##### 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, 2002

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: 000-29085



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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


(Address, including zip code, and telephone
number, including area code,


of registrants principal executive offices)


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, 2002, the Company had outstanding 91,428,570
shares of Common Stock, $0.01 par value.









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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                           
|                                     | Item 4. Disclosure Controls and Procedures                                                   
|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                          
|Certification for Richardo Verdaguer
|Certification for Hector Alonso     
|Certification for Marcelo Girotti   
|Certification for Jorge Paternostro 



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##### Table of Contents






IMPSAT Fiber Networks, Inc.


IMPSAT S.A.





INDEX

|                                  |         |  |                                                                                           |  |  |     | 
|--------------------------------- | ------- |  | ----------------------------------------------------------------------------------------- |  |  | --- | 
|                                  |         |  |                                                                                           | 
|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                            |  |  | 18  | 
|                                  | Item 4. |  | Disclosure Controls and Procedures                                                        |  |  | 19  | 
|PART II  OTHER INFORMATION        |         |  | 19                                                                                        | 
|                                  | Item 1. |  | Legal Proceedings                                                                         |  |  | 19  | 
|                                  | Item 2. |  | Changes in Securities                                                                     |  |  | 19  | 
|                                  | Item 3. |  | Defaults Upon Senior Securities                                                           |  |  | 19  | 
|                                  | Item 4. |  | Submission of Matters to a Vote of
    Security-Holders                                   |  |  | 19  | 
|                                  | Item 5. |  | Other Information                                                                         |  |  | 19  | 
|                                  | Item 6. |  | Exhibits and Reports on Form 8-K                                                          |  |  | 19  | 
|SIGNATURES                        |         |  | 22                                                                                        | 
|CERTIFICATIONS                    |         |  | 23                                                                                        | 



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##### Table of Contents






PART I

FINANCIAL INFORMATION





Item 1.     Financial
Statements

IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES

(DEBTOR-IN-POSSESSION)


CONDENSED CONSOLIDATED BALANCE
SHEETS

(In thousands of U.S. Dollars)


(Unaudited)


|                                             |                                                                                                                                                            |                                             |         |               |           |   |         |            |           |  
|-------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------- | ------- | ------------- | --------- | - | ------- | ---------- | --------- | -
|                                             |                                                                                                                                                            | December 31,                                |         | September 30,
|                                             |                                                                                                                                                            | 2001                                        |         | 2002         
|                                             |                                                                                                                                                            |                                             |         |              
|ASSETS                                      
|CURRENT ASSETS:                              |                                                                                                                                                            |                                             |         |               |           |   |         |           
|                                             | Cash and cash equivalents                                                                                                                                  |                                             | $       | 35,606        |           |   | $       | 33,096     |          
|                                             | Trading investments                                                                                                                                        |                                             |         | 29,319        |           |   |         | 26,074     |          
|                                             | Trade accounts receivable, net                                                                                                                             |                                             |         | 58,411        |           |   |         | 38,209     |          
|                                             | Other receivables                                                                                                                                          |                                             |         | 39,003        |           |   |         | 15,814     |          
|                                             | Prepaid expenses                                                                                                                                           |                                             |         | 3,429         |           |   |         | 3,443      |          
|                                             |                                                                                                                                                            |                                             |         |               |           |   |         |           
|                                             |                                                                                                                                                            | Total current assets                        |         |               | 165,768   |   |         |            | 116,636   |  
|                                             |                                                                                                                                                            |                                             |         |               |           |   |         |           
|BROADBAND NETWORK, Net                       |                                                                                                                                                            |                                             | 310,598 |               |           |   | 220,926 |           
|                                             |                                                                                                                                                            |                                             |         |               |           |   |         |           
|PROPERTY, PLANT AND EQUIPMENT, Net           |                                                                                                                                                            |                                             | 214,459 |               |           |   | 183,806 |           
|                                             |                                                                                                                                                            |                                             |         |               |           |   |         |           
|NON-CURRENT ASSETS:                          |                                                                                                                                                            |                                             |         |               |           |   |         |           
|                                             | Investments in common stock                                                                                                                                |                                             |         | 3,307         |           |   |         | 1,594      |          
|                                             | Deferred financing costs, net                                                                                                                              |                                             |         | 10,752        |           |   |         |            |          
|                                             | Other non-current assets                                                                                                                                   |                                             |         | 13,690        |           |   |         | 12,045     |          
|                                             |                                                                                                                                                            |                                             |         |               |           |   |         |           
|                                             |                                                                                                                                                            | Total non-current assets                    |         |               | 27,749    |   |         |            | 13,639    |  
|                                             |                                                                                                                                                            |                                             |         |               |           |   |         |           
|TOTAL                                        |                                                                                                                                                            | $                                           | 718,574 |               |           | $ | 535,007 |           
|                                             |                                                                                                                                                            |                                             |         |               |           |   |         |           
|LIABILITIES AND STOCKHOLDERS
    DEFICIENCY
|LIABILITIES NOT SUBJECT TO COMPROMISE:       |                                                                                                                                                            |                                             |         |               |           |   |         |           
|CURRENT LIABILITIES                          |                                                                                                                                                            |                                             |         |               |           |   |         |           
|                                             | Accounts payable  trade                                                                                                                                   |                                             | $       | 86,999        |           |   | $       | 71,109     |          
|                                             | Short-term debt                                                                                                                                            |                                             |         | 8,323         |           |   |         |            |          
|                                             | Current portion of long-term debt                                                                                                                          |                                             |         | 959,076       |           |   |         | 282,292    |          
|                                             | Accrued and other liabilities                                                                                                                              |                                             |         | 79,237        |           |   |         | 64,494     |          
|                                             |                                                                                                                                                            |                                             |         |               |           |   |         |           
|                                             |                                                                                                                                                            | Total current liabilities                   |         |               | 1,133,635 |   |         |            | 417,895   |  
|LONG-TERM DEBT, Net                          |                                                                                                                                                            |                                             | 23,189  |               |           |   | 29,238  |           
|OTHER LONG-TERM LIABILITIES                  |                                                                                                                                                            |                                             | 14,973  |               |           |   | 9,409   |           
|DEFERRED REVENUES                            |                                                                                                                                                            |                                             | 99,419  |               |           |   | 95,630  |           
|                                             |                                                                                                                                                            |                                             |         |               |           |   |         |           
|                                             |                                                                                                                                                            | Total liabilities not subject to compromise |         |               | 1,271,216 |   |         |            | 552,172   |  
|                                             |                                                                                                                                                            |                                             |         |               |           |   |         |           
|LIABILITIES SUBJECT TO COMPROMISE            |                                                                                                                                                            |                                             |         |               |           |   | 727,522 |           
|                                             |                                                                                                                                                            |                                             |         |               |           |   |         |           
|                                             |                                                                                                                                                            | Total liabilities                           |         |               | 1,271,216 |   |         |            | 1,279,694 |  
|                                             |                                                                                                                                                            |                                             |         |               |           |   |         |           
|COMMITMENTS AND CONTINGENCIES (NOTE 13)      |                                                                                                                                                            |                                             |         |               |           |   |         |           
|STOCKHOLDERS DEFICIENCY:                    |                                                                                                                                                            |                                             |         |               |           |   |         |           
|                                             | Common Stock, $0.01 par value; 300,000,000 shares
    authorized, 91,428,570 shares issued and outstanding at
    December 31, 2001 and September 30, 2002 |                                             |         | 914           |           |   |         | 914        |          
|                                             | Additional paid in capital                                                                                                                                 |                                             |         | 537,924       |           |   |         | 538,349    |          
|                                             | Accumulated deficit                                                                                                                                        |                                             |         | (1,072,330    | )         |   |         | (1,309,157 | )        
|                                             | Deferred stock-based compensation                                                                                                                          |                                             |         | (5,438        | )         |   |         | (5,438     | )        
|                                             | Accumulated other comprehensive (loss) income                                                                                                              |                                             |         | (13,712       | )         |   |         | 30,645     |          
|                                             |                                                                                                                                                            |                                             |         |               |           |   |         |           
|                                             |                                                                                                                                                            | Total stockholders deficiency              |         |               | (552,642  | ) |         |            | (744,687  | )
|                                             |                                                                                                                                                            |                                             |         |               |           |   |         |           
|TOTAL                                        |                                                                                                                                                            | $                                           | 718,574 |               |           | $ | 535,007 |           
|                                             |                                                                                                                                                            |                                             |         |               |           |   |         |           

See notes to condensed consolidated financial
statements.


F-1



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES

(DEBTOR-IN-POSSESSION)


