##### Table of Contents









UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, DC 20549


FORM 10-Q



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

For the quarterly period ended September 30, 2001

OR



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

For the transition period from
          to

Commission File Number: 333-12977



---

IMPSAT Fiber Networks, Inc.

IMPSAT S.A.


(Exact name of registrant as specified in its
charter)


|                                                                                   |  |                                                               
|---------------------------------------------------------------------------------- |  | --------------------------------------------------------------
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Delaware
	Argentina(state or other jurisdiction of
	incorporation or organization) |  | 52-1910372
	Not Applicable(IRS employer identification number)

Alférez Pareja 256 (1107)

Buenos Aires, Argentina


(5411) 5170 0000






Indicate by check mark whether the Registrants (1) have
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
registrants were required to file such reports), and
(2) have been subject to such filing requirements for the
past 90 days.  YES 
x  NO 
o

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS


Indicate by check mark whether the Company has filed all
documents and reports required to be filed by Section 12,
13 or 15(d) of the Securities Exchange Act of 1934 subsequent to
the distribution of securities under a plan confirmed by a
court.  YES  n/a  NO 
n/a

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest
practicable date:As of September 30, 2001, the Company
had outstanding 91,428,570 shares of Common Stock, $0.01
par value outstanding.









---

TABLE OF CONTENTS



|                             |                                                                                               |  |  |  |  |  |  | 
|---------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I FINANCIAL INFORMATION
|                             | Item 1. Financial Statements                                                                 
|                             | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                             | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|PART II OTHER INFORMATION   
|                             | Item 1. Legal Proceedings                                                                    
|                             | Item 2. Changes in Securities                                                                
|                             | Item 3. Defaults Upon Senior Securities                                                      
|                             | Item 4. Submission of Matters to a Vote of Security-Holders                                  
|                             | Item 5. Other Information                                                                    
|                             | Item 6. Exhibits and Reports on Form 8-K                                                     
|                             | SIGNATURES                                                                                   



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##### Table of Contents






IMPSAT Fiber Networks, Inc.


IMPSAT S.A.





INDEX

|                             |                                                                                                  |          |     |     | 
|---------------------------- | ------------------------------------------------------------------------------------------------ | -------- | --- | --- | 
|                             |                                                                                                  | Page No.
|                             |                                                                                                  |         
|PART I FINANCIAL INFORMATION |                                                                                                  |          | F-1 |    
|                            
|                            
|                            
|                            
|                             | Item 1.  Financial Statements                                                                    |          |     | F-1 | 
|                            
|                            
|                            
|                            
|                             | Item 2.  Managements
	Discussion and Analysis of Financial Condition and Results of
	Operations |          |     | 1   | 
|                            
|                            
|                            
|                            
|                             | Item 3.  Quantitative and
	Qualitative Disclosures About Market Risk                             |          |     | 12  | 
|                            
|                            
|                            
|                            
|PART II OTHER INFORMATION    |                                                                                                  |          | 14  |    
|                            
|                            
|                            
|                            
|                             | Item 1.  Legal Proceedings                                                                       |          |     | 14  | 
|                            
|                            
|                            
|                            
|                             | Item 2.  Changes in Securities                                                                   |          |     | 14  | 
|                            
|                            
|                            
|                            
|                             | Item 3.  Defaults Upon Senior
	Securities                                                        |          |     | 15  | 
|                            
|                            
|                            
|                            
|                             | Item 4.  Submission of Matters to
	a Vote of Security-Holders                                    |          |     | 15  | 
|                            
|                            
|                            
|                            
|                             | Item 5.  Other Information                                                                       |          |     | 15  | 
|                            
|                            
|                            
|                            
|                             | Item 6.  Exhibits and Reports on
	Form 8-K                                                       |          |     | 15  | 
|                            
|                            
|                            
|                            
|SIGNATURES                   |                                                                                                  |          | 18  |    



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##### Table of Contents






PART I

FINANCIAL INFORMATION





Item 1.  Financial Statements

IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of U.S. Dollars)


(Unaudited)


|                                                |                                                                                                                                                        |                                      |           |               |         |   |         |          |          |  
|----------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------ | --------- | ------------- | ------- | - | ------- | -------- | -------- | -
|                                                |                                                                                                                                                        | December 31,                         |           | September 30,
|                                                |                                                                                                                                                        | 2000                                 |           | 2001         
|                                                |                                                                                                                                                        |                                      |           |              
|                                               
|                                               
|                                               
|                                               
|ASSETS                                         
|                                               
|                                               
|                                               
|                                               
|CURRENT ASSETS:                                 |                                                                                                                                                        |                                      |           |               |         |   |         |         
|                                               
|                                               
|                                               
|                                               
|                                                | Cash and cash equivalents                                                                                                                              |                                      | $         | 67,737        |         |   | $       | 60,388   |         
|                                               
|                                               
|                                               
|                                               
|                                                | Trading investments                                                                                                                                    |                                      |           | 240,892       |         |   |         | 20,700   |         
|                                               
|                                               
|                                               
|                                               
|                                                | Trade accounts receivable, net                                                                                                                         |                                      |           | 83,351        |         |   |         | 85,841   |         
|                                               
|                                               
|                                               
|                                               
|                                                | Other receivables                                                                                                                                      |                                      |           | 63,171        |         |   |         | 59,133   |         
|                                               
|                                               
|                                               
|                                               
|                                                | Prepaid expenses                                                                                                                                       |                                      |           | 3,722         |         |   |         | 5,421    |         
|                                                |                                                                                                                                                        |                                      |           |               |         |   |         |         
|                                                |                                                                                                                                                        | Total current assets                 |           |               | 458,873 |   |         |          | 231,483  |  
|                                                |                                                                                                                                                        |                                      |           |               |         |   |         |         
|BROADBAND NETWORK, Net                          |                                                                                                                                                        |                                      | 364,221   |               |         |   | 361,161 |         
|                                                |                                                                                                                                                        |                                      |           |               |         |   |         |         
|PROPERTY, PLANT AND EQUIPMENT, Net              |                                                                                                                                                        |                                      | 381,674   |               |         |   | 296,443 |         
|                                                |                                                                                                                                                        |                                      |           |               |         |   |         |         
|NON-CURRENT ASSETS:                             |                                                                                                                                                        |                                      |           |               |         |   |         |         
|                                               
|                                               
|                                               
|                                               
|                                                | Investments                                                                                                                                            |                                      |           | 15,091        |         |   |         | 12,985   |         
|                                               
|                                               
|                                               
|                                               
|                                                | Intangible assets                                                                                                                                      |                                      |           | 87,693        |         |   |         |          |         
|                                               
|                                               
|                                               
|                                               
|                                                | Deferred income taxes, net                                                                                                                             |                                      |           | 33,059        |         |   |         |          |         
|                                               
|                                               
|                                               
|                                               
|                                                | Deferred financing costs, net                                                                                                                          |                                      |           | 14,804        |         |   |         | 11,487   |         
|                                               
|                                               
|                                               
|                                               
|                                                | Other non-current assets                                                                                                                               |                                      |           | 19,335        |         |   |         | 22,011   |         
|                                                |                                                                                                                                                        |                                      |           |               |         |   |         |         
|                                                |                                                                                                                                                        | Total non-current assets             |           |               | 169,982 |   |         |          | 46,483   |  
|                                                |                                                                                                                                                        |                                      |           |               |         |   |         |         
|TOTAL                                           |                                                                                                                                                        | $                                    | 1,374,750 |               |         | $ | 935,570 |         
|                                                |                                                                                                                                                        |                                      |           |               |         |   |         |         
|                                               
|                                               
|                                               
|                                               
|LIABILITIES AND STOCKHOLDERS EQUITY
	(DEFICIT)
|                                               
|                                               
|                                               
|                                               
|CURRENT LIABILITIES:                            |                                                                                                                                                        |                                      |           |               |         |   |         |         
|                                               
|                                               
|                                               
|                                               
|                                                | Accounts payable  trade                                                                                                                               |                                      | $         | 113,516       |         |   | $       | 130,531  |         
|                                               
|                                               
|                                               
|                                               
|                                                | Short-term debt                                                                                                                                        |                                      |           | 14,603        |         |   |         | 8,648    |         
|                                               
|                                               
|                                               
|                                               
|                                                | Current portion of long-term debt                                                                                                                      |                                      |           | 38,377        |         |   |         | 68,319   |         
|                                               
|                                               
|                                               
|                                               
|                                                | Accrued and other liabilities                                                                                                                          |                                      |           | 53,809        |         |   |         | 52,561   |         
|                                                |                                                                                                                                                        |                                      |           |               |         |   |         |         
|                                                |                                                                                                                                                        | Total current liabilities            |           |               | 220,305 |   |         |          | 260,059  |  
|                                                |                                                                                                                                                        |                                      |           |               |         |   |         |         
|LONG-TERM DEBT, Net                             |                                                                                                                                                        |                                      | 915,263   |               |         |   | 915,361 |         
|                                                |                                                                                                                                                        |                                      |           |               |         |   |         |         
|OTHER LONG-TERM LIABILITIES                     |                                                                                                                                                        |                                      | 28,307    |               |         |   | 12,414  |         
|                                                |                                                                                                                                                        |                                      |           |               |         |   |         |         
|DEFERRED REVENUES                               |                                                                                                                                                        |                                      | 52,290    |               |         |   | 95,781  |         
|                                                |                                                                                                                                                        |                                      |           |               |         |   |         |         
|COMMITMENTS AND CONTINGENCIES (NOTE 12)         |                                                                                                                                                        |                                      |           |               |         |   |         |         
|                                               
|                                               
|                                               
|                                               
|STOCKHOLDERS EQUITY:                           |                                                                                                                                                        |                                      |           |               |         |   |         |         
|                                               
|                                               
|                                               
|                                               
|                                                | Common Stock, $0.01 par value; 300,000,000 shares
	authorized,
	91,428,570 shares issued and outstanding at December 31,
	2000, and September 30, 2001 |                                      |           | 914           |         |   |         | 914      |         
|                                               
|                                               
|                                               
|                                               
|                                                | Additional paid in capital                                                                                                                             |                                      |           | 537,356       |         |   |         | 537,782  |         
|                                               
|                                               
|                                               
|                                               
|                                                | Accumulated deficit                                                                                                                                    |                                      |           | (357,075      | )       |   |         | (869,346 | )       
|                                               
|                                               
|                                               
|                                               
|                                                | Deferred stock-based compensation                                                                                                                      |                                      |           | (5,438        | )       |   |         | (5,438   | )       
|                                               
|                                               
|                                               
|                                               
|                                                | Accumulated other comprehensive loss                                                                                                                   |                                      |           | (17,172       | )       |   |         | (11,957  | )       
|                                                |                                                                                                                                                        |                                      |           |               |         |   |         |         
|                                                |                                                                                                                                                        | Total stockholders equity (deficit) |           |               | 158,585 |   |         |          | (348,045 | )
|                                                |                                                                                                                                                        |                                      |           |               |         |   |         |         
|TOTAL                                           |                                                                                                                                                        | $                                    | 1,374,750 |               |         | $ | 935,570 |         
|                                                |                                                                                                                                                        |                                      |           |               |         |   |         |         

See notes to condensed consolidated financial statements.

F-1



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of U.S. Dollars, except per share amounts)


(Unaudited)


|                                                  |                                                                      |                        |                          |                   |        |         |          |          |        |         |         |         |        |         |          |          |        |          |  
|------------------------------------------------- | -------------------------------------------------------------------- | ---------------------- | ------------------------ | ----------------- | ------ | ------- | -------- | -------- | ------ | ------- | ------- | ------- | ------ | ------- | -------- | -------- | ------ | -------- | -
|                                                  |                                                                      |                        |                          |                  
|                                                  |                                                                      | Three Months Ended     |                          | Nine Months Ended
|                                                  |                                                                      | September 30,          |                          | September 30,    
|                                                  |                                                                      |                        |                          |                  
|                                                  |                                                                      | 2000                   |                          | 2001              |        | 2000    |          | 2001    
|                                                  |                                                                      |                        |                          |                   |        |         |          |         
|NET REVENUES:                                     |                                                                      |                        |                          |                   |        |         |          |          |        |         |         |         |        |         |          |         
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Data and value added services                                        |                        | $                        | 53,346            |        |         | $        | 56,442   |        |         | $       | 157,215 |        |         | $        | 169,406  |       
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Telephony                                                            |                        |                          |                   |        |         |          | 3,405    |        |         |         |         |        |         |          | 6,564    |       
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Internet                                                             |                        |                          | 9,556             |        |         |          | 11,612   |        |         |         | 24,229  |        |         |          | 34,458   |       
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Services to carriers                                                 |                        |                          |                   |        |         |          | 4,215    |        |         |         |         |        |         |          | 14,624   |       
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Sales of equipment                                                   |                        |                          | 4,697             |        |         |          | 896      |        |         |         | 9,672   |        |         |          | 11,594   |       
|                                                  |                                                                      |                        |                          |                   |        |         |          |          |        |         |         |         |        |         |          |         
|Total net revenues from services and equipment    |                                                                      |                        | 67,599                   |                   |        |         | 76,570   |          |        |         | 191,116 |         |        |         | 236,646  |         
|                                                 
|                                                 
|                                                 
|                                                 
|Broadband network development revenues            |                                                                      |                        | 43,077                   |                   |        |         |          |          |        |         | 43,077  |         |        |         | 7,197    |         
|                                                  |                                                                      |                        |                          |                   |        |         |          |          |        |         |         |         |        |         |          |         
|                                                  |                                                                      |                        | Total net revenues       |                   |        | 110,676 |          |          |        | 76,570  |         |         |        | 234,193 |          |          |        | 243,843  |  
|                                                  |                                                                      |                        |                          |                   |        |         |          |          |        |         |         |         |        |         |          |         
|COSTS AND EXPENSES:                               |                                                                      |                        |                          |                   |        |         |          |          |        |         |         |         |        |         |          |         
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Direct costs:                                                        |                        |                          |                   |        |         |          |          |        |         |         |         |        |         |          |          |       
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                                      | Contracted services    |                          |                   | 7,369  |         |          |          | 10,150 |         |         |         | 20,630 |         |          |          | 30,094 |         
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                                      | Other direct costs     |                          |                   | 3,901  |         |          |          | 7,653  |         |         |         | 14,887 |         |          |          | 20,816 |         
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                                      | Leased capacity        |                          |                   | 20,628 |         |          |          | 21,851 |         |         |         | 52,213 |         |          |          | 67,236 |         
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                                      | Broadband network cost |                          |                   | 25,382 |         |          |          |        |         |         |         | 25,382 |         |          |          | 3,335  |         
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                                      | Cost of equipment sold |                          |                   | 4,478  |         |          |          | 722    |         |         |         | 9,075  |         |          |          | 8,219  |         
|                                                  |                                                                      |                        |                          |                   |        |         |          |          |        |         |         |         |        |         |          |         
|                                                  |                                                                      |                        | Total direct costs       |                   |        | 61,758  |          |          |        | 40,376  |         |         |        | 122,187 |          |          |        | 129,700  |  
|                                                  |                                                                      |                        |                          |                   |        |         |          |          |        |         |         |         |        |         |          |         
|                                                  | Salaries and wages                                                   |                        |                          | 16,104            |        |         |          | 20,835   |        |         |         | 46,274  |        |         |          | 64,932   |       
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Selling, general and administrative                                  |                        |                          | 13,805            |        |         |          | 12,251   |        |         |         | 38,293  |        |         |          | 41,721   |       
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Provision for asset impairment                                       |                        |                          |                  |        |         |          | 234,625  |        |         |         |        |        |         |          | 234,625  |       
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Depreciation and amortization                                        |                        |                          | 20,942            |        |         |          | 32,888   |        |         |         | 61,751  |        |         |          | 92,566   |       
|                                                  |                                                                      |                        |                          |                   |        |         |          |          |        |         |         |         |        |         |          |         
|                                                  |                                                                      |                        | Total costs and expenses |                   |        | 112,609 |          |          |        | 340,975 |         |         |        | 268,505 |          |          |        | 563,544  |  
|                                                  |                                                                      |                        |                          |                   |        |         |          |          |        |         |         |         |        |         |          |         
|Operating loss                                    |                                                                      |                        | (1,933                   | )                 |        |         | (264,405 | )        |        |         | (34,312 | )       |        |         | (319,701 | )       
|                                                  |                                                                      |                        |                          |                   |        |         |          |          |        |         |         |         |        |         |          |         
|OTHER INCOME (EXPENSES):                          |                                                                      |                        |                          |                   |        |         |          |          |        |         |         |         |        |         |          |         
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Interest income and investment gains                                 |                        |                          | 7,370             |        |         |          | 1,706    |        |         |         | 20,515  |        |         |          | 9,798    |       
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Interest expense                                                     |                        |                          | (29,568           | )      |         |          | (35,761  | )      |         |         | (80,051 | )      |         |          | (105,983 | )     
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Net loss on foreign exchange                                         |                        |                          | (2,294            | )      |         |          | (26,132  | )      |         |         | (1,490  | )      |         |          | (50,282  | )     
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Recognition of other-than-temporary decline in
	value of investments |                        |                          |                   |        |         |          | (19,537  | )      |         |         |         |        |         |          | (19,537  | )     
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Other (loss) income, net                                             |                        |                          | (397              | )      |         |          | (311     | )      |         |         | 2,087   |        |         |          | (163     | )     
|                                                  |                                                                      |                        |                          |                   |        |         |          |          |        |         |         |         |        |         |          |         
|                                                  |                                                                      |                        | Total other expenses     |                   |        | (24,889 | )        |          |        | (80,035 | )       |         |        | (58,939 | )        |          |        | (166,167 | )
|                                                  |                                                                      |                        |                          |                   |        |         |          |          |        |         |         |         |        |         |          |         
|LOSS BEFORE INCOME TAXES                          |                                                                      |                        | (26,822                  | )                 |        |         | (344,440 | )        |        |         | (93,251 | )       |        |         | (485,868 | )       
|                                                 
|                                                 
|                                                 
|                                                 
|BENEFIT FROM (PROVISION FOR) FOREIGN INCOME TAXES |                                                                      |                        | 162                      |                   |        |         | 84       |          |        |         | (908    | )       |        |         | (26,403  | )       
|                                                  |                                                                      |                        |                          |                   |        |         |          |          |        |         |         |         |        |         |          |         
|NET LOSS                                          |                                                                      |                        | (26,660                  | )                 |        |         | (344,356 | )        |        |         | (94,159 | )       |        |         | (512,271 | )       
|                                                 
|                                                 
|                                                 
|                                                 
|DIVIDENDS ON REDEEMABLE PREFERRED STOCK           |                                                                      |                        |                          |                   |        |         |          |          |        |         | (1,393  | )       |        |         |          |         
|                                                  |                                                                      |                        |                          |                   |        |         |          |          |        |         |         |         |        |         |          |         
|NET LOSS ATTRIBUTABLE TO COMMON                   |                                                                      |                        |                          |                   |        |         |          |          |        |         |         |         |        |         |          |         
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | STOCKHOLDERS                                                         |                        | $                        | (26,660           | )      |         | $        | (344,336 | )      |         | $       | (95,552 | )      |         | $        | (512,271 | )     
|                                                  |                                                                      |                        |                          |                   |        |         |          |          |        |         |         |         |        |         |          |         
|NET LOSS PER COMMON SHARE:                        |                                                                      |                        |                          |                   |        |         |          |          |        |         |         |         |        |         |          |         
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | BASIC AND DILUTED                                                    |                        | $                        | (0.29             | )      |         | $        | (3.77    | )      |         | $       | (1.09   | )      |         | $        | (5.60    | )     
|                                                  |                                                                      |                        |                          |                   |        |         |          |          |        |         |         |         |        |         |          |         
|WEIGHTED AVERAGE NUMBER OF COMMON SHARES:         |                                                                      |                        |                          |                   |        |         |          |          |        |         |         |         |        |         |          |         
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | BASIC AND DILUTED                                                    |                        |                          | 91,429            |        |         |          | 91,429   |        |         |         | 87,569  |        |         |          | 91,429   |       
|                                                  |                                                                      |                        |                          |                   |        |         |          |          |        |         |         |         |        |         |          |         

See notes to condensed consolidated financial statements.

F-2



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands of U.S. Dollars)


(Unaudited)


|                                             |                                                                      |                    |         |                   |         |      |          |        |        |   |          |          |          |   |          |        |       | 
|-------------------------------------------- | -------------------------------------------------------------------- | ------------------ | ------- | ----------------- | ------- | ---- | -------- | ------ | ------ | - | -------- | -------- | -------- | - | -------- | ------ | ----- | 
|                                             |                                                                      |                    |         |                  
|                                             |                                                                      | Three Months Ended |         | Nine Months Ended
|                                             |                                                                      | September 30,      |         | September 30,    
|                                             |                                                                      |                    |         |                  
|                                             |                                                                      | 2000               |         | 2001              |         | 2000 |          | 2001  
|                                             |                                                                      |                    |         |                   |         |      |          |       
|NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS |                                                                      | $                  | (26,660 | )                 |         | $    | (344,356 | )      |        | $ | (95,552  | )        |          | $ | (512,271 | )     
|                                             |                                                                      |                    |         |                   |         |      |          |        |        |   |          |          |          |   |          |       
|OTHER COMPREHENSIVE (LOSS) INCOME:           |                                                                      |                    |         |                   |         |      |          |        |        |   |          |          |          |   |          |       
|                                            
|                                            
|                                            
|                                            
|                                             | Foreign currency translation adjustment                              |                    |         | (2,085            | )       |      |          | (488   | )      |   |          | (2,415   | )        |   |          | (5,470 | )    
|                                            
|                                            
|                                            
|                                            
|                                             | Change in unrealized loss on investments
	available for sale         |                    |         | (13,057           | )       |      |          | (407   | )      |   |          | (127,675 | )        |   |          | (8,852 | )    
|                                            
|                                            
|                                            
|                                            
|                                             | Recognition of other-than-temporary decline in
	value of investments |                    |         |                   |         |      |          | 19,537 |        |   |          |          |          |   |          | 19,537 |      
|                                             |                                                                      |                    |         |                   |         |      |          |        |        |   |          |          |          |   |          |       
|                                             |                                                                      | TOTAL              |         |                   | (15,142 | )    |          |        | 18,642 |   |          |          | (130,090 | ) |          |        | 5,215 | 
|                                             |                                                                      |                    |         |                   |         |      |          |        |        |   |          |          |          |   |          |       
|COMPREHENSIVE LOSS                           |                                                                      | $                  | (41,802 | )                 |         | $    | (325,714 | )      |        | $ | (225,642 | )        |          | $ | (507,056 | )     
|                                             |                                                                      |                    |         |                   |         |      |          |        |        |   |          |          |          |   |          |       

See notes to condensed consolidated financial statements

F-3



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY (DEFICIT)

(In thousands of U.S. Dollars)


(Unaudited)


|                              |                                                                                                    |              |            |            |  |             |     |             |  |               |         |      |  |       |          |          |   |   |        |   |  |   |         |        |   |   |          |          |  
|----------------------------- | -------------------------------------------------------------------------------------------------- | ------------ | ---------- | ---------- |  | ----------- | --- | ----------- |  | ------------- | ------- | ---- |  | ----- | -------- | -------- | - | - | ------ | - |  | - | ------- | ------ | - | - | -------- | -------- | -
|                              |                                                                                                    |              |            |            |  |             |     |             |  | Accumulated   |         |     
|                              |                                                                                                    | Common Stock |            | Additional |  |             |     | Deferred    |  | Other         |         |     
|                              |                                                                                                    |              |            | Paid In    |  | Accumulated |     | Stock-Based |  | Comprehensive |         |     
|                              |                                                                                                    | Shares       |            | Stock      |  | Capital     |     | Deficit     |  | Compensation  |         | Loss |  | Total
|                              |                                                                                                    |              |            |            |  |             |     |             |  |               |         |      |  |      
|BALANCE AT DECEMBER 31, 2000  |                                                                                                    |              | 91,428,570 |            |  | $           | 914 |             |  | $             | 537,356 |      |  | $     | (357,075 | )        |   | $ | (5,438 | ) |  | $ | (17,172 | )      |   | $ | 158,585  |         
|                             
|                             
|                             
|                             
|                              | Amortization of amount paid in excess of carrying
	value of net assets acquired from related party |              |            |            |  |             |     |             |  |               |         | 426  |  |       |          |          |   |   |        |   |  |   |         |        |   |   |          | 426      |  
|                             
|                             
|                             
|                             
|                              | Change in unrealized loss on investments
	available for sale                                       |              |            |            |  |             |     |             |  |               |         |      |  |       |          |          |   |   |        |   |  |   |         | (8,852 | ) |   |          | (8,852   | )
|                             
|                             
|                             
|                             
|                              | Recognition of other-than-temporary decline in
	value of investments                               |              |            |            |  |             |     |             |  |               |         |      |  |       |          |          |   |   |        |   |  |   |         | 19,537 |   |   |          | 19,537   |  
|                             
|                             
|                             
|                             
|                              | Foreign currency translation adjustment                                                            |              |            |            |  |             |     |             |  |               |         |      |  |       |          |          |   |   |        |   |  |   |         | (5,470 | ) |   |          | (5,470   | )
|                             
|                             
|                             
|                             
|                              | Net loss for the period                                                                            |              |            |            |  |             |     |             |  |               |         |      |  |       |          | (512,271 | ) |   |        |   |  |   |         |        |   |   |          | (512,271 | )
|                              |                                                                                                    |              |            |            |  |             |     |             |  |               |         |      |  |       |          |          |   |   |        |   |  |   |         |        |   |   |          |         
|BALANCE AT SEPTEMBER 30, 2001 |                                                                                                    |              | 91,428,570 |            |  | $           | 914 |             |  | $             | 537,782 |      |  | $     | (869,346 | )        |   | $ | (5,438 | ) |  | $ | (11,957 | )      |   | $ | (348,045 | )       
|                              |                                                                                                    |              |            |            |  |             |     |             |  |               |         |      |  |       |          |          |   |   |        |   |  |   |         |        |   |   |          |         

See notes to condensed consolidated financial statements.

