U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB


         QUARTERLY REPORT UNDER SECTION 12 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001.

         TRANSITION  REPORT  UNDER  SECTION  13 OR 15(d) OF THE  SECURITIES
         EXCHANGE  ACT OF 1934 FOR THE  TRANSITION  PERIOD  FROM _____ TO _____.


                          Commission file number 21143

                        CONVERGENCE COMMUNICATIONS, INC.

        (Exact name of small business issuer as specified in its charter)


                 Nevada                                     87-0545056
    (State or other jurisdiction of                      (I.R.S. Employer
     incorporation or organization)                    Identification No.)

     102 West 500 South, Suite 320
          Salt Lake City, Utah                                84101
(Address of Principal Executive Offices)                    (Zip Code)

                                 (801) 328-5618
                           (Issuer's telephone number)

                                 Not Applicable
              (Former name, former address and former fiscal year,
                         if changed since last report)


Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No

As of April 30, 2001, 11,921,094 shares of registrant's Common Stock, par value
$.001 per share, 13,620,472 shares of the registrant's Series C Preferred Stock,
par value $.001 per share, and 2,643,636 shares of the registrant's Series D
Preferred Stock, par value $.001 per share, were outstanding.


<PAGE>

PART I:  FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS REQUIRED BY FORM 10-QSB

     The accompanying unaudited consolidated financial statements of Convergence
Communications,  Inc. have been prepared in accordance  with generally  accepted
accounting  principles for interim financial reporting and pursuant to the rules
and regulations of the Securities and Exchange  Commission.  They do not include
all of the information and footnotes required by generally  accepted  accounting
principles for complete financial statements.  These financial statements should
be read in  conjunction  with  Note 1  herein  and  the  consolidated  financial
statements  and notes  thereto  included in our annual report on Form 10-KSB for
the year ended December 31, 2000,  which are  incorporated  herein by reference.
The  accompanying  financial  statements  have not been examined by  independent
accountants in accordance with generally accepted auditing standards, but in the
opinion of management,  all adjustments (consisting of normal recurring entries)
necessary  for the fair  presentation  of our results of  operations,  financial
position and changes therein for the periods  presented have been included.  The
results of  operations  for the three  months  ended  March 31,  2001 may not be
indicative of the results that may be expected for the year ending  December 31,
2001.

<PAGE>
<TABLE>
<CAPTION>

CONVERGENCE COMMUNICATIONS, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MARCH 31, 2001 AND DECEMBER 31, 2000
------------------------------------------------------------------------------------------------------------------

                                                                                 March 31,         December 31,
                                                                                   2001                2000
                                                                              ----------------    ----------------
<S>                                                                           <C>                 <C>

ASSETS
CURRENT ASSETS:
    Cash and cash equivalents                                                     $ 8,097,914         $ 4,193,170
    Accounts receivable - net                                                       6,711,437           5,244,893
    Inventory - net                                                                   889,316             910,204
    Value added tax receivable                                                      2,651,787           4,048,900
    Prepaid expenses and other                                                      2,548,060           2,129,438
                                                                              ----------------    ----------------
                 Total current assets                                              20,898,514          16,526,605

PROPERTY AND EQUIPMENT - net                                                       65,263,737          56,652,546

INTANGIBLE ASSETS - net                                                            44,809,717          46,513,030

OTHER ASSETS
    Debt issue costs                                                                5,550,687           5,550,687
    Other                                                                           1,441,813           1,475,034
                                                                              ----------------    ----------------
                 Total other assets                                                 6,992,500           7,025,721
                                                                              ----------------    ----------------
TOTAL ASSETS                                                                    $ 137,964,468       $ 126,717,902
                                                                              ================    ================

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
    Short-term debt (payable to related party)                                  $           -         $ 3,000,000
    Notes payable - current portion                                                17,536,416          22,298,447
    Current portion of long-term debt (payable to related party)                    1,436,519           1,436,519
    Accounts payable and accrued liabilities                                       24,362,044          21,944,835
                                                                              ----------------    ----------------
                 Total current liabilities                                         43,334,979          48,679,801

LONG-TERM LIABILITIES:
    Notes payable - long-term portion                                              11,943,398          12,274,717
    Long-term debt (payable to related parties)                                     8,269,497           4,769,497
    Other long-term liabilities                                                       803,125             392,239
                                                                              ----------------    ----------------
                 Total long-term liabilities                                       21,016,020          17,436,453

MINORITY INTEREST IN SUBSIDIARIES                                                     911,555           2,012,603
                                                                              ----------------    ----------------
                 Total liabilities                                                 65,262,554          68,128,857

COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
    Series "D" Preferred stock; $0.001 par value; 10,000,000 shares authorized:
       2,643,636 shares outstanding in 2001                                             2,644                   -
    Series "C" Preferred stock; $0.001 par value; 14,250,000 shares authorized:
       13,620,472 and 9,728,909 shares outstanding in 2001 and 2000, respectively.     13,620              13,620
    Common stock; $0.001 par value; 100,000,000 shares authorized:
       11,921,094 and 11,585,489 shares outstanding in 2001 and 2000, respectively     11,921              11,921
    Additional paid-in capital                                                    150,889,771         127,897,441
    Accumulated deficit                                                           (78,324,157)        (69,089,076)
    Accumulated other comprehensive loss                                              108,115            (244,861)
                                                                              ----------------    ----------------
                 Total stockholders' equity                                        72,701,914          58,589,045
                                                                              ----------------    ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                      $ 137,964,468       $ 126,717,902
                                                                              ================    ================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>

