to be in compliance.

See Item 7, Managements Discussion and Analysis of Financial Condition and Results of
OperationsIndebtedness, of our 2009 annual report on Form 10-K, for a description of the GCUK Notes, 5% Convertible Notes and 12% Senior Secured Notes.

Financing Activities

During the nine months ended
September 30, 2010, we entered into various debt agreements to finance various equipment purchases and software licenses. The total debt obligation resulting from these agreements was $11 million. These agreements have terms that range from 6
to 48 months with a weighted average effective interest rate of 9.8%. In addition, we also entered into various capital leasing arrangements that aggregated $38 million. These agreements have terms that range from 12 to 48 months with a weighted
average effective interest rate of 10.9%.

GCUK Notes Tender Offer

As required by the indenture governing the senior secured notes due 2014 (the GCUK Notes), within 120 days
after the end of each twelve month period ending December 31, GCUK must offer (the Excess Cash Offer) to purchase a portion of the GCUK Notes at a purchase price equal to 100% of their principal amount, plus accrued and unpaid
interest, if any, to the purchase date, with 50% of Designated GCUK Cash Flow from that period. Designated GCUK Cash Flow means GCUKs consolidated net income plus non-cash charges minus capital expenditures, calculated
in accordance with the terms of the indenture governing the GCUK Notes. With respect to the 2009 Excess Cash Offer, we made an offer for $18 million and purchased less than $1 million in principal amount, exclusive of accrued but unpaid interest.

If the current year-to-date results were the results for the full year to December 31, 2010, we would be
obligated to make an Excess Cash Offer of $9 million, exclusive of accrued but unpaid interest. Any such offer is required to be made within 120 days of year-end, and the associated purchases are required to be completed within 150 days after
year-end.



37



---

##### Table of Contents



Cash Management Impacts

Condensed Consolidated Statements of Cash Flows



|                                                             |  |                                 |      |   |                        |   |      |   |  |   |      |  
|------------------------------------------------------------ |  | ------------------------------- | ---- | - | ---------------------- | - | ---- | - |  | - | ---- | -
|                                                             |  | Nine Months 
EndedSeptember 30, |      |   | $ 
Increase/(Decrease) |  
|                                                             |  | 2010                            |      |   | 2009                   |   |     
|                                                             |  |                                 |      |   | (inmillions)           |   |      |   | 
|Net cash flows provided by operating activities              |  | $                               | 34   |   |                        | $ | 135  |   |  | $ | (101 | )
|Net cash flows used in investing activities                  |  |                                 | (123 | ) |                        |   | (123 | ) |  |   | -    |  
|Net cash flows provided by (used in) financing activities    |  |                                 | (53  | ) |                        |   | 52   |   |  |   | (105 | )
|Effect of exchange rate changes on cash and cash equivalents |  |                                 | (24  | ) |                        |   | 5    |   |  |   | (29  | )
|                                                             |  |                                 |      |   |                        |   |      |   |  |   |      |  
|Net increase (decrease) in cash and cash equivalents         |  | $                               | (166 | ) |                        | $ | 69   |   |  | $ | (235 | )
|                                                             |  |                                 |      |   |                        |   |      |   |  |   |      |  

Cash Flows from Operating Activities

Cash flows provided by operating activities decreased in the nine months ended September 30, 2010 compared with the
same period in 2009 primarily as a result of higher interest and incentive compensation payments and lower IRU and prepaid services receipts in the current period. During the nine months ended September 30, 2010, we made $125 million of
interest payments compared with $86 million in the same period of 2009. During the nine months ended September 30, 2010 we received $77 million of cash receipts from the sale of IRUs and prepaid services compared with $92 million in the same
period of 2009.

Cash Flows from Investing Activities

Cash flows used in investing activities in the nine months ended September 30, 2010 was essentially flat when
compared with the same period in 2009. During the nine months ended September 30, 2010, we used $6 million more net cash for purchases and sales of marketable securities, partially offset by a decrease of $5 million in capital expenditures.

Cash Flows from Financing Activities

Cash flows provided by financing activities decreased in the nine months ended September 30, 2010 compared with the
same period in 2009 primarily as a result of: (i) the net cash received as part of refinancing debt in 2009; (ii) lower debt repayments due to a lower repurchase of GCUK Notes under the Excess Cash Offer; and (iii) lower amounts paid
for employee taxes on certain share-based compensation as substantially all of the 2008 annual bonus was paid in stock in 2009.