F-4



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. Dollars)


(Unaudited)


|                                                                      |                                                                                                                         |                                                                      |                                                                        |                                                      |         |         |          |          |         |         |         |  
|--------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------- | ---------------------------------------------------------------------- | ---------------------------------------------------- | ------- | ------- | -------- | -------- | ------- | ------- | ------- | -
|                                                                      |                                                                                                                         |                                                                     
|                                                                      |                                                                                                                         | Nine Months Ended                                                   
|                                                                      |                                                                                                                         | September 30,                                                       
|                                                                      |                                                                                                                         |                                                                     
|                                                                      |                                                                                                                         | 2000                                                                 |                                                                        | 2001                                                
|                                                                      |                                                                                                                         |                                                                      |                                                                        |                                                     
|CASH FLOWS FROM OPERATING ACTIVITIES:                                 |                                                                                                                         |                                                                      |                                                                        |                                                      |         |         |          |         
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Net loss                                                                                                                |                                                                      | $                                                                      | (94,159                                              | )       |         | $        | (512,271 | )      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Adjustments to reconcile net loss to net cash
	provided by (used in) operating
	activities, net of acquisition:         |                                                                      |                                                                        |                                                      |         |         |          |          |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                                         | Amortization and depreciation                                        |                                                                        |                                                      | 61,751  |         |          |          | 92,566  |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                                         | Provision for doubtful accounts                                      |                                                                        |                                                      | 2,852   |         |          |          | 6,906   |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                                         | Deferred income tax (benefit) provision                              |                                                                        |                                                      | (2,266  | )       |          |          | 25,361  |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                                         | Provision for asset impairment                                       |                                                                        |                                                      |         |         |          |          | 234,625 |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                                         | Recognition of other-than-temporary decline in
	value of investments |                                                                        |                                                      |         |         |          |          | 19,537  |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                                         | Proceeds from delivery of broadband network                          |                                                                        |                                                      | 28,869  |         |          |          |         |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                                         | Gross profit from delivery of broadband network                      |                                                                        |                                                      | (17,695 | )       |          |          |         |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                                         | Changes in assets and liabilities:                                   |                                                                        |                                                      |         |         |          |          |         |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                                         |                                                                      | Increase in trade accounts receivable, net                             |                                                      |         | (17,338 | )        |          |         | (9,396  | )      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                                         |                                                                      | Increase in prepaid expenses                                           |                                                      |         | (2,107  | )        |          |         | (1,699  | )      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                                         |                                                                      | (Increase) decrease in other receivables and
	other non-current assets |                                                      |         | (18,128 | )        |          |         | 5,502   |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                                         |                                                                      | Increase in accounts
	payable  trade                                  |                                                      |         | 30,438  |          |          |         | 17,015  |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                                         |                                                                      | Increase in deferred revenues                                          |                                                      |         | 36,191  |          |          |         | 43,491  |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                                         |                                                                      | Increase in accrued and other liabilities                              |                                                      |         | 13,774  |          |          |         | (1,248  | )      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                                         |                                                                      | Decrease in other long-term liabilities                                |                                                      |         | (8,665  | )        |          |         | (15,893 | )      
|                                                                      |                                                                                                                         |                                                                      |                                                                        |                                                      |         |         |          |         
|                                                                      |                                                                                                                         |                                                                      |                                                                        | Net cash provided by (used in) operating
	activities |         |         | 13,517   |          |         |         | (95,504 | )
|                                                                      |                                                                                                                         |                                                                      |                                                                        |                                                      |         |         |          |         
|CASH FLOWS FROM INVESTING ACTIVITIES:                                 |                                                                                                                         |                                                                      |                                                                        |                                                      |         |         |          |         
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Net (increase) in trading investments                                                                                   |                                                                      |                                                                        | (305,963                                             | )       |         |          | 220,192  |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Build- out of broadband network                                                                                         |                                                                      |                                                                        | (33,552                                              | )       |         |          | (59,037  | )      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Purchases of property, plant and equipment                                                                              |                                                                      |                                                                        | (125,754                                             | )       |         |          | (62,125  | )      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | (Increase) in other investment                                                                                          |                                                                      |                                                                        | (168                                                 | )       |         |          | (306     | )      
|                                                                      |                                                                                                                         |                                                                      |                                                                        |                                                      |         |         |          |         
|                                                                      |                                                                                                                         |                                                                      |                                                                        | Net cash used in investing activities                |         |         | (465,437 | )        |         |         | 98,724  |  
|                                                                      |                                                                                                                         |                                                                      |                                                                        |                                                      |         |         |          |         
|CASH FLOWS FROM FINANCING ACTIVITIES:                                 |                                                                                                                         |                                                                      |                                                                        |                                                      |         |         |          |         
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Net (repayments on) borrowings from short-term
	debt                                                                    |                                                                      |                                                                        | (7,364                                               | )       |         |          | (5,955   | )      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Proceeds from long-term debt, net of deferred
	financing costs                                                          |                                                                      |                                                                        | 304,088                                              |         |         |          | 20,144   |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Repayments of long-term debt                                                                                            |                                                                      |                                                                        | (21,980                                              | )       |         |          | (19,288  | )      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Proceeds from issuance of common stock, net                                                                             |                                                                      |                                                                        | 229,350                                              |         |         |          |          |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Cash paid in redemption of preferred stock                                                                              |                                                                      |                                                                        | (32,500                                              | )       |         |          |          |        
|                                                                      |                                                                                                                         |                                                                      |                                                                        |                                                      |         |         |          |         
|                                                                      |                                                                                                                         |                                                                      |                                                                        | Net cash provided by financing activities            |         |         | 471,594  |          |         |         | (5,099  | )
|                                                                      |                                                                                                                         |                                                                      |                                                                        |                                                      |         |         |          |         
|EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH                       |                                                                                                                         |                                                                      |                                                                        |                                                      |         |         |          |         
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | EQUIVALENTS                                                                                                             |                                                                      |                                                                        | (2,415                                               | )       |         |          | (5,470   | )      
|                                                                      |                                                                                                                         |                                                                      |                                                                        |                                                      |         |         |          |         
|NET INCREASE (DECREASE) IN CASH AND CASH
	EQUIVALENTS                 |                                                                                                                         |                                                                      | 17,259                                                                 |                                                      |         |         | (7,349   | )       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|CASH AND CASH EQUIVALENTS AT BEGINNING OF THE
	PERIOD                 |                                                                                                                         |                                                                      | 97,507                                                                 |                                                      |         |         | 67,737   |         
|                                                                      |                                                                                                                         |                                                                      |                                                                        |                                                      |         |         |          |         
|CASH AND CASH EQUIVALENTS AT END OF THE PERIOD                        |                                                                                                                         | $                                                                    | 114,766                                                                |                                                      |         | $       | 60,388   |         
|                                                                      |                                                                                                                         |                                                                      |                                                                        |                                                      |         |         |          |         
|SUPPLEMENTAL CASH FLOW INFORMATION:                                   |                                                                                                                         |                                                                      |                                                                        |                                                      |         |         |          |         
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Interest paid                                                                                                           |                                                                      | $                                                                      | 66,491                                               |         |         | $        | 105,786  |        
|                                                                      |                                                                                                                         |                                                                      |                                                                        |                                                      |         |         |          |         
|                                                                      | Foreign income taxes paid                                                                                               |                                                                      | $                                                                      | 2,893                                                |         |         | $        | 1,410    |        
|                                                                      |                                                                                                                         |                                                                      |                                                                        |                                                      |         |         |          |         
|SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
	FINANCING ACTIVITIES: |                                                                                                                         |                                                                      |                                                                        |                                                      |         |         |          |         
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Accrued dividends on redeemable preferred stock                                                                         |                                                                      | $                                                                      | 1,393                                                |         |         |          |          |        
|                                                                      |                                                                                                                         |                                                                      |                                                                        |                                                      |         |         |          |         
|                                                                      | Change to unrealized gain on investment available
	for sale, net of tax                                                 |                                                                      | $                                                                      | (127,675                                             | )       |         | $        | (8,852   | )      
|                                                                      |                                                                                                                         |                                                                      |                                                                        |                                                      |         |         |          |         
|                                                                      | Broadband network vendor financing                                                                                      |                                                                      | $                                                                      | 135,762                                              |         |         | $        | 29,184   |        
|                                                                      |                                                                                                                         |                                                                      |                                                                        |                                                      |         |         |          |         
|                                                                      | Broadband network financed through other
	long-term liabilities                                                         |                                                                      | $                                                                      | 23,030                                               |         |         |          |          |        
|                                                                      |                                                                                                                         |                                                                      |                                                                        |                                                      |         |         |          |         
|                                                                      | Issuance of treasury stock upon conversion of
	preferred stock                                                          |                                                                      | $                                                                      | 115,142                                              |         |         |          |          |        
|                                                                      |                                                                                                                         |                                                                      |                                                                        |                                                      |         |         |          |         
|                                                                      | Issuance of common stock in exchange for minority
	interests of IMPSAT Argentina, IMPSAT Colombia and
	IMPSAT Venezuela |                                                                      | $                                                                      | 93,034                                               |         |         |          |          |        
|                                                                      |                                                                                                                         |                                                                      |                                                                        |                                                      |         |         |          |         

See notes to condensed consolidated financial statements.

F-5



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS

(Tables in Thousands of U.S. Dollars, except for per share
amounts)


1.  GENERAL

IMPSAT Fiber Networks, Inc., a Delaware holding company, and
subsidiaries (the Company) is a leading integrated
provider of broadband Internet, data and voice services in Latin
America. The Company offers integrated telecommunications
solutions, with an emphasis on end-to-end broadband data
transmission, for national and multinational companies,
financial institutions, governmental agencies and other business
customers. In addition, the Company has built an extensive
pan-Latin American high capacity fiber optic network
(Broadband Network) and is currently undertaking its
second phase of extension which it expects to complete during
the present year.

The Company currently provides telecommunications services to
its customers using its local access and long haul fiber optic
and satellite networks. The deployed facilities include 15
metropolitan area networks in the largest cities of the region,
long haul networks across Argentina, Brazil, Chile and Colombia,
and leased submarine capacity to link South America to the
United States. Finally, the Company has 538,000 gross square
feet of premises housing advanced hosting capabilities.

The Companys operating subsidiaries are wholly owned
(except for a small number of shares issued to other persons to
comply with local corporate law requirements). A listing of the
Companys operating subsidiaries is as follows:

|          |  |                               
|--------- |  | ------------------------------
|         
|         
|         
|         
|Argentina |  | Impsat S.A.                   
|         
|         
|         
|         
|Brazil    |  | Impsat Comunicacoes Ltda.     
|         
|         
|         
|         
|Chile     |  | Impsat Chile S.A.             
|         
|         
|         
|         
|Colombia  |  | Impsat S.A.                   
|         
|         
|         
|         
|Ecuador   |  | Impsatel del Ecuador S.A.     
|         
|         
|         
|         
|Mexico    |  | Impsat S.A. de C.V.           
|         
|         
|         
|         
|Peru      |  | Impsat S.A.                   
|         
|         
|         
|         
|USA       |  | Impsat USA, Inc.              
|         
|         
|         
|         
|Venezuela |  | Telecomunicaciones Impsat S.A.

In addition, the Company owns other subsidiaries, which serve
intermediary functions to the Company and its operating
subsidiaries.

Liquidity and Going Concern Considerations The accompanying condensed consolidated financial statements
have been prepared on a going concern basis, which contemplates
the realization of assets and the satisfaction of liabilities in
the normal course of business; and, as a consequence the
financial statements do not include any adjustments relating to
the recoverability and classification of recorded assets amounts
or the amounts and classifications of liabilities that might be
necessary should the Company be unable to continue as a going
concern. The Company currently faces significant near-term cash
flow and liquidity problems. The Companys capital
requirements under the business plan for fiscal year 2001 are
greater than available capital resources, and the Companys
cash flows and liquidity are insufficient to satisfy all of the
Companys obligation beyond the end of 2001. In particular,
the payment default by 360networks, Inc.
(360networks) during the second quarter of its
contracts with the Company for the provision of IRU dark fiber
and capacity services and backhaul construction services and the
subsequent termination of those contracts will result in the
Companys receipt of approximately $77.4 million less
than anticipated during the remainder of 2001(see Note 12).
Although management is taking action to attempt to reduce
expenditures relating to the 360networks contracts and utilize
the network assets that were to be provided to 360networks, it
will not be possible in the short-term to replace the cash
inflows contemplated by the termination of 360networks

F-6



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


contracts and the nonpayment by 360networks of the amount
originally scheduled to be paid to the Company during 2001. Such
conditions raise substantial doubt that the Company will be able
to continue as a going concern for a reasonable period of time.

The Company has no material working capital or other credit
facility under which it may borrow for working capital or other
general corporate purposes. The Company is not generating
sufficient revenue to fund its operations and to repay its
principal and interest obligations under its 12.125% Senior
Guaranteed Notes due 2003, 13.375% Senior Notes due 2005 and
12.375% Senior Notes due 2008 (collectively the Senior
Notes) and its vendor financing obligations with Nortel
Networks Limited and Lucent Technologies Inc. (collectively the
Broadband Network Vendor Financing Agreements) that
will be due and payable in the short term.

The Company believes that is unlikely to be able to obtain
future debt or equity financing on acceptable terms, or at all.
The securities markets are currently not available to the
Company. The Company may therefore be required to restructure
its balance sheet. It is unlikely that the Company could obtain
additional financing without effecting such restructuring. The
Company has commenced negotiations with representatives of the
holders of its Senior Notes and with the creditors under the
Broadband Network Vendor Financing Agreements and has retained
Houlihan Lokey Howard & Zukin Capital to assist it in
connection with those negotiations and the restructuring of its
financial obligations and balance sheet. There is no assurance
that the Company will be able to successfully restructure its
balance sheet on terms acceptable to it, or at all. If the
Company is unable to restructure its balance sheet, generate
sufficient cash flows and obtain additional financing, the
Company likely will be unable to fund its operating requirements
and meet its debt obligations as they become due. In such an
event, the Company will be in default on such obligations, which
in turn, could force the Company to file for protection under
the federal bankruptcy laws. See Note 9. Such events would
have a material adverse effect upon the Company and would
threaten its ability to continue as a going concern. As the
Company continues to seek agreement with the holders of the
Senior Notes and the creditors under the Broadband Network
Vendor Financing Agreements regarding the restructuring of those
obligations, the Company is closely monitoring the level of cash
payments and commitments requiring cash payments in the
remainder of 2001.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation  The financial
statements are presented on a consolidated basis and include the
accounts of the IMPSAT Fiber Networks, Inc and its subsidiaries.
All significant intercompany transactions and balances have been
eliminated.

Interim Financial Information  The unaudited
condensed consolidated financial statements as of
September 30, 2001 and for the nine months ended
September 30, 2000 and 2001 have been prepared on the same
basis as the Companys audited consolidated financial
statements. In the opinion of management, the unaudited
condensed consolidated financial statements include all
adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the results for such period. The
operating results for the three and nine-month period ended
September 30, 2001 are not necessarily indicative of the
operating results to be expected for the full fiscal year or for
any future period.

Use of Estimates  The preparation of financial
statements in conformity with accounting principles generally
accepted in the United States of America (generally
accepted accounting principles) 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.

Market Risk  The Company currently operates in
countries throughout Latin America. The Companys financial
performance may be affected by inflation, exchange rates and
controls, price controls, interest rates,

F-7



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


changes in governmental economic policy, taxation and political,
economic or other developments in or affecting the Latin America
countries in which the Company operates. The Companys
foreign exchange rate risk, other than in Brazil, is limited
because the majority of its assets are either non-monetary in
nature or denominated in US dollars, and the majority of its
debt is denominated in US dollars. Additionally, a significant
portion of the Companys debt has a fixed interest rate
thereby limiting the Companys interest rate risk exposure.
Accordingly, the Company has not entered into derivative
transactions to hedge against these potential risks.

Cash and Cash Equivalents  Cash and cash
equivalents are time deposits with original maturities of three
months or less at the time of purchase. Cash equivalents and
short-term investments are stated at cost, which approximates
fair value.

Revenue Recognition  Revenues from data,
value-added telephony, IT Solutions and Internet services are
recognized monthly as the services are provided. Equipment sales
are recorded upon delivery to and acceptance by the customer. In
addition, the Company has entered into, and may enter into in
the future, agreements with carriers granting indefeasible
rights of use (IRUs) and access to portions of its
broadband network capacity and infrastructure. Pursuant to these
agreements, the Company will receive fixed advance payments for
the IRU and will recognize the revenue from the IRU ratably over
the life of the IRU. Amounts received in advance are recorded as
deferred revenue in the accompanying consolidated balance
sheets. The Securities and Exchange Commission (the
SEC) issued Staff Accounting Bulletin
(SAB) No. 101, Revenue Recognition in
Financial Statements. SAB No. 101 summarizes the
SECs views on the application of generally accepted
accounting principles to revenue recognition. The Company has
reviewed SAB No. 101 and believes that it is in compliance
with the SECs interpretation of revenue recognition.

No single customer accounted for greater than 10% of total net
revenues from services for the nine months ended
September 30, 2000 and 2001.

Broadband Network  Portions of the Broadband
Network are under construction. Costs in connection with the
construction, installation and expansion of the Broadband
Network are capitalized. Depreciation will be computed using the
straight-line method over the life of the rights of way for the
related network. Rights of way agreements represent the fees
paid and the net present value of fees to be paid per signed
agreements entered into for obtaining rights of way and other
permits for the Broadband Network. These capitalized agreements
are being amortized over the term of the rights of way, which
range from 10 to 20 years.

In addition, the Company has acquired IRUs from other entities
for its own purposes. Such IRU investments are capitalized and
amortized over their estimated useful lives, not to exceed
15 years. The acquired IRUs have a 25-year term. In
those cases where the right of use has been acquired for a
longer period of time (25 years) management believes that,
due to anticipated advances in technology, the Companys
IRUs are not likely to be productive assets beyond 15 years.

|                        |  |             |  | 
|----------------------- |  | ----------- |  | 
|                       
|                       
|                       
|                       
|Network infrastructure  |  | 10-15 years
|                       
|                       
|                       
|                       
|Right of way            |  | 10-20 years
|                       
|                       
|                       
|                       
|IRU investments         |  | 15 years   
|                       
|                       
|                       
|                       
|Equipment and materials |  | 10 years   

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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Property, Plant and Equipment  Property, plant
and equipment are recorded at cost and depreciated using the
straight-line method over the following estimated useful lives:

|                                        |  |             |  | 
|--------------------------------------- |  | ----------- |  | 
|                                       
|                                       
|                                       
|                                       
|Buildings and improvements              |  | 10-25 years
|                                       
|                                       
|                                       
|                                       
|Operating communications equipment      |  | 5-10 years 
|                                       
|                                       
|                                       
|                                       
|Furniture, fixtures and other equipment |  | 2-10 years 

The operating communications equipment owned by the Company is
subject to rapid technological obsolescence; therefore it is
reasonably possible that the equipments estimated useful
lives could change in the near future.

Investments  Investments covered under the
scope of Statement of Financial Accounting Standards
(SFAS) No. 115, Accounting for Certain
Investments in Debt and Equity Securities, are classified by
the Company as either trading for short term
investments and available for sale for long term
investments and are carried at fair value. Unrealized gains and
losses for trading investments are recorded into income.
Unrealized gains or losses, net of tax, for available for sale
investments are included in accumulated other comprehensive
income (loss) within stockholders equity. All other
investments are carried at cost.

Deferred Financing Costs  Debt issuance costs
and transaction fees, which are associated with the issuance of
the Companys 12 1/8% Senior Guaranteed Notes due 2003
(the Senior Guaranteed Notes), the 13 3/4%
Senior Notes due 2005 (the Senior Notes 2005) and
the 12 3/8% Senior Notes due 2008 (the Senior Notes
2008) are being amortized (and charged to interest
expense) over the term of the related notes on a method which
approximates the level yield method.

Intangible Assets  Intangible assets consist
of goodwill created from acquisitions. These intangible assets
are being amortized on a straight-line basis over a period
ranging from 4 to 15 years.

Long-Lived Assets  Long-lived assets,
including goodwill, are reviewed on an ongoing basis for
impairment based on a comparison of carrying values to
undiscounted future cash flows. If an impairment is identified,
the assets carrying amount is adjusted to fair value. During the
three months ended September 30, 2001, in connection with
the Companys ongoing review of its business plan, cash
flow and liquidity position, and the economic environment in
Latin America, the Company determined that its long-lived assets
primarily related to its telecommunication infrastructure were
likely impaired. The Company calculated the present value of its
expected cash flows of its operating subsidiaries to determine
the fair value of its telecommunication infrastructure.
Accordingly, in the three months ended September 30, 2001,
the Company recorded a noncash impairment charge of
$234.6 million. This charge included approximately
$98.3 million for IMPSAT Argentina, $24.7 million for
IMPSAT Brazil and $28.9 million for all other countries. In
addition, the charge also included approximately
$82.7 million for a write-down of the value of goodwill
generated by the acquisition of certain minority interest in the
operating subsidiaries. The Company recorded this impairment
reserve based on internal estimates of fair value and not
independent valuations of its telecommunication infrastructure.
The Company will engage a third party asset valuation firm to
conduct such an appraisal during the fourth quarter of 2001. The
impairment reserve recorded will be adjusted and allocated to
specific assets based on the results of such appraisal.

Income Taxes  Deferred income taxes result
from temporary differences in the recognition of expenses for
tax and financial reporting purposes and are accounted for in
accordance with SFAS No. 109, Accounting for Income
Taxes, which requires the liability method of computing
deferred income taxes. Under the liability method, deferred
taxes are adjusted for tax rate changes as they occur.

Foreign Currency Translation  The
Companys subsidiaries generally use the U.S. dollar as the
functional currency. Accordingly, the financial statements of
the subsidiaries were remeasured. The effects of foreign
currency transactions and of remeasuring the financial position
and results of operations into the

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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


functional currency are included as net gain or loss on foreign
exchange, except for IMPSAT Brazil, which uses the local
currency as the functional currency and which is included in
accumulated other comprehensive income (loss) in
stockholders equity.

Fair Value of Financial Instruments  The
Companys financial instruments include receivables,
investments, payables, short- and long-term debt. The
Companys Senior Guaranteed Notes, Senior Notes 2005 and
2008 and trading and available for sale investments, were valued
at market closing prices at December 31, 2000 and
September 30, 2001. The fair value of all other financial
instruments, which approximate their carrying value, have been
determined using available market information and interest rates
as of December 31, 2000 and September 30, 2001.

At December 31, 2000 and September 30, 2001, the fair
value of the Companys financial instruments was as follows:

|                                         |  |              |         |               |  |   |         | 
|---------------------------------------- |  | ------------ | ------- | ------------- |  | - | ------- | 
|                                         |  | December 31, |         | September 30,
|                                         |  | 2000         |         | 2001         
|                                         |  |              |         |              
|12.125% Senior Guaranteed Notes due 2003 |  | $            | 98,750  |               |  | $ | 70,000  | 
|                                        
|                                        
|                                        
|                                        
|13.75% Senior Notes due 2005             |  |              | 198,000 |               |  |   | 138,000 | 
|                                        
|                                        
|                                        
|                                        
|12.375% Senior Notes due 2008            |  |              | 124,875 |               |  |   | 81,000  | 
|                                        
|                                        
|                                        
|                                        
|Trading Investments                      |  |              | 240,892 |               |  |   | 20,700  | 
|                                        
|                                        
|                                        
|                                        
|Available for sale investments           |  |              | 7,166   |               |  |   | 4,754   | 

Stock-Based Compensation  SFAS No. 123,
Accounting for Stock-Based Compensation, encourages, but
does not require, companies to record compensation cost for
stock-based employee and non-employee members of the Board
compensation plans at fair value. The Company has chosen to
continue to account for stock-based compensation to employees
and non-employee members of the Board using the intrinsic value
method as prescribed by Accounting Principles Board Opinion
(APB) No. 25, Accounting for Stock Issued to
Employees, and related interpretations. Accordingly,
compensation cost for stock options issued to employees and
non-employee members of the Board are measured as the excess, if
any, of the fair value of the Companys stock at the date
of grant over the amount an employee or non-employee member of
the Board must pay for the stock.

Net Loss Per Common Share  Basic earnings
(loss) per share is computed based on the average number of
common shares outstanding and diluted earnings (loss) per
share is computed based on the average number of common and
potential common shares outstanding under the treasury stock
method.

Accumulated Other Comprehensive Loss Accumulated other comprehensive loss is comprised as follows:

|                              |  |             |         |                 |  |       |         |   |  |   |         |  
|----------------------------- |  | ----------- | ------- | --------------- |  | ----- | ------- | - |  | - | ------- | -
|                              |  |             |         | Unrealized      |  |      
|                              |  | Foreign     |         | Gain (Loss)     |  |      
|                              |  | Currency    |         | Available for   |  |      
|                              |  | Translation |         | Sale Investment |  | Total
|                              |  |             |         |                 |  |      
|Balance at December 31, 2000  |  | $           | (6,417  | )               |  | $     | (10,755 | ) |  | $ | (17,172 | )
|                             
|                             
|                             
|                             
|Change during the period      |  |             | (5,470  | )               |  |       | 10,685  |   |  |   | 5,215   |  
|                              |  |             |         |                 |  |       |         |   |  |   |         |  
|Balance at September 30, 2001 |  | $           | (11,887 | )               |  | $     | (70     | ) |  | $ | (11,957 | )
|                              |  |             |         |                 |  |       |         |   |  |   |         |  

New Accounting Pronouncement  The Financial
Accounting Standards Board (FASB) has issued
Statement of Financial Accounting Standards No 142 (SFAS
142), Goodwill and Other Intangible Assets, which
addresses the accounting for goodwill and other intangible
assets. SFAS 142 specifies that, among other things, intangible
assets with an indefinite useful life and goodwill will no
longer be amortized. The standard require goodwill to be
periodically tested for impairment and written down to fair
value if considered impaired.

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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


The provision of SFAS 142 are effective for fiscal years
beginning after December 15, 2001, and are effective for interim
periods in the initial year of adoption. The Company is
currently assessing the financial statement impact of the
adoption of SFAS 142.

In June 2001, the FASB issued SFAS No. 143,
Accounting for Asset Retirement Obligations, which
addresses financial accounting and reporting for legal
obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs.
SFAS No. 143 is effective for fiscal years beginning after
June 15, 2002, with early adoption encouraged. The Company
does not expect the adoption of SFAS No. 143 to have a
material effect on its financial statements or disclosures.

In August 2001, the FASB issued SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets, which addresses financial accounting and reporting
for the impairment or disposal of long-lived assets. SFAS
No. 144 is effective for fiscal years beginning after
December 15, 2001, and interim periods within those fiscal
years, with early adoption encouraged. The provisions of SFAS
No. 144 generally are to be applied prospectively. The
Company does not expect the adoption of SFAS No. 144 to
have a material effect on its financial statements or
disclosures.

Reclassifications  Certain amounts in the 2000
condensed consolidated financial statements have been
reclassified to conform with the 2001 presentation.

3.  INVESTMENTS

The Companys investments consist of the following at
December 31, and September 30:

|                                   |       |              |         |               |  |   |        |        | 
|---------------------------------- | ----- | ------------ | ------- | ------------- |  | - | ------ | ------ | 
|                                   |       | December 31, |         | September 30,
|                                   |       | 2000         |         | 2001         
|                                   |       |              |         |              
|Trading investments, at fair value |       | $            | 240,892 |               |  | $ | 20,700 |       
|                                   |       |              |         |               |  |   |        |       
|Investment, at cost                |       | $            | 7,925   |               |  | $ | 8,231  |       
|                                  
|                                  
|                                  
|                                  
|Investment in common stock         |       |              | 7,166   |               |  |   | 4,754  |       
|                                   |       |              |         |               |  |   |        |       
|                                   | Total |              | $       | 15,091        |  |   | $      | 12,985 | 
|                                   |       |              |         |               |  |   |        |       

The Companys trading investments consist of high-quality,
short-term investments with maturities of less than
360 days.

The Companys cost basis investment represents a less than
1% ownership in an unaffiliated entity established for the
purchase and leasing of satellite capacity time. During
October 2001, the Company sold this investment for
approximately $8 million.

The Companys investment in common stock represents a 3.3%
ownership interest in the outstanding common stock of Claxson
Interactive Group Inc., an integrated media company with
operations in Latin America, which was acquired by the Company
in the fourth quarter of 1999. This investment is subject to
equity price risk. The Company has not taken any actions to
hedge this market risk exposure. During the three and nine
months ended September 30, 2001, the Company recorded a
non-cash charge of $19.5 million, which reflected an
other-than-temporary decline in value of its investment in
common stock based upon a sustained reduction in the quoted
market price of $0.324 per share compared to the original cost
$3.505 per share. This charge is included in Recognition of
other-than temporary decline in value in the accompanying
condensed consolidated statements of operations.

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IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


4.  TRADE ACCOUNTS RECEIVABLE

Trade accounts receivable, by operating subsidiaries, at
December 31 and September 30, are summarized as
follows:

|                                      |       |              |         |               |  |   |         |         | 
|------------------------------------- | ----- | ------------ | ------- | ------------- |  | - | ------- | ------- | 
|                                      |       | December 31, |         | September 30,
|                                      |       | 2000         |         | 2001         
|                                      |       |              |         |              
|IMPSAT Argentina                      |       | $            | 75,116  |               |  | $ | 80,377  |        
|                                     
|                                     
|                                     
|                                     
|IMPSAT Brasil                         |       |              | 6,553   |               |  |   | 5,302   |        
|                                     
|                                     
|                                     
|                                     
|IMPSAT Colombia                       |       |              | 6,662   |               |  |   | 5,074   |        
|                                     
|                                     
|                                     
|                                     
|IMPSAT Venezuela                      |       |              | 6,311   |               |  |   | 7,867   |        
|                                     
|                                     
|                                     
|                                     
|All other countries                   |       |              | 11,218  |               |  |   | 12,134  |        
|                                      |       |              |         |               |  |   |         |        
|                                      | Total |              |         | 105,860       |  |   |         | 110,754 | 
|                                     
|                                     
|                                     
|                                     
|Less: allowance for doubtful accounts |       |              | (22,509 | )             |  |   | (24,913 | )      
|                                      |       |              |         |               |  |   |         |        
|Trade accounts receivable, net        |       | $            | 83,351  |               |  | $ | 85,841  |        
|                                      |       |              |         |               |  |   |         |        

The Companys subsidiaries provide trade credit to their
customers in the normal course of business. The collection of a
substantial portion of the trade receivables are susceptible to
changes in the Latin American economies and political climates.
Prior to extending credit, the customers financial history
is analyzed.