CONVERGENCE COMMUNICATIONS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
------------------------------------------------------------------------------------------------------------

                                                                        Three Months         Three Months
                                                                            Ended               Ended
                                                                          March 31             March 31
                                                                            2001                 2000
                                                                      ------------------   -----------------
<S>                                                                   <C>                  <C>
NET REVENUES FROM SERVICES                                                 $ 10,509,328         $ 7,216,423
                                                                      ------------------   -----------------
COSTS AND EXPENSES:
     Variable cost of services                                                6,950,200           4,100,160
     Salaries, wages and benefits                                             6,091,755           3,154,721
     Selling, general and administrative                                      2,856,309           3,680,208
     Depreciation and amortization                                            3,906,505           2,908,715
     Stock option compensation expense                                           32,703             264,223
                                                                      ------------------   -----------------
                   Total costs and expenses                                  19,837,472          14,108,027
                                                                      ------------------   -----------------
OPERATING LOSS                                                               (9,328,144)         (6,891,604)
OTHER INCOME (EXPENSE):

     Interest income                                                            139,707             272,541
     Interest expense                                                        (1,231,403)           (717,480)
     Other                                                                       70,972               7,898
     Net gain on foreign exchange                                                44,165              30,383
                                                                      ------------------   -----------------
                   Total other expense                                         (976,559)           (406,658)
                                                                      ------------------   -----------------
LOSS BEFORE INCOME TAXES AND MINORITY INTEREST                              (10,304,703)         (7,298,262)

PROVISION FOR INCOME TAXES                                                      (31,427)            (53,759)
                                                                      ------------------   -----------------
LOSS BEFORE MINORITY INTEREST                                               (10,336,130)         (7,352,021)

MINORITY INTEREST IN LOSS OF SUBSIDIARIES                                     1,101,049             657,741
                                                                      ------------------   -----------------
NET LOSS                                                                   $ (9,235,081)       $ (6,694,280)
                                                                      ==================   =================
Net loss per basic and diluted common share                                     $ (0.34)            $ (0.31)
                                                                      ==================   =================
Weighted-average number of common shares:
     Basic and diluted                                                       27,069,000          21,419,157
                                                                      ==================   =================
</TABLE>

See notes to consolidated financial statements.
<PAGE>

<TABLE>
<CAPTION>

CONVERGENCE COMMUNICATIONS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2000
------------------------------------------------------------------------------------------------------------------------------------

                                                                                   Preferred Stock
                                                              --------------------------------------------------------------
                                                                   Series "B"          Series "C"           Series "D"
                                                              ------------------   -------------------- ------------------
                                                  Total       Shares      Amount    Shares      Amount   Shares     Amount
                                               ------------   --------   -------  ----------  -------- ----------  --------
<S>                                            <C>            <C>        <C>       <C>         <C>      <C>         <C>

BALANCE, DECEMBER 31, 1999                    $ 59,375,280    101,374     $ 101    9,728,909   $ 9,729          -   $     -
Comprehensive loss:
    Net loss for year ended December 31, 2000  (32,973,060)
    Other comprehensive loss consisting of
      foreign currency translation adjustment     (214,849)
                                               ------------  --------   -------   ----------  -------- ----------  --------
      Total comprehensive loss                 (33,187,909)         -         -            -         -          -         -
Acquisition of Metrotelecom stock for
    CCI common shares                            1,000,000
Acquisition of stock from former officer                 -    (71,853)      (72)
Conversion of Series B to common shares                  -    (29,521)      (29)
Non-cash remeasurement of options                        -
Exercise of shareholder stock options           27,374,162                         3,891,563     3,891
Exercise of employee stock options                     241
Issuance of common shares for minority interest  3,765,727
Issuance of warrants on Alcatel debt                13,251
Issuance of options for common shares
    below fair value                               248,293
                                              ------------   --------   -------   ----------  -------- ----------  --------
BALANCE, DECEMBER 31, 2000                      58,589,045          -         -   13,620,472    13,620          -         -
Comprehensive loss:
    Net loss for three months ended March       (9,235,081)
      31, 2000
    Other comprehensive income consisting of
      foreign currency translation adjustment      352,976
                                               ------------  --------   -------   ----------  -------- ----------  --------
      Total comprehensive loss                  (8,882,105)         -         -            -         -          -         -
Issuance of Series D shares                     22,937,349                                              2,643,636     2,644
Issuance of options on Alcatel debt                  6,625
Stock-based compensation expense                    51,000
                                               ------------  --------   -------   ----------  -------- ----------  --------
BALANCE, MARCH 31, 2001                       $ 72,701,914          -         -   13,620,472  $ 13,620  2,643,636   $ 2,644
                                               ============  ========   =======   ==========  ======== ==========  ========

                                                              (CONTINUED ON NEXT PAGE)
</TABLE>
<PAGE>

<TABLE>
<CAPTION>

CONVERGENCE COMMUNICATIONS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2000          (CONTINUED FROM PREVIOUS PAGE)