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,    
|                                                                   |                                                                                           |                        |                                                |                  
|                                                                   |                                                                                           | 2001                   |                                                | 2002              |        | 2001    |         | 2002   
|                                                                   |                                                                                           |                        |                                                |                   |        |         |         |        
|NET REVENUES:                                                      |                                                                                           |                        |                                                |                   |        |         |         |         |        |         |          |          |        |          |          |         
|                                                                   | Data and value added services                                                             |                        | $                                              | 59,097            |        |         | $       | 43,901  |        |         | $        | 178,186  |        |          | $        | 138,289  |       
|                                                                   | Internet                                                                                  |                        |                                                | 11,612            |        |         |         | 6,333   |        |         |          | 34,453   |        |          |          | 21,454   |       
|                                                                   | Telephony                                                                                 |                        |                                                | 3,406             |        |         |         | 2,915   |        |         |          | 6,562    |        |          |          | 11,234   |       
|                                                                   | Services to carriers                                                                      |                        |                                                | 1,560             |        |         |         | 1,823   |        |         |          | 5,727    |        |          |          | 5,323    |       
|                                                                   | Sales of equipment                                                                        |                        |                                                | 895               |        |         |         | 336     |        |         |          | 11,718   |        |          |          | 762      |       
|                                                                   |                                                                                           |                        |                                                |                   |        |         |         |         |        |         |          |          |        |          |          |         
|                                                                   |                                                                                           |                        | Total net revenues from services and equipment |                   |        | 76,570  |         |         |        | 55,308  |          |          |        | 236,646  |          |          |        | 177,062  |  
|                                                                   |                                                                                           |                        |                                                |                   |        |         |         |         |        |         |          |          |        |          |          |         
|                                                                   | Broadband network development revenues                                                    |                        |                                                |                   |        |         |         |         |        |         |          | 7,197    |        |          |          |          |       
|                                                                   |                                                                                           |                        |                                                |                   |        |         |         |         |        |         |          |          |        |          |          |         
|                                                                   |                                                                                           |                        | Total net revenues                             |                   |        | 76,570  |         |         |        | 55,308  |          |          |        | 243,843  |          |          |        | 177,062  |  
|                                                                   |                                                                                           |                        |                                                |                   |        |         |         |         |        |         |          |          |        |          |          |         
|COSTS AND EXPENSES:                                                |                                                                                           |                        |                                                |                   |        |         |         |         |        |         |          |          |        |          |          |         
|                                                                   | Direct costs:                                                                             |                        |                                                |                   |        |         |         |         |        |         |          |          |        |          |          |          |       
|                                                                   |                                                                                           | Contracted services    |                                                |                   | 10,150 |         |         |         | 3,676  |         |          |          | 30,094 |          |          |          | 15,013 |         
|                                                                   |                                                                                           | Other direct costs     |                                                |                   | 7,653  |         |         |         | 5,629  |         |          |          | 20,816 |          |          |          | 17,190 |         
|                                                                   |                                                                                           | Leased capacity        |                                                |                   | 21,851 |         |         |         | 17,422 |         |          |          | 67,236 |          |          |          | 57,321 |         
|                                                                   |                                                                                           | Broadband network cost |                                                |                   |        |         |         |         |        |         |          |          | 3,335  |          |          |          |        |         
|                                                                   |                                                                                           | Cost of equipment sold |                                                |                   | 722    |         |         |         | 67     |         |          |          | 8,219  |          |          |          | 307    |         
|                                                                   |                                                                                           |                        |                                                |                   |        |         |         |         |        |         |          |          |        |          |          |         
|                                                                   |                                                                                           |                        | Total direct costs                             |                   |        | 40,376  |         |         |        | 26,794  |          |          |        | 129,700  |          |          |        | 89,831   |  
|                                                                   |                                                                                           |                        |                                                |                   |        |         |         |         |        |         |          |          |        |          |          |         
|                                                                   | Salaries and wages                                                                        |                        |                                                | 20,835            |        |         |         | 10,852  |        |         |          | 64,932   |        |          |          | 36,487   |       
|                                                                   | Selling, general and administrative                                                       |                        |                                                | 12,251            |        |         |         | 6,243   |        |         |          | 41,721   |        |          |          | 20,406   |       
|                                                                   | Provision for asset impairment                                                            |                        |                                                | 234,625           |        |         |         |         |        |         |          | 234,625  |        |          |          |          |       
|                                                                   | Depreciation and amortization                                                             |                        |                                                | 32,888            |        |         |         | 16,706  |        |         |          | 92,566   |        |          |          | 63,974   |       
|                                                                   |                                                                                           |                        |                                                |                   |        |         |         |         |        |         |          |          |        |          |          |         
|                                                                   |                                                                                           |                        | Total costs and expenses                       |                   |        | 340,975 |         |         |        | 60,595  |          |          |        | 563,544  |          |          |        | 210,698  |  
|                                                                   |                                                                                           |                        |                                                |                   |        |         |         |         |        |         |          |          |        |          |          |         
|Operating loss                                                     |                                                                                           |                        | (264,405                                       | )                 |        |         | (5,287  | )       |        |         | (319,701 | )        |        |          | (33,636  | )       
|                                                                   |                                                                                           |                        |                                                |                   |        |         |         |         |        |         |          |          |        |          |          |         
|OTHER INCOME (EXPENSES):                                           |                                                                                           |                        |                                                |                   |        |         |         |         |        |         |          |          |        |          |          |         
|                                                                   | Interest income and investment gains                                                      |                        |                                                | 1,706             |        |         |         | 436     |        |         |          | 9,798    |        |          |          | 1,963    |       
|                                                                   | Interest expense (contractual interest of $36,899
    and $114,385 in 2002, respectively) |                        |                                                | (35,761           | )      |         |         | (13,438 | )      |         |          | (105,983 | )      |          |          | (86,117  | )     
|                                                                   | Net loss on foreign exchange                                                              |                        |                                                | (26,132           | )      |         |         | (62,621 | )      |         |          | (50,282  | )      |          |          | (115,052 | )     
|                                                                   | Recognition of other-than-temporary decline in
    value of investments                   |                        |                                                | (19,537           | )      |         |         |         |        |         |          | (19,537  | )      |          |          |          |       
|                                                                   | Reorganization items                                                                      |                        |                                                |                   |        |         |         | (9,297  | )      |         |          |          |        |          |          | (14,989  | )     
|                                                                   | Other loss, net                                                                           |                        |                                                | (311              | )      |         |         | (2,105  | )      |         |          | (163     | )      |          |          | (3,805   | )     
|                                                                   |                                                                                           |                        |                                                |                   |        |         |         |         |        |         |          |          |        |          |          |         
|                                                                   |                                                                                           |                        | Total other expenses                           |                   |        | (80,035 | )       |         |        | (87,025 | )        |          |        | (166,167 | )        |          |        | (218,000 | )
|                                                                   |                                                                                           |                        |                                                |                   |        |         |         |         |        |         |          |          |        |          |          |         
|LOSS BEFORE INCOME TAXES                                           |                                                                                           |                        | (344,440                                       | )                 |        |         | (92,312 | )       |        |         | (485,868 | )        |        |          | (251,636 | )       
|BENEFIT FROM (PROVISION FOR) FOREIGN INCOME TAXES                  |                                                                                           |                        | 84                                             |                   |        |         | (407    | )       |        |         | (26,403  | )        |        |          | (1,558   | )       
|                                                                   |                                                                                           |                        |                                                |                   |        |         |         |         |        |         |          |          |        |          |          |         
|LOSS BEFORE EXTRAORDINARY GAIN ON EARLY
    EXTINGUISHMENT OF DEBT |                                                                                           |                        | (344,356                                       | )                 |        |         | (92,719 | )       |        |         | (512,271 | )        |        |          | (253,194 | )       
|GAIN ON EARLY EXTINGUISHMENT OF DEBT                               |                                                                                           |                        |                                                |                   |        |         |         |         |        |         |          |          |        |          | 16,367   |         
|                                                                   |                                                                                           |                        |                                                |                   |        |         |         |         |        |         |          |          |        |          |          |         
|NET LOSS                                                           |                                                                                           | $                      | (344,356                                       | )                 |        | $       | (92,719 | )       |        | $       | (512,271 | )        |        | $        | (236,827 | )       
|                                                                   |                                                                                           |                        |                                                |                   |        |         |         |         |        |         |          |          |        |          |          |         
|NET LOSS PER COMMON SHARE:                                         |                                                                                           |                        |                                                |                   |        |         |         |         |        |         |          |          |        |          |          |         
|                                                                   | LOSS BEFORE EXTRAORDINARY ITEM                                                            |                        | $                                              | (3.77             | )      |         | $       | (1.01   | )      |         | $        | (5.60    | )      |          | $        | (2.77    | )     
|                                                                   | EXTRAORDINARY ITEM                                                                        |                        |                                                |                   |        |         |         |         |        |         |          |          |        |          |          | 0.18     |       
|                                                                   |                                                                                           |                        |                                                |                   |        |         |         |         |        |         |          |          |        |          |          |         
|                                                                   | NET LOSS, BASIC AND DILUTED                                                               |                        | $                                              | (3.77             | )      |         | $       | (1.04   | )      |         | $        | (5.60    | )      |          | $        | (2.59    | )     
|                                                                   |                                                                                           |                        |                                                |                   |        |         |         |         |        |         |          |          |        |          |          |         
|WEIGHTED AVERAGE NUMBER OF COMMON SHARES:                          |                                                                                           |                        |                                                |                   |        |         |         |         |        |         |          |          |        |          |          |         
|                                                                   | BASIC AND DILUTED                                                                         |                        |                                                | 91,429            |        |         |         | 91,429  |        |         |          | 91,429   |        |          |          | 91,429   |       
|                                                                   |                                                                                           |                        |                                                |                   |        |         |         |         |        |         |          |          |        |          |          |         

See notes to condensed consolidated financial
statements.


F-2



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES

(DEBTOR-IN-POSSESSION)


CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE LOSS

(In thousands of U.S. Dollars)


(Unaudited)


|                                   |                                                                        |                    |          |                   |        |      |         |        |        |   |          |        |       |   |          |        |        | 
|---------------------------------- | ---------------------------------------------------------------------- | ------------------ | -------- | ----------------- | ------ | ---- | ------- | ------ | ------ | - | -------- | ------ | ----- | - | -------- | ------ | ------ | 
|                                   |                                                                        |                    |          |                  
|                                   |                                                                        | Three Months Ended |          | Nine Months Ended
|                                   |                                                                        | September 30,      |          | September 30,    
|                                   |                                                                        |                    |          |                  
|                                   |                                                                        | 2001               |          | 2002              |        | 2001 |         | 2002  
|                                   |                                                                        |                    |          |                   |        |      |         |       
|NET LOSS                           |                                                                        | $                  | (344,356 | )                 |        | $    | (92,719 | )      |        | $ | (512,271 | )      |       | $ | (236,827 | )     
|                                   |                                                                        |                    |          |                   |        |      |         |        |        |   |          |        |       |   |          |       
|OTHER COMPREHENSIVE (LOSS) INCOME: |                                                                        |                    |          |                   |        |      |         |        |        |   |          |        |       |   |          |       
|                                   | Foreign currency translation adjustment                                |                    |          | (488              | )      |      |         | 37,247 |        |   |          | (5,470 | )     |   |          | 44,954 |       
|                                   | Change in unrealized loss on investments
    available for sale        |                    |          | (407              | )      |      |         | (225   | )      |   |          | (8,852 | )     |   |          | (1,454 | )     
|                                   | Recognition of other-than-temporary decline in
    value of investment |                    |          | 19,537            |        |      |         | 41     |        |   |          | 19,537 |       |   |          | 857    |       
|                                   |                                                                        |                    |          |                   |        |      |         |        |        |   |          |        |       |   |          |       
|                                   |                                                                        | TOTAL              |          |                   | 18,642 |      |         |        | 37,063 |   |          |        | 5,215 |   |          |        | 44,357 | 
|                                   |                                                                        |                    |          |                   |        |      |         |        |        |   |          |        |       |   |          |       
|COMPREHENSIVE LOSS                 |                                                                        | $                  | (325,714 | )                 |        | $    | (55,656 | )      |        | $ | (507,056 | )      |       | $ | (192,470 | )     
|                                   |                                                                        |                    |          |                   |        |      |         |        |        |   |          |        |       |   |          |       

See notes to condensed consolidated financial
statements.

F-3



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES

(DEBTOR-IN-POSSESSION)


CONDENSED CONSOLIDATED STATEMENTS OF
STOCKHOLDERS DEFICIENCY

FOR NINE MONTHS ENDED SEPTEMBER 30,
2002


(In thousands of U.S. Dollars)


(Unaudited)


|                               |                                                                                                       |              |            |            |  |             |     |             |  |               |         |             |  |       |            |          |   |   |        |   |  |   |         |        |   |   |          |          |  
|------------------------------ | ----------------------------------------------------------------------------------------------------- | ------------ | ---------- | ---------- |  | ----------- | --- | ----------- |  | ------------- | ------- | ----------- |  | ----- | ---------- | -------- | - | - | ------ | - |  | - | ------- | ------ | - | - | -------- | -------- | -
|                               |                                                                                                       |              |            |            |  |             |     |             |  |               |         | Accumulated |  |      
|                               |                                                                                                       |              |            |            |  |             |     |             |  | Other         |         |            
|                               |                                                                                                       | Common Stock |            | Additional |  |             |     | Deferred    |  | Comprehensive |         |            
|                               |                                                                                                       |              |            | Paid In    |  | Accumulated |     | Stock-Based |  | (Loss)        |         |            
|                               |                                                                                                       | Shares       |            | Amount     |  | Capital     |     | Deficit     |  | Compensation  |         | Income      |  | Total
|                               |                                                                                                       |              |            |            |  |             |     |             |  |               |         |             |  |      
|BALANCE AT DECEMBER 31, 2001   |                                                                                                       |              | 91,428,570 |            |  | $           | 914 |             |  | $             | 537,924 |             |  | $     | (1,072,330 | )        |   | $ | (5,438 | ) |  | $ | (13,712 | )      |   | $ | (552,642 | )       
|                               | Amortization of amount paid in excess of carrying
    value of net assets acquired from related party |              |            |            |  |             |     |             |  |               |         | 425         |  |       |            |          |   |   |        |   |  |   |         |        |   |   |          | 425      |  
|                               | Change in unrealized loss on investment available
    for sale                                        |              |            |            |  |             |     |             |  |               |         |             |  |       |            |          |   |   |        |   |  |   |         | (1,454 | ) |   |          | (1,454   | )
|                               | Recognition of other-than-temporary decline in
    value of investment                                |              |            |            |  |             |     |             |  |               |         |             |  |       |            |          |   |   |        |   |  |   |         | 857    |   |   |          | 857      |  
|                               | Foreign currency translation adjustment                                                               |              |            |            |  |             |     |             |  |               |         |             |  |       |            |          |   |   |        |   |  |   |         | 44,954 |   |   |          | 44,954   |  
|                               | Net loss for the period                                                                               |              |            |            |  |             |     |             |  |               |         |             |  |       |            | (236,827 | ) |   |        |   |  |   |         |        |   |   |          | (236,827 | )
|                               |                                                                                                       |              |            |            |  |             |     |             |  |               |         |             |  |       |            |          |   |   |        |   |  |   |         |        |   |   |          |         
|BALANCE AT SEPTEMBER 30, 2002. |                                                                                                       |              | 91,428,570 |            |  | $           | 914 |             |  | $             | 538,349 |             |  | $     | (1,309,157 | )        |   | $ | (5,438 | ) |  | $ | 30,645  |        |   | $ | (744,687 | )       
|                               |                                                                                                       |              |            |            |  |             |     |             |  |               |         |             |  |       |            |          |   |   |        |   |  |   |         |        |   |   |          |         

See notes to condensed consolidated financial
statements

F-4



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES

(DEBTOR-IN-POSSESSION)


CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS

(In thousands of U.S. Dollars)