The activity for the allowance for doubtful accounts for the
year ended December 31, 2000 and for the nine months ended
September 30, 2001 is as follows:

|                                |  |              |        |               |  |   |        |  
|------------------------------- |  | ------------ | ------ | ------------- |  | - | ------ | -
|                                |  | December 31, |        | September 30,
|                                |  | 2000         |        | 2001         
|                                |  |              |        |              
|Beginning balance               |  | $            | 19,820 |               |  | $ | 22,509 |  
|                               
|                               
|                               
|                               
|Provision for doubtful accounts |  |              | 4,806  |               |  |   | 6,906  |  
|                               
|                               
|                               
|                               
|Write-offs, net of recoveries   |  |              | (2,117 | )             |  |   | (4,502 | )
|                                |  |              |        |               |  |   |        |  
|Ending balance                  |  | $            | 22,509 |               |  | $ | 24,913 |  
|                                |  |              |        |               |  |   |        |  

5.  OTHER RECEIVABLES

Other receivables consist primarily of refunds or credits
pending from local governments for taxes other than income,
advances to suppliers, and other miscellaneous amounts due to
the Company and its operating subsidiaries as follows at
December 31 and September 30:

|                    |       |              |        |               |  |   |        |        | 
|------------------- | ----- | ------------ | ------ | ------------- |  | - | ------ | ------ | 
|                    |       | December 31, |        | September 30,
|                    |       | 2000         |        | 2001         
|                    |       |              |        |              
|IMPSAT Argentina    |       | $            | 33,678 |               |  | $ | 42,053 |       
|                   
|                   
|                   
|                   
|IMPSAT Brazil       |       |              | 12,538 |               |  |   | 5,090  |       
|                   
|                   
|                   
|                   
|IMPSAT Colombia     |       |              | 4,149  |               |  |   | 2,875  |       
|                   
|                   
|                   
|                   
|IMPSAT Venezuela    |       |              | 2,156  |               |  |   | 2,590  |       
|                   
|                   
|                   
|                   
|All other countries |       |              | 10,650 |               |  |   | 6,525  |       
|                    |       |              |        |               |  |   |        |       
|                    | Total |              | $      | 63,171        |  |   | $      | 59,133 | 
|                    |       |              |        |               |  |   |        |       

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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


6.  BROADBAND NETWORK AND AGREEMENTS

Broadband network and related equipment consists of the
following at December 31 and September 30:

|                                            |       |              |         |               |  |   |         |         | 
|------------------------------------------- | ----- | ------------ | ------- | ------------- |  | - | ------- | ------- | 
|                                            |       | December 31, |         | September 30,
|                                            |       | 2000         |         | 2001         
|                                            |       |              |         |              
|Network infrastructure                      |       | $            | 201,372 |               |  | $ | 216,304 |        
|                                           
|                                           
|                                           
|                                           
|Right of ways                               |       |              | 33,266  |               |  |   | 14,666  |        
|                                           
|                                           
|                                           
|                                           
|Equipment and materials                     |       |              | 151,185 |               |  |   | 183,536 |        
|                                           
|                                           
|                                           
|                                           
|IRU investments                             |       |              | 20,010  |               |  |   | 40,642  |        
|                                            |       |              |         |               |  |   |         |        
|                                            | Total |              |         | 405,833       |  |   |         | 455,148 | 
|                                           
|                                           
|                                           
|                                           
|Less: accumulated depreciation              |       |              | (46,433 | )             |  |   | (71,407 | )      
|                                           
|                                           
|                                           
|                                           
|reserve for
	impairment                     |       |              |         |               |  |   | (60,784 | )      
|                                            |       |              |         |               |  |   |         |        
|                                            | Total |              |         | 359,400       |  |   |         | 322,957 | 
|                                           
|                                           
|                                           
|                                           
|Under construction  Network infrastructure |       |              | 3,424   |               |  |   | 38,204  |        
|                                           
|                                           
|                                           
|                                           
|Under construction  Global Crossing Ducts  |       |              | 1,397   |               |  |   |         |        
|                                            |       |              |         |               |  |   |         |        
|                                            | Total |              | $       | 364,221       |  |   | $       | 361,161 | 
|                                            |       |              |         |               |  |   |         |        

The recap of accumulated depreciation for the year ended
December 31, 2000 and for the nine months ended
September 30, 2001, is as follows:

|                          |  |              |        |               |  |   |        |  
|------------------------- |  | ------------ | ------ | ------------- |  | - | ------ | -
|                          |  | December 31, |        | September 30,
|                          |  | 2000         |        | 2001         
|                          |  |              |        |              
|Beginning balance         |  | $            | 42,368 |               |  | $ | 46,433 |  
|                         
|                         
|                         
|                         
|Depreciation expense      |  |              | 4,365  |               |  |   | 29,755 |  
|                         
|                         
|                         
|                         
|Disposals and retirements |  |              | (300   | )             |  |   | (4,781 | )
|                          |  |              |        |               |  |   |        |  
|Ending balance            |  | $            | 46,433 |               |  | $ | 71,407 |  
|                          |  |              |        |               |  |   |        |  

Nortel Networks Agreements  On
September 6, 1999, the Company executed two turnkey
agreements with Nortel Networks Limited (Nortel)
relating to Nortels design and construction of segments of
the Broadband Network in Argentina and Brazil for approximately
$265 million.

On October 25, 1999, each of IMPSAT Argentina and IMPSAT
Brazil signed definitive agreements with Nortel to borrow an
aggregate of up to approximately $149.1 million and
$148.3 million, respectively, of long-term vendor
financing. The financing, which has a final maturity in 2006,
was used to finance Nortels construction of the segments
of the Broadband Network in Argentina and Brazil as well as
additional purchases of telecommunications equipment. The
Company has guaranteed the obligations of each of IMPSAT
Argentina and IMPSAT Brazil under the Nortel financing
agreements. At September 30, 2001, a total of
$245.7 million was disbursed and outstanding.

Additionally, the Company has obtained additional vendor
financing from Lucent Technologies, Ericsson, Tellabs OY, DMC
and Harris Canada, Inc. for the acquisition of fiber optic cable
and other telecommunications equipment for the Broadband
Network, with respect to which an aggregate of
$30.6 million was disbursed and outstanding as of
September 30, 2001.

On September of 2000 the Company completed and delivered to
Global Crossing the portion of the Trans-Andean Crossing System
connecting Las Toninas, Argentina and Santiago, Chile. In
connection with

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IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


the delivery, the Company recognized revenues and costs totaling
$43.1 million and $25.4 million, respectively.

IRU Agreements The Company has entered
into several framework agreements granting IRUs of up to
25 years on the Companys broadband network, including
network maintenance services and telehousing space. The Company
has received approximately $46.5 million during the nine
months ended September 30, 2001 related to these
agreements. These advance payments are recorded as deferred
revenue in the accompanying condensed consolidated balance
sheet. During the nine months ended September 30, 2001, the
Company recognized approximately $3.0 million from these
agreements, which are reflected as services to carriers in the
accompanying condensed consolidated statement of operations.

7.  PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at December 31 and
September 30, consisted of:

|                                        |       |              |          |               |  |   |          |         | 
|--------------------------------------- | ----- | ------------ | -------- | ------------- |  | - | -------- | ------- | 
|                                        |       | December 31, |          | September 30,
|                                        |       | 2000         |          | 2001         
|                                        |       |              |          |              
|Land                                    |       | $            | 10,398   |               |  | $ | 12,939   |        
|                                       
|                                       
|                                       
|                                       
|Building and improvements               |       |              | 55,792   |               |  |   | 90,132   |        
|                                       
|                                       
|                                       
|                                       
|Operating communications equipment      |       |              | 513,287  |               |  |   | 547,947  |        
|                                       
|                                       
|                                       
|                                       
|Furniture, fixtures and other equipment |       |              | 33,703   |               |  |   | 44,583   |        
|                                        |       |              |          |               |  |   |          |        
|                                        | Total |              |          | 613,180       |  |   |          | 695,601 | 
|                                       
|                                       
|                                       
|                                       
|Less: accumulated depreciation          |       |              | (265,354 | )             |  |   | (315,917 | )      
|                                       
|                                       
|                                       
|                                       
|reserve for
	impairment                 |       |              |          |               |  |   | (91,175  | )      
|                                        |       |              |          |               |  |   |          |        
|                                        | Total |              |          | 347,826       |  |   |          | 288,509 | 
|                                       
|                                       
|                                       
|                                       
|Equipment in transit                    |       |              | 15,285   |               |  |   | 6,155    |        
|                                       
|                                       
|                                       
|                                       
|Works in process                        |       |              | 18,563   |               |  |   | 1,779    |        
|                                        |       |              |          |               |  |   |          |        
|Property, plant and equipment, net      |       | $            | 381,674  |               |  | $ | 296,443  |        
|                                        |       |              |          |               |  |   |          |        

The recap of accumulated depreciation for the year ended
December 31, 2000 and for the nine months ended
September 30, 2001, is as follows:

|                          |  |              |         |               |  |   |         |  
|------------------------- |  | ------------ | ------- | ------------- |  | - | ------- | -
|                          |  | December 31, |         | September 30,
|                          |  | 2000         |         | 2001         
|                          |  |              |         |              
|Beginning balance         |  | $            | 201,656 |               |  | $ | 265,354 |  
|                         
|                         
|                         
|                         
|Depreciation expense      |  |              | 74,156  |               |  |   | 56,923  |  
|                         
|                         
|                         
|                         
|Disposals and retirements |  |              | (10,458 | )             |  |   | (6,360  | )
|                          |  |              |         |               |  |   |         |  
|Ending balance            |  | $            | 265,354 |               |  | $ | 315,917 |  
|                          |  |              |         |               |  |   |         |  

8.  SHORT-TERM DEBT

Several of the Companys subsidiaries maintain short-term
credit facilities with local banks. These credit facilities are
denominated in U.S. dollars, with interest rates ranging from 5%
to 19%. The Companys subsidiaries have historically
refinanced these short-term credit facilities on an annual
basis. As of December 31, 2000 and September 30, 2001,
amounts outstanding under these credit facilities totaled
approximately $14.6 million and $8.6 million,
respectively.

F-14



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


9.  LONG-TERM DEBT

The Companys long-term debt at December 31 and
September 30, is detailed as follows:

|                                                                                                                                                                       |                                                 |                      |         |               |         |   |         |        |         | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------- | -------------------- | ------- | ------------- | ------- | - | ------- | ------ | ------- | 
|                                                                                                                                                                       |                                                 | December 31,         |         | September 30,
|                                                                                                                                                                       |                                                 | 2000                 |         | 2001         
|                                                                                                                                                                       |                                                 |                      |         |              
|12.125% Senior Guaranteed Notes due 2003                                                                                                                               |                                                 | $                    | 125,000 |               |         | $ | 125,000 |       
|                                                                                                                                                                      
|                                                                                                                                                                      
|                                                                                                                                                                      
|                                                                                                                                                                      
|13.75% Senior Notes due 2005                                                                                                                                           |                                                 |                      | 300,000 |               |         |   | 300,000 |       
|                                                                                                                                                                      
|                                                                                                                                                                      
|                                                                                                                                                                      
|                                                                                                                                                                      
|12.375% Senior Notes due 2008                                                                                                                                          |                                                 |                      | 225,000 |               |         |   | 225,000 |       
|                                                                                                                                                                      
|                                                                                                                                                                      
|                                                                                                                                                                      
|                                                                                                                                                                      
|Term notes payable, maturing from 2001 through
	2004; collateralized by buildings and equipment, the assignment
	of customer contracts and investment; denominated in: |                                                 |                      |         |               |         |   |         |       
|                                                                                                                                                                      
|                                                                                                                                                                      
|                                                                                                                                                                      
|                                                                                                                                                                      
|                                                                                                                                                                       | U.S. dollars (interest rates 6.03% 
	12%)      |                      |         | 27,959        |         |   |         | 15,207 |        
|                                                                                                                                                                      
|                                                                                                                                                                      
|                                                                                                                                                                      
|                                                                                                                                                                      
|                                                                                                                                                                       | Local currency (interest rates 8.88% 
	18.56%) |                      |         | 17,177        |         |   |         | 23,109 |        
|                                                                                                                                                                      
|                                                                                                                                                                      
|                                                                                                                                                                      
|                                                                                                                                                                      
|Eximbank notes payable (interest rates
	4.23%  7.19%), maturing semiannually through 200l and
	2004                                                                   |                                                 |                      | 11,359  |               |         |   | 19,035  |       
|                                                                                                                                                                      
|                                                                                                                                                                      
|                                                                                                                                                                      
|                                                                                                                                                                      
|Vendor financing (3.59%  12.50%),
	maturing 2004 to 2008                                                                                                              |                                                 |                      | 247,145 |               |         |   | 276,329 |       
|                                                                                                                                                                       |                                                 |                      |         |               |         |   |         |       
|                                                                                                                                                                       |                                                 | Total long-term debt |         |               | 953,640 |   |         |        | 983,680 | 
|                                                                                                                                                                      
|                                                                                                                                                                      
|                                                                                                                                                                      
|                                                                                                                                                                      
|Less: current portion                                                                                                                                                  |                                                 |                      | (38,377 | )             |         |   | (68,319 | )     
|                                                                                                                                                                       |                                                 |                      |         |               |         |   |         |       
|Long-term debt, net                                                                                                                                                    |                                                 | $                    | 915,263 |               |         | $ | 915,361 |       
|                                                                                                                                                                       |                                                 |                      |         |               |         |   |         |       

The Senior Guaranteed Notes, the Senior Notes 2005 and 2008, the
vendor financing and some of the term notes contain certain
covenants requiring certain financial ratios, limiting the
incurrence of additional indebtedness and capital expenditures,
and restricting the ability to pay dividends.

The Companys liquidity difficulties described in
Note 1 have led to non-compliance with certain covenant
requirements and payment provisions under the Companys
Broadband Network Vendor Financing Agreements. On
October 25, 2001, the Company obtained a waiver of covenant
defaults and an extension from these lenders from scheduled
principal and interest payments under the Broadband Network
Vendor Financing Agreements totaling approximately
$36.3 million that were due on that date. The waiver is
valid through November 25, 2001. There can be no assurance
that these lenders will be willing to extend any forbearance
period beyond November 25, 2001. In the absence of such an
extension of the forbearance period, it is unlikely that the
Company will be able to comply with its obligations to make the
scheduled payments. In such an event, the lenders could demand
that all amounts outstanding under such agreements, including
accrued interest, become immediately due and payable. As of
September 30, 2001, the Companys outstanding balance
under the Broadband Network Vendor Financing Agreements totaled
approximately $261.4 million. A demand for immediate
payment of such outstanding amounts, if such demand were not
rescinded, annulled or otherwise timely cured, would constitute
an event of default, and could result in a payment acceleration
of all outstanding amounts, under the Companys Senior
Notes, which total $650.0 million in the aggregate. In such
an event, the Company would be forced to seek protection under
the United States Bankruptcy Code.

F-15



---



##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


10.  INCOME TAXES

The composition of the provision for income taxes, all of which
is for foreign taxes, for the three and nine months ended
September 30, 2000 and 2001 is as follows:

|         |       |                    |        |                   |  |      |      |      |  |   |        |      |   |   |         |         |  
|-------- | ----- | ------------------ | ------ | ----------------- |  | ---- | ---- | ---- |  | - | ------ | ---- | - | - | ------- | ------- | -
|         |       |                    |        |                  
|         |       | Three Months Ended |        | Nine Months Ended
|         |       | September 30,      |        | September 30,    
|         |       |                    |        |                  
|         |       | 2000               |        | 2001              |  | 2000 |      | 2001
|         |       |                    |        |                   |  |      |      |     
|Current  |       | $                  | (1,274 | )                 |  | $    | (435 | )    |  | $ | (3,174 | )    |   | $ | (1,042  | )      
|        
|        
|        
|        
|Deferred |       |                    | 1,436  |                   |  |      | 519  |      |  |   | 2,266  |      |   |   | (25,361 | )      
|         |       |                    |        |                   |  |      |      |      |  |   |        |      |   |   |         |        
|         | Total |                    | $      | 162               |  |      | $    | 84   |  |   | $      | (908 | ) |   | $       | (26,403 | )
|         |       |                    |        |                   |  |      |      |      |  |   |        |      |   |   |         |        

The foreign statutory tax rates range from 15% to 35% depending
on the particular country. During the current period ended
September, 2001, the Company recorded a valuation allowance of
approximately $25.5 million to reduce its deferred income
tax asset because it is not clear that utilization of the tax
benefits resulting from operating losses and the other temporary
differences are more likely than not to be realized,
as required by SFAS 109.

F-16



---



##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


11.  OPERATING SEGMENT INFORMATION

The Companys operating segment information, by subsidiary,
is as follows for the three and nine months ended
September 30, 2000 and 2001:

|                                       |                      |                                                 |          |        |        |          |         |           |       |           |         |              |        |       |        |       |       |   |          |        |        |  |        |        |         |   |          |        |        | 
|-------------------------------------- | -------------------- | ----------------------------------------------- | -------- | ------ | ------ | -------- | ------- | --------- | ----- | --------- | ------- | ------------ | ------ | ----- | ------ | ----- | ----- | - | -------- | ------ | ------ |  | ------ | ------ | ------- | - | -------- | ------ | ------ | 
|                                       |                      |                                                 |          |        |        |          |         |           |       |           |         |             
|Three Months Ended September 30,       |                      |                                                 |          |        |        |          |         | All other |       |           |         |             
|2001                                   |                      | Argentina                                       |          | Brazil |        | Colombia |         | Venezuela |       | countries |         | Eliminations |        | Total
|                                       |                      |                                                 |          |        |        |          |         |           |       |           |         |              |        |      
|Net Revenues                           |                      |                                                 |          |        |        |          |         |           |       |           |         |              |        |       |        |       |       |   |          |        |        |  |        |        |         |   |          |       
|                                      
|                                      
|                                      
|                                      
|Data and value added services:         |                      |                                                 |          |        |        |          |         |           |       |           |         |              |        |       |        |       |       |   |          |        |        |  |        |        |         |   |          |       
|                                      
|                                      
|                                      
|                                      
|                                       | Satellite            |                                                 | $        | 13,041 |        |          | $       | 3,452     |       |           | $       | 5,275        |        |       | $      | 6,226 |       |   | $        | 8,115  |        |  | $      | (3,987 | )       |   | $        | 32,122 |       
|                                      
|                                      
|                                      
|                                      
|                                       | Broad Band           |                                                 |          | 7,982  |        |          |         | 2,908     |       |           |         | 9,058        |        |       |        | 903   |       |   |          | 3,360  |        |  |        | (2,256 | )       |   |          | 21,955 |       
|                                      
|                                      
|                                      
|                                      
|                                       | Value added services |                                                 |          | 1,356  |        |          |         | 108       |       |           |         | 118          |        |       |        | 9     |       |   |          | 3,072  |        |  |        | (2,298 | )       |   |          | 2,365  |       
|                                       |                      |                                                 |          |        |        |          |         |           |       |           |         |              |        |       |        |       |       |   |          |        |        |  |        |        |         |   |          |       
|                                       | Subtotal             |                                                 |          | 22,379 |        |          |         | 6,468     |       |           |         | 14,451       |        |       |        | 7,138 |       |   |          | 14,547 |        |  |        | (8,541 | )       |   |          | 56,442 |       
|                                      
|                                      
|                                      
|                                      
|Telephony                              |                      |                                                 | 2,416    |        |        |          |         |           |       |           |         |              |        |       |        |       |       |   | 1,899    |        |        |  | (910   | )      |         |   | 3,405    |       
|                                      
|                                      
|                                      
|                                      
|Internet                               |                      |                                                 | 4,884    |        |        |          | 2,428   |           |       |           | 976     |              |        |       | 524    |       |       |   | 3,907    |        |        |  | (1,107 | )      |         |   | 11,612   |       
|                                      
|                                      
|                                      
|                                      
|Services to carriers                   |                      |                                                 | 1,562    |        |        |          | 761     |           |       |           | 45      |              |        |       | 392    |       |       |   | 1,727    |        |        |  | (272   | )      |         |   | 4,215    |       
|                                      
|                                      
|                                      
|                                      
|Sales of equipment                     |                      |                                                 | 830      |        |        |          |         |           |       |           | 6       |              |        |       | 26     |       |       |   | 34       |        |        |  |        |        |         |   | 896      |       
|                                       |                      |                                                 |          |        |        |          |         |           |       |           |         |              |        |       |        |       |       |   |          |        |        |  |        |        |         |   |          |       
|                                       |                      | Total net revenues from services and
	equipment |          |        | 32,071 |          |         |           | 9,657 |           |         |              | 15,478 |       |        |       | 8,080 |   |          |        | 22,114 |  |        |        | (10,830 | ) |          |        | 76,570 | 
|                                       |                      |                                                 |          |        |        |          |         |           |       |           |         |              |        |       |        |       |       |   |          |        |        |  |        |        |         |   |          |       
|Broadband network development revenues |                      |                                                 |          |        |        |          |         |           |       |           |         |              |        |       |        |       |       |   |          |        |        |  |        |        |         |   |          |       
|                                       |                      |                                                 |          |        |        |          |         |           |       |           |         |              |        |       |        |       |       |   |          |        |        |  |        |        |         |   |          |       
|                                       |                      | Total net revenues                              |          | $      | 32,071 |          |         | $         | 9,657 |           |         | $            | 15,478 |       |        | $     | 8,080 |   |          | $      | 22,114 |  |        | $      | (10,830 | ) |          | $      | 76,570 | 
|                                       |                      |                                                 |          |        |        |          |         |           |       |           |         |              |        |       |        |       |       |   |          |        |        |  |        |        |         |   |          |       
|Operating income (loss)                |                      | $                                               | (115,927 | )      |        | $        | (33,340 | )         |       | $         | (1,474  | )            |        | $     | 674    |       |       | $ | (114,338 | )      |        |  |        |        |         | $ | (264,405 | )     
|                                       |                      |                                                 |          |        |        |          |         |           |       |           |         |              |        |       |        |       |       |   |          |        |        |  |        |        |         |   |          |       
|Total assets                           |                      | $                                               | 460,215  |        |        | $        | 157,657 |           |       | $         | 104,985 |              |        | $     | 59,679 |       |       | $ | 153,034  |        |        |  |        |        |         | $ | 935,570  |       
|                                       |                      |                                                 |          |        |        |          |         |           |       |           |         |              |        |       |        |       |       |   |          |        |        |  |        |        |         |   |          |       

|                                       |                      |                                                 |         |        |        |          |         |           |       |           |         |              |        |       |        |       |       |   |         |        |        |  |        |        |        |   |           |        |         | 
|-------------------------------------- | -------------------- | ----------------------------------------------- | ------- | ------ | ------ | -------- | ------- | --------- | ----- | --------- | ------- | ------------ | ------ | ----- | ------ | ----- | ----- | - | ------- | ------ | ------ |  | ------ | ------ | ------ | - | --------- | ------ | ------- | 
|                                       |                      |                                                 |         |        |        |          |         |           |       | All other |         |              |        |      
|2000                                   |                      | Argentina                                       |         | Brazil |        | Colombia |         | Venezuela |       | countries |         | Eliminations |        | Total
|                                       |                      |                                                 |         |        |        |          |         |           |       |           |         |              |        |      
|Net Revenues                           |                      |                                                 |         |        |        |          |         |           |       |           |         |              |        |       |        |       |       |   |         |        |        |  |        |        |        |   |           |       
|                                      
|                                      
|                                      
|                                      
|Data and value added services:         |                      |                                                 |         |        |        |          |         |           |       |           |         |              |        |       |        |       |       |   |         |        |        |  |        |        |        |   |           |       
|                                      
|                                      
|                                      
|                                      
|                                       | Satellite            |                                                 | $       | 18,033 |        |          | $       | 3,820     |       |           | $       | 6,586        |        |       | $      | 5,845 |       |   | $       | 10,712 |        |  | $      | (5,599 | )      |   | $         | 39,397 |        
|                                      
|                                      
|                                      
|                                      
|                                       | Broad Band           |                                                 |         | 6,416  |        |          |         | 662       |       |           |         | 5,449        |        |       |        | 453   |       |   |         | 338    |        |  |        | (40    | )      |   |           | 13,278 |        
|                                      
|                                      
|                                      
|                                      
|                                       | Value added services |                                                 |         | 507    |        |          |         | 8         |       |           |         | 42           |        |       |        | 201   |       |   |         |        |        |  |        | (87    | )      |   |           | 671    |        
|                                       |                      |                                                 |         |        |        |          |         |           |       |           |         |              |        |       |        |       |       |   |         |        |        |  |        |        |        |   |           |       
|                                       | Subtotal             |                                                 |         | 24,956 |        |          |         | 4,490     |       |           |         | 12,077       |        |       |        | 6,499 |       |   |         | 11,050 |        |  |        | (5,726 | )      |   |           | 53,346 |        
|                                      
|                                      
|                                      
|                                      
|Telephony                              |                      |                                                 |         |        |        |          |         |           |       |           |         |              |        |       |        |       |       |   |         |        |        |  |        |        |        |   |           |       
|                                      
|                                      
|                                      
|                                      
|Internet                               |                      |                                                 | 3,106   |        |        |          | 2,798   |           |       |           | 897     |              |        |       | 376    |       |       |   | 3,530   |        |        |  | (1,151 | )      |        |   | 9,556     |       
|                                      
|                                      
|                                      
|                                      
|Services to carriers                   |                      |                                                 |         |        |        |          |         |           |       |           |         |              |        |       |        |       |       |   |         |        |        |  |        |        |        |   |           |       
|                                      
|                                      
|                                      
|                                      
|Sales of equipment                     |                      |                                                 | 4,432   |        |        |          | 5       |           |       |           |         |              |        |       | 19     |       |       |   | 241     |        |        |  |        |        |        |   | 4,697     |       
|                                       |                      |                                                 |         |        |        |          |         |           |       |           |         |              |        |       |        |       |       |   |         |        |        |  |        |        |        |   |           |       
|                                       |                      | Total net revenues from services and
	equipment |         |        | 32,494 |          |         |           | 7,293 |           |         |              | 12,974 |       |        |       | 6,894 |   |         |        | 14,821 |  |        |        | (6,877 | ) |           |        | 67,599  | 
|                                       |                      |                                                 |         |        |        |          |         |           |       |           |         |              |        |       |        |       |       |   |         |        |        |  |        |        |        |   |           |       
|Broadband network development revenues |                      |                                                 | 32,272  |        |        |          |         |           |       |           |         |              |        |       |        |       |       |   | 10,805  |        |        |  |        |        |        |   | 43,077    |       
|                                       |                      |                                                 |         |        |        |          |         |           |       |           |         |              |        |       |        |       |       |   |         |        |        |  |        |        |        |   |           |       
|                                       |                      | Total net revenues                              |         | $      | 64,766 |          |         | $         | 7,293 |           |         | $            | 12,974 |       |        | $     | 6,894 |   |         | $      | 25,626 |  |        | $      | (6,877 | ) |           | $      | 110,676 | 
|                                       |                      |                                                 |         |        |        |          |         |           |       |           |         |              |        |       |        |       |       |   |         |        |        |  |        |        |        |   |           |       
|Operating income (loss)                |                      | $                                               | 7,105   |        |        | $        | (8,516  | )         |       | $         | 451     |              |        | $     | 132    |       |       | $ | (1,105  | )      |        |  |        |        |        | $ | (1,933    | )     
|                                       |                      |                                                 |         |        |        |          |         |           |       |           |         |              |        |       |        |       |       |   |         |        |        |  |        |        |        |   |           |       
|Total assets                           |                      | $                                               | 383,928 |        |        | $        | 203,898 |           |       | $         | 101,267 |              |        | $     | 52,938 |       |       | $ | 594,938 |        |        |  |        |        |        | $ | 1,336,969 |       
|                                       |                      |                                                 |         |        |        |          |         |           |       |           |         |              |        |       |        |       |       |   |         |        |        |  |        |        |        |   |           |       