Contractual Cash Commitments

During the nine months ended September 30, 2010, we entered into the following significant contractual commitments: (i) an amendment to an equipment and service agreement that requires payments
of $30 million (including value added taxes of approximately $6 million) over the next two years; (ii) an extension of an agreement for supply, installation and maintenance of customer premises equipment that requires payments of $23 million
through 2013; (iii) an amendment to an existing equipment lease facility that requires payments of $10 million through 2013; (iv) a three and a half year extension to a global maintenance and support agreement that requires payments of
approximately $22 million through December 2013; (v) an extension to a digital services agreement that requires payments of $37 million through April 2011; (vi) an agreement to secure the lease of capital equipment requiring payments of
$20 million over the next three years and (vii) an amendment to an existing network augmentation agreement that requires payments of $11 million through 2012.

Credit Risk

We are subject to concentrations of credit
risk in our trade receivables. Although our receivables are geographically dispersed and include customers both large and small in numerous industries, our receivables from our carrier sales channels are generated from sales of services to other
carriers in the telecommunications industry. As of September 30, 2010 and December 31, 2009, our receivables related to our carrier sales channels represented approximately 38% and 43%, respectively, of our consolidated receivables. Also
as of September 30, 2010 and December 31, 2009, our receivables due from various agencies of the U.K. Government together represented approximately 8% and 5%, respectively, of our consolidated receivables.

Currency Risk

Certain of our current and prospective customers derive their revenue in currencies other than U.S. Dollars but are invoiced by us in U.S. Dollars. The obligations of customers with revenue in foreign
currencies may be subject to unpredictable and indeterminate increases in the event that such currencies depreciate in value relative to the U.S. Dollar. Furthermore, such customers may become subject to exchange control regulations restricting the
conversion of their revenue currencies into U.S. Dollars. In either event, the affected customers may not be able to pay us in U.S. Dollars. In addition, where we issue invoices for our services in currencies other



38



---

##### Table of Contents

than U.S. Dollars, our operating results may suffer due to currency translations in the event that such currencies depreciate relative to the U.S. Dollar and we cannot or do not elect to
enter into currency hedging arrangements in respect of those payment obligations. Declines in the value of foreign currencies (such as the devaluation of the Venezuelan bolivar discussed below) relative to the U.S. Dollar could adversely affect
our ability to market our services to customers whose revenue is denominated in those currencies.

Certain
Latin American economies have experienced shortages in foreign currency reserves and have adopted restrictions on the use of certain mechanisms to expatriate local earnings and convert local currencies into U.S. Dollars. Any such shortages or
restrictions may limit or impede our ability to transfer or to convert such currencies into U.S. Dollars and to expatriate such funds for the purpose of making timely payments of interest and principal on our indebtedness. These restrictions have a
significantly greater impact on us and on our ability to service our debt as a result of the Impsat acquisition. In addition, currency devaluations in one country may have adverse effects in another country.

In Venezuela, the official bolivaresU.S. Dollar exchange rate established by the Venezuelan Central Bank
(BCV) and the Venezuelan Ministry of Finance has historically attributed to the bolivar a value significantly greater than the value that prevailed on the former unregulated parallel market. The official rate is the rate used by the
Comisión de Administración de Divisas (CADIVI), an agency of the Venezuelan government, to exchange bolivares pursuant to an official process that requires application and government approval. We use the official rate to
record the assets, liabilities and transactions of our Venezuelan subsidiary. Effective January 12, 2010, the Venezuelan government devalued the Venezuelan bolivar. The official rate increased from 2.15 Venezuelan bolivares to the
U.S. Dollar to 4.30 for goods and services deemed non-essential and 2.60 for goods and services deemed essential. This devaluation reduced our net monetary assets (including unrestricted cash and cash equivalents) by
approximately $27 million based on the bolivares balances as of such date, resulting in a corresponding foreign exchange loss, included in other expense, net in our unaudited condensed consolidated statement of operations for the nine months ended
September 30, 2010.

In an attempt to control inflation, on May 18, 2010, the Venezuelan government
announced that the unregulated parallel currency exchange market would be shut down and that the BCV would be given control over the previously unregulated portions of the exchange market. In June 2010, a new regulated currency trading system
controlled by the BCV, the Transaction System for Foreign Currency Denominated Securities (SITME), commenced operations and established an initial weighted average implicit exchange rate of approximately 5.30 bolivares to the
U.S. Dollar. Subject to the limitations and restrictions imposed by the BCV, entities domiciled in Venezuela may access the SITME by buying U.S. Dollar denominated securities through banks authorized by the BCV. The purpose of the new regulated
system is to supplement the CADIVI application and approval process with an additional process that allows for quicker and smaller exchanges.