(Unaudited)


|                                                                         |                                                                                                                   |                                                                        |                                                                |                                                         |         |         |         |          |         |         |        |  
|------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------- | -------------------------------------------------------------- | ------------------------------------------------------- | ------- | ------- | ------- | -------- | ------- | ------- | ------ | -
|                                                                         |                                                                                                                   |                                                                       
|                                                                         |                                                                                                                   | Nine Months Ended                                                     
|                                                                         |                                                                                                                   | September 30,                                                         
|                                                                         |                                                                                                                   |                                                                       
|                                                                         |                                                                                                                   | 2001                                                                   |                                                                | 2002                                                   
|                                                                         |                                                                                                                   |                                                                        |                                                                |                                                        
|CASH FLOWS FROM OPERATING ACTIVITIES:                                    |                                                                                                                   |                                                                        |                                                                |                                                         |         |         |         |         
|                                                                         | Net loss                                                                                                          |                                                                        | $                                                              | (512,271                                                | )       |         | $       | (236,827 | )      
|                                                                         | Adjustments to reconcile net loss to net cash
    (used in) provided by operating activities, net of acquisition: |                                                                        |                                                                |                                                         |         |         |         |          |        
|                                                                         |                                                                                                                   | Amortization and depreciation                                          |                                                                |                                                         | 92,566  |         |         |          | 63,974  |        
|                                                                         |                                                                                                                   | Provision for doubtful accounts                                        |                                                                |                                                         | 6,906   |         |         |          | 7,653   |        
|                                                                         |                                                                                                                   | Recognition of other-than-temporary decline in
    value of investment |                                                                |                                                         | 19,537  |         |         |          | 857     |        
|                                                                         |                                                                                                                   | Gain on early extinguishment of debt                                   |                                                                |                                                         |         |         |         |          | (16,367 | )      
|                                                                         |                                                                                                                   | Deferred income tax provision                                          |                                                                |                                                         | 25,361  |         |         |          | 167     |        
|                                                                         |                                                                                                                   | Provision for asset impairment                                         |                                                                |                                                         | 234,625 |         |         |          |         |        
|                                                                         |                                                                                                                   | Changes in assets and liabilities:                                     |                                                                |                                                         |         |         |         |          |         |        
|                                                                         |                                                                                                                   |                                                                        | (Increase) decrease in trade accounts receivable,
    net      |                                                         |         | (9,396  | )       |          |         | 14,875  |       
|                                                                         |                                                                                                                   |                                                                        | Increase in prepaid expenses                                   |                                                         |         | (1,699  | )       |          |         | (14     | )     
|                                                                         |                                                                                                                   |                                                                        | Decrease in other receivables and other
    non-current assets |                                                         |         | 5,502   |         |          |         | 67,121  |       
|                                                                         |                                                                                                                   |                                                                        | Increase in accounts payable  trade                           |                                                         |         | 17,015  |         |          |         | 45,710  |       
|                                                                         |                                                                                                                   |                                                                        | (Decrease) increase in accrued and other
    liabilities       |                                                         |         | (1,248  | )       |          |         | 81,465  |       
|                                                                         |                                                                                                                   |                                                                        | Increase (decrease) in deferred revenues                       |                                                         |         | 43,491  |         |          |         | (3,789  | )     
|                                                                         |                                                                                                                   |                                                                        | Decrease in other long-term liabilities                        |                                                         |         | (15,893 | )       |          |         | (5,564  | )     
|                                                                         |                                                                                                                   |                                                                        |                                                                |                                                         |         |         |         |         
|                                                                         |                                                                                                                   |                                                                        |                                                                | Net cash (used in) provided by operating
    activities |         |         | (95,504 | )        |         |         | 19,261 |  
|                                                                         |                                                                                                                   |                                                                        |                                                                |                                                         |         |         |         |         
|CASH FLOWS FROM INVESTING ACTIVITIES:                                    |                                                                                                                   |                                                                        |                                                                |                                                         |         |         |         |         
|                                                                         | Net decrease in trading investments                                                                               |                                                                        |                                                                | 220,192                                                 |         |         |         | 3,245    |        
|                                                                         | Purchases of broadband network, net of disposals                                                                  |                                                                        |                                                                | (59,037                                                 | )       |         |         | (4,283   | )      
|                                                                         | Purchases of property, plant and equipment, net
    of disposals                                                  |                                                                        |                                                                | (62,125                                                 | )       |         |         | (8,657   | )      
|                                                                         | Decrease in other investment                                                                                      |                                                                        |                                                                | (306                                                    | )       |         |         |          |        
|                                                                         |                                                                                                                   |                                                                        |                                                                |                                                         |         |         |         |         
|                                                                         |                                                                                                                   |                                                                        |                                                                | Net cash provided by (used in) investing
    activities |         |         | 98,724  |          |         |         | (9,695 | )
|                                                                         |                                                                                                                   |                                                                        |                                                                |                                                         |         |         |         |         
|CASH FLOWS FROM FINANCING ACTIVITIES:                                    |                                                                                                                   |                                                                        |                                                                |                                                         |         |         |         |         
|                                                                         | Net repayments of short-term debt                                                                                 |                                                                        |                                                                | (5,955                                                  | )       |         |         | (8,323   | )      
|                                                                         | Proceeds from long-term debt                                                                                      |                                                                        |                                                                | 20,144                                                  |         |         |         | 1,526    |        
|                                                                         | Repayments of long-term debt                                                                                      |                                                                        |                                                                | (19,288                                                 | )       |         |         | (5,894   | )      
|                                                                         |                                                                                                                   |                                                                        |                                                                |                                                         |         |         |         |         
|                                                                         |                                                                                                                   |                                                                        | Net cash provided by (used in) financing
    activities        |                                                         |         | (5,099  | )       |          |         | (12,691 | )     
|                                                                         |                                                                                                                   |                                                                        |                                                                |                                                         |         |         |         |         
|EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH
    EQUIVALENTS          |                                                                                                                   |                                                                        | (5,470                                                         | )                                                       |         |         | 615     |         
|                                                                         |                                                                                                                   |                                                                        |                                                                |                                                         |         |         |         |         
|NET DECREASE IN CASH AND CASH EQUIVALENTS                                |                                                                                                                   |                                                                        | (7,349                                                         | )                                                       |         |         | (2,510  | )       
|CASH AND CASH EQUIVALENTS AT BEGINNING OF THE
    PERIOD                 |                                                                                                                   |                                                                        | 67,737                                                         |                                                         |         |         | 35,606  |         
|                                                                         |                                                                                                                   |                                                                        |                                                                |                                                         |         |         |         |         
|CASH AND CASH EQUIVALENTS AT END OF THE PERIOD                           |                                                                                                                   | $                                                                      | 60,388                                                         |                                                         |         | $       | 33,096  |         
|                                                                         |                                                                                                                   |                                                                        |                                                                |                                                         |         |         |         |         
|SUPPLEMENTAL CASH FLOW INFORMATION:                                      |                                                                                                                   |                                                                        |                                                                |                                                         |         |         |         |         
|                                                                         | Interest paid                                                                                                     |                                                                        | $                                                              | 105,786                                                 |         |         | $       | 16,126   |        
|                                                                         |                                                                                                                   |                                                                        |                                                                |                                                         |         |         |         |         
|                                                                         | Foreign income taxes paid                                                                                         |                                                                        | $                                                              | 1,410                                                   |         |         | $       | 1,769    |        
|                                                                         |                                                                                                                   |                                                                        |                                                                |                                                         |         |         |         |         
|                                                                         | Cash paid during period for reorganization items:                                                                 |                                                                        |                                                                |                                                         |         |         |         |          |        
|                                                                         |                                                                                                                   |                                                                        | Professional fees                                              |                                                         |         |         |         |          | $       | 2,878   |       
|                                                                         |                                                                                                                   |                                                                        |                                                                |                                                         |         |         |         |         
|                                                                         |                                                                                                                   |                                                                        | Other reorganization payments                                  |                                                         |         |         |         |          | $       | 2,814   |       
|                                                                         |                                                                                                                   |                                                                        |                                                                |                                                         |         |         |         |         
|SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
    FINANCING ACTIVITIES: |                                                                                                                   |                                                                        |                                                                |                                                         |         |         |         |         
|                                                                         | Change to unrealized gain (loss) in
    investment available for sale                                             |                                                                        | $                                                              | (8,852                                                  | )       |         | $       | (1,454   | )      
|                                                                         |                                                                                                                   |                                                                        |                                                                |                                                         |         |         |         |         
|                                                                         | Broadband network vendor financing                                                                                |                                                                        | $                                                              | 29,184                                                  |         |         |         |          |        
|                                                                         |                                                                                                                   |                                                                        |                                                                |                                                         |         |         |         |         

See notes to condensed consolidated financial
statements.


F-5



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES

(DEBTOR-IN-POSSESSION)


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 (the 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).

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. In addition, the Company has
500,000 gross square feet of premises housing advanced hosting
capabilities.

The Holding 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 Holding 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 Peru S.A.               | 
|USA       |  |  | Impsat USA, Inc.               | 
|Venezuela |  |  | Telecomunicaciones Impsat S.A. | 

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

Financial
Restructuring On
March 11, 2002, the Holding Company, which has been advised
by Houlihan Lokey Howard & Zukin Capital, concluded
negotiations with an ad hoc committee representing certain
creditors under the Holding Companys Broadband Network
Vendor Financing Agreements, and certain holders of its
$125.0 million 12.125% Senior Guaranteed Notes due 2003,
$300.0 million 13.75% Senior Notes due 2005 and
$225.0 million 12.375% Senior Notes due 2008 (collectively,
the Senior Notes) of a non-binding term sheet
agreement in principle (the Restructuring Term
Sheet) relating to the terms of a proposed restructuring
of these long-term obligations, as part of a comprehensive
financial restructuring of the Company. The Restructuring Term
Sheet, contemplates the following principal components of the
proposed restructuring plan:



| |   |                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | all of the shares of the Holding Companys
    existing common stock, options granted under the Holding
    Companys stock option plans, and any other equity
    interests would be cancelled, retired and eliminated with no
    consideration paid therefore, and the Holding Company would
    issue new common stock in accordance with the
    proposed restructuring plan;
|
| |  | creditors under the Broadband Network Vendor
    Financing Agreements would receive                                                                                                                                                                                                                                                                                                 



| |   |                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------
| |  | $140.7 million senior secured debt issued by
    IMPSAT Argentina and IMPSAT Brazil and guaranteed by the Holding
    Company;

F-6



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




| |   |                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $22.5 million of new senior convertible
    notes guaranteed by IMPSAT Argentina and initially convertible
    into 5% of the Holding Companys new common stock on a
    fully-diluted basis; and
|
| |  | warrants to acquire up to 15% of the Holding
    Companys new common stock on a fully-diluted basis.                                                                                             



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | holders of the Notes due 2003 would receive
    $67.5 million of new senior convertible notes of the
    Holding Company guaranteed by IMPSAT Argentina and initially
    convertible into 23% of the Holding Companys new common
    stock on a fully-diluted basis                                                                                                                                                                                                                 
|
| |  | holders of the Notes due 2005 and the Notes due
    2008 would exchange those securities for 98% of the
    Companys new common stock, subject to certain dilutive
    events                                                                                                                                                                                                                                                                                                        
|
| |  | the Holding Companys guarantees of certain
    indebtedness owed by the Holding Companys operating
    subsidiaries to certain of their respective creditors will
    either be restructured in exchange for new senior convertible
    notes and warrants consistent with and proportionate to the
    restructuring treatment of analogous indebtedness under the
    Broadband Network Vendor Financing Agreements, or canceled in
    exchange for equity in the Holding Company
|
| |  | no distribution to the existing stockholders of
    the Holding Company                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | management would receive 2% of the Holding
    Companys new common stock plus stock options representing
    8% of the Holding Companys new common stock.                                                                                                                                                                                                                                                                                                                           

The Restructuring Term Sheet provided that
completion of the proposed restructuring plan would be subject
to certain conditions, including the plans acceptance by
affected classes of the Holding Companys securities
holders in accordance with the United States Bankruptcy Code
(Bankruptcy Code).

Petition for Relief Under
Chapter 11 On
June 11, 2002 (the Petition Date), the Holding
Company filed a voluntary petition for relief under Chapter 11
of the federal bankruptcy laws in the United States Bankruptcy
Court for the Southern District of New York. Under
Chapter 11, certain claims against the Holding Company in
existence prior to the filing of the petition for relief under
the federal bankruptcy laws are stayed while the Holding Company
continues business operations as Debtor-in-possession. These
claims are reflected in the September 30, 2002 consolidated
balance sheet as liabilities subject to compromise.
Additional claims (liabilities subject to compromise) may arise
subsequent to the filing date resulting from rejection of
executory contracts, including leases, and from the
determination of the Bankruptcy Court (or agreed to by parties
in interest) of allowed claims for contingencies and other
disputed amounts.

On September 4, 2002, the Holding Company
filed a Disclosure Statement (the Disclosure
Statement) and a Plan of Reorganization (the
Plan) with the Bankruptcy Court. The Plan reflects
the terms of the pre-arranged plan of reorganization that
holders of the indebtedness under the Companys Vendor
Financing Agreements and Senior Notes agreed to support. The
Plan, if approved, would restructure the Companys
indebtedness in the manner described above under the caption
Financial Restructuring. The Disclosure Statement
summarizes the Plan and contains information concerning among
other matters the history, business, results of operations,
management, properties, liabilities and the assets available for
distribution under the Plan as well as the anticipated
organization and operation of a reorganized Holding Company. The
Disclosure Statement also describes certain effects of Plan
confirmation, certain risk factors associated with the Plan the
manner in which distributions will be made to the Companys
creditors under the Plan for all amounts that were owed to such
parties on the Petition Date and the confirmation process and
voting procedures that holders of claims in impaired classes
must follow for their votes to be counted. On or around
November 1, 2002, the Plan and Disclosure Statement were
mailed to the impaired creditors and other interests who are
entitled to vote on confirmation of the Plan. Notice of the Plan
was also mailed to the Holding Companys equity holders,
but because they will receive nothing on account of their claims
under the Plan, the votes of the equity holder class were not
solicited. December 3, 2002 has been established as the

F-7



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


deadline for the receipt of votes to accept or
reject the Plan. The Bankruptcy Court has scheduled a hearing
for December 11, 2002 to consider confirmation of the Plan.
At the confirmation hearing; the Bankruptcy Court will determine
whether sufficient acceptances have been received to confirm the
Plan or, if not, whether it is nevertheless confirmable under
applicable bankruptcy law. Assuming the Bankruptcy Court
approves the Plan, the Company currently expects the Plan to
become effective and the Companys Chapter 11
restructuring proceeding to be completed prior to
December 31, 2002. No assurance can be given, however, that
the Bankruptcy Court will confirm the Plan or, if confirmed,
that the Plan will be consummated in the manner that the Company
anticipates or at all.