F-17



---



##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                       |                      |                                                 |          |        |        |          |         |           |        |           |         |              |        |       |        |        |        |   |          |        |        |  |        |         |         |   |          |         |         | 
|-------------------------------------- | -------------------- | ----------------------------------------------- | -------- | ------ | ------ | -------- | ------- | --------- | ------ | --------- | ------- | ------------ | ------ | ----- | ------ | ------ | ------ | - | -------- | ------ | ------ |  | ------ | ------- | ------- | - | -------- | ------- | ------- | 
|                                       |                      |                                                 |          |        |        |          |         |           |        |           |         |             
|Nine Months Ended September 30,        |                      |                                                 |          |        |        |          |         | All other |        |           |         |             
|2001                                   |                      | Argentina                                       |          | Brazil |        | Colombia |         | Venezuela |        | countries |         | Eliminations |        | Total
|                                       |                      |                                                 |          |        |        |          |         |           |        |           |         |              |        |      
|Net Revenues                           |                      |                                                 |          |        |        |          |         |           |        |           |         |              |        |       |        |        |        |   |          |        |        |  |        |         |         |   |          |        
|                                      
|                                      
|                                      
|                                      
|Data and value added services:         |                      |                                                 |          |        |        |          |         |           |        |           |         |              |        |       |        |        |        |   |          |        |        |  |        |         |         |   |          |        
|                                      
|                                      
|                                      
|                                      
|                                       | Satellite            |                                                 | $        | 42,034 |        |          | $       | 10,713    |        |           | $       | 17,069       |        |       | $      | 18,565 |        |   | $        | 25,496 |        |  | $      | (9,785  | )       |   | $        | 104,092 |        
|                                      
|                                      
|                                      
|                                      
|                                       | Broad Band           |                                                 |          | 23,451 |        |          |         | 6,575     |        |           |         | 25,548       |        |       |        | 2,327  |        |   |          | 7,588  |        |  |        | (4,806  | )       |   |          | 60,683  |        
|                                      
|                                      
|                                      
|                                      
|                                       | Value added services |                                                 |          | 2,983  |        |          |         | 1,217     |        |           |         | 215          |        |       |        | 9      |        |   |          | 8,667  |        |  |        | (8,460  | )       |   |          | 4,631   |        
|                                       |                      |                                                 |          |        |        |          |         |           |        |           |         |              |        |       |        |        |        |   |          |        |        |  |        |         |         |   |          |        
|                                       | Subtotal             |                                                 |          | 68,468 |        |          |         | 18,505    |        |           |         | 42,832       |        |       |        | 20,901 |        |   |          | 41,751 |        |  |        | (23,051 | )       |   |          | 169,406 |        
|                                      
|                                      
|                                      
|                                      
|Telephony                              |                      |                                                 | 4,797    |        |        |          |         |           |        |           | 4       |              |        |       |        |        |        |   | 3,134    |        |        |  | (1,371 | )       |         |   | 6,564    |        
|                                      
|                                      
|                                      
|                                      
|Internet                               |                      |                                                 | 13,284   |        |        |          | 8,706   |           |        |           | 3,135   |              |        |       | 1,406  |        |        |   | 11,919   |        |        |  | (3,992 | )       |         |   | 34,458   |        
|                                      
|                                      
|                                      
|                                      
|Services to carriers                   |                      |                                                 | 4,572    |        |        |          | 3,555   |           |        |           | 258     |              |        |       | 1,080  |        |        |   | 6,175    |        |        |  | (1,016 | )       |         |   | 14,624   |        
|                                      
|                                      
|                                      
|                                      
|Sales of equipment                     |                      |                                                 | 4,888    |        |        |          | 2,698   |           |        |           | 485     |              |        |       | 995    |        |        |   | 2,528    |        |        |  |        |         |         |   | 11,594   |        
|                                       |                      |                                                 |          |        |        |          |         |           |        |           |         |              |        |       |        |        |        |   |          |        |        |  |        |         |         |   |          |        
|                                       |                      | Total net revenues from services and
	equipment |          |        | 96,009 |          |         |           | 33,464 |           |         |              | 46,714 |       |        |        | 24,382 |   |          |        | 65,507 |  |        |         | (29,430 | ) |          |         | 236,646 | 
|                                       |                      |                                                 |          |        |        |          |         |           |        |           |         |              |        |       |        |        |        |   |          |        |        |  |        |         |         |   |          |        
|Broadband network development revenues |                      |                                                 |          |        |        |          | 2,552   |           |        |           |         |              |        |       |        |        |        |   | 4,645    |        |        |  |        |         |         |   | 7,197    |        
|                                       |                      |                                                 |          |        |        |          |         |           |        |           |         |              |        |       |        |        |        |   |          |        |        |  |        |         |         |   |          |        
|                                       |                      | Total net revenues                              |          | $      | 96,009 |          |         | $         | 36,016 |           |         | $            | 46,714 |       |        | $      | 24,382 |   |          | $      | 70,152 |  |        | $       | (29,430 | ) |          | $       | 243,843 | 
|                                       |                      |                                                 |          |        |        |          |         |           |        |           |         |              |        |       |        |        |        |   |          |        |        |  |        |         |         |   |          |        
|Operating income (loss)                |                      | $                                               | (144,984 | )      |        | $        | (53,529 | )         |        | $         | (1,120  | )            |        | $     | 997    |        |        | $ | (121,065 | )      |        |  |        |         |         | $ | (319,701 | )      
|                                       |                      |                                                 |          |        |        |          |         |           |        |           |         |              |        |       |        |        |        |   |          |        |        |  |        |         |         |   |          |        
|Total assets                           |                      | $                                               | 460,215  |        |        | $        | 157,657 |           |        | $         | 104,985 |              |        | $     | 59,679 |        |        | $ | 153,034  |        |        |  |        |         |         | $ | 935,570  |        
|                                       |                      |                                                 |          |        |        |          |         |           |        |           |         |              |        |       |        |        |        |   |          |        |        |  |        |         |         |   |          |        

|                                       |                      |                                                 |         |        |         |          |         |           |        |           |         |              |        |       |        |        |        |   |         |        |        |  |        |         |         |   |           |         |         | 
|-------------------------------------- | -------------------- | ----------------------------------------------- | ------- | ------ | ------- | -------- | ------- | --------- | ------ | --------- | ------- | ------------ | ------ | ----- | ------ | ------ | ------ | - | ------- | ------ | ------ |  | ------ | ------- | ------- | - | --------- | ------- | ------- | 
|                                       |                      |                                                 |         |        |         |          |         |           |        | All other |         |              |        |      
|2000                                   |                      | Argentina                                       |         | Brazil |         | Colombia |         | Venezuela |        | countries |         | Eliminations |        | Total
|                                       |                      |                                                 |         |        |         |          |         |           |        |           |         |              |        |      
|Net Revenues                           |                      |                                                 |         |        |         |          |         |           |        |           |         |              |        |       |        |        |        |   |         |        |        |  |        |         |         |   |           |        
|                                      
|                                      
|                                      
|                                      
|Data and value added services:         |                      |                                                 |         |        |         |          |         |           |        |           |         |              |        |       |        |        |        |   |         |        |        |  |        |         |         |   |           |        
|                                      
|                                      
|                                      
|                                      
|                                       | Satellite            |                                                 | $       | 54,163 |         |          | $       | 10,951    |        |           | $       | 22,522       |        |       | $      | 18,281 |        |   | $       | 28,551 |        |  | $      | (14,828 | )       |   | $         | 119,640 |        
|                                      
|                                      
|                                      
|                                      
|                                       | Broad Band           |                                                 |         | 17,432 |         |          |         | 1,304     |        |           |         | 14,810       |        |       |        | 1,392  |        |   |         | 1,091  |        |  |        | (129    | )       |   |           | 35,900  |        
|                                      
|                                      
|                                      
|                                      
|                                       | Value added services |                                                 |         | 1,427  |         |          |         | 12        |        |           |         | 92           |        |       |        | 231    |        |   |         | 16     |        |  |        | (103    | )       |   |           | 1,675   |        
|                                       |                      |                                                 |         |        |         |          |         |           |        |           |         |              |        |       |        |        |        |   |         |        |        |  |        |         |         |   |           |        
|                                       | Subtotal             |                                                 |         | 73,022 |         |          |         | 12,267    |        |           |         | 37,424       |        |       |        | 19,904 |        |   |         | 29,658 |        |  |        | (15,060 | )       |   |           | 157,215 |        
|                                      
|                                      
|                                      
|                                      
|Telephony                              |                      |                                                 |         |        |         |          |         |           |        |           |         |              |        |       |        |        |        |   |         |        |        |  |        |         |         |   |           |        
|                                      
|                                      
|                                      
|                                      
|Internet                               |                      |                                                 | 8,113   |        |         |          | 6,234   |           |        |           | 2,660   |              |        |       | 958    |        |        |   | 10,071  |        |        |  | (3,807 | )       |         |   | 24,229    |        
|                                      
|                                      
|                                      
|                                      
|Services to carriers                   |                      |                                                 |         |        |         |          |         |           |        |           |         |              |        |       |        |        |        |   |         |        |        |  |        |         |         |   |           |        
|                                      
|                                      
|                                      
|                                      
|Sales of equipment                     |                      |                                                 | 8,932   |        |         |          | 334     |           |        |           |         |              |        |       | 71     |        |        |   | 335     |        |        |  |        |         |         |   | 9,672     |        
|                                       |                      |                                                 |         |        |         |          |         |           |        |           |         |              |        |       |        |        |        |   |         |        |        |  |        |         |         |   |           |        
|                                       |                      | Total net revenues from services and
	equipment |         |        | 90,067  |          |         |           | 18,835 |           |         |              | 40,084 |       |        |        | 20,933 |   |         |        | 40,064 |  |        |         | (18,867 | ) |           |         | 191,116 | 
|                                       |                      |                                                 |         |        |         |          |         |           |        |           |         |              |        |       |        |        |        |   |         |        |        |  |        |         |         |   |           |        
|Broadband network development revenues |                      |                                                 | 32,272  |        |         |          |         |           |        |           |         |              |        |       |        |        |        |   | 10,805  |        |        |  |        |         |         |   | 43,077    |        
|                                       |                      |                                                 |         |        |         |          |         |           |        |           |         |              |        |       |        |        |        |   |         |        |        |  |        |         |         |   |           |        
|                                       |                      | Total net revenues                              |         | $      | 122,339 |          |         | $         | 18,835 |           |         | $            | 40,084 |       |        | $      | 20,933 |   |         | $      | 50,869 |  |        | $       | (18,867 | ) |           | $       | 234,193 | 
|                                       |                      |                                                 |         |        |         |          |         |           |        |           |         |              |        |       |        |        |        |   |         |        |        |  |        |         |         |   |           |        
|Operating income (loss)                |                      | $                                               | (7,498  | )      |         | $        | (19,862 | )         |        | $         | 1,194   |              |        | $     | 538    |        |        | $ | (8,684  | )      |        |  |        |         |         | $ | (34,312   | )      
|                                       |                      |                                                 |         |        |         |          |         |           |        |           |         |              |        |       |        |        |        |   |         |        |        |  |        |         |         |   |           |        
|Total assets                           |                      | $                                               | 383,928 |        |         | $        | 203,898 |           |        | $         | 101,267 |              |        | $     | 52,938 |        |        | $ | 594,938 |        |        |  |        |         |         | $ | 1,336,969 |        
|                                       |                      |                                                 |         |        |         |          |         |           |        |           |         |              |        |       |        |        |        |   |         |        |        |  |        |         |         |   |           |        

F-18



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


12.  COMMITMENTS AND CONTINGENCIES

Commitments  The Company leases
satellite capacity with total annual rental commitments of
approximately $28.3 million through the year 2005. In
addition, the Company had committed to long-term contracts for
the purchase of terrestrial links from third parties in
Argentina, Colombia, and the United States for approximately
$16.8 million per year through 2005. The Company has
commitments to purchase communications and data center equipment
amounting to approximately $9.8 million at
September 30, 2001. The Company has commitments for
additional IRU investments totaling approximately $63.9 million
in the aggregate under its various IRU agreements.

IMPSAT Brazil has entered into a $5.9 million term note
with El Camino Resources, which is guaranteed by the Company and
IMPSAT Argentina. At September 30, 2001, the balance
outstanding was approximately $3.2 million.

Litigation  The Company is involved in
or subject to various litigation and legal proceedings
incidental to the normal conduct of its business. Whenever
justified, the Company expects to vigorously prosecute or defend
such claims, although there can be no assurance that the Company
will ultimately prevail with respect to any such matters.

In November 1996, IMPSAT Argentina filed suit against a
former customer, ENCOTESA, for amounts due and arising under
IMPSAT Argentinas contracts with ENCOTESA, the Argentine
national postal service for $7.3 million. The ultimate
collectivity of this matter continues to be negotiated for
settlement; however, the Company has valued this receivable at a
net realizable value of zero.

360networks  During June 2001, the
Company terminated a series of contracts which the Company had
signed in the first quarter of 2001 with subsidiaries of
360americas networks (Bermuda) ltd. (collectively
360americas), a subsidiary of 360networks to
construct and provide IRU dark fiber, capacity services and
conduit to 360americas over the Companys Broadband Network
in Argentina and Brazil, as a result of the breach by
360americas of its payment obligations under those contracts,
including the new Argentina-Brazil link that the Company has
recently completed. Between March and May 2001, the Company
made available segments of the IRU dark fiber and capacity
services to 360americas for acceptance, but 360americas failed
to make certain payments as required by the Companys
contract with them. 360americas also failed to make certain
payment for collocation space in the Companys telehouses
in Sao Paulo and Rio de Janeiro, Brazil and Buenos Aires,
Argentina, and the Company terminated those contracts as well.
The Company has also terminated a contract with 360americas for
collocation space in Caracas, Venezuela, also for payment
default by 360americas.

The Company has commenced arbitration and litigation proceedings
against 360americas for damages under the terminated contracts
for the provision of IRU dark fiber and capacity services, as
contemplated by the relevant agreements. 360americas was not
included in the series of bankruptcy and insolvency filings made
in the United State and Canada by its parent, 360networks, Inc.
and certain of it other affiliates, 360networks, Inc. has
announced that it intends to seek a buyer for its South American
undersea fiber optic cable system, which is owned by
360americas. The Company intends to aggressively pursue its
remedies against 360americas, including its claim for damages
due under the terminated contracts, but is unable to predict
whether the Company will prevail in any such proceedings and, if
so, whether 360americas would be able to pay any arbitration or
litigation award that might be entered in favor of the Company.

During the pendency of the arbitration and litigation
proceedings, the Company will continue to include as deferred
revenues on its condensed consolidated balance sheet the amount
received from 360americas as down payments under the terminated
contracts, after deducting amounts that were due and payable at
the time of the termination of the contracts. As of
September 30, 2001, the balance of such deferred revenue
was $22.6 million.

F-19



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


IPO Allocations Class Action  On
November 1, 2001, a purported class action lawsuit was
filed in the United States District Court for the Southern
District of New York against the Company, several of its
officers and directors, and the underwriters who handled its
initial public offering of common stock in February 2000
(the IPO). Although neither the Company nor the
individual defendants have yet been served with the complaint,
the complaint was filed purportedly on behalf of persons who
purchased our common stock between February 1, 2000 and
December 6, 2000. The complaint alleges violations of the
Securities Act of 1933 and the Securities Exchange Act of 1934,
mainly based on the assertion that there was undisclosed
compensation received by the Companys underwriters in
connection with the IPO. Although only one case has been filed
so far, the Company expects other cases to be filed and
anticipates that these cases will be consolidated into a single
class action. The Company believes that the Company and the
individual defendants have meritorious defenses to the claims
made in the complaint and intends to vigorously contest the
lawsuit.

F-20



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##### Table of Contents



IMPSAT S.A.

CONDENSED BALANCE SHEETS

(In thousands of U.S. Dollars)


(Unaudited)


|                                                               |                                                                                                                      |                            |         |               |         |   |         |          |         | 
|-------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | ------------- | ------- | - | ------- | -------- | ------- | 
|                                                               |                                                                                                                      | December 31,               |         | September 30,
|                                                               |                                                                                                                      | 2000                       |         | 2001         
|                                                               |                                                                                                                      |                            |         |              
|                                                              
|                                                              
|                                                              
|                                                              
|ASSETS                                                        
|                                                              
|                                                              
|                                                              
|                                                              
|CURRENT ASSETS:                                                |                                                                                                                      |                            |         |               |         |   |         |         
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Cash and cash equivalents                                                                                            |                            | $       | 12,051        |         |   | $       | 8,094    |        
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Trade accounts receivable, net                                                                                       |                            |         | 58,680        |         |   |         | 62,831   |        
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Receivable from affiliated companies                                                                                 |                            |         | 13,303        |         |   |         | 16,737   |        
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Other receivables                                                                                                    |                            |         | 33,679        |         |   |         | 42,053   |        
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Prepaid expenses                                                                                                     |                            |         | 2,584         |         |   |         | 2,940    |        
|                                                               |                                                                                                                      |                            |         |               |         |   |         |         
|                                                               |                                                                                                                      | Total current assets       |         |               | 120,297 |   |         |          | 132,655 | 
|                                                               |                                                                                                                      |                            |         |               |         |   |         |         
|BROADBAND NETWORK, Net                                         |                                                                                                                      |                            | 176,961 |               |         |   | 182,169 |         
|                                                               |                                                                                                                      |                            |         |               |         |   |         |         
|PROPERTY, PLANT AND EQUIPMENT, Net                             |                                                                                                                      |                            | 163,754 |               |         |   | 120,128 |         
|                                                               |                                                                                                                      |                            |         |               |         |   |         |         
|NON-CURRENT ASSETS:                                            |                                                                                                                      |                            |         |               |         |   |         |         
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Investments                                                                                                          |                            |         | 11,829        |         |   |         | 10,995   |        
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Deferred income taxes, net                                                                                           |                            |         | 8,262         |         |   |         |          |        
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Other non-current assets                                                                                             |                            |         | 13,672        |         |   |         | 14,268   |        
|                                                               |                                                                                                                      |                            |         |               |         |   |         |         
|                                                               |                                                                                                                      | Total non-current assets   |         |               | 33,763  |   |         |          | 25,263  | 
|                                                               |                                                                                                                      |                            |         |               |         |   |         |         
|TOTAL                                                          |                                                                                                                      | $                          | 494,775 |               |         | $ | 460,215 |         
|                                                               |                                                                                                                      |                            |         |               |         |   |         |         
|                                                              
|                                                              
|                                                              
|                                                              
|LIABILITIES AND STOCKHOLDERS
	EQUITY                         
|                                                              
|                                                              
|                                                              
|                                                              
|CURRENT LIABILITIES:                                           |                                                                                                                      |                            |         |               |         |   |         |         
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Accounts payable  trade                                                                                             |                            | $       | 71,362        |         |   | $       | 99,517   |        
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Short-term debt                                                                                                      |                            |         | 8,860         |         |   |         |          |        
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Advances from affiliated companies                                                                                   |                            |         | 7,523         |         |   |         | 689      |        
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Current portion of long-term debt                                                                                    |                            |         | 15,385        |         |   |         | 31,070   |        
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Accrued and other liabilities                                                                                        |                            |         | 10,625        |         |   |         | 13,780   |        
|                                                               |                                                                                                                      |                            |         |               |         |   |         |         
|                                                               |                                                                                                                      | Total current liabilities  |         |               | 113,755 |   |         |          | 145,056 | 
|                                                               |                                                                                                                      |                            |         |               |         |   |         |         
|LONG-TERM DEBT, Net                                            |                                                                                                                      |                            | 127,626 |               |         |   | 134,066 |         
|                                                               |                                                                                                                      |                            |         |               |         |   |         |         
|DEFERRED REVENUES                                              |                                                                                                                      |                            | 32,561  |               |         |   | 50,212  |         
|                                                               |                                                                                                                      |                            |         |               |         |   |         |         
|COMMITMENTS AND CONTINGENCIES (NOTE 11)
	STOCKHOLDERS EQUITY: |                                                                                                                      |                            |         |               |         |   |         |         
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Common Stock, $0.01 par value
	14,755 shares issued and outstanding at December 31,
	2000, and at September 30, 2001 |                            |         | 3             |         |   |         | 3        |        
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Paid in capital                                                                                                      |                            |         | 250,326       |         |   |         | 331,180  |        
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Accumulated deficit                                                                                                  |                            |         | (30,247       | )       |   |         | (200,233 | )      
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Accumulated other comprehensive income (loss)                                                                        |                            |         | 751           |         |   |         | (69      | )      
|                                                               |                                                                                                                      |                            |         |               |         |   |         |         
|                                                               |                                                                                                                      | Total stockholders equity |         |               | 220,833 |   |         |          | 130,881 | 
|                                                               |                                                                                                                      |                            |         |               |         |   |         |         
|TOTAL                                                          |                                                                                                                      | $                          | 494,775 |               |         | $ | 460,215 |         
|                                                               |                                                                                                                      |                            |         |               |         |   |         |         

See notes to condensed financial statements.

F-21



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##### Table of Contents



IMPSAT S.A.

CONDENSED STATEMENTS OF OPERATIONS

(In thousands of U.S. Dollars)


(Unaudited)


|                                       |                                      |                                      |                                    |                   |        |        |          |         |       |         |         |        |        |         |          |         |        |         |  
|-------------------------------------- | ------------------------------------ | ------------------------------------ | ---------------------------------- | ----------------- | ------ | ------ | -------- | ------- | ----- | ------- | ------- | ------ | ------ | ------- | -------- | ------- | ------ | ------- | -
|                                       |                                      |                                      |                                    |                  
|                                       |                                      | Three Months Ended                   |                                    | Nine Months Ended
|                                       |                                      | September 30,                        |                                    | September 30,    
|                                       |                                      |                                      |                                    |                  
|                                       |                                      | 2000                                 |                                    | 2001              |        | 2000   |          | 2001   
|                                       |                                      |                                      |                                    |                   |        |        |          |        
|NET REVENUES:                          |                                      |                                      |                                    |                   |        |        |          |         |       |         |         |        |        |         |          |        
|                                      
|                                      
|                                      
|                                      
|                                       | Data and value added services        |                                      | $                                  | 24,956            |        |        | $        | 22,379  |       |         | $       | 73,022 |        |         | $        | 68,468  |       
|                                      
|                                      
|                                      
|                                      
|                                       | Telephony                            |                                      |                                    |                   |        |        |          | 2,416   |       |         |         |        |        |         |          | 4,797   |       
|                                      
|                                      
|                                      
|                                      
|                                       | Internet                             |                                      |                                    | 3,106             |        |        |          | 4,884   |       |         |         | 8,113  |        |         |          | 13,284  |       
|                                      
|                                      
|                                      
|                                      
|                                       | Services to carriers                 |                                      |                                    |                   |        |        |          | 1,562   |       |         |         |        |        |         |          | 4,572   |       
|                                      
|                                      
|                                      
|                                      
|                                       | Sales of equipment                   |                                      |                                    | 4,432             |        |        |          | 830     |       |         |         | 8,932  |        |         |          | 4,888   |       
|                                       |                                      |                                      |                                    |                   |        |        |          |         |       |         |         |        |        |         |          |        
|Total net revenues from services       |                                      |                                      | 32,494                             |                   |        |        | 32,071   |         |       |         | 90,067  |        |        |         | 96,009   |        
|                                      
|                                      
|                                      
|                                      
|Broadband network development revenues |                                      |                                      | 32,272                             |                   |        |        |          |         |       |         | 32,272  |        |        |         |          |        
|                                       |                                      |                                      |                                    |                   |        |        |          |         |       |         |         |        |        |         |          |        
|                                       |                                      |                                      | Total net revenues                 |                   |        | 64,766 |          |         |       | 32,071  |         |        |        | 122,339 |          |         |        | 96,009  |  
|                                       |                                      |                                      |                                    |                   |        |        |          |         |       |         |         |        |        |         |          |        
|COSTS AND EXPENSES:                    |                                      |                                      |                                    |                   |        |        |          |         |       |         |         |        |        |         |          |        
|                                      
|                                      
|                                      
|                                      
|                                       | Direct costs:                        |                                      |                                    |                   |        |        |          |         |       |         |         |        |        |         |          |         |       
|                                      
|                                      
|                                      
|                                      
|                                       |                                      | Contracted services                  |                                    |                   | 3,732  |        |          |         | 5,028 |         |         |        | 10,608 |         |          |         | 13,568 |        
|                                      
|                                      
|                                      
|                                      
|                                       |                                      | Other direct costs                   |                                    |                   | 2,045  |        |          |         | 4,912 |         |         |        | 7,976  |         |          |         | 13,123 |        
|                                      
|                                      
|                                      
|                                      
|                                       |                                      | Leased capacity                      |                                    |                   | 8,400  |        |          |         | 9,802 |         |         |        | 20,831 |         |          |         | 27,752 |        
|                                      
|                                      
|                                      
|                                      
|                                       |                                      | Broadband network construction costs |                                    |                   | 18,057 |        |          |         |       |         |         |        | 18,057 |         |          |         |        |        
|                                      
|                                      
|                                      
|                                      
|                                       |                                      | Cost of equipment sold               |                                    |                   | 4,292  |        |          |         | 723   |         |         |        | 8,549  |         |          |         | 4,138  |        
|                                       |                                      |                                      |                                    |                   |        |        |          |         |       |         |         |        |        |         |          |        
|                                       |                                      |                                      | Total direct costs                 |                   |        | 36,526 |          |         |       | 20,465  |         |        |        | 66,021  |          |         |        | 58,581  |  
|                                       |                                      |                                      |                                    |                   |        |        |          |         |       |         |         |        |        |         |          |        
|                                       | Salaries and wages                   |                                      |                                    | 6,826             |        |        |          | 9,581   |       |         |         | 19,566 |        |         |          | 27,722  |       
|                                      
|                                      
|                                      
|                                      
|                                       | Selling, general and administrative  |                                      |                                    | 5,409             |        |        |          | 4,640   |       |         |         | 17,906 |        |         |          | 15,579  |       
|                                      
|                                      
|                                      
|                                      
|                                       | Depreciation and amortization        |                                      |                                    | 8,900             |        |        |          | 14,982  |       |         |         | 26,344 |        |         |          | 40,781  |       
|                                      
|                                      
|                                      
|                                      
|                                       | Provision for asset impairment       |                                      |                                    |                   |        |        |          | (98,330 | )     |         |         |        |        |         |          | (98,330 | )     
|                                       |                                      |                                      |                                    |                   |        |        |          |         |       |         |         |        |        |         |          |        
|                                       |                                      |                                      | Total costs and expenses           |                   |        | 57,661 |          |         |       | 147,998 |         |        |        | 129,837 |          |         |        | 240,993 |  
|                                       |                                      |                                      |                                    |                   |        |        |          |         |       |         |         |        |        |         |          |        
|Operating income(loss)                 |                                      |                                      | 7,105                              |                   |        |        | (115,927 | )       |       |         | (7,498  | )      |        |         | (144,984 | )      
|                                       |                                      |                                      |                                    |                   |        |        |          |         |       |         |         |        |        |         |          |        
|OTHER INCOME (EXPENSES):               |                                      |                                      |                                    |                   |        |        |          |         |       |         |         |        |        |         |          |        
|                                      
|                                      
|                                      
|                                      
|                                       | Interest income and investment gains |                                      |                                    | 119               |        |        |          | 595     |       |         |         | 795    |        |         |          | 1,349   |       
|                                      
|                                      
|                                      
|                                      
|                                       | Interest expense                     |                                      |                                    | (2,844            | )      |        |          | (5,936  | )     |         |         | (8,703 | )      |         |          | (17,386 | )     
|                                      
|                                      
|                                      
|                                      
|                                       | Net gain (loss) on foreign exchange  |                                      |                                    | 149               |        |        |          | (587    | )     |         |         | 220    |        |         |          | (593    | )     
|                                      
|                                      
|                                      
|                                      
|                                       | Other income net                     |                                      |                                    | 2                 |        |        |          | 285     |       |         |         | 6      |        |         |          | 295     |       
|                                       |                                      |                                      |                                    |                   |        |        |          |         |       |         |         |        |        |         |          |        
|                                       |                                      |                                      | Total other income (expenses), net |                   |        | (2,574 | )        |         |       | (5,643  | )       |        |        | (7,682  | )        |         |        | (16,335 | )
|                                       |                                      |                                      |                                    |                   |        |        |          |         |       |         |         |        |        |         |          |        
|(LOSS) INCOME BEFORE INCOME TAXES      |                                      |                                      | 4,531                              |                   |        |        | (121,570 | )       |       |         | (15,180 | )      |        |         | (161,319 | )      
|                                      
|                                      
|                                      
|                                      
|PROVISION FOR INCOME TAXES             |                                      |                                      | (630                               | )                 |        |        |          |         |       |         | (1,966  | )      |        |         | (8,667   | )      
|                                       |                                      |                                      |                                    |                   |        |        |          |         |       |         |         |        |        |         |          |        
|NET INCOME (LOSS)                      |                                      | $                                    | 3,901                              |                   |        | $      | (121,570 | )       |       | $       | (17,146 | )      |        | $       | (169,986 | )      
|                                       |                                      |                                      |                                    |                   |        |        |          |         |       |         |         |        |        |         |          |        

See notes to condensed financial statements.