As indicated above, the conversion of bolivares into foreign currencies is limited by the current exchange control regime. Accordingly, the acquisition of foreign currency by Venezuelan companies to honor
foreign debt, pay dividends or otherwise expatriate capital is subject to either the limitations and restrictions of the SITME or the CADIVI registration, application and approval process, and is also subject to the availability of foreign currency
within the guidelines set forth by the National Executive Power for the allocation of foreign currency. Approvals under the CADIVI process have become less forthcoming over time, resulting in a significant buildup of excess cash in our Venezuelan
subsidiary and a significant increase in our exchange rate and exchange control risks.

At September 30,
2010, we had $17 million of obligations registered and subject to approval by CADIVI for the conversion of bolivares into foreign currencies. We cannot predict the timing and extent of any CADIVI approvals to honor foreign debt, distribute dividends
or otherwise expatriate capital using the official Venezuelan exchange rate. Some approvals have been issued within a few months while others have taken more than one year. During 2010 we received approvals from CADIVI to convert bolivares to U.S.
Dollars at both the essential and non-essential official rates. In the third quarter of 2010, we participated in a debt auction held by the Venezuelan government and used bolivares to purchase $10 million of U.S. Dollar-denominated bonds at par
value in connection with our currency exchange risk mitigation efforts. We received approval to purchase the bonds and sold these bonds immediately upon receipt at a price of $8 million paid in U.S. Dollars, which resulted in an approximate 25%
discount. The loss of $2 million was included in other income (expense), net in our unaudited condensed consolidated statement of operations for the nine months ended September 30, 2010. To date, we have not executed any exchanges through
SITME. If we were to successfully avail our self of the SITME process to convert our Venezuelan subsidiarys cash balances into U.S. Dollars, we would incur currency exchange losses in the period of conversion based on the difference between
the official exchange rate and the SITME rate. Additionally, if we were to determine in the future that the SITME rate was the more appropriate rate to use to measure bolivar-based assets, liabilities and transactions, reported results would be
further adversely affected.

As of September 30, 2010, approximately $29 million (valued at the fixed
official CADIVI rate of 4.30 Venezuelan bolivares to the U.S. Dollar at September 30, 2010 (the CADIVI rate)) of our cash and cash equivalents was held in Venezuelan bolivares. For the three and nine months ended
September 30, 2010, our Venezuelan subsidiary generated approximately $13 million and $38 million, respectively, of our consolidated revenue and $8 million and $22 million, respectively, of our consolidated OIBDA, in each case based on the
CADIVI rate. As of September 30, 2010, our Venezuelan subsidiary had $35 million of net monetary assets of which $13 million and $22 million were denominated in U.S. Dollars and Venezuelan bolivares, respectively, in each case based on the
CADIVI rate. As of September 30, 2010, our Venezuelan subsidiary had $68 million of net assets, which may not be transferred to GCL in the form of loans, advances or cash dividends without the consent of a third party (i.e., CADIVI or SITME).



39



---

##### Table of Contents



We
conduct a significant portion of our business using the British Pound Sterling, the Euro and the Brazilian Real. Appreciation of the U.S. Dollar adversely impacts our consolidated revenue. Since we tend to incur costs in the same currency
in which we realize revenue, the impact on operating income and operating cash flow is largely mitigated. In addition, the appreciation of the U.S. Dollar relative to foreign currencies reduces the U.S. Dollar value of cash balances held
in those currencies.

Off-Balance Sheet Arrangements

See Item 7 in the Companys 2009 annual report on Form 10-K. No material change regarding this information has
occurred since that filing.



|Item 3. | Quantitative and Qualitative Disclosures about Market Risk
|------- | ----------------------------------------------------------

See Item 7A in the Companys 2009 annual report on Form 10-K for information regarding quantitative and qualitative disclosures about market risk. No material change regarding this information
has occurred since that filing.



|Item 4. | Controls and Procedures
|------- | -----------------------

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rule 13(a) -15(e) under the Exchange Act) are controls and other
procedures that are designed to ensure that information required to be disclosed by a public company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in
the SECs rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a public company in the reports that it files or submits under
the Exchange Act is accumulated and communicated to the companys management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding
required disclosure. Disclosure controls and procedures include many aspects of internal control over financial reporting (as defined later in this Item 4).

In connection with the preparation of this quarterly report on Form 10-Q, management, with the participation of our Chief
Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, pursuant to Rule 13a-15 under the Exchange Act. Based upon managements evaluation, our Chief Executive Officer and Chief
Financial Officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2010.