The Holding Companys unconsolidated balance
sheet as of September 30, 2002 consists primarily of cash
and trading investments of approximately $26.0 million,
other assets of approximately $0.2 million and the net
investment in each of its consolidated subsidiaries. The Holding
Companys liabilities consists primarily of accounts
payable of approximately $2 million and the
liabilities subject to compromise described in Note
11.

The Holding Companys statement of
operations for the nine months ended September 30, 2002
consists of the equity in the earnings of its consolidated
subsidiaries, interest income earned on its trading investments,
offset by the interest expense on the Senior Notes, certain
general and administrative expenses and the reorganization items
described in Note 11.

The accompanying condensed consolidated financial
statements do not purport to reflect or provide for the
consequences of the bankruptcy proceedings. In particular, such
financial statements do not purport to show (a) as to
assets, their realizable value on a liquidation basis or their
availability to satisfy liabilities; (b) as to prepetition
liabilities, the amounts that may be allowed for claims or
contingencies, or the status and priority thereof; (c) as
to stockholder accounts, the effect of any changes that may be
made in the capitalization of the Holding Company; or
(d) as to operations, the effect of any changes that may be
made in the business of the Holding Company and its subsidiaries.

Going Concern
Matters The Companys
history of losses, negative working capital, stockholders
deficiency and the Chapter 11 proceedings raise substantial
doubt about the Holding Companys ability to continue as a
going concern. The consolidated financial statements do not
include any adjustments relating to recoverability and
classification of recorded asset amounts or the amount and
classification of liabilities that might be necessary should the
Holding Company be unable to continue as a going concern. The
ability of the Holding Company to continue as a going concern
and to appropriately use the going concern basis is dependent
upon, among other things, (i) the Holding Companys
ability to revise and implement its business plan,
(ii) confirmation of the reorganization plan under the
Bankruptcy Code, (iii) the Holding Companys ability
to achieve profitable operations after such confirmation, and
(iv) the Holding Companys ability to generate
sufficient cash from operations to meet its obligations. The
consolidated financial statements do not give effect to any
adjustment to the carrying value of assets or amounts and
classifications of liabilities that might result from the
uncertainties described above.

2.     SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES

Basis of
Presentation The financial
statements are presented on a condensed consolidated basis and
include the accounts of IMPSAT Fiber Networks, Inc and its
subsidiaries. All significant intercompany transactions and
balances have been eliminated. AICPA Statement of Position
(SOP) 90-7, Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code, was followed in
the preparation of these condensed consolidated financial
statements.

F-8



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


Interim Financial
Information The unaudited
condensed consolidated financial statements as of
September 30, 2002 and for the three and nine months ended
September 30, 2001 and 2002 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 months ended
September 30, 2002 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. Significant assumptions and
estimates were used in determining the carrying values of the
Companys telecommunication infrastructure and
collectibility of receivables. 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, 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 has not entered into derivative transactions to hedge
against potential foreign exchange or interest rate risks.

Currency
Risks In early January
2002, as Argentinas ongoing political and financial crisis
deepened, the country defaulted on its massive foreign debt and
the government of President Eduardo Duhalde, who entered office
on January 1, 2002, abandoned the decade-old fixed
peso-dollar exchange rate and permitted the peso
to float freely against the U.S. dollar. The pesofree
market opened on January 11, 2002 at 1.65 pesosto
the U.S. dollar and has been volatile since. At
September 30, 2002, the Argentine pesotraded at
pesos3.75 to the U.S. dollar. The devaluation of the
Argentine pesowill generally affect the Companys
condensed consolidated financial statements by generating
foreign exchange gains or losses on peso-denominated
monetary liabilities and assets of IMPSAT Argentina and will
generally result in a decrease, in U.S. dollar terms, in the
Companys revenues, costs and expenses in Argentina.

During December 2001, the Argentine government
instituted a system for the freezing of the deposits in its
financial system. In February 2002, these measures led to, among
other things, the pesification decree.
Generally, this decree mandates that all monetary obligations
arising from agreements subject to Argentine law denominated in
foreign currency and existing as of January 6, 2002 are
mandatorily converted into monetary obligations denominated in
pesosat an exchange rate of one U.S. dollar to one
peso. Such obligations generally may be adjusted pursuant
to the coeficiente de estabilizacion de
referencia(CER), as published by the Argentine
central bank based on the Argentine consumer price index. Under
the pesification decree, after the foreign
currency denominated contracts are converted to pesos(at
the rate of one pesoto one U.S. dollar rate), the
contracts may be privately renegotiated by the parties back into
foreign currency denominated terms. Under the
pesification decree, if a contract governed
by Argentine law is entered into after the decrees
enactment, that contract may be denominated in either U.S.
dollars or pesos. However, if the parties choose to
denominate the new contract in pesos, payments under that
contract are not entitled to be adjusted according to the CER or
any other consumer price index. Contracts denominated in
pesosbefore the decree continue to be denominated in
pesos, unaffected by the decree. Finally, the decree
provides that if the value of the goods sold or services
rendered is higher or lesser than the price payable after the
mandatory pesification, either party may
request an equitable adjustment of such price. If
the parties do not agree on the equitable
adjustment, the dispute is to be settled by the courts,
which will attempt to preserve the contractual agreement between
the parties. The devaluation and the
pesification of agreements

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SUBSIDIARIES


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NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


of the Company governed by Argentine law may have
adverse, unknown and unforeseeable effects on the Company.

Since the pesification decree,
IMPSAT Argentinas customer contracts and operating cash
inflows are now predominantly denominated in pesoswhile
its debt service payments and a portion of its costs (including
capital equipment purchases and payments for certain leased
telecommunication capacity) are denominated in U.S. dollars.
Accordingly, the Companys financial condition and results
of operations in Argentina are dependent upon IMPSAT
Argentinas ability to generate sufficient pesos(in
U.S. dollar terms) to pay its costs, expenses and to satisfy its
debt service requirements. Because of the recent nature of these
events and the significant uncertainties regarding the extent
and duration of the devaluation and the direction of the fiscal
policies in Argentina, management cannot presently determine or
reasonably estimate the impact a continued economic crisis in
that country could possibly have on IMPSAT Argentinas and
the Companys overall cash flows, financial condition, and
results of operations.

Numerous uncertainties exist surrounding the
ultimate resolution of Argentinas economic and political
instability and actual results could differ from those estimates
and assumptions utilized. The Argentine economic and political
situation continues to evolve and the Argentine government may
enact future regulations or policies that, when finalized and
adopted, may adversely and materially impact, among other items,
(i) the realized revenues the Company receives for services
offered in Argentina; (ii) the timing of repatriations of
any dividends or other cash flows from IMPSAT Argentina to the
Company in the United States; (iii) the Companys
asset valuations; and (iv) the Companys
pesos-denominated monetary assets and liabilities.

The Companys results in Brazil also were
adversely affected during the period by the devaluation of the
Brazilian real against the U.S. dollar. At June 30, 2001,
the real traded at a rate of R$2.83 = $1.00, and at September
30, 2002 it had depreciated to R$3.84 = $1.00. These and prior
devaluations have had a negative effect on the Companys
real-denominated revenues. The devaluation of the real and the
decline in growth in the Brazilian economy have been caused in
part by the continued recession in the region, a general
aversion to emerging markets by foreign direct and financial
investors and the overall decline in worldwide economic
production. On October 27, 2002, Luiz Inacio Lula da Silva
of the left-wing Workers Party was elected president of
Brazil. Although, as a candidate, Mr. da Silva expressed support
for tightening of Brazils fiscal policy as a condition of
an IMF loan and promised to honor and stabilize government debt,
anxiety has persisted within the investor community regarding
whether Mr. da Silva can restore financial confidence and
quickly establish trust in his administration and its ability to
govern. A protraction or worsening of the economic difficulties
in Brazil, including further currency devaluations, could have a
material adverse effect on IMPSAT Brazils and the
Companys overall financial condition and results of
operations.

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 the Companys 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 condensed 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

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SUBSIDIARIES


(DEBTOR-IN-POSSESSION)




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


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 three and nine
months ended September 30, 2001 and 2002.

Non-Monetary
Transactions The Company
may exchange capacity on its Broadband Network for capacity from
other carriers through the exchange of IRUs. These transactions
are accounted for in accordance with Accounting Principles Board
Opinion No. 29, Accounting for Nonmonetary
Transactions, where an exchange of similar IRUs is recorded
at a historical carryover basis with no revenue or any gain or
loss being recorded.

Broadband
Network Costs in
connection with the construction, installation and expansion of
the Broadband Network are capitalized. 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 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 | 
|Equipment and materials |  |  | 10 years    | 
|Right of way            |  |  | 1020 years | 
|IRU investments         |  |  | 15 years    | 

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 or
available for sale for long term investments and are
carried at fair value. Unrealized gains and losses for trading
investments are included in the Companys results of
operations. Unrealized gains or losses, net of tax, for
available for sale investments are included in accumulated other
comprehensive 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 the related undiscounted future
cash flows. If the carrying amounts exceed such cash flows,
identifying a possible impairment, 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

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SUBSIDIARIES


(DEBTOR-IN-POSSESSION)




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


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
charge based on internal estimates of fair value, other
indicators and not on an independent valuation of its
telecommunication infrastructure.

During the three and nine month periods ended
September 30, 2002, no impairments were recorded.

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 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.

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
director compensation plans at fair value. The Company has
chosen to continue to account for stock-based compensation to
employees and non-employee directors 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 directors 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 director must pay
for the stock. The Company also provides the required
disclosures of SFAS No. 123.

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 Loss |  |      
|                              |  | Foreign     |         | on Investments  |  |      
|                              |  | Currency    |         | Available for   |  |      
|                              |  | Translation |         | Sale            |  | Total
|                              |  |             |         |                 |  |      
|Balance at December 31, 2001  |  | $           | (13,395 | )               |  | $     | (317 | ) |  | $ | (13,712 | )
|Change during the period      |  |             | 44,954  |                 |  |       | (597 | ) |  |   | 44,357  |  
|                              |  |             |         |                 |  |       |      |   |  |   |         |  
|Balance at September 30, 2002 |  | $           | 31,559  |                 |  | $     | (914 | ) |  | $ | 30,645  |  
|                              |  |             |         |                 |  |       |      |   |  |   |         |  

New Accounting
Pronouncements In June
2001, the Financial Accounting Standards Board
(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

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IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


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 consolidated 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
adoption of SFAS No. 144 did not have a material effect on
the Companys consolidated financial statements or
disclosures.

In April 2002, the FASB issued SFAS No. 145,
Rescission of the FASB Statements No. 44 and 64,
Amendment of FASB Statement No. 13, and Technical
Corrections. SFAS No. 145 eliminates the requirement to
classify gains and losses from the extinguishment of
indebtedness as extraordinary, requires certain lease
modifications to be treated the same as a sale-leaseback
transaction, and makes other non-substantive technical
corrections to existing pronouncements. SFAS No. 145 is
effective for fiscal years beginning after May 15, 2002, with
earlier adoption encouraged. The Company does not expect the
adoption of SFAS 145 to have a material effect on its
consolidated financial statements.

In July 2002, the FASB issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities. SFAS No. 146 requires companies to
recognize costs associated with exit or disposal activities when
they are incurred rather than at the date of a commitment to an
exit or disposal plan. Examples of costs covered by the standard
include lease termination costs and certain employee severance
costs that are associated with a restructuring, discontinued
operations, plant closing, or other exit or disposal activities.
SFAS No. 146 is effective prospectively for exit or
disposal activities initiated after December 31, 2002, with
earlier adoption encouraged. As the provisions of SFAS
No. 146 are required to be applied prospectively after the
adoption date, the Company cannot determine the potential
effects that adoption of SFAS No. 146 will have on its
consolidated financial statements.

Reclassifications
Certain amounts in the 2001 condensed consolidated financial
statements have been reclassified to conform with the 2002
presentation.