F-22



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##### Table of Contents



IMPSAT S.A.

CONDENSED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands of U.S. Dollars)


(Unaudited)


|                                     |                                                                           |                    |       |                   |       |      |          |      |          |   |         |   |         |   |          |      |          |  
|------------------------------------ | ------------------------------------------------------------------------- | ------------------ | ----- | ----------------- | ----- | ---- | -------- | ---- | -------- | - | ------- | - | ------- | - | -------- | ---- | -------- | -
|                                     |                                                                           |                    |       |                  
|                                     |                                                                           | Three Months Ended |       | Nine Months Ended
|                                     |                                                                           | September 30,      |       | September 30,    
|                                     |                                                                           |                    |       |                  
|                                     |                                                                           | 2000               |       | 2001              |       | 2000 |          | 2001
|                                     |                                                                           |                    |       |                   |       |      |          |     
|NET INCOME (LOSS)                    |                                                                           | $                  | 3,901 |                   |       | $    | (121,570 | )    |          | $ | (17,146 | ) |         | $ | (169,986 | )   
|OTHER COMPREHENSIVE LOSS, net of tax |                                                                           |                    |       |                   |       |      |          |      |          |   |         |   |         |   |          |     
|                                    
|                                    
|                                    
|                                    
|                                     | Change in unrealized loss on investment available
	for sale, net of taxes |                    |       |                   |       |      |          | (1   | )        |   |         |   |         |   |          | (820 | )       
|                                     |                                                                           |                    |       |                   |       |      |          |      |          |   |         |   |         |   |          |     
|                                     |                                                                           | COMPREHENSIVE LOSS |       | $                 | 3,901 |      |          | $    | (121,571 | ) |         | $ | (17,146 | ) |          | $    | (170,806 | )
|                                     |                                                                           |                    |       |                   |       |      |          |      |          |   |         |   |         |   |          |     

See notes to condensed financial statements.

F-23



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##### Table of Contents



IMPSAT S.A.

CONDENSED STATEMENT OF STOCKHOLDERS EQUITY

(In thousands of U.S. Dollars)


(Unaudited)


|                              |                                                                           |        |   |         |  |             |         |               |  |       |          |          |   |   |     |      |   |   |         |          |  
|----------------------------- | ------------------------------------------------------------------------- | ------ | - | ------- |  | ----------- | ------- | ------------- |  | ----- | -------- | -------- | - | - | --- | ---- | - | - | ------- | -------- | -
|                              |                                                                           |        |   |         |  |             |         | Accumulated   |  |      
|                              |                                                                           |        |   |         |  |             |         | Other         |  |      
|                              |                                                                           | Common |   | Paid In |  | Accumulated |         | Comprehensive |  |      
|                              |                                                                           | Stock  |   | Capital |  | Deficit     |         | Income (Loss) |  | Total
|                              |                                                                           |        |   |         |  |             |         |               |  |      
|BALANCE AT DECEMBER 31, 2000  |                                                                           | $      | 3 |         |  | $           | 250,326 |               |  | $     | (30,247  | )        |   | $ | 751 |      |   | $ | 220,833 |         
|                             
|                             
|                             
|                             
|                              | Change on unrealized loss on investment available
	for sale, net of taxes |        |   |         |  |             |         |               |  |       |          |          |   |   |     | (820 | ) |   |         | (820     | )
|                             
|                             
|                             
|                             
|                              | Shareholders contribution                                                |        |   |         |  |             |         | 80,854        |  |       |          |          |   |   |     |      |   |   |         | 80,854   |  
|                             
|                             
|                             
|                             
|                              | Net loss for the period                                                   |        |   |         |  |             |         |               |  |       |          | (169,986 | ) |   |     |      |   |   |         | (169,986 | )
|                              |                                                                           |        |   |         |  |             |         |               |  |       |          |          |   |   |     |      |   |   |         |         
|BALANCE AT SEPTEMBER 30, 2001 |                                                                           | $      | 3 |         |  | $           | 331,180 |               |  | $     | (200,233 | )        |   | $ | (69 | )    |   | $ | 130,881 |         
|                              |                                                                           |        |   |         |  |             |         |               |  |       |          |          |   |   |     |      |   |   |         |         

See notes to condensed financial statements.

F-24



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##### Table of Contents



IMPSAT S.A.

CONDENSED STATEMENTS OF CASH FLOWS

(In thousands of U.S. Dollars)


(Unaudited)


|                                                                      |                                                                                                       |                                               |                                                             |                                           |         |         |         |          |        |        |         |  
|--------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------- | --------------------------------------------- | ----------------------------------------------------------- | ----------------------------------------- | ------- | ------- | ------- | -------- | ------ | ------ | ------- | -
|                                                                      |                                                                                                       |                                              
|                                                                      |                                                                                                       | Nine Months Ended                            
|                                                                      |                                                                                                       | September 30,                                
|                                                                      |                                                                                                       |                                              
|                                                                      |                                                                                                       | 2000                                          |                                                             | 2001                                     
|                                                                      |                                                                                                       |                                               |                                                             |                                          
|CASH FLOWS FROM OPERATING ACTIVITIES:                                 |                                                                                                       |                                               |                                                             |                                           |         |         |         |         
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Net loss                                                                                              |                                               | $                                                           | (17,146                                   | )       |         | $       | (169,986 | )     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Adjustments to reconcile net loss to net cash
	provided by operating
	activities, net of acquisition: |                                               |                                                             |                                           |         |         |         |          |       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                       | Amortization and depreciation                 |                                                             |                                           | 26,344  |         |         |          | 40,781 |       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                       | Provision for asset impairment                |                                                             |                                           |         |         |         |          | 98,330 |       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                       | Proceeds on delivery of Broadband Network     |                                                             |                                           | 18,064  |         |         |          |        |       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                       | Gross profit on delivery of Broadband Network |                                                             |                                           | (14,215 | )       |         |          |        |       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                       | Provision for doubtful accounts               |                                                             |                                           | 1,371   |         |         |          | 5,177  |       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                       | Deferred income tax provision                 |                                                             |                                           |         |         |         |          | 8,667  |       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                       | Changes in assets and liabilities:            |                                                             |                                           |         |         |         |          |        |       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                       |                                               | Increase in trade accounts receivable net                   |                                           |         | (13,297 | )       |          |        | (9,328 | )      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                       |                                               | Increase in prepaid expenses                                |                                           |         | (569    | )       |          |        | (356   | )      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                       |                                               | Increase in other receivables and other
	non-current assets |                                           |         | (3,466  | )       |          |        | (8,970 | )      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                       |                                               | Increase in accounts payable  trade                        |                                           |         | 15,174  |         |          |        | 28,155 |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                       |                                               | Increase in deferred revenues                               |                                           |         | 15,442  |         |          |        | 17,651 |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                       |                                               | Increase in accrued and other liabilities                   |                                           |         | 555     |         |          |        | 3,155  |        
|                                                                      |                                                                                                       |                                               |                                                             |                                           |         |         |         |         
|                                                                      |                                                                                                       |                                               |                                                             | Net cash provided by operating activities |         |         | 28,257  |          |        |        | 13,276  |  
|                                                                      |                                                                                                       |                                               |                                                             |                                           |         |         |         |         
|CASH FLOWS FROM INVESTING ACTIVITIES:                                 |                                                                                                       |                                               |                                                             |                                           |         |         |         |         
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Build-out of broadband network                                                                        |                                               |                                                             | (16,253                                   | )       |         |         | (51,780  | )     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Purchases of property, plant and equipment                                                            |                                               |                                                             | (56,603                                   | )       |         |         | (25,711  | )     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Increase in other investment                                                                          |                                               |                                                             | (168                                      | )       |         |         | (391     | )     
|                                                                      |                                                                                                       |                                               |                                                             |                                           |         |         |         |         
|                                                                      |                                                                                                       |                                               |                                                             | Net cash used in investing activities     |         |         | (73,024 | )        |        |        | (77,882 | )
|                                                                      |                                                                                                       |                                               |                                                             |                                           |         |         |         |         
|CASH FLOWS FROM FINANCING ACTIVITIES:                                 |                                                                                                       |                                               |                                                             |                                           |         |         |         |         
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Net repayments/borrowings of short-term debt                                                          |                                               |                                                             | (3,999                                    | )       |         |         | (8,860   | )     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Changes in advances to/from affiliates                                                                |                                               |                                                             | (54,169                                   | )       |         |         | (10,268  | )     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Repayments of long-term debt                                                                          |                                               |                                                             | (896                                      | )       |         |         | (1,077   | )     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Capital contribution                                                                                  |                                               |                                                             | 102,022                                   |         |         |         | 80,854   |       
|                                                                      |                                                                                                       |                                               |                                                             |                                           |         |         |         |         
|                                                                      |                                                                                                       |                                               |                                                             | Net cash provided by financing activities |         |         | 42,958  |          |        |        | 60,649  |  
|                                                                      |                                                                                                       |                                               |                                                             |                                           |         |         |         |         
|NET DECREASE IN CASH AND CASH EQUIVALENTS                             |                                                                                                       |                                               | (1,809                                                      | )                                         |         |         | (3,957  | )       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|CASH AND CASH EQUIVALENTS AT BEGINNING OF THE
	PERIOD                 |                                                                                                       |                                               | 4,199                                                       |                                           |         |         | 12,051  |         
|                                                                      |                                                                                                       |                                               |                                                             |                                           |         |         |         |         
|CASH AND CASH EQUIVALENTS AT END OF THE PERIOD                        |                                                                                                       | $                                             | 2,390                                                       |                                           |         | $       | 8,094   |         
|                                                                      |                                                                                                       |                                               |                                                             |                                           |         |         |         |         
|SUPPLEMENTAL CASH FLOW INFORMATION:                                   |                                                                                                       |                                               |                                                             |                                           |         |         |         |         
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Interest paid                                                                                         |                                               | $                                                           | 5,184                                     |         |         | $       | 8,912    |       
|                                                                      |                                                                                                       |                                               |                                                             |                                           |         |         |         |         
|SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
	FINANCING ACTIVITIES: |                                                                                                       |                                               |                                                             |                                           |         |         |         |         
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Change to unrealized loss on investment available
	for sale, net of tax                               |                                               |                                                             |                                           |         |         | $       | (820     | )     
|                                                                      |                                                                                                       |                                               |                                                             |                                           |         |         |         |         
|                                                                      | Broadband network vendor financing                                                                    |                                               | $                                                           | 64,185                                    |         |         | $       | 20,597   |       
|                                                                      |                                                                                                       |                                               |                                                             |                                           |         |         |         |         

See notes to condensed financial statements.

F-25



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##### Table of Contents



IMPSAT S.A.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

(Tables in Thousands of U.S. Dollars)


1.  GENERAL

IMPSAT S.A. (the Company) is a leading integrated
provider of broadband Internet, data and voice services in
Argentina. The Company offers integrated telecommunications
solutions, with an emphasis on end-to-end broadband data
transmission, for national and multinational companies,
financial institutions, governmental agencies and other business
customers in Argentina. It provides its services through its
advanced telecommunications networks comprised of owned
teleports, earth stations, fiber optic and microwave links and
leased satellite capacity. As of September 30, 2001, the
Company is a 100% owned subsidiary of Impsat Fiber Networks,
Inc. (the Parent Company)

Liquidity and Going Concern Considerations The accompanying condensed financial statements have been
prepared on a going concern basic, which contemplates the
realization of assets and the satisfaction of liabilities in the
normal course of business; and, as a consequence the financial
statements do not include any adjustments relating to the
recoverability and classification of recorded assets amounts or
the amounts and classifications of liabilities that might be
necessary should the Company be unable to continue as a going
concern. The Parent Company and the Company currently faces
significant near-term cash flow and liquidity problems. The
Parent Companys capital requirements under the business
plan for fiscal year 2001 are greater than available capital
resources, and the Parent Companys cash flows and
liquidity are insufficient to satisfy all of the Parent
Companys obligation beyond the end of 2001. In particular,
the payment default by 360networks, Inc.
(360networks) during the second quarter of its
contracts with the Company and Impsat Brazil for the provision
of IRU dark fiber and capacity services and backhaul
construction services and the subsequent termination of those
contracts will result in the Parent Companys receipt of
approximately $77.4 million less than anticipated during
the remainder of 2001 (see Note 11).

Although the Parent Companys management is taking action
to attempt to reduce expenditures relating to the 360networks
contracts and utilize the network assets that were to be
provided to 360networks, it will not be possible in the
short-term to replace the cash inflows contemplated by the
termination of 360networks contracts and the nonpayment by
360networks of the amount originally scheduled to be paid to the
Company during 2001. Such condition raise substantial doubt that
the Company will be able to continue as a going concern for a
reasonable period of time.

The Parent Company and the Company have no material working
capital or other credit facility under which they may borrow for
working capital or other general corporate purposes. The Parent
Company and the Company are not generating sufficient revenue to
fund their operations or to repay their principal and interest
obligations that will be due and payable in the short term.

The Parent Company and the Company believe that they are
unlikely to be able to obtain future debt or equity financing on
acceptable terms, or at all. The Parent Company and the Company
may therefore be required to restructure their balance sheets.
It is unlikely that the Parent Company and the Company could
obtain additional financing without effecting such
restructuring. The Parent Company has commenced negotiations
with representatives of the holders of its Senior Notes and with
the creditors under the Broadband Network Vendor Financing
Agreements and has retained Houlihan Lokey Howard & Zukin
Capital to assist it in connection with those negotiations and
the restructuring of its financial obligations and balance
sheet. There is no assurance that the Parent Company and the
Company will be able to successfully restructure their balance
sheets on terms acceptable to them, or at all. If the Parent
Company and the Company are unable to restructure their balance
sheets, generate sufficient cash flows and obtain additional
financing, the Parent Company and the Company likely will be
unable to fund their operating requirements and meet their debt
obligations as they become due. In such an event, the Parent
Company and the Company will be in default on such obligations,
which in turn, could force the Parent Company and the Company to
file for protection under the federal bankruptcy laws. Such
events would have a material adverse effect upon the Parent
Company and

F-26



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##### Table of Contents



IMPSAT S.A.




NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS  (Continued)


would threaten its ability to continue as a going concern. As
the Parent Company continues to seek agreement with the holders
of the Senior Notes and the creditors under the Broadband
Network Vendor Financing Agreements regarding the restructuring
of those obligations, the Parent Company is closely monitoring
the level of cash payments and commitments requiring cash
payments in the remainder of 2001.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Interim Financial Information The unaudited
condensed financial statements as of September 30, 2001 and
for the nine months ended September 30, 2000 and 2001 have
been prepared on the same basis as the audited financial
statements. In the opinion of management, such unaudited
financial statements include all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the
results for such period. The operating results for the nine
months ended September 30, 2000 and 2001 are not
necessarily indicative of the operating results to be expected
for the full fiscal year or for any future period.

Use of Estimates The preparation of financial
statements in conformity with accounting principles generally
accepted 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.

Cash and Cash Equivalents Cash and cash
equivalents are highly liquid investments, including short-term
investments and time deposits with maturities of three months or
less at the time of purchase. Cash equivalents and short-term
investments are stated at cost, which approximates fair value.

Revenue Recognition Revenues from data, value
added, telephony an Internet services are recognized monthly as
the services are provided. Equipment sales are recorded upon
delivery to and acceptance by the customer. In addition the
Company has entered into, and may enter into in the future,
agreements with carriers granting indefeasible rights of use
(IRU) and access to portions of its broadband
network capacity and infrastructure. Pursuant to these
agreements, the Company will receive fixed advance payments for
the IRU and will recognize the revenue from the IRU ratably over
the life of the IRU. Amounts received in advance are recorded as
deferred revenue in the accompanying balance sheets. The
Securities and Exchange Commission (the SEC) issued
Staff Accounting Bulletin (SAB) No. 101,
Revenue Recognition in Financial Statements. SAB
No. 101 summarizes the SECs views on the application
of generally accepted accounting principles to revenue
recognition. The Company has reviewed SAB No. 101 and
believes that it is in compliance with the SECs
interpretation of revenue recognition.

No single customer accounted for greater than 10% of total
revenues from services for the nine months ended
September 30, 2000 and 2001.

Broadband Network The Broadband Network has
been finished during the fourth quarter of 2000. These assets
are recorded at cost and depreciated using the straight-line
method over the following estimated useful lives. In addition,
the Company during 2000 acquired IRUs from other entities for
its own purposes. Such IRU investments are capitalized and
amortized over their estimated useful lives, not to exceed
15 years. The acquired IRUs have a 25-year term. In those
cases where the right of use has been acquired for a longer
period of time (25 years), management believes that, due to
anticipated advances in technology, the Companys IRUs are
not likely to be productive assets beyond 15 years.

|                        |  |            
|----------------------- |  | -----------
|                       
|                       
|                       
|                       
|Network Infrastructure  |  | 10-15 years
|                       
|                       
|                       
|                       
|IRU investment          |  | 15 years   
|                       
|                       
|                       
|                       
|Equipment and materials |  | 10 years   

F-27



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##### Table of Contents



IMPSAT S.A.




NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS  (Continued)


Property, Plant and Equipment Costs Property,
plant and equipment are recorded at cost and depreciated using
the straight-line method over the following estimated useful
lives:

|                                        |  |            
|--------------------------------------- |  | -----------
|                                       
|                                       
|                                       
|                                       
|Building and improvement                |  | 10-25 years
|                                       
|                                       
|                                       
|                                       
|Operating communications equipment      |  | 5-10 years 
|                                       
|                                       
|                                       
|                                       
|Furniture, fixtures and other equipment |  | 2-10 years 

The operating communications equipment owned by the Company is
subject to rapid technological obsolescence, therefore it is
reasonably possible that the equipments estimated useful
lives could change in the near future.

Investments Investments covered under the
scope of Statement of Financial Accounting Standards
(SFAS) No. 115, Accounting for Certain
Investments in Debt and Equity Securities, are classified by
the Company as available for sale are carried at
fair value. Unrealized gains or losses, net of tax, for
available for sale investments are included in accumulated other
comprehensive income (loss) within stockholders
equity. All other investments are carried at cost.

Long-Lived Assets Long-lived assets are
reviewed on an ongoing basis for impairment based on a
comparison of carrying values to undiscounted future cash flows.
If an impairment is identified, the assets carrying amount is
adjusted to fair value. During the three months ended
September 30, 2001, in connection with the Companys
ongoing review of its business plan, cash flow and liquidity
position, and the economic environment in Latin America, the
Company determined that its long-lived assets primarily related
to its telecommunication infrastructure were likely impaired.
The Company calculated the present value of its expected cash
flows of its operating subsidiaries to determine the fair value
of its telecommunication infrastructure. Accordingly, in the
three months ended September 30, 2001, the Company recorded
a non-cash impairment charge of $98.3 million. The Company
recorded this impairment reserve based on internal estimates of
fair value and not independent valuations of its
telecommunication infrastructure. The Company will engage a
third party asset valuation firm to conduct such an appraisal
during the fourth quarter of 2001. The impairment reserve
recorded will be adjusted and allocated to specific assets based
on the results of such appraisal.

Income Taxes Deferred income taxes result
from temporary differences in the recognition of expenses for
tax and financial reporting purposes and are accounted for in
accordance with Statements of Financial Accounting Standards
(SFAS) No. 109, Accounting for Income
Taxes, which requires the liability method of computing
deferred income taxes. Under the liability method, deferred
taxes are adjusted for tax rate changes as they occur.

Foreign Currencies Translation The
translation of these financial statements into U.S. dollars has
been made following the guidelines of SFAS No. 52,
Foreign Currency Translation. Major operations of IMPSAT
S.A. are stated in U.S. dollars. Accordingly, the U.S. dollar
has been designated as the functional currency. Local currencies
denominated transactions are remeasured into the functional
currency. Accordingly, fixed assets and stockholders account
have been translated into U.S. dollars taking into account the
exchange rate prevailing at each transaction date. Monetary
assets and liabilities are translated using the period-end
exchange. Profit and loss accounts were translated using average
exchange rates for the periods in which they were accrued,
except for the consumption of non-monetary assets for which
their respective dollar translated costs were considered.

Fair Value of Financial Instruments The
Companys financial instruments include receivables,
investments, payables, short- and long-term debt. The available
for sale investments were valued at market closing prices at
September 30, 2001. The fair value of all other financial
instruments which approximate their carrying (or contract)
values have been determined using interest rates as of
September 30, 2001.

F-28



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##### Table of Contents



IMPSAT S.A.




NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS  (Continued)


New Accounting Pronouncement The Financial
Accounting Standards Board (FASB) has issued
Statement of Financial Accounting Standards No. 143,
Accounting for Asset Retirement Obligations, which
addresses financial accounting and reporting for legal
obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs.
SFAS No. 143 is effective for fiscal years beginning after
June 15, 2002, with early adoption encouraged. The Company
does not expect the adoption of SFAS No. 143 to have a
material effect on its financial statements or disclosures.

In August 2001, the FASB issued SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets, which addresses financial accounting and reporting
for the impairment or disposal of long-lived assets. SFAS
No. 143 is effective for fiscal years beginning after
December 15, 2001 and interim periods within those fiscal
years, with early adoption encouraged. The provisions of SFAS
No. 144 generally are to be applied prospectively. The
Company does not expect the adoption of SFAS No. 144 to
have a material effect on its financial statements or
disclosures.

Reclassifications Certain amounts in the 2000
financial statements have been reclassified to conform to the
2001 presentation.

3.  TRADE ACCOUNTS RECEIVABLE

Trade accounts receivable at December 31 and
September 30, are summarized as follows:

|                                      |  |              |         |               |  |   |         |  
|------------------------------------- |  | ------------ | ------- | ------------- |  | - | ------- | -
|                                      |  | December 31, |         | September 30,
|                                      |  | 2000         |         | 2001         
|                                      |  |              |         |              
|Trade accounts receivable             |  | $            | 75,116  |               |  | $ | 80,377  |  
|                                     
|                                     
|                                     
|                                     
|Less: allowance for doubtful accounts |  |              | (16,436 | )             |  |   | (17,546 | )
|                                      |  |              |         |               |  |   |         |  
|Trade accounts receivable, net        |  | $            | 58,680  |               |  | $ | 62,831  |  
|                                      |  |              |         |               |  |   |         |  

The Company provides trade credit to their customers in the
normal course of business. Prior to extending credit, the
customers financial history is analyzed.

The activity for the allowance for doubtful accounts for the
year ended December 31, 2000 and for the nine months ended
September 30, 2001 is as follows:

|                                |  |              |        |               |  |   |        |  
|------------------------------- |  | ------------ | ------ | ------------- |  | - | ------ | -
|                                |  | December 31, |        | September 30,
|                                |  | 2000         |        | 2001         
|                                |  |              |        |              
|Beginning balance               |  | $            | 13,943 |               |  | $ | 16,436 |  
|                               
|                               
|                               
|                               
|Provision for doubtful accounts |  |              | 3,035  |               |  |   | 5,177  |  
|                               
|                               
|                               
|                               
|Write-offs, net of recoveries   |  |              | (542   | )             |  |   | (4,067 | )
|                                |  |              |        |               |  |   |        |  
|Ending balance                  |  | $            | 16,436 |               |  | $ | 17,546 |  
|                                |  |              |        |               |  |   |        |  

4.  OTHER RECEIVABLES

Other receivables consist primarily of refunds or credits
pending from local governments for taxes other than income,
advances to suppliers other than for fixed assets, and other
miscellaneous amounts due to the Company.

F-29



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##### Table of Contents



IMPSAT S.A.




NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS  (Continued)


5.  BROADBAND NETWORK AND AGREEMENTS

Broadband network and related equipment at December 31 and
September 30 consists of:

|                                             |       |              |         |               |  |   |         |         | 
|-------------------------------------------- | ----- | ------------ | ------- | ------------- |  | - | ------- | ------- | 
|                                             |       | December 31, |         | September 30,
|                                             |       | 2000         |         | 2001         
|                                             |       |              |         |              
|Network infrastructure                       |       | $            | 91,206  |               |  | $ | 130,508 |        
|                                            
|                                            
|                                            
|                                            
|Equipment and materials                      |       |              | 122,477 |               |  |   | 151,142 |        
|                                            
|                                            
|                                            
|                                            
|IRU investments                              |       |              | 4,395   |               |  |   | 4,395   |        
|                                             |       |              |         |               |  |   |         |        
|                                             | Total |              |         | 218,078       |  |   |         | 286,045 | 
|                                            
|                                            
|                                            
|                                            
|Less: accumulated depreciation               |       |              | (42,084 | )             |  |   | (57,774 | )      
|                                            
|                                            
|                                            
|                                            
|reserve for
	impairment of assets            |       |              |         |               |  |   | (46,102 | )      
|                                             |       |              |         |               |  |   |         |        
|                                             | Total |              |         | 175,994       |  |   |         | 182,169 | 
|                                            
|                                            
|                                            
|                                            
|Under construction  Network
	infrastructure |       |              | 967     |               |  |   |         |        
|                                             |       |              |         |               |  |   |         |        
|                                             | Total |              | $       | 176,961       |  |   | $       | 182,169 | 
|                                             |       |              |         |               |  |   |         |        

The recap of accumulated depreciation for the year ended
December 31, 2000 and for the nine months ended
September 30, 2001, is as follows:

|                          |  |              |        |               |  |   |        |  
|------------------------- |  | ------------ | ------ | ------------- |  | - | ------ | -
|                          |  | December 31, |        | September 30,
|                          |  | 2000         |        | 2001         
|                          |  |              |        |              
|Beginning balance         |  | $            | 39,763 |               |  | $ | 42,084 |  
|                         
|                         
|                         
|                         
|Depreciation expense      |  |              | 2,321  |               |  |   | 17,272 |  
|                         
|                         
|                         
|                         
|Disposals and retirements |  |              |        |               |  |   | (1,582 | )
|                          |  |              |        |               |  |   |        |  
|Ending balance            |  | $            | 42,084 |               |  | $ | 57,774 |  
|                          |  |              |        |               |  |   |        |  

Nortel Networks Agreements On
September 6, 1999, the Company executed a turnkey agreement
with Nortel Networks Inc. (Nortel) relating to
Nortels design and construction of segments of the
Broadband Network in Argentina for approximately
$133.1 million.

On October 25, 1999, the Company signed a definitive
agreement with an affiliate of Nortel Networks to borrow an
aggregate of up to approximately $149.1 million of long
term vendor financing. The financing, which has a final maturity
in 2006, was used to finance Nortels construction of the
segments of the Broadband Network and the purchase of additional
equipment to be used by the Company in connection with the
operation of the Broadband Network. The Parent Company has
agreed to guarantee the obligations of the Company under the
Nortel financing agreement. At September 30, 2001, a total
of $120.6 million was disbursed and outstanding under the
Nortel Financing Agreement.

Additionally, the Company has obtained additional vendor
financing from Lucent Technologies, Ericsson, Tellabs OY, DMC
and Harris Canadá, Inc. for the acquisition of fiber optic
cable and other telecommunications equipment for the Broadband
Network for an aggregate of up to approximately
$29.8 million.

On September of 2000 the Company completed and delivered to
Global Crossing the portion of the Trans-Andean Crossing System
connecting Las Toninas, Argentina and Santiago, Chile. In
connection with the delivery, the Company recognized revenues
and costs totaling $32.3 million and $18.1 million,
respectively.

IRU Agreements The Company has entered
into several framework agreements granting IRUs of up to
25 years on the Companys broadband network, including
network maintenance services and telehousing space. The Company
has received approximately $18.9 million during the nine
months ended September 30,

F-30



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##### Table of Contents



IMPSAT S.A.




NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS  (Continued)


2001 related to these agreements. These advance payments are
recorded as deferred revenue in the accompanying balance sheet.