                                                                                                     Accumulated
                                                   Common Stock         Additional                      Other
                                                ------------------       Paid-in      Accumulated    Comprehensive
                                                 Shares      Amount      Capital        Deficit      Income (Loss)
                                               ----------   --------   ------------  -------------  -------------
<S>                                             <C>         <C>        <C>           <C>            <C>
BALANCE, DECEMBER 31, 1999                     11,585,489   $ 11,585   $ 95,147,893   $(35,764,016)  $    (30,012)
Comprehensive loss:
    Net loss for year ended December 31, 2000                                          (32,973,060)
    Other comprehensive loss consisting of
      foreign currency translation adjustment                                                            (214,849)
                                               ----------   --------   ------------  -------------  -------------
      Total comprehensive loss                          -          -              -    (32,973,060)      (214,849)
Acquisition of Metrotelecom stock for
    CCI common shares                             121,212        121        999,879
Acquisition of stock from former officer         (328,510)      (328)           400
Conversion of Series B to common shares           125,237        125            (96)
Non-cash remeasurement of options                                           352,000       (352,000)
Exercise of shareholder stock options                                    27,370,271
Exercise of employee stock options                 11,000         11            230
Issuance of common shares for minority interest   406,666        407      3,765,320
Issuance of warrants on Alcatel debt                                         13,251
Issuance of options for common shares
    below fair value                                                        248,293
                                               ----------   --------   ------------  -------------  -------------
BALANCE, DECEMBER 31, 2000                     11,921,094     11,921    127,897,441    (69,089,076)      (244,861)
Comprehensive loss:
    Net loss for three months ended
      March 31, 2000                                                                    (9,235,081)
    Other comprehensive income consisting of
      foreign currency translation adjustment                                                             352,976
                                               ----------   --------   ------------  -------------  -------------
      Total comprehensive loss                          -         -               -     (9,235,081)       352,976
Issuance of Series D shares                                              22,934,705
Issuance of options on Alcatel debt                                           6,625
Stock-based compensation expense                                             51,000
                                               ----------   --------    -----------  -------------  -------------
BALANCE, MARCH 31, 2001                        11,921,094   $ 11,921  $ 150,889,771   $(78,324,157)     $ 108,115
                                               ==========   ========   ============  =============  =============
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

CONVERGENCE COMMUNICATIONS, INC.                                                                     DRAFT
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
-----------------------------------------------------------------------------------------------------------

                                                                         Three Months       Three Months
                                                                             Ended              Ended
                                                                           March 31           March 31
                                                                             2001               2000
                                                                        ----------------   ----------------
<S>                                                                     <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                              $ (9,235,081)      $ (6,694,280)
     Adjustments to reconcile net loss to net cash used in
        operating activities:
           Depreciation and amortization                                      3,906,505          2,908,715
           Provision for bad debts                                              332,915             35,944
           Minority interest in loss of subsidiaries                         (1,101,049)          (657,741)
           Stock-based compensation expense                                      51,000            264,223
           Amortization of discount on notes payable                            211,900            589,085
           Issuance of options on Alcatel debt                                    6,625                  -
           Change in assets and liabilities:
              Accounts receivable                                            (1,799,459)          (612,553)
              Inventory                                                          20,888           (105,538)
              Prepaid expenses and other current assets                         978,491         (2,266,256)
              Other assets                                                     (147,875)          (409,937)
              Accounts payable and accrued liabilities                        2,715,625          2,763,551
              Other long-term liabilities                                       410,886              8,213
                                                                        ----------------   ----------------
                   Net cash used in operating activities                     (3,648,629)        (4,176,574)
                                                                        ----------------   ----------------

CASH FLOWS FROM INVESTING ACTIVITIES -
     Purchases of property and equipment                                    (10,633,287)        (2,691,898)
                                                                        ----------------   ----------------
                   Net cash used in investing activities                    (10,633,287)        (2,691,898)
                                                                        ----------------   ----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Net proceeds from issuance of Series "D" Preferred Stock                22,937,349                  -
     Proceeds from related party borrowings                                   4,230,000                  -
     Payments on related party borrowings                                    (3,000,000)                 -
     Payments on notes payable                                               (5,964,000)          (199,666)
     Net proceeds from exercise of employee stock options                             -                241
                                                                        ----------------   ----------------
                   Net cash provided by (used in) financing activities       18,203,349           (199,425)
                                                                        ----------------   ----------------

EFFECT OF EXCHANGE RATES ON CASH                                                (16,689)            12,559
                                                                        ----------------   ----------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                          3,904,744         (7,055,338)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                4,193,170         26,303,296
                                                                        ----------------   ----------------
CASH AND CASH EQUIVALENTS AT END OF YEAR                                    $ 8,097,914       $ 19,247,958
                                                                        ================   ================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
     Cash paid during the quarter for interest                                $ 507,910          $ 107,577
                                                                        ================   ================
     Cash paid during the quarter for income taxes (including prepaid)         $ 35,466           $ 41,164
                                                                        ================   ================
</TABLE>

See notes to consolidated financial statements.

<PAGE>


CONVERGENCE COMMUNICATIONS, INC.
AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2001
(Unaudited)


1.       Basis of Presentation

     Convergence  Communications,  Inc. and subsidiaries  (the "Company"),  is a
Latin  American  facilities-based  telecommunications  company  which  owns  and
operates IP-based,  broadband  metropolitan area networks.  The Company offers a
menu  of  broadband  connectivity,  IP-telephony,  high-speed  Internet  access,
web-site  hosting,  virtual  private  networks,  e-commerce  and pay  television
services to businesses and consumers in Latin America.