3.     INVESTMENTS

The Companys investments consist of the
following at December 31, 2001 and September 30, 2002:

|                                   |  |              |        |               |  |   |        | 
|---------------------------------- |  | ------------ | ------ | ------------- |  | - | ------ | 
|                                   |  | December 31, |        | September 30,
|                                   |  | 2001         |        | 2002         
|                                   |  |              |        |              
|Trading investments, at fair value |  | $            | 29,319 |               |  | $ | 26,074 | 
|                                   |  |              |        |               |  |   |        | 
|Investments in common stock        |  | $            | 3,307  |               |  | $ | 1,594  | 
|                                   |  |              |        |               |  |   |        | 

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

The Companys investment in common stock
includes a 3.3% ownership interest in the outstanding common
stock of Claxson Interactive Group Inc., an integrated media
company with operations in Latin America. This investment is
subject to equity price risk. The Company has not taken any
actions to hedge this market risk exposure. During the period
ended September 30, 2002, the Company recorded a non-cash
charge of $0.8 million which reflected an
other-than-temporary decline in value of this investment based
upon a sustained reduction in the quoted market price.

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IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


4.     TRADE ACCOUNTS
RECEIVABLE

Trade accounts receivable, by operating
subsidiaries, at December 31, 2001 and September 30,
2002, are summarized as follows:

|                                      |       |              |         |               |  |   |         |        | 
|------------------------------------- | ----- | ------------ | ------- | ------------- |  | - | ------- | ------ | 
|                                      |       | December 31, |         | September 30,
|                                      |       | 2001         |         | 2002         
|                                      |       |              |         |              
|IMPSAT Argentina                      |       | $            | 51,037  |               |  | $ | 29,083  |       
|IMPSAT Brasil                         |       |              | 6,714   |               |  |   | 3,816   |       
|IMPSAT Colombia                       |       |              | 5,033   |               |  |   | 3,942   |       
|IMPSAT Venezuela                      |       |              | 6,637   |               |  |   | 8,410   |       
|All other countries                   |       |              | 12,772  |               |  |   | 11,237  |       
|                                      |       |              |         |               |  |   |         |       
|                                      | Total |              |         | 82,193        |  |   |         | 56,488 | 
|Less: allowance for doubtful accounts |       |              | (23,782 | )             |  |   | (18,279 | )     
|                                      |       |              |         |               |  |   |         |       
|Trade accounts receivable, net        |       | $            | 58,411  |               |  | $ | 38,209  |       
|                                      |       |              |         |               |  |   |         |       

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, 2001 and for the
nine months ended September 30, 2002 is as follows:

|                                |  |              |        |               |  |   |         |  
|------------------------------- |  | ------------ | ------ | ------------- |  | - | ------- | -
|                                |  | December 31, |        | September 30,
|                                |  | 2001         |        | 2002         
|                                |  |              |        |              
|Beginning balance               |  | $            | 22,509 |               |  | $ | 23,782  |  
|Provision for doubtful accounts |  |              | 16,784 |               |  |   | 7,653   |  
|Write-offs, net of recoveries   |  |              | (7,697 | )             |  |   | (2,799  | )
|Effect of exchange rate change  |  |              | (7,814 | )             |  |   | (10,357 | )
|                                |  |              |        |               |  |   |         |  
|Ending balance                  |  | $            | 23,782 |               |  | $ | 18,279  |  
|                                |  |              |        |               |  |   |         |  

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 and are as
follows at December 31, 2001 and September 30, 2002:

|                    |       |              |        |               |  |   |       |        | 
|------------------- | ----- | ------------ | ------ | ------------- |  | - | ----- | ------ | 
|                    |       | December 31, |        | September 30,
|                    |       | 2001         |        | 2002         
|                    |       |              |        |              
|IMPSAT Argentina    |       | $            | 22,155 |               |  | $ | 4,600 |       
|IMPSAT Brazil       |       |              | 3,209  |               |  |   | 1,847 |       
|IMPSAT Colombia     |       |              | 3,777  |               |  |   | 2,574 |       
|IMPSAT Venezuela    |       |              | 2,667  |               |  |   | 1,494 |       
|All other countries |       |              | 7,195  |               |  |   | 5,299 |       
|                    |       |              |        |               |  |   |       |       
|                    | Total |              | $      | 39,003        |  |   | $     | 15,814 | 
|                    |       |              |        |               |  |   |       |       

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IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)




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, 2001 and
September 30, 2002:

|                                            |       |              |         |               |  |   |         |         | 
|------------------------------------------- | ----- | ------------ | ------- | ------------- |  | - | ------- | ------- | 
|                                            |       | December 31, |         | September 30,
|                                            |       | 2001         |         | 2002         
|                                            |       |              |         |              
|Network infrastructure                      |       | $            | 168,301 |               |  | $ | 128,520 |        
|Equipment and materials                     |       |              | 132,494 |               |  |   | 120,654 |        
|Right of ways                               |       |              | 16,056  |               |  |   | 8,946   |        
|IRU investments                             |       |              | 46,913  |               |  |   | 40,658  |        
|                                            |       |              |         |               |  |   |         |        
|                                            | Total |              |         | 363,764       |  |   |         | 298,678 | 
|Less: accumulated depreciation              |       |              | (83,373 | )             |  |   | (96,663 | )      
|                                            |       |              |         |               |  |   |         |        
|                                            | Total |              |         | 280,391       |  |   |         | 202,015 | 
|Under construction  Network infrastructure |       |              | 30,207  |               |  |   | 18,911  |        
|                                            |       |              |         |               |  |   |         |        
|                                            | Total |              | $       | 310,598       |  |   | $       | 220,926 | 
|                                            |       |              |         |               |  |   |         |        

The recap of accumulated depreciation for the
year ended December 31, 2001 and for the nine months ended
September 30, 2002 is as follows:

|                          |  |              |        |               |  |   |         |  
|------------------------- |  | ------------ | ------ | ------------- |  | - | ------- | -
|                          |  | December 31, |        | September 30,
|                          |  | 2001         |        | 2002         
|                          |  |              |        |              
|Beginning balance         |  | $            | 46,433 |               |  | $ | 83,373  |  
|Depreciation expense      |  |              | 41,173 |               |  |   | 23,842  |  
|Disposals and retirements |  |              | (4,233 | )             |  |   | (10,552 | )
|                          |  |              |        |               |  |   |         |  
|Ending balance            |  | $            | 83,373 |               |  | $ | 96,663  |  
|                          |  |              |        |               |  |   |         |  

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, 2002, a total of $
245.4 million was outstanding. (See Note 1 for a
description of the restructuring of these amounts under the
Holding Companys proposed restructuring plan.)

The Companys subsidiaries have obtained
additional vendor financing from 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 $14.5 million was
disbursed and outstanding as of September 30, 2002, which
are guaranteed by the Company.

Global
Crossing During the
year ended December 31, 2000, the Company completed and
delivered to Global Crossing the portion of the Trans-Andean
Crossing System connecting Las Toninas, Argentina and Santiago,
Chile. As part of the Broadband Network and the South American
Crossing, the Company also constructed turnkey backhaul segments
and granted IRUs to Global Crossing in Peru and Brazil between

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IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


Global Crossings landing points in those
countries and its metropolitan points of presence located at the
Companys telehouses in Lima, Peru and Sao Paulo and Rio de
Janeiro, Brazil. In connection with the delivery of such
infrastructure to Global Crossing during 2000, the Company
recognized during the nine months ended September 30, 2001,
revenues and costs totaling $7.2 million and
$3.3 million, respectively.

As part of its arrangements with Global Crossing,
the Company has agreed to purchase from Global Crossing
indefeasible rights of use of capacity valued at not less than
$46 million on any of Global Crossings fiber optic
cable networks worldwide. These rights enable the Company to
interconnect the Companys networks in Argentina and Brazil
and give the Company global international access. The Company
had purchased approximately $9.7 million under this
agreement as of December 31, 2001 and has not purchased any
amount during the nine months ended September 30, 2002,
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 advance payments related to these
agreements. These advance payments are recorded as deferred
revenue in the accompanying condensed consolidated balance
sheets. During the three and nine months ended
September 30, 2002, the Company recognized approximately
$1.8 million and $3.8 million, respectively, 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, 2001 and September 30, 2002, consisted of:

|                                        |       |              |          |               |  |   |          |         | 
|--------------------------------------- | ----- | ------------ | -------- | ------------- |  | - | -------- | ------- | 
|                                        |       | December 31, |          | September 30,
|                                        |       | 2001         |          | 2002         
|                                        |       |              |          |              
|Land                                    |       | $            | 11,223   |               |  | $ | 11,185   |        
|Building and improvements               |       |              | 68,350   |               |  |   | 69,396   |        
|Operating communications equipment      |       |              | 424,428  |               |  |   | 408,799  |        
|Furniture, fixtures and other equipment |       |              | 36,376   |               |  |   | 38,255   |        
|                                        |       |              |          |               |  |   |          |        
|                                        | Total |              |          | 540,377       |  |   |          | 527,635 | 
|Less: accumulated depreciation          |       |              | (332,345 | )             |  |   | (348,515 | )      
|                                        |       |              |          |               |  |   |          |        
|                                        | Total |              |          | 208,032       |  |   |          | 179,120 | 
|Equipment in transit                    |       |              | 3,413    |               |  |   | 2,773    |        
|Works in process                        |       |              | 3,014    |               |  |   | 1,913    |        
|                                        |       |              |          |               |  |   |          |        
|Property, plant and equipment, net      |       | $            | 214,459  |               |  | $ | 183,806  |        
|                                        |       |              |          |               |  |   |          |        

The recap of accumulated depreciation for the
year ended December 31, 2001 and for the nine months ended
September 30, 2002, is as follows:

|                          |  |              |         |               |  |   |         |  
|------------------------- |  | ------------ | ------- | ------------- |  | - | ------- | -
|                          |  | December 31, |         | September 30,
|                          |  | 2001         |         | 2002         
|                          |  |              |         |              
|Beginning balance         |  | $            | 265,354 |               |  | $ | 332,345 |  
|Depreciation expense      |  |              | 76,465  |               |  |   | 39,706  |  
|Disposals and retirements |  |              | (9,474  | )             |  |   | (23,536 | )
|                          |  |              |         |               |  |   |         |  
|Ending balance            |  | $            | 332,345 |               |  | $ | 348,515 |  
|                          |  |              |         |               |  |   |         |  

F-16



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


8.     SHORT-TERM
DEBT

As of December 31, 2001, several of the
Companys subsidiaries maintain short-term credit
facilities with local banks, denominated in U.S. dollars with
interest rates ranging from 14% to 21% and the amount
outstanding under these credit facilities totaled approximately
$8.3 million. As of September 30, 2002 these credit
facilities were repaid and not renewed.

9.     LONG-TERM
DEBT

The Companys long-term debt at
December 31, 2001 and September 30, 2002, is detailed
as follows:

|                                                                                                                                                                     |                                          |                                                     |                      |               |        |         |          |   |        |         | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------- | --------------------------------------------------- | -------------------- | ------------- | ------ | ------- | -------- | - | ------ | ------- | 
|                                                                                                                                                                     |                                          | December 31,                                        |                      | September 30,
|                                                                                                                                                                     |                                          | 2001                                                |                      | 2002         
|                                                                                                                                                                     |                                          |                                                     |                      |              
|Senior Notes:                                                                                                                                                        |                                          |                                                     |                      |               |        |         |          |  
|                                                                                                                                                                     | 12.125% Senior Guaranteed Notes due 2003 |                                                     | $                    | 125,000       |        |         |          |   |       
|                                                                                                                                                                     | 13.75% Senior Notes due 2005             |                                                     |                      | 300,000       |        |         |          |   |       
|                                                                                                                                                                     | 12.375% Senior Notes due 2008            |                                                     |                      | 225,000       |        |         |          |   |       
|Term notes, maturing from 2001 through 2005;
    collateralized by buildings and equipment, the assignment of
    customer contracts and investment; denominated in: |                                          |                                                     |                      |               |        |         |          |  
|                                                                                                                                                                     |                                          | U.S. dollars (interest rates
    5.81%  12.66%)    |                      |               | 16,325 |         |          | $ | 11,904 |        
|                                                                                                                                                                     |                                          | Local currency (interest rates
    10.37%  38.37%) |                      |               | 21,904 |         |          |   | 21,454 |        
|Eximbank notes (interest rates
    3.88%  10.09%), maturing semiannually through
    2002 and 2004                                                                  |                                          |                                                     | 18,585               |               |        |         | 18,275   |  
|Vendor financing (3%  24.68%),
    maturing 2004 to 2008                                                                                                            |                                          |                                                     | 275,451              |               |        |         | 259,897  |  
|                                                                                                                                                                     |                                          |                                                     |                      |               |        |         |          |  
|                                                                                                                                                                     |                                          |                                                     | Total long-term debt |               |        | 982,265 |          |   |        | 311,530 | 
|Less: current portion including defaulted
    indebtedness                                                                                                           |                                          |                                                     | (959,076             | )             |        |         | (282,292 | )
|                                                                                                                                                                     |                                          |                                                     |                      |               |        |         |          |  
|Long-term debt, net                                                                                                                                                  |                                          | $                                                   | 23,189               |               |        | $       | 29,238   |  
|                                                                                                                                                                     |                                          |                                                     |                      |               |        |         |          |  

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

The Companys liquidity difficulties 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 for 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 expired on November 25, 2001 and the Broadband
Network Vendor Financing Agreements became due and payable, and
the Company is in default, see Note 1. The Company did not make
the semi-annual interest payments on the Senior Notes due 2003
(which were due on January 15, 2002 and July 15,
2002), on the Senior Notes due 2005 (which were due on
February 15, 2002 and August 15, 2002), or on the Senior
Notes due 2008 (which were due on December 15, 2001 and
June 15, 2002). See Note 1. As a result of the
Companys default under the Broadband Network Vendor
Financing Agreements, the defaulted amounts have been
reclassified to current portion of long-term debts as of
December 31, 2001 and September 30, 2002, respectively.