6.  PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at December 31 and
September 30 consists of:

|                                        |       |              |          |               |  |   |          |         | 
|--------------------------------------- | ----- | ------------ | -------- | ------------- |  | - | -------- | ------- | 
|                                        |       | December 31, |          | September 30,
|                                        |       | 2000         |          | 2001         
|                                        |       |              |          |              
|Land                                    |       | $            | 3,160    |               |  | $ | 3,106    |        
|                                       
|                                       
|                                       
|                                       
|Building and improvements               |       |              | 37,369   |               |  |   | 51,959   |        
|                                       
|                                       
|                                       
|                                       
|Operating communications equipment      |       |              | 224,293  |               |  |   | 238,044  |        
|                                       
|                                       
|                                       
|                                       
|Furniture, fixtures and other equipment |       |              | 16,594   |               |  |   | 25,016   |        
|                                        |       |              |          |               |  |   |          |        
|                                        | Total |              |          | 281,416       |  |   |          | 318,125 | 
|                                       
|                                       
|                                       
|                                       
|Less: accumulated depreciation          |       |              | (131,378 | )             |  |   | (151,703 | )      
|                                       
|                                       
|                                       
|                                       
|reserve for
	impairment                 |       |              |          |               |  |   | (52,228  | )      
|                                        |       |              |          |               |  |   |          |        
|                                        | Total |              |          | 150,038       |  |   |          | 114,194 | 
|                                       
|                                       
|                                       
|                                       
|Equipment in transit                    |       |              | 12,928   |               |  |   | 5,526    |        
|                                       
|                                       
|                                       
|                                       
|Works in process                        |       |              | 788      |               |  |   | 408      |        
|                                        |       |              |          |               |  |   |          |        
|Property, plant and equipment, net      |       | $            | 163,754  |               |  | $ | 120,128  |        
|                                        |       |              |          |               |  |   |          |        

The recap of accumulated depreciation for the year ended
December 31, 2000 and for the nine months ended
September 30, 2001, is as follows:

|                          |  |              |         |               |  |   |         |  
|------------------------- |  | ------------ | ------- | ------------- |  | - | ------- | -
|                          |  | December 31, |         | September 30,
|                          |  | 2000         |         | 2001         
|                          |  |              |         |              
|Beginning balance         |  | $            | 105,801 |               |  | $ | 131,378 |  
|                         
|                         
|                         
|                         
|Depreciation expense      |  |              | 35,850  |               |  |   | 23,509  |  
|                         
|                         
|                         
|                         
|Disposals and retirements |  |              | (10,273 | )             |  |   | (3,184  | )
|                          |  |              |         |               |  |   |         |  
|Ending balance            |  | $            | 131,378 |               |  | $ | 151,703 |  
|                          |  |              |         |               |  |   |         |  

7.  INVESTMENTS

The Companys investments at December 31 and
September 30 consist of:

|                                                                                   |       |              |       |               |  |   |       |        | 
|---------------------------------------------------------------------------------- | ----- | ------------ | ----- | ------------- |  | - | ----- | ------ | 
|                                                                                   |       | December 31, |       | September 30,
|                                                                                   |       | 2000         |       | 2001         
|                                                                                   |       |              |       |              
|Investment, at cost                                                                |       | $            | 7,925 |               |  | $ | 8,231 |       
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Investment in common stock, at fair value New
	Skies Satellites N.V. ($2,748 cost) |       |              | 3,904 |               |  |   | 2,764 |       
|                                                                                   |       |              |       |               |  |   |       |       
|                                                                                   | Total |              | $     | 11,829        |  |   | $     | 10,995 | 
|                                                                                   |       |              |       |               |  |   |       |       

The Companys cost basis investment represents a less than
1% ownership in an unaffiliated entity established for the
purchase and leasing of satellite capacity time. During
October 2001, the Company sold this investment for
approximately $8 million. The Companys investment in
common stock is subject to equity price risk. The Company has
not taken any actions to hedge this market risk exposure.

F-31



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##### Table of Contents



IMPSAT S.A.




NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS  (Continued)


8.  SHORT-TERM DEBT

As of December 31, 2000 the Companys short-term debt
consisted of short-term credit facilities, denominated in U.S.
dollars with interest rates ranging from 11% to 17% and the
amount outstanding under these credit facilities totaled
approximately $8.9 million. As of September 30, 2001
these credit facilities were canceled.

9.  LONG-TERM DEBT

The Companys long-term debt at December 31 and
September 30, is detailed as follows:

|                                                                                                                      |                      |              |         |               |  |   |         |         | 
|--------------------------------------------------------------------------------------------------------------------- | -------------------- | ------------ | ------- | ------------- |  | - | ------- | ------- | 
|                                                                                                                      |                      | December 31, |         | September 30,
|                                                                                                                      |                      | 2000         |         | 2001         
|                                                                                                                      |                      |              |         |              
|Term notes payable, maturing from 2001 through
	2004, collateralized by certain assets; denominated in U.S.
	dollars: |                      | $            | 1,861   |               |  | $ | 782     |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Eximbank notes payable (4.23%  7.81%),
	maturing semiannually through 200l and 2004                                  |                      |              | 11,359  |               |  |   | 13,964  |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Vendor financing (5.21%  12.5%), due
	2006                                                                           |                      |              | 129,791 |               |  |   | 150,390 |        
|                                                                                                                      |                      |              |         |               |  |   |         |        
|                                                                                                                      | Total long-term debt |              |         | 143,011       |  |   |         | 165,136 | 
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Less: current portion                                                                                                 |                      |              | (15,385 | )             |  |   | (31,070 | )      
|                                                                                                                      |                      |              |         |               |  |   |         |        
|Long-term debt, net                                                                                                   |                      | $            | 127,626 |               |  | $ | 134,066 |        
|                                                                                                                      |                      |              |         |               |  |   |         |        

The Companys liquidity difficulties described in
Note 1 have led to non-compliance with certain covenant
requirements and payment provisions under the Broadband Network
Vendor Financing Agreements. On October 25, 2001, the
Company obtained a waiver of covenant defaults and an extension
from these lenders from scheduled principal and interest
payments under the Broadband Network Vendor Financing Agreements
totaling approximately $18.4 million that were due on that
date. The waiver is valid through November 25, 2001. There
can be no assurance that these lenders will be willing to extend
any forbearance period beyond November 25, 2001. In the
absence of such an extension of the forbearance period, it is
unlikely that the Company will be able to comply with its
obligations to make the scheduled payments. In such an event,
the lenders could demand that all amounts outstanding under such
agreements, including accrued interest, become immediately due
and payable. As of September 30, 2001, the Companys
outstanding balance under the Broadband Network Vendor Financing
Agreements totaled approximately $136.3 million. A demand
for immediate payment of such outstanding amounts, if such
demand were not rescinded, annulled or otherwise timely cured,
would constitute an event of default, and could result in a
payment acceleration of all outstanding amounts, under the
Parent Companys Senior Notes, which total
$650.0 million in the aggregate. In such an event, the
Parent Company would be forced to seek protection under the
United States Bankruptcy Code.

F-32



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##### Table of Contents



IMPSAT S.A.




NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS  (Continued)


10.  INCOME TAXES

The composition of the provision for income taxes, for the three
and nine months ended September 30, 2000 and 2001 is as
follows:

|         |       |               |      |               |   |      |   |      |  |   |        |        |   |   |        |        |  
|-------- | ----- | ------------- | ---- | ------------- | - | ---- | - | ---- |  | - | ------ | ------ | - | - | ------ | ------ | -
|         |       |               |      |              
|         |       | Three Months  |      | Nine Months  
|         |       | Ended         |      | Ended        
|         |       | September 30, |      | September 30,
|         |       |               |      |              
|         |       | 2000          |      | 2001          |   | 2000 |   | 2001
|         |       |               |      |               |   |      |   |     
|Current  |       | $             | (630 | )             |   |      |   |      |  | $ | (1,966 | )      |   |   |        |       
|        
|        
|        
|        
|Deferred |       |               |      |               |   |      |   |      |  |   |        |        |   | $ | (8,667 | )     
|         |       |               |      |               |   |      |   |      |  |   |        |        |   |   |        |       
|         | Total |               | $    | (630          | ) |      | $ | 0    |  |   | $      | (1,966 | ) |   | $      | (8,667 | )
|         |       |               |      |               |   |      |   |      |  |   |        |        |   |   |        |       

The statutory tax rate in Argentina is 35%. During the period
ended September 30, 2001, the Company recorded a valuation
allowance of approximately $7.4 million because it is not
clear that utilization of the tax benefits from operating losses
and other differences are more likely than not to be
realized, as required by SFAS 109.

11.  COMMITMENTS AND CONTINGENCIES

Commitments The Company leases
telecommunications links with annual rental commitments of
approximately $8.1 million through the year 2005. In
addition, the Company has commitments to purchase communications
and data center equipment amounting to approximately
$8.3 million at September 30, 2001.

Guarantees The Company is guarantor on the
$125 million 12 1/8% Senior Guaranteed Notes Due 2003
issued on July 30, 1996 by the Parent Company.

IMPSAT Brazil has entered into a $5.9 million term note
with El Camino Resources, which is guaranteed by the Company and
the Parent Company. At September 30, 2001, the balance
outstanding was approximately $3.2 million.

Litigation The Company is involved in or
subject to various litigation and legal proceedings incidental
to the normal conduct of its business. Whenever justified, the
Company expects to vigorously prosecute or defend such claims,
although there can be no assurance that the Company will
ultimately prevail with respect to any such matters.

In November 1996, the Company filed suit against a former
customer, ENCOTESA, for amounts due and arising under the
Companys contracts with ENCOTESA, the Argentine national
postal service for $7.3 million. The ultimate collectivity
of this matter continues to be negotiated for settlement,
however, the Company has valued this receivable at a net
realizable value of zero.

During June 2001, the Company and IMPSAT Brazil terminated
a series of contracts which they had signed in the first quarter
of 2001 with subsidiaries of 360 americas networks (Bermuda)
ltd. (collectively 360americas), a subsidiary of 360
networks, Inc. to construct and provide IRU dark fiber, capacity
services and conduit to 360americas over the Companys
Broadband Network in Argentina and Brazil, as a result of the
breach by 360americas of its payment obligation under those
contracts, including the new Argentina  Brazil link
that the Companies are currently constructing. Between March and
May 2001, the Company and IMPSAT Brazil made available
segments of the IRU desk fiber and capacity services to
360americas for acceptance, but 360 americas failed to make
certain payments as required by the contracts. 360amercias also
failed to make certain payments for collocation space in the
Companys and IMPSAT Brazils telehouses in Sao Paulo
and Rio de Janeiro, Brazil and Buenos Aires, Argentina, and
those contracts were terminated as

F-33



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##### Table of Contents



IMPSAT S.A.




NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS  (Continued)


well. The Parent Company has also more recently terminated a
contract with 360americas for collocation space in Caracas,
Venezuela, also for payment default by 360americas.

The Parent Company has commenced arbitration and litigation
proceedings against 360americas for damages under the terminated
contracts for the provision of IRU dark fiber and capacity
services, as contemplated by the relevant agreements.
360americas was not included in the series of bankruptcy and
insolvency filings made in the United State and Canada by its
parent, 360networks, Inc. and certain of its other affiliates.
360networks, Inc. has announced that it intends to seek a buyer
for its South American underseas fiber optic cable system, which
is owned by 360americas. The Parent Company intends to
aggressively pursue its remedies against 360americas, including
its claim for damages due under the terminated contracts, but is
unable to predict whether the Parent Company will prevail in any
such proceedings and, if so, whether 360americas would be able
to pay any arbitration or litigation award that might be entered
in favor of the Parent Company.

During the pendency of the arbitration and litigation
proceedings, the Company will continue to include as deferred
revenues on its condensed consolidated balance sheet the amount
received from 360americas as down payments under the terminated
contracts, after deducting amounts that were due and payable at
the time of the termination of the contracts. As of
September 30, 2001, the balance of such deferred revenue
was $8.0 million.

* * * * * *

F-34



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##### Table of Contents






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

Results of Operations

The following table summarizes our results of operations:

|                                                  |                                        |                                                             |                                  |                                 |        |         |       |      |      |       |          |     |        |        |        |     |      |       |         |        |         |         |       |      |      |       |          |        |         |         |        |     |      |       | 
|------------------------------------------------- | -------------------------------------- | ----------------------------------------------------------- | -------------------------------- | ------------------------------- | ------ | ------- | ----- | ---- | ---- | ----- | -------- | --- | ------ | ------ | ------ | --- | ---- | ----- | ------- | ------ | ------- | ------- | ----- | ---- | ---- | ----- | -------- | ------ | ------- | ------- | ------ | --- | ---- | ----- | 
|                                                  |                                        |                                                             |                                  |                                
|                                                  |                                        | Three Months Ended September 30,                            |                                  | Nine Months Ended September 30,
|                                                  |                                        |                                                             |                                  |                                
|                                                  |                                        |                                                             |                                  |                                 |        |         |       |     
|                                                  |                                        | 2000                                                        |                                  | 2001                            |        | 2000    |       | 2001
|                                                  |                                        |                                                             |                                  |                                 |        |         |       |     
|                                                  |                                        |                                                             |                                  |                                 |        |         |       |      |      |       |          |     |        |       
|                                                  |                                        |                                                            
|                                                  |                                        | (In thousands and as a percentage of consolidated revenues)
|                                                 
|                                                 
|                                                 
|                                                 
|Net revenues:                                     |                                        |                                                             |                                  |                                 |        |         |       |      |      |       |          |     |        |        |        |     |      |       |         |        |         |         |       |      |      |       |          |        |         |         |        |    
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Net revenues from services:            |                                                             |                                  |                                 |        |         |       |      |      |       |          |     |        |        |        |     |      |       |         |        |         |         |       |      |      |       |          |        |         |         |        |     |     
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                        | Data and value added services                               |                                  | $                               | 53,346 |         |       |      | 48.2 | %     |          | $   | 56,442 |        |        |     | 73.7 | %     |         | $      | 157,215 |         |       |      | 67.1 | %     |          | $      | 169,406 |         |        |     | 69.5 | %    
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                        | Telephony                                                   |                                  |                                 |       |         |       |      |     |       |          |     | 3,405  |        |        |     | 4.4  |       |         |        |        |         |       |      |     |       |          |        | 6,564   |         |        |     | 2.7  |      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                        | Internet                                                    |                                  |                                 | 9,556  |         |       |      | 8.6  |       |          |     | 11,612 |        |        |     | 15.2 |       |         |        | 24,229  |         |       |      | 10.3 |       |          |        | 34,458  |         |        |     | 14.1 |      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                        | Services to carriers                                        |                                  |                                 |       |         |       |      |     |       |          |     | 4,215  |        |        |     | 5.5  |       |         |        |        |         |       |      |     |       |          |        | 14,624  |         |        |     | 6.0  |      
|                                                  |                                        |                                                             |                                  |                                 |        |         |       |      |      |       |          |     |        |        |        |     |      |       |         |        |         |         |       |      |      |       |          |        |         |         |        |    
|                                                  |                                        |                                                             | Total net revenues from services |                                 |        | 62,902  |       |      |      | 56.8  |          |     |        | 75,674 |        |     |      | 98.8  |         |        |         | 181,444 |       |      |      | 77.5  |          |        |         | 225,052 |        |     |      | 92.3  | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Sales of equipment                     |                                                             |                                  | 4,697                           |        |         |       | 4.2  |      |       |          | 896 |        |        |        | 1.2 |      |       |         | 9,672  |         |         |       | 4.1  |      |       |          | 11,594 |         |         |        | 4.8 |     
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Broadband network development revenues |                                                             |                                  | 43,077                          |        |         |       | 38.9 |      |       |          |    |        |        |        |    |      |       |         | 43,077 |         |         |       | 18.4 |      |       |          | 7,197  |         |         |        | 3.0 |     
|                                                  |                                        |                                                             |                                  |                                 |        |         |       |      |      |       |          |     |        |        |        |     |      |       |         |        |         |         |       |      |      |       |          |        |         |         |        |    
|                                                  |                                        |                                                             | Total net revenues               |                                 |        | 110,676 |       |      |      | 100.0 |          |     |        | 76,570 |        |     |      | 100.0 |         |        |         | 234,193 |       |      |      | 100.0 |          |        |         | 243,843 |        |     |      | 100.0 | 
|                                                 
|                                                 
|                                                 
|                                                 
|Direct costs:                                     |                                        |                                                             |                                  |                                 |        |         |       |      |      |       |          |     |        |        |        |     |      |       |         |        |         |         |       |      |      |       |          |        |         |         |        |    
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                        | Contracted services                                         |                                  |                                 | 7,369  |         |       |      | 6.7  |       |          |     | 10,150 |        |        |     | 13.3 |       |         |        | 20,630  |         |       |      | 8.8  |       |          |        | 30,094  |         |        |     | 12.3 |      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                        | Other direct costs                                          |                                  |                                 | 3,901  |         |       |      | 3.5  |       |          |     | 7,653  |        |        |     | 10.0 |       |         |        | 14,887  |         |       |      | 6.4  |       |          |        | 20,816  |         |        |     | 8.5  |      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                        | Leased capacity                                             |                                  |                                 | 20,628 |         |       |      | 18.6 |       |          |     | 21,851 |        |        |     | 28.5 |       |         |        | 52,213  |         |       |      | 22.3 |       |          |        | 67,236  |         |        |     | 27.6 |      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                        | Broadband network costs                                     |                                  |                                 | 25,382 |         |       |      | 22.9 |       |          |     |       |        |        |     |     |       |         |        | 25,382  |         |       |      | 10.8 |       |          |        | 3,335   |         |        |     | 1.4  |      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                        | Cost of sold equipment                                      |                                  |                                 | 4,478  |         |       |      | 4.0  |       |          |     | 722    |        |        |     | 0.9  |       |         |        | 9,075   |         |       |      | 3.9  |       |          |        | 8,219   |         |        |     | 3.4  |      
|                                                  |                                        |                                                             |                                  |                                 |        |         |       |      |      |       |          |     |        |        |        |     |      |       |         |        |         |         |       |      |      |       |          |        |         |         |        |    
|                                                  |                                        |                                                             | Total direct costs               |                                 |        | 61,758  |       |      |      | 55.8  |          |     |        | 40,376 |        |     |      | 52.7  |         |        |         | 122,187 |       |      |      | 52.2  |          |        |         | 129,700 |        |     |      | 53.2  | 
|                                                 
|                                                 
|                                                 
|                                                 
|Salaries and wages                                |                                        |                                                             | 16,104                           |                                 |        |         | 14.6  |      |      |       | 20,835   |     |        |        | 27.2   |     |      |       | 46,274  |        |         |         | 19.8  |      |      |       | 64,932   |        |         |         | 26.6   |    
|                                                 
|                                                 
|                                                 
|                                                 
|Selling, general and administrative expenses      |                                        |                                                             | 13,805                           |                                 |        |         | 12.5  |      |      |       | 12,251   |     |        |        | 16.0   |     |      |       | 38,293  |        |         |         | 16.4  |      |      |       | 41,721   |        |         |         | 17.1   |    
|                                                 
|                                                 
|                                                 
|                                                 
|Depreciation and amortization                     |                                        |                                                             | 20,942                           |                                 |        |         | 18.9  |      |      |       | 32,888   |     |        |        | 43.0   |     |      |       | 61,751  |        |         |         | 26.4  |      |      |       | 92,566   |        |         |         | 38.0   |    
|                                                 
|                                                 
|                                                 
|                                                 
|Provision for asset impairment                    |                                        |                                                             |                                 |                                 |        |         |      |      |      |       | 234,625  |     |        |        | 306.4  |     |      |       |        |        |         |         |      |      |      |       | 234,625  |        |         |         | 96.2   |    
|                                                 
|                                                 
|                                                 
|                                                 
|Interest expense, net                             |                                        |                                                             | (22,198                          | )                               |        |         | (20.1 | )    |      |       | (34,055  | )   |        |        | (44.5  | )   |      |       | (59,536 | )      |         |         | (25.4 | )    |      |       | (96,185  | )      |         |         | (39.4  | )  
|                                                 
|                                                 
|                                                 
|                                                 
|Net loss on foreign exchange                      |                                        |                                                             | (2,294                           | )                               |        |         | (2.1  | )    |      |       | (26,132  | )   |        |        | (34.1  | )   |      |       | (1,490  | )      |         |         | (0.6  | )    |      |       | (50,282  | )      |         |         | (20.6  | )  
|                                                 
|                                                 
|                                                 
|                                                 
|Other (loss) income, net                          |                                        |                                                             | (397                             | )                               |        |         | (0.4  | )    |      |       | (19,848  | )   |        |        | (25.9  | )   |      |       | 2,087   |        |         |         | 0.9   |      |      |       | (19,700  | )      |         |         | (8.1   | )  
|                                                 
|                                                 
|                                                 
|                                                 
|Provision for (benefit from) foreign income taxes |                                        |                                                             | 162                              |                                 |        |         | 0.1   |      |      |       | 84       |     |        |        | 0.1    |     |      |       | (908    | )      |         |         | (0.4  | )    |      |       | (26,403  | )      |         |         | (10.8  | )  
|                                                 
|                                                 
|                                                 
|                                                 
|Net loss attributable to common stockholders      |                                        |                                                             | (26,660                          | )                               |        |         | 24.1  |      |      |       | (344,356 | )   |        |        | (449.7 | )   |      |       | (95,552 | )      |         |         | (40.8 | )    |      |       | (512,271 | )      |         |         | (210.1 | )  

Nine Months Ended September 30, 2001 Compared To Nine
Months Ended September 30, 2000

Revenues. Our total net revenues for the first nine
months of 2001 were composed of net revenues from services,
equipment sales revenues and Broadband Network development
revenues.

Our total net revenues for the three and nine months ended
September 30, 2001 were $76.6 million and
$243.8 million, a decrease of $34.1 million (or 30.8%)
and an increase of $9.7 million (or 4.1%) from total net
revenues for the same periods in 2000. The decrease in total
revenues for the three months ended September 30, 2001
reflects the recognition during the third quarter of 2000 of
$43.1 million in Broadband Network development revenues
upon our delivery to Global Crossing of certain
telecommunications infrastructure that we had contracted to
construct for Global Crossing in 1999.

Our total net revenues for the third quarter of 2001 were
approximately $2.0 million (or 2.5%) lower than net
revenues recorded during the second quarter of 2001. The decline
in total net revenues for the third quarter 2001 compared to the
second quarter of 2001 was due to a decrease in the third
quarter of equipment sales,

1



---



##### Table of Contents





Our net revenues from services for the three and nine months
ended September 30, 2001, totaled $75.7 million and
$225.1 million, increases of $12.8 million (or 20.3%)
and $43.6 million (or 24.0%) from net revenues from
services for the same periods in 2000. Net revenues from
services totaled $75.1 million for the three months ended
June 30, 2001. Our net revenues from services include net
revenues from:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | data and value added services, which include satellite and
	broadband data transmission services, systems integration and
	other information technology services and other value-added
	services                                                                                                                                                                                                    
|
| |  | telephony, including local, national and international
	long-distance services                                                                                                                                                                                                                                                                                                                      
|
| |  | Internet, which is composed of our Internet backbone access and
	managed modem services to ISPs and other telecommunications
	providers, and related collocation and web hosting services that
	we provide through our advanced hosting facilities, and                                                                                                                                             
|
| |  | carriers carrier services, which consist of our wholesale
	long-haul services to other telecommunications carriers
	(including revenue recognition from the sale of IRU capacity on
	our Broadband Network to, and our provision of switching and
	transportation of telecommunications traffic services for, such
	carriers), and related maintenance and collocation services to
	those carriers.

In addition to net revenues from services, our total net
revenues for the three and nine months ended September 30,
2001 included revenues from sales of equipment and Broadband
Network development revenues. Revenues from equipment sales for
the three and nine months ended September 30, 2001 totaled
$0.9 million and $11.6 million, respectively, a
$3.8 million (or 80.9%) decrease and a $1.9 million
(or 19.9%) increase from the same periods in 2000. Revenues from
Broadband Network development revenues for the three and nine
months ended September 30, 2001 totaled zero and
$7.2 million, respectively, compared to $43.1 million
of such revenues for each of the three and the nine months ended
September 30, 2000.

Our Broadband Network development revenues for the first three
quarters of 2000 related to our construction on behalf of
affiliates of Global Crossing Ltd. of certain terrestrial
segments connecting that companys fiber optic cable system
connecting South America with North America. Our Broadband
Network development revenues for the nine months ended
September 30, 2001 related to our construction of
additional backhaul segments for Global Crossings fiber
optic cable system and for a similar fiber optic cable system
that was being developed by 360networks, Inc. These revenues
were predominantly recorded during the first quarter of 2001
upon our delivery of the constructed segments to Global Crossing
and 360networks. These amounts in 2001 include a total of
$1.9 million recognized upon the delivery of certain
segments to 360networks for which payment of $0.4 million
has not been received to date. In June 2001, we terminated
a series of contracts that we had signed with 360networks due to
the latters payment default of its obligations under those
contracts to us. For a description of this matter, refer to
Legal Proceedings in Part II of this Quarterly
Report on Form 10-Q. The cancellation of our contracts with
360networks in June 2001 has resulted in lower
carriers carrier services revenues in Brazil during the
third quarter of 2001.

2



---



##### Table of Contents



The following table shows our revenues from services by
operating subsidiary for the periods indicated:

|                 |  |                                 |        |                                |  |             |        |      |  |      |        |             |  |   |        |  |  |   |        |  |  |  |       |  
|---------------- |  | ------------------------------- | ------ | ------------------------------ |  | ----------- | ------ | ---- |  | ---- | ------ | ----------- |  | - | ------ |  |  | - | ------ |  |  |  | ----- | -
|                 |  |                                 |        |                               
|                 |  | Three Months Ended September 30 |        | Nine Months Ended September 30
|                 |  |                                 |        |                               
|                 |  | 2000                            |        | 2001                           |  | % change(1) |        | 2000 |  | 2001 |        | % change(1)
|                 |  |                                 |        |                                |  |             |        |      |  |      |        |            
|                 |  |                                
|                 |  | dollar amounts in thousands    
|                
|                
|                
|                
|IMPSAT Argentina |  | $                               | 28,062 |                                |  | $           | 31,241 |      |  |      | 11.3   | %           |  | $ | 81,135 |  |  | $ | 91,121 |  |  |  | 12.3  | %
|                
|                
|                
|                
|IMPSAT Colombia  |  |                                 | 12,974 |                                |  |             | 15,472 |      |  |      | 19.3   |             |  |   | 40,084 |  |  |   | 46,229 |  |  |  | 15.3  |  
|                
|                
|                
|                
|IMPSAT Brazil    |  |                                 | 7,288  |                                |  |             | 9,657  |      |  |      | 32.5   |             |  |   | 18,501 |  |  |   | 30,766 |  |  |  | 66.3  |  
|                
|                
|                
|                
|IMPSAT Venezuela |  |                                 | 6,875  |                                |  |             | 8,054  |      |  |      | 17.1   |             |  |   | 20,862 |  |  |   | 23,387 |  |  |  | 12.1  |  
|                
|                
|                
|                
|IMPSAT Ecuador   |  |                                 | 3,564  |                                |  |             | 3,996  |      |  |      | 12.1   |             |  |   | 10,545 |  |  |   | 11,707 |  |  |  | 11.0  |  
|                
|                
|                
|                
|IMPSAT Mexico    |  |                                 | 1,014  |                                |  |             | 903    |      |  |      | (10.9  | )           |  |   | 2,697  |  |  |   | 3,053  |  |  |  | 13.2  |  
|                
|                
|                
|                
|IMPSAT Chile     |  |                                 | 406    |                                |  |             | 1,983  |      |  |      | 388.4  |             |  |   | 631    |  |  |   | 5,520  |  |  |  | 774.8 |  
|                
|                
|                
|                
|IMPSAT Peru      |  |                                 | 125    |                                |  |             | 1,782  |      |  |      | 1325.6 |             |  |   | 355    |  |  |   | 3,773  |  |  |  | 962.8 |  
|                
|                
|                
|                
|IMPSAT USA       |  |                                 | 7,157  |                                |  |             | 9,066  |      |  |      | 26.7   |             |  |   | 18,893 |  |  |   | 27,714 |  |  |  | 46.7  |  
|                
|                
|                
|                
|Other            |  |                                 |       |                                |  |             |       |      |  |      |       |             |  |   | 144    |  |  |   | 100    |  |  |  | (30.6 | )




|    |                                                                                         
|--- | ----------------------------------------------------------------------------------------
|(1) | Increase (decrease) in relevant period in 2001 compared to
	corresponding period in 2000

Growth in our net revenues from services resulted primarily from
broadband, telephony and Internet services and from services to
carriers. The growth in our net revenues from services has been
adversely impacted during the prior two quarters by the
continued adverse economic conditions in our most important
markets in Argentina and Brazil. Argentina, which is in the
midst of a four-year recession, is our largest market. Brazil,
where we commenced operations in 1998, has been adversely
affected by the economic difficulties faced by its neighbor
Argentina and has experienced a significant devaluation of its
currency against the U.S. dollar during the three and nine
months ended September 30, 2001. The Argentine Government
has recently announced plans to effect a restructuring of its
external public indebtedness held by both domestic and foreign
creditors. We do not expect any improvement in the overall
macroeconomic situation in Argentina or Brazil in the near term.