     From its inception, the Company has focused on providing telecommunications
services  using  high-speed  transmission  networks  within and across  national
borders.  The Company  intends to capitalize on the rapidly  growing  demand for
telecommunications   services  in  countries   emerging  from   developing   and
state-controlled   economies  and  where  there  is  growing  liberalization  of
regulations governing the provision of telecommunications services.

     The Company's  consolidated  financial  statements  have been prepared on a
going  concern  basis,   which   contemplates  the  realization  of  assets  and
satisfaction of liabilities in the normal course of business.  The  consolidated
financial   statements   do  not  include  any   adjustments   relating  to  the
recoverability and  classifications of recorded amounts of assets or the amounts
and classifications of liabilities that might be necessary should the Company be
unable to continue as a going  concern.  The Company's  continuation  as a going
concern  depends upon its ability to generate  sufficient cash flows to meet its
obligations on a timely basis and to obtain additional  financing or refinancing
as may be required.

     At March 31, 2001,  the  Company's  current  liabilities  exceeded  current
assets by $22,436,465. Since its inception, the Company has sustained net losses
and negative cash flow,  due  primarily to  amortization  of  intangible  assets
relating to  acquisitions,  interest  expense on debt relating to  acquisitions,
start-up costs,  legal and professional  expenses,  and charges for depreciation
and other costs relating to its acquisition and development of its business. The
Company  expects to continue to  experience  net losses and  negative  cash flow
through 2002, and may continue to do so thereafter while it develops and expands
its business, even if individual markets of the Company become profitable.

     In addition,  as of March 31, 2001, the Company was out of compliance  with
the operating covenants of the $175,000,000 Alcatel equipment financing facility
and has not  received  a waiver  of such  noncompliance  from the  lender.  As a
result, Alcatel has the right to accelerate the maturity of the outstanding debt
and the Company is unable to draw upon its  facility  until such  covenants  are
met. The outstanding  balance under the Alcatel  facility of $7,591,555 has been
classified  as a current  liability  in the  accompanying  consolidated  balance
sheets.

     The  Company  intends  to meet  its  operational  and  capital  expenditure
requirements during 2001 from a combination of:

          o    Net proceeds  from its recent equity  financing  (see "Changes in
               Securities" below)

          o    Additional private equity or debt transactions

          o    Extending or modifying repayment terms on seller notes

          o    Reductions in capital expenditures

          o    Control of operating expense growth

          o    Sales of selected businesses and/or assets

     Management  also intends to work with Alcatel to renegotiate  the operating
covenants under the Alcatel financing facility, which, if successful,  may allow
the Company to extend  repayment terms under the facility and make further draws
for equipment purchases.  The Company can give no assurance that it will be able
to obtain  additional  equity  and debt  financing,  renegotiate  its  operating
covenants with Alcatel or make further draws on the Alcatel facility, or control
operating  and capital  expenditures  in amounts  sufficient  for the Company to
continue as a going concern.

2.       Principles of Consolidation

     The consolidated  financial  statements include the accounts of Convergence
Communications,  Inc.,  all wholly and  majority-owned  subsidiaries,  its 32.6%
interest in Chispa Dos, Inc. ("Chispa"),  the holding entity of Cablevisa, S.A.,
Multicable  S.A. and Cybernet de El Salvador S.A, and its 49% voting interest in
International  Van, S. A. de C.V.  ("Intervan").  All  significant  intercompany
accounts and transactions have been eliminated in consolidation.

3.       Net Loss per Common Share and Common Share Equivalent

     Net loss per common share and common share equivalent  amounts are computed
by both the basic  method,  which  uses the  weighted  average  number of common
shares  and the  common  stock  equivalents  on a voting  basis for the Series B
(which  was  converted  to  common  stock in  August  2000)  and  Series C and D
preferred stock outstanding, and the diluted method, which includes the dilutive
common shares from stock options and warrants,  as calculated using the treasury
stock  method.  At March 31,  2001 and  2000,  all  options  and  warrants  were
anti-dilutive due to the losses of the Company.

4.       Use of Estimates in Preparing Financial Statements

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  in  the  United  States  of  America  requires
management to make estimates and assumptions that affect the reported amounts of
assets and  liabilities  and disclosure of contingent  assets and liabilities at
the date of the financial  statements  and the reported  amounts of revenues and
expenses  during the reporting  period.  Actual  results could differ from those
estimates.

5.       Operating Segment Information

     We make key financial  decisions based on certain  operating results of our
subsidiaries and revenue types. Our operating segment  information is as follows
for the three months ended March 31, 2001 and 2000:

<TABLE>
<CAPTION>

                                                                Central
2001                          Mexico         Venezuela           America          Corporate          Totals
----------------------     -------------    -------------     --------------    --------------    -------------
<S>                    <C>               <C>               <C>               <C>               <C>
Revenue:
-        Data          $      3,513,812  $       330,668   $      1,115,862  $              -  $     4,960,342
-        CATV                         -                -          1,836,354                 -        1,836,354
-        Other                1,351,247           18,617          2,342,768                 -        3,712,632
Operating loss               (3,272,123)      (1,022,827)        (2,533,688)       (2,499,506)      (9,328,144)


                                                                 Central
2000                          Mexico         Venezuela           America          Corporate          Totals
----------------------     -------------    -------------     --------------    --------------    --------------
Revenue:
-        Data          $      2,595,748  $       292,439   $      1,216,996  $              -  $     4,105,183
-        CATV                         -                -          1,661,884                 -        1,661,884
-        Other                1,050,193           12,326            386,837                 -        1,449,356
Operating loss               (1,715,549)        (355,180)        (1,323,988)       (3,496,887)      (6,891,604)