Changes in Internal Control over Financial Reporting

On May 9, 2007, we acquired Impsat. We are currently in the process of incorporating Impsats internal controls
into our control structure and migrating overlapping processes and systems to legacy Global Crossing processes and systems. We consider the ongoing integration of Impsat a material change in our internal control over financial reporting.

Except as noted above, there were no other material changes in our internal control over financial reporting during the
third quarter of 2010.



40



---

##### Table of Contents



PART II. OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

See Note 8, Contingencies, to the accompanying unaudited condensed consolidated financial statements for a discussion of certain legal proceedings affecting the Company.



|Item 1A. | Risk Factors
|-------- | ------------

Except as set forth below, there have been no material changes in the most significant factors that make an investment in the Company speculative or risky from those set forth in Item 1A., Risk
Factors, to the Companys annual report on Form 10-K for the year ended December 31, 2009.

We
are subject to the Foreign Corrupt Practices Act (the FCPA), which generally prohibits companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or keeping business and/or other
benefits. Although we have policies and procedures designed to ensure that we, our employees and agents comply with the FCPA, there is no assurance that such policies or procedures will work effectively all of the time or protect us against
liability under the FCPA for actions taken by our agents, employees and intermediaries with respect to our business or any businesses that we acquire. We operate in a number of jurisdictions that pose a high risk of potential FCPA violations. As
previously disclosed, between 2004 and 2006 (prior to our acquisition of Impsat in May 2007), Impsat paid approximately $23,000 (based on the exchange rate at the time of payment) to government officials to allow performance of construction work
notwithstanding the fact that required permits were not obtained. Also as previously disclosed, the Colombian National Attorney General (Procuraduría General de la Nación (NAG)) published a decision in November 2007
finding (as part of broader allegations unrelated to Impsat) that funds originated with Impsat had been used by a contractor retained by Impsat to bribe an official within Colombias homeland security agency (Departamento Administrativo de
Seguridad (DAS)). Impsat retained the contractor in question in 2003 and paid him approximately $44,000 (based on the exchange rate at the time of payment) in 2004; we have not been able to determine whether any of these funds went
to DAS officials. The NAGs decision included a referral of the report and its findings to the criminal prosecutor, and the referral included specific reference to Impsat. One DAS official has been criminally convicted in connection with a
related investigation, and criminal proceedings are pending against two other individuals (including a former senior official at DAS). We brought these matters to the attention of the U.S. Securities and Exchange Commission (the SEC) and
the U.S. Department of Justice in March 2008. Following that disclosure we were notified that the SEC had commenced an investigation of the matter. The staff of the SEC notified us in March 2010 that it has completed its investigation and does
not intend to recommend any enforcement action by the SEC. If we are not in compliance with the FCPA and other laws governing the conduct of business with government entities (including local laws), we may be subject to criminal and civil penalties
and other remedial measures, which could have an adverse impact on our business, financial condition, results of operations and liquidity. Any investigation of any potential violations of the FCPA or other anticorruption laws by U.S. or foreign
authorities could have an adverse impact on our business, financial condition and results of operations.

In
Venezuela, the official bolivaresU.S. Dollar exchange rate established by the Venezuelan Central Bank (BCV) and the Venezuelan Ministry of Finance has historically attributed to the bolivar a value significantly greater than
the value that prevailed on the former unregulated parallel market. The official rate is the rate used by the Comisión de Administración de Divisas (CADIVI), an agency of the Venezuelan government, to exchange bolivares
pursuant to an official process that requires application and government approval. We use the official rate to record the assets, liabilities and transactions of our Venezuelan subsidiary. Effective January 12, 2010, the Venezuelan government
devalued the Venezuelan bolivar. The official rate increased from 2.15 Venezuelan bolivares to the U.S. Dollar to 4.30 for goods and services deemed non-essential and 2.60 for goods and services deemed essential. This
devaluation reduced our net monetary assets (including unrestricted cash and cash equivalents) by approximately $27 million based on the bolivares balances as of such date, resulting in a corresponding foreign exchange loss, included in other
expense, net in our unaudited condensed consolidated statement of operations for the nine months ended September 30, 2010.

In an attempt to control inflation, on May 18, 2010, the Venezuelan government announced that the unregulated parallel currency exchange market would be shut down and that the BCV would be given
control over the previously unregulated portions of the exchange market. In June 2010, a new regulated currency trading system controlled by the BCV, the Transaction System for Foreign Currency Denominated Securities (SITME), commenced
operations and established an initial weighted average implicit exchange rate of approximately 5.30 bolivares to the U.S. Dollar. Subject to the limitations and restrictions imposed by the BCV, entities domiciled in Venezuela may access the
SITME by buying U.S. Dollar denominated securities through banks authorized by the BCV. The purpose of the new regulated system is to supplement the CADIVI application and approval process with an additional process that allows for quicker and
smaller exchanges.