Our revenues from satellite services during the three and nine
months ending September 30, 2001 declined in comparison to
the corresponding periods in 2000 due to lower satellite-based
services volume as we transferred telecommunications services to
our Broadband Network, downward pressure on our prices because
of competition and adverse economic conditions and to a limited
number of customer cancellations or non-renewals. The following
table shows our revenues from services by business lines (after
elimination of intercompany transactions) for the periods
indicated:

|                               |           |                                  |       |                                 |        |             |        |        |        |      |      |             |      |  |        |         |         |  |        |         |         |  |      |       |      | 
|------------------------------ | --------- | -------------------------------- | ----- | ------------------------------- | ------ | ----------- | ------ | ------ | ------ | ---- | ---- | ----------- | ---- |  | ------ | ------- | ------- |  | ------ | ------- | ------- |  | ---- | ----- | ---- | 
|                               |           |                                  |       |                                
|                               |           | Three Months Ended September 30, |       | Nine Months Ended September 30,
|                               |           |                                  |       |                                
|                               |           | 2000                             |       | 2001                            |        | % change(1) |        | 2000   |        | 2001 |      | % change(1)
|                               |           |                                  |       |                                 |        |             |        |        |        |      |      |            
|                               |           |                                 
|                               |           | (dollar amounts in thousands)   
|                              
|                              
|                              
|                              
|Data and value added services: |           |                                  |       |                                 |        |             |        |        |        |      |      |             |      |  |        |         |         |  |        |         |         |  |      |      
|                              
|                              
|                              
|                              
|                               | Broadband |                                  | $     | 13,278                          |        |             | $      | 21,955 |        |      |      | 65.3        | %    |  | $      | 35,900  |         |  | $      | 60,683  |         |  |      | 69.0  | %   
|                              
|                              
|                              
|                              
|                               | Satellite |                                  |       | 39,397                          |        |             |        | 32,122 |        |      |      | (18.5       | )    |  |        | 119,640 |         |  |        | 104,092 |         |  |      | (13.0 | )   
|                              
|                              
|                              
|                              
|                               | Other     |                                  |       | 671                             |        |             |        | 2,365  |        |      |      | 252.5       |      |  |        | 1,675   |         |  |        | 4,631   |         |  |      | 176.5 |     
|                               |           |                                  |       |                                 |        |             |        |        |        |      |      |             |      |  |        |         |         |  |        |         |         |  |      |      
|                               |           | Total                            |       |                                 | 53,346 |             |        |        | 56,442 |      |      |             | 5.8  |  |        |         | 157,215 |  |        |         | 169,406 |  |      |       | 7.8  | 
|                              
|                              
|                              
|                              
|Telephony                      |           |                                  |       |                                 |        |             | 3,405  |        |        |      |     |             |      |  |        |         |         |  | 6,564  |         |         |  |     |      
|                              
|                              
|                              
|                              
|Internet                       |           |                                  | 9,556 |                                 |        |             | 11,612 |        |        |      | 21.5 |             |      |  | 24,229 |         |         |  | 34,458 |         |         |  | 42.2 |      
|                              
|                              
|                              
|                              
|Services to carriers           |           |                                  |      |                                 |        |             | 4,215  |        |        |      |     |             |      |  |       |         |         |  | 14,624 |         |         |  |     |      
|                               |           |                                  |       |                                 |        |             |        |        |        |      |      |             |      |  |        |         |         |  |        |         |         |  |      |      
|                               |           | Total net revenues from services |       | $                               | 62,902 |             |        | $      | 75,674 |      |      |             | 20.3 |  |        | $       | 181,444 |  |        | $       | 225,052 |  |      |       | 24.0 | 
|                               |           |                                  |       |                                 |        |             |        |        |        |      |      |             |      |  |        |         |         |  |        |         |         |  |      |      




|    |                                                                                          
|--- | -----------------------------------------------------------------------------------------
|(1) | Increase (decrease) in relevant period in 2001 compared to
	corresponding period in 2000.

Our revenue from services growth for the first nine months of
2001 as compared to the prior years corresponding period
was achieved principally because of an overall increase in the
number of customers and

3



---



##### Table of Contents





The following table shows the evolution of our customer base for
the periods indicated:

|                 |       |                     |       |             |  |               |       |       |  |  |       |       |  |  |       |      |  |  |      |      |  
|---------------- | ----- | ------------------- | ----- | ----------- |  | ------------- | ----- | ----- |  |  | ----- | ----- |  |  | ----- | ---- |  |  | ---- | ---- | -
|                 |       | September 30,       |       | June 30,    |  | September 30, |       |       |  | 
|                 |       | 2000                |       | 2001        |  | 2001          |       |       |  | 
|                 |       |                     |       |             |  |               |       |       |  | 
|                 |       |                     |       |             |  |              
|                 |       | number of customers |       | % change(1) |  | % change(2)  
|                 |       |                     |       |             |  |              
|IMPSAT Argentina |       |                     | 1,024 |             |  |               | 1,202 |       |  |  | 1,162 |       |  |  | 13.5  | %    |  |  | (3.3 | )%  
|                
|                
|                
|                
|IMPSAT Colombia  |       |                     | 651   |             |  |               | 782   |       |  |  | 746   |       |  |  | 14.6  |      |  |  | (4.6 | )   
|                
|                
|                
|                
|IMPSAT Brazil    |       |                     | 168   |             |  |               | 360   |       |  |  | 378   |       |  |  | 125.0 |      |  |  | 5.0  |     
|                
|                
|                
|                
|IMPSAT Venezuela |       |                     | 225   |             |  |               | 288   |       |  |  | 291   |       |  |  | 29.3  |      |  |  | 1.0  |     
|                
|                
|                
|                
|IMPSAT Ecuador   |       |                     | 196   |             |  |               | 253   |       |  |  | 259   |       |  |  | 32.1  |      |  |  | 2.4  |     
|                
|                
|                
|                
|IMPSAT Mexico    |       |                     | 42    |             |  |               | 53    |       |  |  | 56    |       |  |  | 33.3  |      |  |  | 5.7  |     
|                
|                
|                
|                
|IMPSAT Chile     |       |                     | 9     |             |  |               | 33    |       |  |  | 49    |       |  |  | 444.4 |      |  |  | 48.5 |     
|                
|                
|                
|                
|IMPSAT Peru      |       |                     | 30    |             |  |               | 35    |       |  |  | 33    |       |  |  | 10.0  |      |  |  | (5.7 | )   
|                
|                
|                
|                
|IMPSAT USA       |       |                     | 57    |             |  |               | 73    |       |  |  | 73    |       |  |  | 28.1  |      |  |  | 0.0  |     
|                 |       |                     |       |             |  |               |       |       |  |  |       |       |  |  |       |      |  |  |      |     
|                 | Total |                     |       | 2,402       |  |               |       | 3,079 |  |  |       | 3,047 |  |  |       | 26.9 |  |  |      | (1.0 | )
|                 |       |                     |       |             |  |               |       |       |  |  |       |       |  |  |       |      |  |  |      |     




|    |                                                                         
|--- | ------------------------------------------------------------------------
|(1) | Increase as of September 30, 2001 compared to
	September 30, 2000.      
|   
|(2) | Increase (decrease) as of September 30, 2001 compared
	to June 30, 2001.

In the three months ended September 30, 2001, we lost a net
total of 32 customers, a decrease of 1.0% from the period ended
June 30, 2001, due to the adverse economic conditions in
our principal markets during the first nine months of 2001.
These conditions were most pronounced in Argentina, where we
lost a net total of 40 customers during the third quarter of
2001. In addition, the economic recessions experienced in
Argentina and Brazil have led us to reduce our customer
expansion efforts in the small and medium customer segments as
these customers have declined to commit to increased
expenditures for their telecommunications needs pending their
own assessments as to the expected length and severity of the
current economic crises.

Our net revenues at IMPSAT Argentina for the third quarter and
first nine months of 2001 totaled $32.1 million and
$96.0 million, a decrease of $32.7 million (or 50.5%)
and $26.3 million (or 21.5%) from the same periods in 2000.
The decrease in revenues as compared to the corresponding
periods in 2000 relates to our recognition in the third quarter
of 2000 of $32.3 million in Broadband Network development
revenues upon delivery of telecommunications infrastructure to
Global Crossing. Excluding Broadband Network development
revenues and other equipment sales revenues, IMPSAT
Argentinas net revenues from services for the three and
nine months ended September 30, 2001 totaled
$31.2 million and $91.1 million, an increase of
$3.2 million (or 11.3%) and $10.0 million (or 12.3%)
from the same periods in 2000.

IMPSAT Argentinas revenue growth during the first nine
months of 2001 has been adversely affected by the continued
recession in Argentina. These difficulties became more
pronounced during the second and third quarters of 2001 than in
previous periods as questions concerning the ability of the
Argentine Government to remain current in its external debt
payments led to a decline in commercial confidence and activity
and an increase in the cost of financing for Argentine
companies. While the introduction of the Broadband Network in
the fourth quarter of 2000 has enabled us to expand our range of
services and attract additional sources of revenue, the ongoing
severe economic downturn in Argentina has adversely affected
many of our customers in that country and caused a small number
of them to terminate their contracts with us, fail to renew
their contracts, or reduce the amount of services contracted. We
do not expect any significant improvement in the Argentine
economy for the remainder of 2001 and believe that any continued
decline in the Argentine economy could have an adverse effect on
our revenues in Argentina. The Argentine Government has recently
announced an intention to renegotiate on a voluntary basis its
external public indebtedness and has stated that it will take
additional steps to reduce its expenditures and balance its
budget. A prolonged political or economic crisis in Argentina,
our largest country of operation, could be expected to have an
adverse effect on

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IMPSAT Brazils results have been affected by the adverse
economic situation in Brazil, including the devaluation of the
Brazilian real against the U.S. dollar. As of
September 30, 2001, the real had devalued against
the U.S. dollar by 15.9% and 36.6%, compared to the exchange
rate as of June 30, 2001 and December 31, 2000. The
devaluation of the real caused IMPSAT Brazils net
revenues in U.S. dollar terms to be lower than expected. In
local currency terms, IMPSAT Brazils third quarter 2001
revenues from services decreased by 7.2% as compared to the
second quarter of 2001. At December 31, 2000, the real
traded at a rate of R$1.95 = $1.00. At September 30, 2001,
the real traded at a rate of 2.67 = $1.00. See
 Net (Loss) Gain on Foreign Exchange and
Item 3. Quantitative and Qualitative Disclosures
About Market Risk. The devaluation of the real and
the decline in growth in the Brazilian economy have been caused
in part by the continued recession in Argentina, a key trading
partner of Brazil, an energy crisis and rationing brought about
by a continued period of drought that has affected Brazils
hydroelectric generating capacity, a general aversion to
emerging markets by foreign direct and financial investors and
the overall decline in worldwide economic production. Unlike the
other countries in which we operate, pursuant to Brazilian law
our contracts for services in Brazil must be denominated in
reais and may not be indexed or linked to the exchange
rate between the real and the U.S. dollar, although they
generally may include provision for inflation adjustments. As a
result, continued devaluation of the real against the
U.S. dollar would adversely affect our revenues from Brazil.

In Colombia, after a period of declining revenues throughout
2000 due to the general deterioration in the Colombian economy,
we recorded an increase in revenues during the first nine months
of 2001 of 16.5% over the same period in 2000. We expect that
our revenues in Colombia will stabilize at current levels
throughout the remainder of 2001 and during 2002.

Our operations in the United States showed improved results.
IMPSAT USAs revenues totaled $9.1 million and
$27.8 million for the three and nine months ended
September 30, 2001, an increase of $1.9 million (or
26.9%) and $8.9 million (or 47.0%) as compared to the same
periods in 2000. This is primarily a result of increased network
services and Internet backbone access services to multinational
corporations with operations in Latin America.

Direct Costs. Our direct costs for the three and nine
months ended September 30, 2001 totaled $40.4 million
and $129.7 million, a decrease of $21.4 million (or
34.6%) and an increase of $7.5 million (or 6.1%), compared
to the same periods in 2000. The decrease in direct costs for
the three months ended September 30, 2001 as compared to
the corresponding period in 2000 relates to Broadband Network
development costs and costs of sold equipment incurred during
the third quarter of 2000.

Of our total direct costs for the three and nine months ended
September 30, 2001, $20.5 million and
$58.6 million related to the operations of IMPSAT
Argentina. This compares to $36.5 million and
$66.0 million at IMPSAT Argentina for the same periods in
2000. Direct costs for IMPSAT Brazil totaled $25.9 million
for the first nine months of 2001, compared to
$17.5 million for the corresponding period in 2000.

Excluding direct costs related to Broadband Network development
and costs of sold equipment, our total direct costs for the
three and nine months ended September 30, 2001 totaled
$39.7 million and $118.1 million, an increase of
$7.8 million (or 24.3%) and $30.4 million (or 34.7%),
compared to the same periods in 2000. Direct costs for the
second quarter of 2001, excluding Broadband Network development
costs and costs of sold equipment, were $39.7 million.
Excluding direct costs relating to the Broadband Network
development and costs of sold equipment, for the third quarter
and first nine months of 2001, $19.7 million and
$54.4 million of our direct costs related to the operations
of IMPSAT Argentina, and $7.2 million and
$23.9 million related to the operations of IMPSAT Brazil.
This compares to $14.2 million and $39.4 million at
IMPSAT Argentina and $6.7 million and $17.2 million at
IMPSAT Brazil for the same periods in 2000.

Direct costs of our subsidiaries are described prior to the
elimination of intercompany transactions.

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(1) Contracted Services. Contracted services costs
include costs of maintenance and installation (and
de-installation) services provided by outside contractors.
During the three and nine months ended September 30, 2001,
our contracted services costs totaled $10.2 million and
$30.1 million, an increase of $2.8 million (or 37.7%)
and $9.5 million (or 45.9%) from the same periods in 2000.
Of this amount, maintenance costs for our telecommunications
network infrastructure, including the Broadband Network, totaled
$6.7 million and $19.5 million for the three and nine
months ended September 30, 2001, compared to
$4.7 million and $12.0 million during the same periods
in 2000. Our maintenance costs increased because we had more
infrastructure, including the Broadband Network. Installation
costs totaled $3.4 million and $10.6 million for the
three and nine months ended September 30, 2001, compared to
$2.7 million and $8.6 million for the same periods in
2000.

(2) Other Direct Costs. Other direct costs
principally include licenses and other fees; sales commissions
paid to third-party sales representatives; and our provision for
doubtful accounts.

Sales commissions paid to third-party sales representatives for
the three and nine months ended September 30, 2001 totaled
$2.1 million and $6.0 million, compared to
$2.1 million and $6.2 million for the corresponding
periods in 2000. The majority of these commissions related to
customers of IMPSAT Argentina.

We recorded a net provision for doubtful accounts of
$2.7 million and $6.9 million for the three and nine
months ended September 30, 2001, compared to a net recovery
totaling $0.2 million (because during the third quarter of
2000, we obtained payment of certain past due receivables in
Argentina and Colombia) and a net provision of $2.9 million
for the same periods in the previous year. At September 30,
2001, approximately 31.9% of our gross trade accounts receivable
were past due more than six months compared to 29.0% for the
same period in 2000. At the same date, our allowance for
doubtful accounts covered approximately 70.5% of our gross trade
accounts receivable past due more than six months. The average
days in quarterly gross trade accounts receivable increased from
108 at June 30, 2001 to 111 at September 30, 2001. At
September 30, 2000, average days of gross trade accounts
receivable equaled 73.

Our provision for doubtful accounts during the third quarter of
2001 does not provide for any impact that the zero
deficit law passed by the Government of Argentina in
July 2001 might have on our public sector customers in
Argentina. We have maintained our general provisioning policy,
which calls for a provision of 100% of all amounts past due
180 days or more unless we have specific reasons to expect
that payment will be received from a delinquent client, in
respect of our accounts receivable from our Argentine public
sector customers. Absent future developments, we intend to
continue this provisioning policy in respect of such accounts.
See Government of Argentina Zero Deficit Law; Public
Service Customers for a description of our Argentine
public sector accounts receivable and the treatment that has
been applied to certain of those receivables.

(3) Leased Capacity. Our leased capacity costs for
the three and nine months ended September 30, 2001 totaled
$21.9 million and $67.2 million, which represented an
increase of $1.2 million (or 5.9%) and $15.0 million
(or 28.8%) from the corresponding periods in 2000. Our leased
capacity costs for the three months ended September 30,
2001, declined by $1.6 million (or 6.8%) compared to such
costs for the three months ended June 30, 2001.

Our leased capacity costs for satellite capacity for the three
and nine months ended September 30, 2001 totaled
$10.2 million and $30.9 million, a decrease of
$0.4 million (or 4.2%) and an increase of $2.8 million
(or 9.9%), from the corresponding periods in 2000. Leased
satellite capacity costs declined in Argentina during the third
quarter of 2001 as compared to the same period in 2000, in part
due to our transitioning customers from satellite-based
solutions onto the Broadband Network. Our satellite capacity
costs increased principally in Venezuela and the United States,
where we increased our satellite capacity to satisfy customer
needs. Certain of our satellite capacity leases are scheduled to
terminate during the last quarter of 2001. We anticipate that we
may renew or replace these terminated contracts. We had
approximately 908 MHz of leased satellite capacity at
September 30, 2001 and 1,099 MHz at September 30, 2000.

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Our costs for dedicated leased capacity on third-party fiber
optic networks totaled $27.7 million for the first nine
months of 2001, an increase of $6.1 million (or 28.2%) from
the corresponding period in 2000. These costs were incurred
principally in Argentina, Brazil and the United States. Prior to
the implementation of our Broadband Network, we incurred these
higher costs of leased fiber optic capacity in Argentina and
Brazil due to the continued demand by our customers in those
countries for greater bandwidth and, in the United States, due
to the expansion of our Internet service offerings where we
provide a link between Latin America and the U.S. Internet
backbone. Although we are transferring increasing amounts of our
telecommunications traffic to the Broadband Network as we
migrate our customers to our Broadband Network, we will continue
to require leased capacity to provide telecommunications
services to clients with facilities outside of the footprint of
our Broadband Network in order to provide end-to-end
telecommunications services. We believe that our leased fiber
optic capacity costs will decrease slightly during the remainder
of 2001 and for 2002.

In connection with certain new services which we are offering as
a result of the implementation of our Broadband Network and the
effectiveness of our license in Argentina to provide domestic
and international long distance services, we also incur costs
for interconnection and telephony termination costs and
frequency rights. These costs totaled $2.9 million and
$8.6 million during the three and nine months ended
September 30, 2001 as compared to $0.8 million and
$2.4 million for the same periods in 2000.

(4) Costs of Equipment Sold and Broadband Network
Development. In the three and nine months ended
September 30, 2001, we incurred costs of equipment sold of
$0.7 million and $8.2 million, compared to costs of
equipment sold of $4.5 million and $9.1 million for
the corresponding periods in 2000. During these same periods in
2001, we incurred Broadband Network development costs of zero
and $3.3 million, compared to $25.4 million in each of
the corresponding periods in 2000.

Salaries and Wages. Salaries and wages for the three and
nine months ended September 30, 2001 totaled
$20.8 million and $64.9 million, an increase of
$4.7 million (or 29.4%) and $18.7 million (or 40.3%),
from the same periods in 2000. Salaries and wages for the third
quarter of 2001 declined by $1.1 million as compared to
such costs in the second quarter of 2001.

IMPSAT Argentina incurred salaries and wages for the three and
nine months ended September 30, 2001 totaling
$9.6 million and $27.7 million, an increase of
$2.8 million (or 40.4%) and $8.2 million (or 41.7%)
over the same periods in 2000. IMPSAT Argentina had 349
employees as of September 30, 2001 as compared to 463
employees as of September 30, 2000. During the third
quarter of 2001, IMPSAT Argentina decreased its workforce by a
net total of 74 persons. IMPSAT Brazil incurred salaries and
wages for the three and nine months ended September 30,
2001 of $3.5 million and $12.8 million, a decrease of
$0.1 million (or 2.2%) and an increase of $4.8 million
(or 59.9%) over the same periods in 2000. IMPSAT Brazil
decreased its number of employees to 339 persons at
September 30, 2001, compared to 390 persons at
September 30, 2000 and 387 persons at June 30, 2001.
In addition to our reduced employee headcount, the decrease in
salaries and wages at IMPSAT Brazil is in part related to the
devaluation of the realagainst the U.S. dollar, which
resulted in a decrease in U.S. dollar terms of our salaries and
wages expense in Brazil.

As a result of the adverse economic conditions experienced in
Argentina, Brazil and elsewhere in Latin America and as part of
cost-control measures implemented by management following the
end of the first quarter of 2001, we have decreased the total
net number of employees by 189 people compared to our employee
headcount at the end of the second quarter of 2001. Our number
of employees fell from 1,611 at September 30, 2000 to 1,401
at September 30, 2001. In connection with these layoffs,
our salaries and wages for the third quarter of 2001 include
one-time severance payments totaling approximately
$2.3 million, of which severance payments at IMPSAT
Argentina totaled $1.6 million. Management expects that the
reduction in headcount will result in savings of approximately
$0.9 million per month during the remainder of 2001.
Management expects to continue to monitor the size of its total
workforce and to make appropriate adjustments as required by
financial and competitive circumstances.

Selling, General and Administrative Expenses. Our
SG&A expenses consist principally of:



| |   |                                         
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| |  | publicity and promotion costs           
|
| |  | professional fees and other remuneration

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| |   |                                              
| | - | ---------------------------------------------
| |  | travel and entertainment                     
|
| |  | rent                                         
|
| |  | plant services, telephone and energy expenses

We incurred SG&A expenses of $12.3 million and
$41.7 million for the three and nine months ended
September 30, 2001. These SG&A expenses represented a
decrease of $1.6 million (or 11.3%) and an increase of
$3.4 million (or 9.0%), from the three and nine months
ended September 30, 2000. Our SG&A expenses for the
third quarter of 2001 declined by $2.5 million (or 17.1%)
as compared to the second quarter of 2001, due, in part, to a
decrease in our publicity and promotion costs and to the
positive effects of the devaluation of the real against
the U.S. dollar, which decreased the dollar value of our
SG&A expenses incurred in Brazil. SG&A expenses at
IMPSAT Argentina for the three and nine months ended
September 30, 2001 totaled $4.6 million and
$15.6 million, decreases of $0.8 million (or 14.2%)
and $2.3 million (or 13.0%), from SG&A expenses
incurred by IMPSAT Argentina for the three and nine months ended
September 30, 2000. Management intends to take efforts
throughout the remainder of 2001 to further control or reduce
SG&A expenses.

Depreciation and Amortization. Our depreciation and
amortization expenses for the three and nine months ended
September 30, 2001 totaled $32.9 million and
$92.6 million. This represents an increase of
$11.9 million (or 57.0%) and $30.8 million (or 49.9%),
compared to our depreciation and amortization for the three and
nine months ended September 30, 2000. The increase in our
depreciation and amortization expense reflects the continued
growth in our asset base. We expect these expenses to increase
in future periods.

Depreciation and amortization for IMPSAT Argentina for the three
and nine months ended September 30, 2001, totaled
$15.0 million and $40.8 million. This represents an
increase of $6.1 million (or 68.3%) and $14.4 million
(or 54.8%), compared to IMPSAT Argentinas depreciation and
amortization for the three and nine months ended
September 30, 2000.

Provision for Asset Impairment. During the three months
ended September 30, 2001, in connection with the
Companys ongoing review of its business plan, cash flow
and liquidity position, and the economic environment in Latin
America, the Company determined that its long-lived assets
primarily related to its telecommunication infrastructure were
likely impaired. The Company calculated the present value of
expected cash flows of its operating subsidiaries to determine
the fair value of its telecommunication infrastructure.
Accordingly, in the three months ended September 30, 2001,
the Company recorded a non-cash impairment charge of
$234.6 million. This charge included approximately
$98.3 million for IMPSAT Argentina, $24.7 million for
IMPSAT Brazil and $28.9 million for all other countries. In
addition, the charge also included approximately
$82.7 million for a write-down of the value of goodwill
generated by the acquisition of certain minority interest in the
operating subsidiaries. The Company recorded this impairment
reserve based on internal estimates of fair value and not
independent valuations of its telecommunication infrastructure.
The Company will engage a third party asset valuation firm to
conduct such an appraisal during the fourth quarter of 2001. The
impairment reserve recorded will be adjusted and allocated to
specific assets based on the results of such appraisal.

Interest Expense, Net. Our net interest expense for the
three months ended September 30, 2001 totaled
$34.1 million, consisting of interest expense of
$35.8 million and interest income of $1.7 million. Our
net interest expense for the nine months ended
September 30, 2001 totaled $96.2 million, consisting
of interest expense of $106.0 million and interest income
of $9.8 million. At September 30, 2001, we had cash,
cash equivalents and other short-term trading investments of
$81.1 million. Our net interest expense increased
$11.9 million (or 53.4%) and $36.6 million (or 61.6%)
for the three and nine months ended September 30, 2001 from
net interest expense for the same periods in 2000. Our interest
income has declined as we have utilized our cash and trading
investments in connection with our capital expenditures and
general corporate purposes.

For the three and nine months ended September 30, 2001
IMPSAT Argentinas net interest expense totaled
$5.3 million and $16.0 million, compared to $2.7
million and $7.9 million for the corresponding periods in
2000.

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Our total indebtedness as of September 30, 2001 was
$992.3 million as compared to $899.2 million as of
September 30, 2000. As of September 30, 2001, total
outstanding indebtedness at IMPSAT Argentina totaled
$165.8 million ($165.1 million after eliminating
intercompany items), compared to $135.3 million
($120.5 million after eliminating intercompany items) as of
September 30, 2000.

Net Loss on Foreign Exchange. We recorded net losses on
foreign exchange for the three and nine months ended
September 30, 2001 of $26.1 million and
$50.3 million, compared to net losses of $2.3 million
and $1.5 million for the same periods in 2000. The increase
in our losses on foreign exchange was primarily due to the
devaluation of the Brazilian real against the U.S. Dollar
during the first nine months of 2001. At December 31, 2000,
the real traded at a rate of R$1.95 = $1.00. At
September 30, 2001, the real traded at a rate of
R$2.67 = $1.00. The net losses on foreign exchange reflect the
effect of the devaluation of the real against the U.S.
dollar on the book value of our monetary assets in Brazil,
including the primarily dollar-denominated debt of IMPSAT Brazil
under the Nortel vendor financing agreement.

Recognition of Other-than-temporary Decline in Value. We
recorded a one-time loss of $19.5 million for the three and
nine months ended September 30, 2001 relating to the decline in
value of our shares of common stock of Claxson Interactive Group
Inc., an integrated media company with operations in Latin
America (the Claxson Shares). This loss relating to
our write down of our investment in the Claxson Shares was
recorded because we had determined that, in accordance with the
requirements under Statement of Financial Accounting Standard
(SFAS) 115, the Claxson Shares had experienced an other
than temporary decline in value. Our Claxson Shares, which had a
market value of $2.0 million at September 30, 2001,
were initially acquired in the fourth quarter of 1999 for a cost
of $21.5 million.

Benefit From (Provision for) Foreign Income Taxes. For
the three and nine months ended September 30, 2001, we
recorded a benefit for foreign income taxes of $0.1 million
and a provision for foreign income taxes $26.4 million,
compared to a benefit for foreign income taxes of
$0.2 million and a provision for foreign income taxes
$0.9 million for the corresponding periods in 2000. The
increase in the provision for foreign income taxes was a result
of a valuation allowance made in the second quarter of 2000
totaling approximately $25.5 million that was required to
be recorded because it is not clear that utilization of tax
benefits resulting from operating losses and other temporary
differences are more likely than not to be realized,
as stipulated by SFAS 109.

Net Loss Attributable to Common Stockholders. For the
three and nine months ended September 30, 2001, we incurred
a net loss attributable to common stockholders of
$344.4 million and $512.3 million, an increase of
$317.7 million (or 1,191.7%) and $416.7 million (or
436.1%) for same periods in 2000. The increase in our net loss
attributable to common stockholders was principally due to our
recording in the third quarter of 2001 of the non-cash
impairment charge discussed above, and an increase in net
interest expense due to higher average outstanding indebtedness.