</TABLE>


6.       Subsequent Event

     On April 30, 2001, the Company received a notice from FondElec Group,  Inc.
that it had initiated an arbitration  proceeding against the Company for amounts
allegedly  due under the terms of a services  agreement  between the Company and
FondElec dated August 1999. The services  agreement  requires the Company to pay
FondElec amounts for investment advisory and other consulting services. FondElec
alleges the total amount due it under that  agreement in excess of $3.1 million.
FondElec  is a  shareholder  in the  Company  and is an  affiliate  of  FondElec
Essential   Services  Growth  Fund,   L.P.,   which  is  one  of  our  principal
shareholders.  The Company  believes it has recorded  adequate  accruals and has
significant counterclaims and setoffs against FondElec for the amounts allegedly
due  under the  terms of that  services  agreement,  and that it  otherwise  has
meritorious  defenses to any claim for all or a portion of the fees, and intends
to defend its position vigorously in the arbitration.

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS

     The following  discussion and analysis  relates to our financial  condition
and results of  operations  for the three  months ended March 31, 2001 and 2000.
This information  should be read in conjunction with our consolidated  financial
statements and the notes related thereto appearing elsewhere in the document.

A.       OVERVIEW

     We provide high quality,  low-cost integrated communications services using
our own  metropolitan  area  networks  and local  networks  of  incumbent  local
exchange providers. We operate primarily in recently deregulated and high-growth
markets,  principally  in  Mexico,  Venezuela  and  Central  America.  We  offer
customers  broadband,  high-speed  data  connections,   high-speed  and  dial-up
Internet  access,  voice and video  services in a number of our markets using an
IP-based technology platform and networks that employ fiber-optic fixed wireless
technologies and hybrid fiber coaxial cable.

     From our  inception in 1995 until 1998,  our main  activities  consisted of
acquiring licenses and authorizations in our various market countries, acquiring
building access rights,  hiring  management and other key personnel,  developing
operating  systems and activities  directly  associated with the acquisition and
deployment of our various networks.  During fiscal 1998, we acquired the ability
to provide, or introduced,  significant bundled  telecommunications  services in
our markets.

     Since our inception,  we have sustained significant net losses and negative
cash flow.  We expect the losses and  negative  cash flow to  continue  until we
develop a  customer  base that will  generate  sufficient  revenues  to fund our
operating  expenses.  We  expect  that our 2001  operating  and net  losses  and
negative  operating  cash flow will be greater than in 2000. We also  anticipate
that the execution of our business plan will result in a rapid  expansion of our
operations,  which may place a significant  strain on our management,  financial
and other  resources.  Our ability to manage the  problems  associated  with our
expansion will depend, among other things on, our ability to monitor operations,
control costs, maintain effective quality control, secure necessary interconnect
and regulatory approvals, expand internal management, technical, information and
accounting systems and attract,  assimilate and retain qualified  management and
professional  personnel.  Our inability or failure to  effectively  manage these
issues could result in significant  subscriber turnover,  stagnant or decreasing
subscriber  growth,  our  inability  to meet  our  contractual  obligations  for
continued funding under our various vendor financing  relationships such as with
Alcatel,   managerial   inefficiencies,   missed  corporate   opportunities  and
continuing or increased losses.

     The  difficulties  in  managing  these  various  business  issues  will  be
compounded by a number of the unique  attributes of our business  operations and
our strategy for becoming a premier facilities-based telecommunications provider
in our various markets.  For example,  we use, as part of our operating network,
wireless technology.  This technology has been used by other  telecommunications
providers  for  a  significant  period  of  time,  but  our  point-to-multipoint
technology has only been  commercially used on a limited basis. We selected this
technology  because we believe  it  complements  the  wireline  technologies  we
otherwise  employ in our networks,  but if that  technology  does not perform as
expected or provide  the  advantages  that we expect,  our  business,  financial
condition  and the results of our  operations  may be  materially  and adversely
affected.  Further,  we employ an IP-based  technology platform that uses packet
switching to transmit voice,  video and data elements over the same network.  We
believe that  IP-based  packet-switched  networks have less overhead and greater
capacity than  traditionally  used technology  platforms but, in the past, there
have been issues  regarding the quality of service  provided by those platforms.
We believe that the quality of services  provided by other transport systems has
been  incorporated  into the newer  generations  of IP  switches  and  bandwidth
managers, but if our technology platform does not perform as expected or provide
the advantages we expect, our business,  financial  condition and the results of
our operations could also be materially and adversely affected. Also, as part of
our operations in some of our markets, we rely on network capacity that we lease
from third parties,  some of which may be our  competitors in the market.  Those
parties  may not have the same  incentive  as  other,  non-competitive,  network
owners to maintain those existing  relationships  with us on terms which promote
our competitive advantage.