During the second quarter of 2002, the Company
extinguished certain of its vendor financing obligations prior
to maturity and recorded a gain on early extinguishment of
approximately $16.4 million.

F-17



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


10.     INCOME
TAXES

The composition of the (provision for) benefit
from income taxes, all of which is for foreign taxes, for the
three and nine months ended September 30, 2001 and 2002 is
as follows:

|         |       |                    |      |                   |  |      |      |      |   |   |         |         |   |   |        |        |  
|-------- | ----- | ------------------ | ---- | ----------------- |  | ---- | ---- | ---- | - | - | ------- | ------- | - | - | ------ | ------ | -
|         |       |                    |      |                  
|         |       | Three Months Ended |      | Nine Months Ended
|         |       | September 30,      |      | September 30,    
|         |       |                    |      |                  
|         |       | 2001               |      | 2002              |  | 2001 |      | 2002
|         |       |                    |      |                   |  |      |      |     
|Current  |       | $                  | (435 | )                 |  | $    | (412 | )    |   | $ | (1,042  | )       |   | $ | (1,391 | )     
|Deferred |       |                    | 519  |                   |  |      | 5    |      |   |   | (25,361 | )       |   |   | (167   | )     
|         |       |                    |      |                   |  |      |      |      |   |   |         |         |   |   |        |       
|         | Total |                    | $    | 84                |  |      | $    | (407 | ) |   | $       | (26,403 | ) |   | $      | (1,558 | )
|         |       |                    |      |                   |  |      |      |      |   |   |         |         |   |   |        |       

The foreign statutory tax rates range from 15% to
35% depending on the particular country.

As of September 30, 2002, the Company has
recorded a valuation allowance to offset its entire net deferred
tax asset.

11.     LIABILITIES
SUBJECT TO COMPROMISE AND REORGANIZATION ITEMS

Liabilities subject to
compromise This refers
to liabilities incurred prior to the commencement of the
Chapter 11 case. These liabilities consist primarily of
amounts outstanding under the Companys Senior Notes and
also includes accounts payable, accrued interest and other
accrued expenses. These amounts represent the Companys
estimate of known or potential claims to be resolved in
connection with the Chapter 11 case. Such claims remain
subject to future adjustments. Adjustments may result from
(i) negotiations, (ii) actions of the Bankruptcy
Court, (iii) further developments with respect to disputed
claims, (iv) future rejection of additional executory
contracts or unexpired leases, (v) the determination as to
the value of any collateral securing claims, (vi) proof of
claims or (vii) other events. Payment terms for these
amounts, which are considered long-term liabilities at this
time, will be established in connection with a plan of
reorganization.

The principal categories of claims classified as
liabilities subject to compromise under reorganization
proceedings are identified below:

|                 |                                          |   |         |         | 
|---------------- | ---------------------------------------- | - | ------- | ------- | 
|Senior Notes:    |                                          |   |         |        
|                 | 12.125% Senior Guaranteed Notes due 2003 |   | $       | 125,000 | 
|                 | 13.75% Senior Notes due 2005             |   |         | 300,000 | 
|                 | 12.375% Senior Notes due 2008            |   |         | 225,000 | 
|Accrued Interest |                                          |   | 77,317  |        
|Accounts payable |                                          |   | 205     |        
|                 |                                          |   |         |        
|Total            |                                          | $ | 727,522 |        
|                 |                                          |   |         |        

Contractual interest expense not accrued on
prepetition debt totaled $28.3 million for the period that
began as of June 11, 2002. the date of the Holding
Companys petition for relief under chapter 11 of the
Bankruptcy Code, and ended September 30, 2002.

F-18



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


Reorganization
items Reorganization
items during the three and nine months period ended
September 30, 2002 are comprised of the following:

|                                      |       |                    |       |                    |  |   |       |        | 
|------------------------------------- | ----- | ------------------ | ----- | ------------------ |  | - | ----- | ------ | 
|                                      |       | Three Months       |       | Nine Months       
|                                      |       | Ended              |       | Ended             
|                                      |       | September 30, 2002 |       | September 30, 2002
|                                      |       |                    |       |                   
|Write-off of deferred financing costs |       | $                  | 7,910 |                    |  | $ | 7,910 |       
|Professional fees                     |       |                    | 1,387 |                    |  |   | 7,079 |       
|                                      |       |                    |       |                    |  |   |       |       
|                                      | Total |                    | $     | 9,297              |  |   | $     | 14,989 | 
|                                      |       |                    |       |                    |  |   |       |       

12.     OPERATING
SEGMENT INFORMATION

The Companys operating segment information,
by subsidiary, is as follows for the three and nine months ended
September 30, 2001 and 2002:

Three Months Ended September 30,

|                             |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |       |  |   |         |        |  |   |        |        |   |   |         |        | 
|---------------------------- | -------------------- | --------- | ------- | ------ |  | -------- | ------- | --------- |  | --------- | ------ | ------------ |  | ----- | ------ | ----- |  | - | ------- | ------ |  | - | ------ | ------ | - | - | ------- | ------ | 
|                             |                      |           |         |        |  |          |         |           |  | All other |        |              |  |      
|2002                         |                      | Argentina |         | Brazil |  | Colombia |         | Venezuela |  | countries |        | Eliminations |  | Total
|                             |                      |           |         |        |  |          |         |           |  |           |        |              |  |      
|Net Revenues                 |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |       |  |   |         |        |  |   |        |        |   |   |         |       
|Data & value added services: |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |       |  |   |         |        |  |   |        |        |   |   |         |       
|                             | Satellite            |           | $       | 3,974  |  |          | $       | 2,355     |  |           | $      | 4,133        |  |       | $      | 5,512 |  |   | $       | 7,027  |  |   | $      | (1,619 | ) |   | $       | 21,382 | 
|                             | Broad Band           |           |         | 3,727  |  |          |         | 3,271     |  |           |        | 8,670        |  |       |        | 1,192 |  |   |         | 5,581  |  |   |        | (3,332 | ) |   |         | 19,109 | 
|                             | Value added services |           |         | 1,335  |  |          |         | 784       |  |           |        | 187          |  |       |        | 206   |  |   |         | 3,779  |  |   |        | (2,881 | ) |   |         | 3,410  | 
|                             |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |       |  |   |         |        |  |   |        |        |   |   |         |       
|                             | Subtotal             |           |         | 9,036  |  |          |         | 6,410     |  |           |        | 12,990       |  |       |        | 6,910 |  |   |         | 16,387 |  |   |        | (7,832 | ) |   |         | 43,901 | 
|                             |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |       |  |   |         |        |  |   |        |        |   |   |         |       
|Internet                     |                      |           | 1,585   |        |  |          | 856     |           |  |           | 1,132  |              |  |       | 631    |       |  |   | 2,703   |        |  |   | (574   | )      |   |   | 6,333   |       
|Telephony                    |                      |           | 1,858   |        |  |          |         |           |  |           |        |              |  |       |        |       |  |   | 1,688   |        |  |   | (631   | )      |   |   | 2,915   |       
|Services to carriers         |                      |           | 906     |        |  |          | 633     |           |  |           | 63     |              |  |       |        |       |  |   | 241     |        |  |   | (20    | )      |   |   | 1,823   |       
|Sales of equipment           |                      |           | 204     |        |  |          | 9       |           |  |           | 5      |              |  |       | 86     |       |  |   | 32      |        |  |   |        |        |   |   | 336     |       
|                             |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |       |  |   |         |        |  |   |        |        |   |   |         |       
|Total net revenues           |                      | $         | 13,589  |        |  | $        | 7,908   |           |  | $         | 14,190 |              |  | $     | 7,627  |       |  | $ | 21,051  |        |  | $ | (9,057 | )      |   | $ | 55,308  |       
|                             |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |       |  |   |         |        |  |   |        |        |   |   |         |       
|Operating income (loss)      |                      | $         | (4,459  | )      |  | $        | (949    | )         |  | $         | 734    |              |  | $     | 1,595  |       |  | $ | (2,208  | )      |  |   |        |        |   | $ | (5,287  | )     
|                             |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |       |  |   |         |        |  |   |        |        |   |   |         |       
|Total assets                 |                      | $         | 178,558 |        |  | $        | 106,938 |           |  | $         | 88,887 |              |  | $     | 55,352 |       |  | $ | 105,272 |        |  |   |        |        |   | $ | 535,007 |       
|                             |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |       |  |   |         |        |  |   |        |        |   |   |         |       

F-19



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


|                                                   |                      |           |          |        |  |          |         |           |  |           |         |              |  |       |        |       |  |   |          |        |  |   |         |        |   |   |          |        | 
|-------------------------------------------------- | -------------------- | --------- | -------- | ------ |  | -------- | ------- | --------- |  | --------- | ------- | ------------ |  | ----- | ------ | ----- |  | - | -------- | ------ |  | - | ------- | ------ | - | - | -------- | ------ | 
|                                                   |                      |           |          |        |  |          |         |           |  | All other |         |              |  |      
|2001                                               |                      | Argentina |          | Brazil |  | Colombia |         | Venezuela |  | countries |         | Eliminations |  | Total
|                                                   |                      |           |          |        |  |          |         |           |  |           |         |              |  |      
|Net Revenues                                       |                      |           |          |        |  |          |         |           |  |           |         |              |  |       |        |       |  |   |          |        |  |   |         |        |   |   |          |       
|Data & value added services:                       |                      |           |          |        |  |          |         |           |  |           |         |              |  |       |        |       |  |   |          |        |  |   |         |        |   |   |          |       
|                                                   | Satellite            |           | $        | 13,041 |  |          | $       | 4,156     |  |           | $       | 5,275        |  |       | $      | 6,226 |  |   | $        | 8,115  |  |   | $       | (3,987 | ) |   | $        | 32,826 | 
|                                                   | Broad Band           |           |          | 7,981  |  |          |         | 2,909     |  |           |         | 9,058        |  |       |        | 903   |  |   |          | 3,360  |  |   |         | (2,256 | ) |   |          | 21,955 | 
|                                                   | Value added services |           |          | 2,008  |  |          |         | 51        |  |           |         | 170          |  |       |        | 401   |  |   |          | 4,007  |  |   |         | (2,321 | ) |   |          | 4,316  | 
|                                                   |                      |           |          |        |  |          |         |           |  |           |         |              |  |       |        |       |  |   |          |        |  |   |         |        |   |   |          |       
|                                                   | Subtotal             |           |          | 23,030 |  |          |         | 7,116     |  |           |         | 14,503       |  |       |        | 7,530 |  |   |          | 15,482 |  |   |         | (8,564 | ) |   |          | 59,097 | 
|                                                   |                      |           |          |        |  |          |         |           |  |           |         |              |  |       |        |       |  |   |          |        |  |   |         |        |   |   |          |       
|Internet                                           |                      |           | 4,884    |        |  |          | 2,428   |           |  |           | 976     |              |  |       | 524    |       |  |   | 3,907    |        |  |   | (1,107  | )      |   |   | 11,612   |       
|Telephony                                          |                      |           | 2,418    |        |  |          |         |           |  |           |         |              |  |       |        |       |  |   | 1,899    |        |  |   | (911    | )      |   |   | 3,406    |       
|Services to carriers                               |                      |           | 910      |        |  |          | 113     |           |  |           |         |              |  |       |        |       |  |   | 794      |        |  |   | (257    | )      |   |   | 1,560    |       
|Sales of equipment                                 |                      |           | 830      |        |  |          |         |           |  |           | 6       |              |  |       | 26     |       |  |   | 33       |        |  |   |         |        |   |   | 895      |       
|                                                   |                      |           |          |        |  |          |         |           |  |           |         |              |  |       |        |       |  |   |          |        |  |   |         |        |   |   |          |       
|Total net revenues from services and
    equipment |                      | $         | 32,072   |        |  | $        | 9,657   |           |  | $         | 15,485  |              |  | $     | 8,080  |       |  | $ | 22,115   |        |  | $ | (10,839 | )      |   | $ | 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  |       
|                                                   |                      |           |          |        |  |          |         |           |  |           |         |              |  |       |        |       |  |   |          |        |  |   |         |        |   |   |          |       