Liquidity and Capital Resources

At September 30, 2001, we had total cash, cash equivalents
and short-term trading investments of $81.1 million and our
total indebtedness was $992.3 million, of which
$77.0 million represented short-term debt and the current
portion of our long-term debt. We currently face significant
near-term cash flow and liquidity problems. Our capital
requirements under our business plan for fiscal year 2001 are
greater than available capital resources, and, as discussed
further below, our cash flows and liquidity are insufficient to
satisfy all of our obligations beyond the end of 2001. In
particular, the payment default by 360networks during the second
quarter of its contracts with us for the provision of IRU dark
fiber and capacity services and backhaul construction services
and the subsequent termination of those contracts will result in
our receipt of $77.4 million less than anticipated during
the remainder of 2001. See Part II, Item 1.
Legal Proceedings for a description of the status and
background of our contracts with 360networks. Although
Management has and is taking action to attempt to reduce
expenditures relating to the 360networks contracts and utilize
the network assets that were to be provided to 360networks, it
will not be possible in the short-term to replace the cash
inflows contemplated by the termination of 360networks contracts
and the nonpayment by 360networks of the amounts originally
scheduled to be paid to us during 2001.

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The Company has no material working capital or other credit
facility under which it may borrow for working capital or other
general corporate purposes. The Company is not generating
sufficient revenue to fund its operations and to repay its
principal and interest obligations under its 12 1/8% Senior
Guaranteed Notes due 2003, 13 3/4% Senior Notes due 2005
and 12 3/8% Senior Notes due 2008 (collectively, the
Senior Notes) and its vendor financing obligations
with Nortel Networks Limited and Lucent Technologies Inc.
(collectively, the Broadband Network Vendor Financing
Agreements) that will be due and payable in the short term.

The Company believes that is unlikely to be able to obtain
future debt or equity financing on acceptable terms, or at all.
The securities markets are currently not available to the
Company. The Company may therefore be required to restructure
its balance sheet. It is unlikely that the Company could obtain
additional financing without effecting such restructuring. The
Company has commenced negotiations with representatives of the
holders of its Senior Notes and with the creditors under the
Broadband Network Vendor Financing Agreements and has retained
Houlihan Lokey Howard & Zukin Capital to assist it in
connection with those negotiations and the restructuring of its
financial obligations and balance sheet. There is no assurance
that the Company will be able to successfully restructure its
balance sheet on terms acceptable to it, or at all. If the
Company is unable to restructure its balance sheet, generate
sufficient cash flow and obtain additional financing, the
Company likely will be unable to fund its operating requirements
and meet its debt obligations as they come due. In such an
event, the Company will be in default on such obligations,
which, in turn, could force the Company to file for protection
under the federal bankruptcy laws.

In particular, our financial difficulties have led to
non-compliance with certain covenant requirements and payment
provisions under our vendor financing agreements with Nortel and
Lucent. On October 25, 2001, we obtained a waiver of
covenant defaults and an extension from these lenders from
scheduled principal and interest payments under the Broadband
Network Vendor Financing Agreements totaling $36.3 million
that were due on that date. The waiver is valid through
November 25, 2001. There can be no assurance that these
lenders will be willing to extend any forbearance period beyond
November 25, 2001. In the absence of such an extension of
the forbearance period, it is unlikely that we will be able to
comply with our obligations to make the scheduled payments. In
such an event, Nortel and Lucent could demand that all amounts
outstanding under such facilities, including accrued interest,
become immediately due and payable. As of September 30,
2001, our outstanding balance under the Broadband Network Vendor
Financing Agreements totaled $261.4 million. A demand for
immediate payment of such outstanding amounts, if such demand
were not rescinded, annulled or otherwise timely cured, would
constitute an event of default, and could result in a payment
acceleration of all outstanding amounts, under our Senior Notes,
which total $650 million in the aggregate. In such an
event, the Company would be forced to seek protection under the
United States Bankruptcy Code.

As we continue to seek agreement with the holders of the Senior
Notes and the creditors under the Broadband Network Vendor
Financing Agreements regarding the restructuring of those
obligations, we are closely monitoring the level of cash
payments and commitments. We have begun to take actions to
substantially reduce our commitments requiring cash payments in
the remainder of 2001.

We have recently completed the long-haul link of the Broadband
Network between the cities of Curitiba and Porto Alegre in
Brazil and the city of Parana in Argentina. The new link
connects with the Broadband Network that was deployed in
Argentina, Brazil and Chile and results in the creation of a
fully integrated terrestrial fiber optic network connecting
Santiago, Chile; Buenos Aires, Argentina; and São Paulo and
Rio de Janeiro, Brazil with points in between.

Due to the continued adverse macroeconomic conditions in
Argentina and Brazil and to the termination of certain contracts
with a subsidiary of 360networks, Inc. (see Part II,
Item 1. Legal Proceedings), we have reduced our
capital expenditures budget. Our capital expenditures budget for
the fourth quarter of 2001 (including amounts already spent to
date) totals approximately $15.0 million. We will continue
to monitor our needs for capital expenditures against the
anticipated demand for telecommunications services among our
customers and will make our capital expenditures largely in
response to customer demand for services.

As set forth in our consolidated statement of cash flows, our
operating activities used $95.5 million of net cash flow
during the first nine months of 2001, compared to
$13.5 million generated during the same period in

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Financing activities utilized $5.1 million in net cash for
the first nine months of 2001, compared with $471.6 million
provided for the same period in 2000. For the first nine months
of 2001, net cash flow from investing activities (including a
decrease in our trading investments) generated
$98.7 million, compared to $465.4 million used during
the corresponding period in 2000. We have used
$29.2 million in non-cash investing and financing
activities related to the development of the Broadband Network
for the first nine months of 2001, principally as a result of
disbursements under the Broadband Network Vendor Financing
Agreements with Nortel.

At September 30, 2001, we had leased satellite capacity
with total annual rental commitments of approximately
$28.3 million through the year 2005. At the same date, we
had commitments to purchase telecommunications and data center
equipment amounting to approximately $9.8 million. We also
have commitments of approximately $63.9 million with
respect to purchases of IRUs for undersea submarine fiber optic
capacity with which we intend to link our telecommunications
networks in our countries of operation with and among each other
and other parts of the World. Furthermore, we had leased from
third parties a series of terrestrial links for the provision of
data, Internet and telephony services to our clients in the
different countries in which we operate. We had committed to
long term contracts for the purchase of terrestrial links from
third parties in Argentina, Colombia, and the United States for
approximately $16.8 million per year through 2005. The
remainder of the leases are typically under one-year contracts,
the early cancellation of which is subject to a fee.

Government of Argentina Zero-Deficit Law; Public Sector
Customers

On July 30, 2001, the Argentine Government passed a
zero deficit law under which the Federal Government
would only make payments, including transfers to the Argentine
Provinces, equal to the actual revenue received by the
Government. The zero-deficit law was enacted against pressure
within the international capital markets that the Argentine
Government might be unable to make payments on its international
debt. The zero-deficit law could result in reductions or delays
of payments by the Argentine Government to its surplus and
creditors. To date, no regulations have been passed or announced
to clarify the means by which the Argentine Government intends
to implement the zero-deficit law nor have the various Provinces
formally announced how they would propose to implement their own
mechanisms to take into account the anticipated lower receipts
from the Federal Government.

Upon the enactment of the zero-deficit law, it was expected that
at least certain Provinces will make partial payment of their
trade and other credits in negotiable instruments, for which a
discounted secondary market was expected to develop. During
October 2001, the Government of the Province of Buenos
Aires in Argentina paid the Company $2.8 million on account
of telecommunications services previously provided to the
Province by the Company. Of the total amount paid,
$0.8 million was made in Patacones, which are
short-term negotiable bonds issued by the Province of Buenos
Aires in response to the zero deficit law, and $1.9 million
was made in longer term bonds issued by the Province of Buenos
Aires. Several Argentine businesses and banks have begun to
accept Patacones as a medium for the settlement of
financial transactions, and we have not discounted the face
amount of such Patacones as an allowance for doubtful
accounts. The provincial bonds, which are dollar-denominated,
accrue interest at an annual rate of 6%, payable semi-annually
each January and July, commencing January 2002. The
principal amount of the Provincial bonds is payable in a single
installment in July 2004. With respect the Provincial
bonds, no secondary market has developed to date and a secondary
market value of these bonds has not been established. As a
result, we have recorded these bonds at 100% of their face value
as Other non-current assets on our balance sheet. We
will continue to monitor developments regarding the secondary
market value of the Provincial bonds and to make appropriate
adjustments to our financial statements.

The Company provides telecommunications services in Argentina to
a number of public sector entities that will be impacted by the
zero-deficit law, including the Banco de la Nacion Argentina,
the National Border Police and the National Social Security
Administration. In total, 3.0% of the Companys total
revenues

11



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##### Table of Contents





Argentine Government Debt Restructuring

At the beginning of November 2001, the Argentine Government
announced that it would attempt to restructure its existing
external public indebtedness with its Argentine and
international creditors in order to obtain interest savings and
relief from principal repayments in the next several years. The
restructuring or default by the Argentine Government of its
external public indebtedness may have an adverse effect on the
Argentine economy and on the availability of capital flows to
companies headquartered or operating in Argentina. In addition,
the failure of the Argentine Government to successfully
restructure its indebtedness could have an adverse effect on the
Argentine economy, including increasing pressure on the
Argentine Government to devalue the Argentine peso against the
U.S. dollar. Such a devaluation would make it more difficult for
Argentine companies to service their commercial and financial
obligations due in U.S. dollars or tied to the U.S. dollar. Any
of the foregoing events and a continuation of the Argentine
recession would have a material adverse effect on our business,
results of operations, financial condition, ability to make
payments on our indebtedness and on the market price of our
common stock.




Item 3.  Quantitative and Qualitative
Disclosures About Market Risk

The sections below highlight our exposure to interest rate and
foreign exchange rate risks and changes in the market values of
our investment in equity securities. The analyses presented
below are illustrative and should not be viewed as predictive of
our future financial performance. Additionally, we cannot assure
you that our actual results in any particular year will not
differ from the amounts indicated below. However, we believe
that these results are reasonable based on our financial
instrument portfolio at September 30, 2001 and assuming
that the hypothetical interest rate and foreign exchange rate
changes used in the analyses occurred during year 2001. We do
not hold or issue any market risk sensitive instruments for
trading purposes.

Interest Rate Risk. Our cash, cash equivalents and
trading investments consist of highly liquid investments with a
maturity of less than 360 days. As a result of the
short-term nature of these instruments, we do not believe that a
hypothetical 10% change in interest rates would have a material
impact on our future earnings and cash flows related to these
instruments. A hypothetical 10% change in interest rates would
also have an immaterial impact on the fair values of these
instruments.

We are exposed to interest rate risk on our floating rate
indebtedness, which affects our cost of financing. Our floating
rate indebtedness has increased as we have drawn down
commitments under our vendor financing agreements to cover
capital expenditures, including the Broadband Network. Our
actual interest rate is not quantifiable or predictable because
of the variability of future interest rates and business
requirements. We do not believe such risk is material and we do
not customarily use derivative instruments to adjust interest
rate risk.

|                                 |  |                        |        |      |  |      |        |      |  |      |         |            |  |       |        |       |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         | 
|-------------------------------- |  | ---------------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------- | ---------- |  | ----- | ------ | ----- |  | - | ------- | - |  | - | ------- | - |  | - | ------- | - |  | - | ------- | 
|                                 |  |                        |        |     
|                                 |  | Expected Maturity Date |        |     
|                                 |  |                        |        | Fair
|September 30                     |  | 2001                   |        | 2002 |  | 2003 |        | 2004 |  | 2005 |         | Thereafter |  | Total |        | Value
|                                 |  |                        |        |      |  |      |        |      |  |      |         |            |  |       |        |      
|Senior Notes (fixed rate)        |  |                        |       |      |  |      |       |      |  | $    | 125,000 |            |  |       |       |       |  | $ | 300,000 |   |  | $ | 225,000 |   |  | $ | 650,000 |   |  | $ | 289,000 | 
|                                 |  |                        |        |      |  |      |        |      |  |      |         |            |  |       |        |       |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         | 
|Avg. interest rate               |  |                        |       |      |  |      |       |      |  |      | 12.13   | %          |  |       |       |       |  |   | 13.75   | % |  |   | 12.38   | % |  |   | 12.96   | % |  |   |         | 
|                                 |  |                        |        |      |  |      |        |      |  |      |         |            |  |       |        |       |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         | 
|Term Notes (fixed rate)          |  | $                      | 18,780 |      |  | $    | 7,623  |      |  | $    | 14,465  |            |  | $     | 10,882 |       |  | $ | 4,701   |   |  | $ | 900     |   |  | $ | 57,351  |   |  | $ | 57,351  | 
|                                 |  |                        |        |      |  |      |        |      |  |      |         |            |  |       |        |       |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         | 
|Avg. interest rate               |  |                        | 9.81   | %    |  |      | 9.81   | %    |  |      | 9.81    | %          |  |       | 9.81   | %     |  |   | 9.81    | % |  |   | 9.81    | % |  |   | 9.81    | % |  |   |         | 
|                                
|                                
|                                
|                                
|Vendor Financing (variable rate) |  | $                      | 49,539 |      |  | $    | 39,027 |      |  | $    | 53,094  |            |  | $     | 51,947 |       |  | $ | 47,584  |   |  | $ | 35,138  |   |  | $ | 276,329 |   |  | $ | 276,329 | 
|                                 |  |                        |        |      |  |      |        |      |  |      |         |            |  |       |        |       |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         | 
|Avg. interest rate               |  |                        | 8.05   | %    |  |      | 8.05   | %    |  |      | 8.05    | %          |  |       | 8.05   | %     |  |   | 8.05    | % |  |   | 8.05    | % |  |   | 8.05    | % |  |   |         | 
|                                 |  |                        |        |      |  |      |        |      |  |      |         |            |  |       |        |       |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         | 

12



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Foreign Currency Risk. A substantial portion of our
costs, including lease payments for satellite transponder
capacity, purchases of capital equipment, and payments of
interest and principal on our indebtedness, is payable in U.S.
dollars. To date, we have not entered into hedging or swap
contracts to address currency risks because our contracts with
our customers generally provide for payment in U.S. dollars or
for payment in local currency linked to the exchange rate
between the local currency and the U.S. dollar at the time of
invoicing. These contractual provisions are structured to reduce
our risk if currency exchange rates fluctuate. However, given
that the exchange rate is generally set at the date of invoicing
and that in some cases we experience substantial delays in
collecting receivables, we are exposed to some exchange rate
risk.

Pursuant to Brazilian law, our contracts with customers in
Brazil cannot be denominated in dollars or linked to the
exchange rate between the Brazilian real and the U.S.
dollar. Pursuant to these Brazilian legal requirements, we are
permitted to amend the pricing of our services for our long-term
telecommunication services contracts with our customers annually
based on changes in the consumer price index in Brazil for the
prior year. Changes in the consumer price index may lag or be
lower than changes in the exchange rate between Brazil
real and the U.S. dollar and therefore may not fully
allow us to address the impact of a devaluation of the Brazilian
real against the U.S. dollar. Our expansion in Brazil,
including our development of the Broadband Network in Brazil,
has, and will continue to, increase our exposure to exchange
rate risks. Revenues from services from our Brazilian operations
for the first nine months of each of 2000 and 2001 represented
approximately 10.2% and 13.7% of our total net revenues from
services for such periods. However, this proportion can be
expected to increase significantly in future periods in
connection with the progression of our operations in Brazil and
the development of the Broadband Network. At September 30,
2001, the real traded at a rate of R$2.67 = $1.00.

13



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##### Table of Contents






PART II

OTHER INFORMATION





Item 1.  Legal Proceedings

IPO Allocations Class Action. On November 1,
2001, a purported class action lawsuit was filed in the United
States District Court for the Southern District of New York
against us, several of our officers and directors, and the
underwriters who handled our initial public offering of common
stock in February 2000 (the IPO). Although
neither the Company nor the individual defendants have yet been
served with the complaint, the complaint was filed purportedly
on behalf of persons who purchased our common stock between
February 1, 2000 and December 6, 2000. The complaint
alleges violations of the Securities Act of 1933 and the
Securities Exchange Act of 1934, mainly based on the assertion
that there was undisclosed compensation received by our
underwriters in connection with the IPO. Although only one case
has been filed so far, we expect other cases to be filed and
anticipate that these cases will be consolidated into a single
class action. We believe that we and the individual defendants
have meritorious defenses to the claims made in the complaint
and intend to vigorously contest the lawsuit.

360networks, Inc. During June 2001, we terminated a
series of contracts which we had signed in the first quarter of
2001 with 360americas network (Bermuda) ltd. and its
subsidiaries (collectively, 360americas), a
subsidiary of 360networks, Inc., to construct and provide IRU
dark fiber, capacity services and conduit to 360americas over
the Broadband Network in Argentina and Brazil, including the new
Argentina-Brazil link that we are currently constructing, as a
result of the breach by 360americas of its payment obligations
under those contracts. Between March and May 2001, we made
available segments of the IRU dark fiber and capacity services
to 360americas for acceptance, but 360americas failed to make
certain payments as required by our contracts with them.
360americas also failed to make certain payments for collocation
space in our telehouses in Sao Paulo and Rio de Janeiro, Brazil
and Buenos Aires, Argentina, and we terminated those contracts
as well. We have also terminated a contract with 360americas for
collocation space in Caracas, Venezuela, also for payment
default by 360americas.

Our IRU dark fiber, capacity services and construction contracts
with 360americas contemplated total payments of approximately
$98.8 million in advance upon delivery of the IRU dark
fiber, capacity services and conduit construction to 360americas
and additional recurring payments, totaling approximately
$45.0 million over the term of the contracts, for
maintenance services. As of the termination of the contracts,
360americas had paid us a total of $25.8 million and was in
default on additional payments totaling $32.0 million. In
addition, 360americas is in default on payments for collocation
services totaling $0.8 million.

We have commenced arbitration and litigation proceedings against
360americas for damages under the terminated contracts for the
provision of IRU dark fiber and capacity services, as
contemplated by the relevant agreements. 360americas was not
included in the series of bankruptcy and insolvency filings made
in the United States and Canada by its parent, 360networks, Inc.
and certain of its other affiliates. 360networks, Inc. has
announced that it intends to seek a buyer of its South American
undersea fiber optic cable system, which is owned by
360americas. We intend to aggressively pursue our remedies
against 360americas, including our claim for damages due under
the terminated contracts, but are unable to predict whether we
will prevail in any such proceedings and, if so, whether
360americas would be able to pay any arbitration or litigation
award that might be entered in our favor.

During the pendency of the arbitration and litigation
proceedings, we will continue to include as Deferred Revenues on
our balance sheet the amount received from 360americas as
downpayments under the terminated contracts, after deducting
amounts that were due and payable at the time of the termination
of the 360americas contracts. As of September 30, 2001, the
balance of such Deferred Revenues was $22.6 million.




Item 2.  Changes in Securities

Not applicable.

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Item 3.  Defaults Upon Senior
Securities

Not applicable.




Item 4.  Submission of Matters to a Vote of
Security-Holders

Not applicable.




Item 5.  Other Information

Not applicable.




Item 6.  Exhibits and Reports on
Form 8-K

(a)(1)

Exhibit Index:

|        |  |                                                                                                                                                                                                                                                                                                               
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                               
|No.     |  | Description                                                                                                                                                                                                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                               
|3.1     |  | Amended and Restated Certificate of Incorporation
	of the Company (filed on January 14, 2000 as
	Exhibit No. 3.1 to the Companys Registration
	Statement on Form S-1 (No. 333-88389) and incorporated
	herein by reference).                                                                                 
|3.2     |  | Amended and Restated Bylaws of the Company (filed
	on January 14, 2000 as Exhibit No. 3.2 to the
	Companys Registration Statement on Form S-1
	(No. 333-88389) and incorporated herein by reference).                                                                                                        
|4.1     |  | Indenture for the Notes, dated as of
	February 16, 2000, among the Company, The Bank of New York,
	as Trustee and Banque Internationale a Luxembourg (including
	form of Note) (filed on March 10, 2000 as an exhibit to the
	Companys 1999 Annual Report on Form 10K and
	incorporated herein by reference).
|4.2     |  | Indenture for the Notes, dated as of
	June 17, 1998, between the Company and The Bank of New
	York, as Trustee (including form of Note) (filed on
	July 21, 1998 as an exhibit to the Companys
	Registration Statement on Form S-4 (No. 333-59469) and
	incorporated herein by reference).                   
|4.3     |  | Securityholders Agreement dated as of
	March 19, 1998, among Nevasa Holdings, the Morgan Stanley
	investors and certain other parties (filed on April 15,
	1998, as an exhibit to the Companys Annual Report on
	Form 10-K for 1997 and incorporated herein by reference).                                   
|4.4     |  | Supplemental Indenture dated as of May 13,
	1997 among IMPSAT Corporation, IMPSAT S.A. and The Bank of New
	York (filed on April 15, 1998 as an exhibit to the
	Companys Annual Report on Form 10-K for 1997 and
	incorporated herein by reference).                                                         
|4.5     |  | Indenture dated as of July 31, 1996, among
	the Company, IMPSAT Argentina as Guarantor and the Bank of New
	York as Trustee (including form of Note) (filed on
	November 20, 1996 as an exhibit to the Companys
	Registration Statement on Form S-4 (No. 333-12977) and
	incorporated herein by reference).  
|4.6     |  | Shareholders Agreement dated as of March 10,
	1999 (filed on January 14, 2000 as an exhibit to the
	Companys Registration Statement on Form S-1
	(No. 333-88389) and incorporated herein by reference).                                                                                                      
|4.7     |  | Specimen Stock Certificate (filed on
	January 14, 2000 as an exhibit to the Companys
	Registration Statement on Form S-1 (No. 333-88389) and
	incorporated herein by reference).                                                                                                                             
|4.8     |  | Form of Stockholder Rights Plan Agreement between
	the Company and The Bank of New York, as Rights Agent (filed on
	June 21, 2000 as an exhibit to the Companys
	Registration Statement on Form S-4 (No. 333-34954) and
	incorporated herein by reference).                                                  

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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|No.     |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|4.9     |  | Certificate of Designations dated as of
	June 7, 2000 (filed on June 21, 2000 as an exhibit to
	the Companys Registration Statement on Form S-4
	(No. 333-34954) and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|9.1     |  | 1998 Stock Option Plan (filed on March 31,
	1999 as an exhibit to the Companys 1998 Annual Report on
	Form 10-K and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|9.2     |  | 1999 Stock Option Plan (filed on January 14,
	2000 as an exhibit to the Companys Registration Statement
	on Form S-1 (No. 333-88389) and incorporated herein by
	reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.1   |  | Global Crossing Framework Agreement (filed on
	October 4, 1999 as an exhibit to the Companys
	Registration Statement on Form S-1 (No. 333-88389) and
	incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|10.2   |  | Turnkey Backhaul Construction and IRU Agreement
	between IMPSAT Brazil and South American Crossing, Ltd. (Rio de
	Janeiro), dated as of February 17, 2000 (filed on
	April 17, 2000 as an exhibit to the Companys
	Registration Statement on Form S-4 (No. 333-34954) and
	incorporated herein by reference). In accordance with
	Instruction 2 to Item 601 of Regulation S-K, the
	following agreement was not filed as an exhibit because it is
	substantially identical in all material respects to Exhibit
	10.2: Turnkey Backhaul Construction and IRU Agreement between
	IMPSAT Brazil and South American Crossing, Ltd. (São
	Paolo), dated as of February 17, 2000.
|10.3   |  | Turnkey Project Agreement between IMPSAT
	Argentina and Nortel (filed on October 4, 1999 as an
	exhibit to the Companys Registration Statement on
	Form S-1 (No. 333-88389) and incorporated herein by
	reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.4   |  | TAC Turnkey Construction and IRU Agreement among
	IMPSAT Argentina, IMPSAT Chile and South American Crossing Ltd.
	(filed on October 4, 1999 as an exhibit to the
	Companys Registration Statement on Form S-1
	(No. 333-88389) and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                     
|10.5   |  | Capacity Commitment Agreement dated as of
	November 10, 2000, between South American Crossing Ltd. and
	IMPSAT Fiber Networks, Inc. (filed on March 30, 2001, as an
	exhibit to the Companys Annual Report on Form 10-K
	for 2000 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                   
|10.6   |  | Capacity Purchase Agreement dated as of
	November 10, 2000, between Global Crossing Bandwidth, Inc.
	and International Satellite Communication Holding Ltd. (filed on
	March 30, 2001, as an exhibit to the Companys Annual
	Report on Form 10-K for 2000 and incorporated herein by
	reference).                                                                                                                                                                                                                                                                                                                                                                          
|10.7   |  | Capacity IRU Agreement dated as of
	February 15, 2001, by and between 360americas network
	(Bermuda) ltd. and IMPSAT Fiber Networks, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|10.8   |  | IRU Fiber Agreement (Argentina) dated as of
	February 15, 2001, by and between IMPSAT S.A. (Argentina)
	and 360networks de Argentina S.R.L. (filed on March 30,
	2001 as an exhibit to the Companys 2000 Annual Report on
	Form 10K and incorporated herein by reference). In
	accordance with Instruction 2 to Item 601 of
	Regulation S-K, the following agreement was not filed as an
	exhibit because it is substantially identical in all material
	respects to Exhibit 10.9: IRU Fiber Agreement (Brazil)
	dated as of February 15, 2001, by and between Impsat
	Comunicações Ltda. and 360networks do Brasil Ltda..                                                 
|10.9   |  | Service Agreement dated as of February 15,
	2001, by and between Impsat Comunicações Ltda. and
	360networks do Brasil Ltda. (filed on March 30, 2001 as an
	exhibit to the Companys 2000 Annual Report on
	Form 10K and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.10   |  | Master Loan Agreement dated as of June 6,
	2001 among Harris Canada, Inc. and the Company, IMPSAT
	Argentina, IMPSAT Brazil, IMPSAT Colombia, IMPSAT Ecuador, and
	IMPSAT Venezuela (filed on August 16, 2001 as an Exhibit to
	the Companys Quarterly Report on Form 10-Q and
	incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                         

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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|No.     |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|10.11   |  | Amended and Restated Financing Agreement between
	IMPSAT Argentina and Nortel (filed on August 16, 2001 as an
	exhibit to the Companys Quarterly Report on Form 10-Q
	and incorporated herein by reference). In accordance with
	Instruction 2 to Item 601 of Regulation S-K, the
	following agreement was not filed as an exhibit because it is
	substantially identical in all material respects to
	Exhibit 10.11: Amended and Restated Financing Agreement
	between IMPSAT Brazil and Nortel.
|21.1    |  | List of subsidiaries of the registrants
	(incorporated by reference to the Business 
	General section of the Companys Annual Report on
	Form 10-K for 2000 and incorporated herein by reference).                                                                                                                                                                                                                                                                                             
|24.1    |  | Power of Attorney (included on the signature page
	hereto).                                                                                                                                                                                                                                                                                                                                                                                                                                       




|  |                                                                                                                                
|- | -------------------------------------------------------------------------------------------------------------------------------
| | Confidential treatment requested as to certain portions, which
	portions were omitted and filed separately with the Commission.

(a)(2) List of Schedules. All schedules for which
provision is made in the applicable accounting regulations of
the Commission are omitted because they are not applicable, or
the information is included in the financial statements included
herein.

(b) Reports on Form 8-K. None.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the registrants have duly caused this report
to be signed on their behalf by the undersigned thereunto duly
authorized, in the City of Buenos Aires in the Republic of
Argentina, in the capacities and on the dates indicated.



| |                            
| | ---------------------------
| | IMPSAT Fiber Networks, Inc.



| |     |                    
| | --- | -------------------
| | By: | /s/ GUILLERMO JOFRÉ

| |                            
| | ---------------------------
| |                            
| | Guillermo Jofré            
| | Vice President, Finance and
| | Chief Financial Officer    
|
| | Date: November 19, 2001    
|
| | IMPSAT S.A.                



| |     |                
| | --- | ---------------
| | By: | /s/ JOSÉ TORRES

| |                         
| | ------------------------
| |                         
| | José Torres             
| | Director and            
| | Chief Accounting Officer
|
| | Date: November 19, 2001 

18