B.       MATERIAL CHANGES IN RESULTS OF OPERATIONS

Three months ended March 31, 2001 compared to the three months ended March 31,
2000:

     Revenues.  Our  revenues  for the three months ended March 31, 2001 totaled
$10.5  million,   compared  to  $7.2  million  for  the  same  period  in  2000,
representing a $3.3 million  increase in revenues (or 46%). The following  table
shows our revenues by region for the first quarters of 2001 and 2000:

         TOTAL REVENUES
         (in thousands)                             2001             2000
                                                 ----------       ----------
         Mexico (Intervan)                    $      4,865     $      3,646
         Venezuela (Inter@net)                         349              305
         Central America                             5,295            3,265
                                                 ----------       ----------
              Consolidated total              $     10,509     $      7,216
                                                 ==========       ==========

     The increase in our 2001 revenues was primarily  attributable  to growth of
our  operations  in  Mexico   (Intervan)   combined  with  the   acquisition  of
Metrotelecom  (Central America) in April 2000. Intervan  contributed almost $1.2
million of the revenue  increase,  consisting  of an increase of $0.9 million in
high speed data revenue with the  remainder  consisting  of other  revenue.  The
acquisition  of  Metrotelecom  in April  2000  contributed  $1.8  million to the
revenue increase in 2001.

     Variable Cost of Services.  Variable cost of services consists primarily of
high-speed data bandwidth,  telephony and cable programming charges. The cost of
these  services  totaled $6.9 million for the three months ended March 31, 2001,
an  increase  of $2.9  million  over the same  period of 2000.  The  significant
increase  in variable  cost of  services is a result of growth in our  revenues,
including completing the acquisition of Metrotelecom in April 2000.

     Salaries, Wages and Benefits. Our salaries, wages and benefits totaled $6.1
million for the three months  ended March 31, 2001,  an increase of $2.9 million
over the same period in 2000.  We  maintained a total of 795  employees at March
31, 2001, of which 142 employees  related to  Metrotelecom  which we acquired in
April 2000. The adjusted headcount of 654 employees for March 31, 2000, compared
to 795  employees at March 31, 2001 reflects an employee  headcount  increase of
22%. The increase in employee headcount reflects  significant employee hiring in
primarily our sales,  marketing and technical departments to support our planned
significant growth in operations.  We increased the salaries, wages and benefits
of our personnel to match market rates and increases in cost of living.

     Selling,  General and Administrative Expenses. We incurred SG&A expenses of
$2.9  million  during the three  months ended March 31, 2001, a decrease of $0.8
million  compared to the same  period in 2000.  The  decrease  in SG&A  expenses
reflects a concerted effort by management to reduce such expenses in 2001.

     Depreciation and  Amortization.  Our depreciation and amortization  expense
totaled $3.9 million during the three months ended March 31, 2001,  representing
an  increase  of $1.0  million  over the same  period in 2000.  The  significant
increase reflects the depreciation  expense from network assets obtained through
acquisitions and foreign subsidiary network asset purchases.

     Interest Income and Interest  Expense.  Our interest income  decreased $0.1
million for a total of almost $0.1  million  during the three months ended March
31,  2001 due to a lower  average  cash  investment  balance  during the period.
Interest  expense over the same period  increased  $0.5 million due primarily to
the  acquisition  debt we  incurred  in April  2000.  Additionally,  the average
interest rate recorded on our  indebtedness  during the three months ended March
31, 2001 was approximately  12.5%,  compared to approximately 10.75% as of March
31, 2000.

     Net Loss. We incurred a net loss  attributable  to common  shareholders  of
$9.2  million in the three  months  ended  March 31,  2001,  an increase of $2.5
million compared to the same period in 2000. The principal  reasons for the $2.5
million increase were:

          o    $2.9 million increase in salary and benefits expense attributable
               primarily  to the  significant  growth in employee  headcount  to
               support planned operations.

          o    $1.0  million  increase  in  depreciation  on  fixed  assets  and
               amortization  expense  on  intangible  assets  as a result of the
               build-out of our networks and one additional acquisition.

          o    $0.5 million  increase in interest  expense due to the  increased
               acquisition debt balance.

          o    above  increases  were offset by a $0.4  million  increase in net
               revenues over variable cost of services,  a $0.5 million increase
               in  minority  interest  loss,  a $0.8  million  decrease  in SG&A
               expenses due to the concerted effort by management to reduce such
               expenses   and  a  $0.2  million   decrease  in  non-cash   stock
               compensation expense.

Liquidity and Capital Resources

     Since inception, we have funded our cash requirements at the parent company
level through debt and equity transactions. The proceeds from these transactions
were primarily used to fund our  investments in, and  acquisitions  of, start-up
network  operations,  to provide  working  capital,  and for  general  corporate
purposes,  including  the  expenses we incurred  in seeking and  evaluating  new
business opportunities. Our foreign subsidiary interests have been financed by a
combination of equity investments and shareholder loans.

     We will  continue  to make  significant  capital  expenditures  in the next
several years in connection with building our networks,  the further development
of our  operations in Mexico,  Venezuela and Central  America,  and new customer
accounts (for which we install our equipment on customer premises). We intend to
meet our capital requirements during 2001 from a combination of the following:

          o    unused proceeds from our February 2001 financing

          o    additional equity or debt financings

          o    extending or modifying repayment terms on seller notes

          o    reductions in capital expenditures

          o    control of operating expense growth

          o    sales of selected businesses and/or assets

     We anticipate that we will require a minimum of $20 million during 2001 for
capital expenditures related to the expansion of our existing telecommunications
business,  and that we will require significant amounts thereafter.  If we spend
over $20 million for capital  expenditures,  as noted above, we would anticipate
meeting a portion of our capital  requirements through draw downs on the Alcatel
facility.  Under the  terms of the  January  amendment  to our  agreements  with
Alcatel,  we are required to obtain additional equity financing (as well as meet
operational  milestones)  in order to make  further  draw  downs on the  Alcatel
facility and obtain  reimbursement  of certain  amounts we have paid or will pay
prior to the reimbursement.  As of the date of this report, we have not met some
of the amended operating covenants, and therefore, have been unable to draw down
on the  Alcatel  facility.  We intend to work with  Alcatel to  renegotiate  the
operating covenants to provide us with the ability to make further draw downs on
the  facility.  We can make no  assurances  that  Alcatel will agree to any such
modifications.  Further, as of the date of this report, we are not in compliance
with the payment covenants of the equipment  purchasing provision of the Alcatel
agreements.  We are  negotiating  a waiver  of  those  payment  provisions  with
Alcatel,  but we have not yet received  (and there can be no  assurance  that we
will obtain)  Alcatel's  agreement to the waiver,  or that Alcatel will agree to
modify the payment  provisions in a manner which we believe is acceptable.  As a
result,  Alcatel has the right to accelerate the maturity of the amounts we have
drawn under the facility and pursue its remedies for default.  See our report on
Form 8-K dated June 22,  2000 and our annual  report on Form 10-KSB for the year
ended  December 31, 2000 for a more  detailed  description  of Alcatel's  rights
under the financing facility.

     If we  are  able  to  obtain  a  waiver  or  modification  of  the  payment
provisions, but are still unable to make draw downs on the Alcatel facility (and
receive  reimbursement  of certain amounts we have paid or will pay thereunder),
the amount of our capital expenditures could be reduced significantly.  Also, as
noted above, we intend to meet a portion of our capital requirements through the
sale of our equity or debt  securities  and  through  the sale of certain of our
assets,  including all or a portion of our Guatemala and El Salvador operations.
There can be no  assurance,  however,  that we will be able to complete any such
financing  transactions or sales on terms  acceptable to us, or on any terms, in
part  because  of the  current  state of the  telecommunications  industry.  The
telecommunications  market dropped dramatically during 2000, and from March 2000
through the beginning of 2001, the market value of telecommunications  companies
decreased  significantly.  The values of telecommunications  companies have also
been   adversely   affected  by  the  credit   experience  of  the   established
telecommunications  vendors,  which have  recently  had  increasing  problems in
collecting payments for their equipment. As a result of these factors, investors
and lenders are carefully evaluating  prospective  investment  opportunities in,
and the  investment  values of,  telecommunications  companies  that are seeking
investments. If we are unable to obtain additional equity capital as a result of
the factors noted above in this paragraph,  or otherwise,  our ability to comply
with the terms of the  Alcatel  financing  facility  and make draw  downs on the
facility (and receive  reimbursement of certain amounts we have paid or will pay
thereunder) also could be adversely affected.

     During the first  quarter ended March 31, 2001,  our  operating  activities
used $3.6 million,  compared with $4.2 million  during the same quarter in 2000.
Our investing activities used $10.6 million in the first quarter ended March 31,
2001,  compared with $2.7 million during the same quarter in 2000. These changes
are primarily  attributable to the increase in working capital  requirements and
purchases of property and equipment related to our rapidly expanding operations.
Financing  activities,  principally  the issuance of Series D Preferred Stock in
February 2001 offset by the payments on notes payable, provided $18.2 million in
net cash flow during the first quarter ended March 31, 2001.

     As of March 31, 2001, we had current assets of $20.9  million,  compared to
$16.5  million as of December 31,  2000,  for an increase of $4.4  million.  The
increase in current  assets was  primarily due to an increase in cash related to
the issuance of Series D Preferred Stock in February 2001.

     The cash flow generated by our foreign operations will not be sufficient to
cover our  planned  significant  operational  growth in this  fiscal  year.  Our
ability to execute our business  plan will be dependent on our efforts to obtain
additional sources of funds to finance our business plan.

     We have the ability to moderate our capital  spending and losses by varying
the number and extent of our market  build out  activities  and the  services we
offer in our  various  markets.  If we elect to slow the  speed,  or narrow  the
focus, of our business plan, we will be able to reduce our capital  requirements
and losses.  The actual costs of building out and  launching  our markets  would
depend on a number of  factors,  however,  including  our  ability to  negotiate
favorable prices for purchases of network equipment, the number of customers and
the  services for which they  subscribe,  the nature and success of the services
that we may offer,  regulatory  changes and changes in technology.  In addition,
actual  costs and  revenues  could  vary from the  amounts  we expect or budget,
possibly  materially,  and  such  variations  are  likely  to  affect  how  much
additional financing we will need for our operations.  Accordingly, there can be
no assurance  that our actual  financial  needs will not exceed the  anticipated
amounts available to us, including from new, third parties,  described above. If
we are  required to conserve our  operating  cash by slowing the buildout of our
networks,  decreasing  our  marketability  efforts or  otherwise  modifying  our
service  offerings or the manner and timing of the way we implement our business
plan,  our ability to meet the  operational  milestones set forth in the January
2001 amendment to our Alcatel  agreements could be adversely  affected,  perhaps
materially. If we are unable to meet those operations milestones, we will not be
able to make further draw downs on the Alcatel facility or obtain reimbursements
of certain amounts we have paid on or will pay Alcatel under the facility.