Nine Months Ended September 30,

|                             |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |        |  |   |         |        |  |   |         |         |   |   |         |         | 
|---------------------------- | -------------------- | --------- | ------- | ------ |  | -------- | ------- | --------- |  | --------- | ------ | ------------ |  | ----- | ------ | ------ |  | - | ------- | ------ |  | - | ------- | ------- | - | - | ------- | ------- | 
|                             |                      |           |         |        |  |          |         |           |  | All other |        |              |  |      
|2002                         |                      | Argentina |         | Brazil |  | Colombia |         | Venezuela |  | countries |        | Eliminations |  | Total
|                             |                      |           |         |        |  |          |         |           |  |           |        |              |  |      
|Net Revenues                 |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |        |  |   |         |        |  |   |         |         |   |   |         |        
|Data & value added services: |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |        |  |   |         |        |  |   |         |         |   |   |         |        
|                             | Satellite            |           | $       | 12,939 |  |          | $       | 9,229     |  |           | $      | 13,155       |  |       | $      | 16,636 |  |   | $       | 23,020 |  |   | $       | (6,139  | ) |   | $       | 68,840  | 
|                             | Broad Band           |           |         | 11,498 |  |          |         | 11,697    |  |           |        | 26,933       |  |       |        | 3,428  |  |   |         | 15,601 |  |   |         | (10,238 | ) |   |         | 58,919  | 
|                             | Value added services |           |         | 3,914  |  |          |         | 2,392     |  |           |        | 547          |  |       |        | 1,015  |  |   |         | 11,431 |  |   |         | (8,769  | ) |   |         | 10,530  | 
|                             |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |        |  |   |         |        |  |   |         |         |   |   |         |        
|                             | Subtotal             |           |         | 28,351 |  |          |         | 23,318    |  |           |        | 40,635       |  |       |        | 21,079 |  |   |         | 50,052 |  |   |         | (25,146 | ) |   |         | 138,289 | 
|                             |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |        |  |   |         |        |  |   |         |         |   |   |         |        
|Internet                     |                      |           | 5,284   |        |  |          | 3,366   |           |  |           | 3,379  |              |  |       | 1,896  |        |  |   | 10,003  |        |  |   | (2,474  | )       |   |   | 21,454  |        
|Telephony                    |                      |           | 7,282   |        |  |          |         |           |  |           |        |              |  |       |        |        |  |   | 8,417   |        |  |   | (4,465  | )       |   |   | 11,234  |        
|Services to carriers         |                      |           | 2,481   |        |  |          | 2,034   |           |  |           | 182    |              |  |       |        |        |  |   | 695     |        |  |   | (69     | )       |   |   | 5,323   |        
|Sales of equipment           |                      |           | 308     |        |  |          | 9       |           |  |           | 14     |              |  |       | 210    |        |  |   | 221     |        |  |   |         |         |   |   | 762     |        
|                             |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |        |  |   |         |        |  |   |         |         |   |   |         |        
|Total net revenues           |                      | $         | 43,706  |        |  | $        | 28,727  |           |  | $         | 44,210 |              |  | $     | 23,185 |        |  | $ | 69,388  |        |  | $ | (32,154 | )       |   | $ | 177,062 |        
|                             |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |        |  |   |         |        |  |   |         |         |   |   |         |        
|Operating income (loss)      |                      | $         | (22,445 | )      |  | $        | (13,045 | )         |  | $         | 1,935  |              |  | $     | 3,601  |        |  | $ | (3,682  | )      |  |   |         |         |   | $ | (33,636 | )      
|                             |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |        |  |   |         |        |  |   |         |         |   |   |         |        
|Total assets                 |                      | $         | 178,558 |        |  | $        | 106,938 |           |  | $         | 88,887 |              |  | $     | 55,352 |        |  | $ | 105,272 |        |  |   |         |         |   | $ | 535,007 |        
|                             |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |        |  |   |         |        |  |   |         |         |   |   |         |        

F-20



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


|                                                   |                      |           |          |        |  |          |         |           |  |           |         |              |  |       |        |        |  |   |          |        |  |   |         |         |   |   |          |         | 
|-------------------------------------------------- | -------------------- | --------- | -------- | ------ |  | -------- | ------- | --------- |  | --------- | ------- | ------------ |  | ----- | ------ | ------ |  | - | -------- | ------ |  | - | ------- | ------- | - | - | -------- | ------- | 
|                                                   |                      |           |          |        |  |          |         |           |  | All other |         |              |  |      
|2001                                               |                      | Argentina |          | Brazil |  | Colombia |         | Venezuela |  | countries |         | Eliminations |  | Total
|                                                   |                      |           |          |        |  |          |         |           |  |           |         |              |  |      
|Net Revenues                                       |                      |           |          |        |  |          |         |           |  |           |         |              |  |       |        |        |  |   |          |        |  |   |         |         |   |   |          |        
|Data & value added services:                       |                      |           |          |        |  |          |         |           |  |           |         |              |  |       |        |        |  |   |          |        |  |   |         |         |   |   |          |        
|                                                   | Satellite            |           | $        | 42,033 |  |          | $       | 11,419    |  |           | $       | 17,073       |  |       | $      | 18,758 |  |   | $        | 25,496 |  |   | $       | (9,785  | ) |   | $        | 104,994 | 
|                                                   | Broad Band           |           |          | 23,451 |  |          |         | 6,590     |  |           |         | 25,547       |  |       |        | 2,327  |  |   |          | 7,588  |  |   |         | (4,806  | ) |   |          | 60,697  | 
|                                                   | Value added services |           |          | 4,969  |  |          |         | 3,187     |  |           |         | 374          |  |       |        | 697    |  |   |          | 11,750 |  |   |         | (8,482  | ) |   |          | 12,495  | 
|                                                   |                      |           |          |        |  |          |         |           |  |           |         |              |  |       |        |        |  |   |          |        |  |   |         |         |   |   |          |        
|                                                   | Subtotal             |           |          | 70,453 |  |          |         | 21,196    |  |           |         | 42,994       |  |       |        | 21,782 |  |   |          | 44,834 |  |   |         | (23,073 | ) |   |          | 178,186 | 
|                                                   |                      |           |          |        |  |          |         |           |  |           |         |              |  |       |        |        |  |   |          |        |  |   |         |         |   |   |          |        
|Internet                                           |                      |           | 13,283   |        |  |          | 8,702   |           |  |           | 3,135   |              |  |       | 1,406  |        |  |   | 11,919   |        |  |   | (3,992  | )       |   |   | 34,453   |        
|Telephony                                          |                      |           | 4,799    |        |  |          |         |           |  |           |         |              |  |       |        |        |  |   | 3,134    |        |  |   | (1,371  | )       |   |   | 6,562    |        
|Services to carriers                               |                      |           | 2,587    |        |  |          | 941     |           |  |           | 99      |              |  |       |        |        |  |   | 3,093    |        |  |   | (993    | )       |   |   | 5,727    |        
|Sales of equipment                                 |                      |           | 4,886    |        |  |          | 2,625   |           |  |           | 485     |              |  |       | 1,194  |        |  |   | 2,528    |        |  |   |         |         |   |   | 11,718   |        
|                                                   |                      |           |          |        |  |          |         |           |  |           |         |              |  |       |        |        |  |   |          |        |  |   |         |         |   |   |          |        
|Total net revenues from services and
    equipment |                      |           | 96,008   |        |  |          | 33,464  |           |  |           | 46,713  |              |  |       | 24,382 |        |  |   | 65,508   |        |  |   | (29,429 | )       |   |   | 236,646  |        
|                                                   |                      |           |          |        |  |          |         |           |  |           |         |              |  |       |        |        |  |   |          |        |  |   |         |         |   |   |          |        
|Broadband network development revenues             |                      |           |          |        |  |          | 2,552   |           |  |           |         |              |  |       |        |        |  |   | 4,645    |        |  |   |         |         |   |   | 7,197    |        
|                                                   |                      |           |          |        |  |          |         |           |  |           |         |              |  |       |        |        |  |   |          |        |  |   |         |         |   |   |          |        
|Total net revenues                                 |                      | $         | 96,008   |        |  | $        | 36,016  |           |  | $         | 46,713  |              |  | $     | 24,382 |        |  | $ | 70,153   |        |  | $ | (29,429 | )       |   | $ | 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  |        
|                                                   |                      |           |          |        |  |          |         |           |  |           |         |              |  |       |        |        |  |   |          |        |  |   |         |         |   |   |          |        

13.     COMMITMENTS
AND CONTINGENCIES

Commitments
The Company leases satellite capacity with average annual rental
commitments of approximately $25.4 million through the year
2006. 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 $3.3 million per year through 2006. The
Company has commitments to purchase communications and data
center equipment amounting to approximately $2.3 million at
September 30, 2002.

The Company has commitments for additional IRU
investments totaling approximately $63.9 million in the
aggregate under its various IRU agreements. These commitments
are not included in the condensed consolidated balance sheet as
of September 30, 2002.

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., a
subsidiary of 360networks, Inc., and certain other subsidiaries
of 360networks, Inc. (collectively 360networks), to
construct and provide IRU dark fiber, capacity services and
conduit to 360networks 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 360networks for acceptance, but 360networks failed to make
certain payments as required by the Companys contract with
them. 360networks also failed to make certain payments 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 360networks for collocation space in
Caracas, Venezuela, also for payment default by 360networks.

The Company has commenced arbitration and
litigation proceedings against 360networks for damages under the
terminated contracts for the provision of IRU dark fiber and
capacity services, as contemplated by

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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


the relevant agreements. 360americas and the
other subsidiaries with which the Company had contracted were
not included in the series of bankruptcy and insolvency filings
made in the United State and Canada by their parent, 360
networks, Inc. and certain of its 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 360networks, 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 360networks 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 360networks 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, 2002, the balance of such deferred revenue was
$22.6 million.

IPO Allocations
Class Action On
November 1, 2001, a lawsuit was filed in the United States
District Court for the Southern District of New York against the
Company, certain of the Companys current officers and
directors, and the underwriters to the Companys initial
public offering. This lawsuit alleges on behalf of a proposed
class of all shareholders that the Company and its underwriters
violated various provisions of the securities laws in connection
with the IPO in February 2000. The plaintiff has proposed a
putative class from the date of the IPO to December 6,
2000. In August 2001, the court ordered that this suit be
coordinated for all pre-trial purposes in a proceeding styled In
re Initial Public Offering Securities Litigation, 21 MC 92, an
intra-district proceeding involving approximately 900 lawsuits
concerning the initial public offerings of approximately 310
companies and 48 underwriters. The complaint does not seek a
specified amount of damages. The Companys management
believes that the Company has meritorious defenses to the
allegations in the complaints and intends to defend the
litigation vigorously. However, due to the early stages of this
action, the Company cannot conclude as to the possible outcome.
The Company has certain insurance policies with respect to such
claims and has filed a claim with its carriers regarding this
matter.

Other
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 collectibility of this matter continues to be
negotiated for settlement; however, the Company has valued this
receivable at a net realizable value of zero.

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##### Table of Contents



IMPSAT S.A.