As indicated above, the conversion of bolivares into foreign currencies is limited by the
current exchange control regime. Accordingly, the acquisition of foreign currency by Venezuelan companies to honor foreign debt, pay dividends or otherwise expatriate capital is subject to either the limitations and restrictions of the SITME or the
CADIVI registration, application and approval process, and is also subject to the availability of foreign currency within the guidelines set forth by the National Executive Power for the allocation of foreign currency. Approvals under the CADIVI
process have become less forthcoming over time, resulting in a significant buildup of excess cash in our Venezuelan subsidiary and a significant increase in our exchange rate and exchange control risks.



41



---

##### Table of Contents



At
September 30, 2010, we had $17 million of obligations registered and subject to approval by CADIVI for the conversion of bolivares into foreign currencies. We cannot predict the timing and extent of any CADIVI approvals to honor foreign debt,
distribute dividends or otherwise expatriate capital using the official Venezuelan exchange rate. Some approvals have been issued within a few months while others have taken more than one year. During 2010 we received approvals from CADIVI to
convert bolivares to U.S. Dollars at both the essential and non-essential official rates. In the third quarter of 2010, we participated in a debt auction held by the Venezuelan government and used bolivares to purchase $10 million of
U.S. Dollar-denominated bonds at par value in connection with our currency exchange risk mitigation efforts. We received approval to purchase the bonds and sold these bonds immediately upon receipt at a price of $8 million paid in U.S. Dollars,
which resulted in an approximate 25% discount. The loss of $2 million was included in other income (expense), net in our unaudited condensed consolidated statement of operations for the nine months ended September 30, 2010. To date, we have not
executed any exchanges through SITME. If we were to successfully avail our self of the SITME process to convert our Venezuelan subsidiarys cash balances into U.S. Dollars, we would incur currency exchange losses in the period of conversion
based on the difference between the official exchange rate and the SITME rate. Additionally, if we were to determine in the future that the SITME rate was the more appropriate rate to use to measure bolivar-based assets, liabilities and
transactions, reported results would be further adversely affected.

As of September 30, 2010,
approximately $29 million (valued at the fixed official CADIVI rate of 4.30 Venezuelan bolivares to the U.S. Dollar at September 30, 2010 (the CADIVI rate)) of our cash and cash equivalents was held in Venezuelan
bolivares. For the three and nine months ended September 30, 2010, our Venezuelan subsidiary generated approximately $13 million and $38 million, respectively, of our consolidated revenue and $8 million and $22 million, respectively, of our
consolidated OIBDA, in each case based on the CADIVI rate. As of September 30, 2010, our Venezuelan subsidiary had $35 million of net monetary assets of which $13 million and $22 million were denominated in U.S. Dollars and Venezuelan
bolivares, respectively, in each case based on the CADIVI rate. As of September 30, 2010, our Venezuelan subsidiary had $68 million of net assets, which may not be transferred to GCL in the form of loans, advances or cash dividends without the
consent of a third party (i.e., CADIVI or SITME).



|Item 6. | Exhibits
|------- | --------

Exhibits filed as part of this report are listed below.



|     |  |                                                                                                                                                                                                
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|31.1 |  | Certification by John J. Legere, Chief Executive Officer of GCL pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 (filed
herewith).                                            
|     | 
|31.2 |  | Certification by John A. Kritzmacher, Chief Financial Officer of GCL pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 (filed
herewith).                                       
|     | 
|32.1 |  | Certification by John J. Legere, Chief Executive Officer of GCL, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (furnished herewith).
|     | 
|32.2 |  | Certification by John A. Kritzmacher, Chief Financial Officer of GCL, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of (furnished herewith).



42



---

##### Table of Contents

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 on November 3, 2010 by the undersigned thereunto duly authorized.



|                        |  |                               
|----------------------- |  | ------------------------------
|GLOBAL CROSSING LIMITED
|                        | 
|By:                     |  | /S/    JOHN A.
KRITZMACHER    
|                        |  | John A. Kritzmacher           
|                        |  | Chief Financial Officer       
|                        |  | (Principal Financial Officer) 
|                        | 
|By:                     |  | /S/    ROBERT A.
KLUG         
|                        |  | Robert A. Klug                
|                        |  | Chief Accounting Officer      
|                        |  | (Principal Accounting Officer)



43