     To the extent we acquire the amounts  necessary to fund our  business  plan
through the  issuance of equity  securities,  our  shareholders  may  experience
dilution in the value per share of their equity  securities.  The acquisition of
funding  through the issuance of debt could result in a  substantial  portion of
our cash flow from  operations  being  dedicated to the payment of principal and
interest  on  that  indebtedness,   and  could  render  us  more  vulnerable  to
competitive  pressures and economic  downturns.  Our  subsidiaries or affiliates
could also obtain  financing from third  parties,  but there can be no assurance
our subsidiaries or affiliates will be able to obtain the financing  required to
make planned  capital  expenditures,  provide working capital or meet other cash
needs on terms which are economically acceptable to us.

D.       SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

     Certain  statements  contained in  "Management's  Discussion  and Analysis"
constitute  forward-looking  statements  concerning  our  operations,   economic
performance and financial condition.  Because those statements involve risks and
uncertainties,  actual  results may differ  materially  from those  expressed or
implied by those forward-looking statements.

     In  addition,  any  statements  that express or involve  discussions  as to
expectations,  beliefs,  plans,  objectives,  assumptions  or  future  events or
performance  are  not  historical   facts  and  may  be   forward-looking   and,
accordingly,  those statements involve estimates,  assumptions and uncertainties
which could cause actual results to differ  materially  from those  expressed in
the  forward-looking  statements.  Accordingly,  those types of  statements  are
qualified in their entirety by reference to, and are accompanied by, the factors
discussed  throughout  this  report.  Among the key  factors  that have a direct
bearing  on our  results  of  operations  are the  potential  risk of  delay  in
implementing our business plan; the political, economic and legal aspects of the
markets  in  which  we  operate;   competition;  and  our  need  for  additional
substantial financing. We have no control over some of these factors.

     The  factors  described  in this report  could  cause our actual  operating
results  to  differ  materially  from  those  expressed  in any  forward-looking
statements made by or on behalf of us. Persons reviewing this report, therefore,
should not place undue reliance on those forward-looking statements. Further, to
the extent this report contains forward-looking  statements,  they speak only as
of the date of this  report,  and we  undertake  no  obligation  to  update  any
forward-looking   statement  or   statements   to  reflect  the   occurrence  of
unanticipated  events.  New factors may emerge from time to time,  and it is not
possible for  management  to predict all of such  factors.  Further,  management
cannot  assess the impact of each such  factor on our  business or the extent to
which any factor, or combination of factors,  may cause actual results to differ
materially from those contained in any forward-looking statements.

PART II: OTHER INFORMATION

ITEM 1.       LEGAL PROCEEDINGS


     See also the section  entitled  "Legal  Proceedings"  in our report on Form
10-KSB for the year ended December 31, 2000.

     On April 30, 2001, we received a notice from FondElec  Group,  Inc. that it
had initiated an  arbitration  proceeding  against us for amounts  allegedly due
under the terms of a services  agreement  between us and  FondElec  dated August
1999. The services  agreement requires us to pay FondElec amounts for investment
advisory and other consulting services. FondElec alleges the total amount due it
under that agreement in excess of $3.1 million. FondElec is a shareholder in the
company and is an affiliate of FondElec  Essential  Services Growth Fund,  L.P.,
which is one of our principal shareholders. We believe we have recorded adequate
accruals and have significant counterclaims and setoffs against FondElec for the
amounts  allegedly due under the terms of that services  agreement,  and that we
otherwise  have  meritorious  defenses  to any claim for all or a portion of the
fees, and intends to defend our position vigorously in the arbitration.

ITEM 2.       CHANGES IN SECURITIES


     On February 7, 2001, we issued 2,643,636 shares of our Series D convertible
preferred  stock to six accredited  investors and received  $24,585,850 in cash.
See  our  report  on Form  8-K  filed  on  March  8,  2001  for a more  detailed
description of this transaction.

ITEM 3.       DEFAULTS UPON SENIOR SECURITIES


                                See Item 5 below.

ITEM 4.       MATTERS SUBMITTED TO A VOTE OF THE COMPANY'S SHAREHOLDERS


                                      None.

ITEM 5.       OTHER INFORMATION

     MetroTelecom  Acquisition - On April 5, 2000, we completed the  acquisition
of all of the  outstanding  stock of a group of companies that conduct,  through
directly or indirectly  held operating  subsidiaries,  high speed data,  dial-up
Internet,  high speed  Internet,  telephony and  subscription  cable  television
services in  Guatemala.  The Company has  notified  the former  shareholders  of
several material claims it has under the purchase  contract,  which would result
in a reduction in the initial  purchase price and an offset against future notes
due under the  purchase  contract.  Accordingly,  the Company did not pay a note
payable due on April 5, 2001 in the amount of $4,750,000 plus accrued interest.

ITEM 6.  EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K

         A.       EXHIBITS.

                                      None.


         B.       REPORTS ON FORM 8-K

     On March 8,  2001,  we filed a report on Form 8-K which  described  (i) the
closing  of  a  $24,585,850   private   placement  of  equity   securities   and
corresponding  payment made with the cash  proceeds,  (ii) the receipt of a data
concession  in Mexico (iii) the receipt of a data and  telephony  concession  in
Venezuela, and (iv) an update on the status of our Alcatel financing agreements.



<PAGE>


                                   SIGNATURES

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

                                     CONVERGENCE COMMUNICATIONS, INC.


Date:  May 15, 2001                  BY       /s/ JERRY SLOVINSKI
                                              ----------------------------------
                                              Jerry Slovinski
                                              Chief Financial Officer