CONDENSED BALANCE SHEETS

(In thousands of U.S. Dollars)


(Unaudited)


|                                             |                                                                                                                        |                                |         |               |         |   |         |          |          |  
|-------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------- | ------------------------------ | ------- | ------------- | ------- | - | ------- | -------- | -------- | -
|                                             |                                                                                                                        | December 31,                   |         | September 30,
|                                             |                                                                                                                        | 2001                           |         | 2002         
|                                             |                                                                                                                        |                                |         |              
|ASSETS                                      
|CURRENT ASSETS:                              |                                                                                                                        |                                |         |               |         |   |         |         
|                                             | Cash and cash equivalents                                                                                              |                                | $       | 3,979         |         |   | $       | 5,628    |         
|                                             | Trade accounts receivable, net                                                                                         |                                |         | 33,924        |         |   |         | 17,874   |         
|                                             | Receivable from affiliated companies                                                                                   |                                |         | 17,715        |         |   |         | 16,884   |         
|                                             | Other receivables                                                                                                      |                                |         | 22,155        |         |   |         | 4,600    |         
|                                             | Prepaid expenses                                                                                                       |                                |         | 1,730         |         |   |         | 1,043    |         
|                                             |                                                                                                                        |                                |         |               |         |   |         |         
|                                             |                                                                                                                        | Total current assets           |         |               | 79,503  |   |         |          | 46,029   |  
|                                             |                                                                                                                        |                                |         |               |         |   |         |         
|BROADBAND NETWORK, Net                       |                                                                                                                        |                                | 105,995 |               |         |   | 96,977  |         
|                                             |                                                                                                                        |                                |         |               |         |   |         |         
|PROPERTY, PLANT AND EQUIPMENT, Net           |                                                                                                                        |                                | 40,149  |               |         |   | 28,694  |         
|                                             |                                                                                                                        |                                |         |               |         |   |         |         
|NON-CURRENT ASSETS:                          |                                                                                                                        |                                |         |               |         |   |         |         
|                                             | Investments in common stock                                                                                            |                                |         | 2,429         |         |   |         | 1,538    |         
|                                             | Other non-current assets                                                                                               |                                |         | 7,395         |         |   |         | 5,320    |         
|                                             |                                                                                                                        |                                |         |               |         |   |         |         
|                                             |                                                                                                                        | Total non-current assets       |         |               | 9,824   |   |         |          | 6,858    |  
|                                             |                                                                                                                        |                                |         |               |         |   |         |         
|TOTAL                                        |                                                                                                                        | $                              | 235,471 |               |         | $ | 178,558 |         
|                                             |                                                                                                                        |                                |         |               |         |   |         |         
|LIABILITIES AND STOCKHOLDERS
    DEFICIENCY
|CURRENT LIABILITIES:                         |                                                                                                                        |                                |         |               |         |   |         |         
|                                             | Accounts payable  trade                                                                                               |                                | $       | 59,535        |         |   | $       | 66,243   |         
|                                             | Advances from affiliated companies                                                                                     |                                |         | 2,448         |         |   |         | 5,852    |         
|                                             | Current portion of long-term debt                                                                                      |                                |         | 162,390       |         |   |         | 148,215  |         
|                                             | Accrued and other liabilities                                                                                          |                                |         | 15,422        |         |   |         | 25,398   |         
|                                             |                                                                                                                        |                                |         |               |         |   |         |         
|                                             |                                                                                                                        | Total current liabilities      |         |               | 239,795 |   |         |          | 245,708  |  
|                                             |                                                                                                                        |                                |         |               |         |   |         |         
|LONG-TERM DEBT, Net                          |                                                                                                                        |                                | 3,183   |               |         |   | 85      |         
|                                             |                                                                                                                        |                                |         |               |         |   |         |         
|DEFERRED REVENUES                            |                                                                                                                        |                                | 52,653  |               |         |   | 50,870  |         
|                                             |                                                                                                                        |                                |         |               |         |   |         |         
|COMMITMENTS AND CONTINGENCIES (Note 10)      |                                                                                                                        |                                |         |               |         |   |         |         
|STOCKHOLDERS DEFICIENCY:                    |                                                                                                                        |                                |         |               |         |   |         |         
|                                             | Common Stock, $0.01 par value 73,775 shares
    issued and outstanding at December 31, 2001 and September
    30, 2002 |                                |         | 4             |         |   |         | 4        |         
|                                             | Paid in capital                                                                                                        |                                |         | 331,179       |         |   |         | 331,179  |         
|                                             | Accumulated deficit                                                                                                    |                                |         | (391,024      | )       |   |         | (448,372 | )       
|                                             | Accumulated other comprehensive loss                                                                                   |                                |         | (319          | )       |   |         | (916     | )       
|                                             |                                                                                                                        |                                |         |               |         |   |         |         
|                                             |                                                                                                                        | Total stockholders deficiency |         |               | (60,160 | ) |         |          | (118,105 | )
|                                             |                                                                                                                        |                                |         |               |         |   |         |         
|TOTAL                                        |                                                                                                                        | $                              | 235,471 |               |         | $ | 178,558 |         
|                                             |                                                                                                                        |                                |         |               |         |   |         |         

See notes to condensed financial statements.

F-23



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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,            
|                           |                                      |                        |                    |                          
|                           |                                      | 2001                   |                    | 2002                      |       | 2001   |         | 2002  
|                           |                                      |                        |                    |                           |       |        |         |       
|NET REVENUES:              |                                      |                        |                    |                           |       |        |         |        |       |        |          |         |        |        |         |        
|                           | Data and value added services        |                        | $                  | 23,030                    |       |        | $       | 9,036  |       |        | $        | 70,453  |        |        | $       | 28,351  |       
|                           | Internet                             |                        |                    | 4,884                     |       |        |         | 1,585  |       |        |          | 13,283  |        |        |         | 5,284   |       
|                           | Telephony                            |                        |                    | 2,418                     |       |        |         | 1,858  |       |        |          | 4,799   |        |        |         | 7,282   |       
|                           | Services to carriers                 |                        |                    | 910                       |       |        |         | 906    |       |        |          | 2,587   |        |        |         | 2,481   |       
|                           | Sales of equipment                   |                        |                    | 830                       |       |        |         | 204    |       |        |          | 4,886   |        |        |         | 308     |       
|                           |                                      |                        |                    |                           |       |        |         |        |       |        |          |         |        |        |         |        
|                           |                                      |                        | Total net revenues |                           |       | 32,072 |         |        |       | 13,589 |          |         |        | 96,008 |         |         |        | 43,706 |        
|                           |                                      |                        |                    |                           |       |        |         |        |       |        |          |         |        |        |         |        
|COSTS AND EXPENSES:        |                                      |                        |                    |                           |       |        |         |        |       |        |          |         |        |        |         |        
|                           | Direct costs:                        |                        |                    |                           |       |        |         |        |       |        |          |         |        |        |         |         |       
|                           |                                      | Contracted services    |                    |                           | 5,028 |        |         |        | 1,209 |        |          |         | 13,568 |        |         |         | 4,526  |       
|                           |                                      | Other direct costs     |                    |                           | 4,912 |        |         |        | 3,270 |        |          |         | 13,122 |        |         |         | 9,401  |       
|                           |                                      | Leased capacity        |                    |                           | 9,802 |        |         |        | 4,860 |        |          |         | 27,752 |        |         |         | 18,538 |       
|                           |                                      | Cost of equipment sold |                    |                           | 723   |        |         |        | 35    |        |          |         | 4,138  |        |         |         | 116    |       
|                           |                                      |                        |                    |                           |       |        |         |        |       |        |          |         |        |        |         |        
|                           |                                      |                        |                    | Total direct costs        |       |        | 20,465  |        |       |        | 9,374    |         |        |        | 58,580  |         |        |        | 32,581  |  
|                           |                                      |                        |                    |                           |       |        |         |        |       |        |          |         |        |        |         |        
|                           | Salaries and wages                   |                        |                    | 9,581                     |       |        |         | 1,983  |       |        |          | 27,722  |        |        |         | 6,805   |       
|                           | Selling, general and administrative  |                        |                    | 4,641                     |       |        |         | 1,456  |       |        |          | 15,579  |        |        |         | 5,394   |       
|                           | Depreciation and amortization        |                        |                    | 14,982                    |       |        |         | 5,237  |       |        |          | 40,781  |        |        |         | 21,371  |       
|                           | Provision for asset impairment       |                        |                    | 98,330                    |       |        |         |        |       |        |          | 98,330  |        |        |         |         |       
|                           |                                      |                        |                    |                           |       |        |         |        |       |        |          |         |        |        |         |        
|                           |                                      |                        |                    | Total costs and expenses  |       |        | 147,999 |        |       |        | 18,050   |         |        |        | 240,992 |         |        |        | 66,151  |  
|                           |                                      |                        |                    |                           |       |        |         |        |       |        |          |         |        |        |         |        
|Operating loss             |                                      |                        | (115,927           | )                         |       |        | (4,459  | )      |       |        | (144,984 | )       |        |        | (22,445 | )      
|                           |                                      |                        |                    |                           |       |        |         |        |       |        |          |         |        |        |         |        
|OTHER INCOME (EXPENSES):   |                                      |                        |                    |                           |       |        |         |        |       |        |          |         |        |        |         |        
|                           | Interest income and investment gains |                        |                    | 595                       |       |        |         | 168    |       |        |          | 1,349   |        |        |         | 755     |       
|                           | Interest expense                     |                        |                    | (5,936                    | )     |        |         | (5,740 | )     |        |          | (17,386 | )      |        |         | (23,982 | )     
|                           | Net loss on foreign exchange         |                        |                    | (587                      | )     |        |         | 1,061  |       |        |          | (593    | )      |        |         | (11,708 | )     
|                           | Other income (loss), net             |                        |                    | 285                       |       |        |         | (35    | )     |        |          | 295     |        |        |         | 32      |       
|                           |                                      |                        |                    |                           |       |        |         |        |       |        |          |         |        |        |         |        
|                           |                                      |                        |                    | Total other expenses, net |       |        | (5,643  | )      |       |        | (4,546   | )       |        |        | (16,335 | )       |        |        | (34,903 | )
|                           |                                      |                        |                    |                           |       |        |         |        |       |        |          |         |        |        |         |        
|LOSS BEFORE INCOME TAXES   |                                      |                        | (121,570           | )                         |       |        | (9,005  | )      |       |        | (161,319 | )       |        |        | (57,348 | )      
|PROVISION FOR INCOME TAXES |                                      |                        |                    |                           |       |        |         |        |       |        | (8,667   | )       |        |        |         |        
|                           |                                      |                        |                    |                           |       |        |         |        |       |        |          |         |        |        |         |        
|NET LOSS                   |                                      | $                      | (121,570           | )                         |       | $      | (9,005  | )      |       | $      | (169,986 | )       |        | $      | (57,348 | )      
|                           |                                      |                        |                    |                           |       |        |         |        |       |        |          |         |        |        |         |        

See notes to condensed financial statements.

F-24



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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,    
|                          |                                                                |                    |          |                  
|                          |                                                                | 2001               |          | 2002              |   | 2001 |        | 2002
|                          |                                                                |                    |          |                   |   |      |        |     
|NET LOSS                  |                                                                | $                  | (121,570 | )                 |   | $    | (9,005 | )    |   | $ | (169,986 | )    |   | $ | (57,348 | )   
|OTHER COMPREHENSIVE LOSS: |                                                                |                    |          |                   |   |      |        |      |   |   |          |      |   |   |         |     
|                          | Change in unrealized loss on investment available
    for sale |                    |          | (1                | ) |      |        | (186 | ) |   |          | (820 | ) |   |         | (597 | )
|                          |                                                                |                    |          |                   |   |      |        |      |   |   |          |      |   |   |         |     
|                          | TOTAL                                                          |                    |          | (1                | ) |      |        | (186 | ) |   |          | (820 | ) |   |         | (597 | )
|                          |                                                                |                    |          |                   |   |      |        |      |   |   |          |      |   |   |         |     
|COMPREHENSIVE LOSS        |                                                                | $                  | (121,571 | )                 |   | $    | (9,191 | )    |   | $ | (170,806 | )    |   | $ | (57,945 | )   
|                          |                                                                |                    |          |                   |   |      |        |      |   |   |          |      |   |   |         |     

See notes to condensed financial statements.

F-25



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##### Table of Contents



IMPSAT S.A.

CONDENSED STATEMENT OF STOCKHOLDERS
DEFICIENCY

(In thousands of U.S. Dollars)


(Unaudited)


|                              |                                                                |        |   |         |  |             |         |               |  |       |          |         |   |   |      |      |   |   |          |         |  
|----------------------------- | -------------------------------------------------------------- | ------ | - | ------- |  | ----------- | ------- | ------------- |  | ----- | -------- | ------- | - | - | ---- | ---- | - | - | -------- | ------- | -
|                              |                                                                |        |   |         |  |             |         | Accumulated   |  |      
|                              |                                                                |        |   |         |  |             |         | Other         |  |      
|                              |                                                                | Common |   | Paid in |  | Accumulated |         | Comprehensive |  |      
|                              |                                                                | Stock  |   | Capital |  | Deficit     |         | (Loss)        |  | Total
|                              |                                                                |        |   |         |  |             |         |               |  |      
|BALANCE AT DECEMBER 31, 2001. |                                                                | $      | 4 |         |  | $           | 331,179 |               |  | $     | (391,024 | )       |   | $ | (319 | )    |   | $ | (60,160  | )      
|                              | Change in unrealized loss on investment available
    for sale |        |   |         |  |             |         |               |  |       |          |         |   |   |      | (597 | ) |   |          | (597    | )
|                              | Net loss for the period                                        |        |   |         |  |             |         |               |  |       |          | (57,348 | ) |   |      |      |   |   |          | (57,348 | )
|                              |                                                                |        |   |         |  |             |         |               |  |       |          |         |   |   |      |      |   |   |          |        
|BALANCE AT SEPTEMBER 30, 2002 |                                                                | $      | 4 |         |  | $           | 331,179 |               |  | $     | (448,372 | )       |   | $ | (916 | )    |   | $ | (118,105 | )      
|                              |                                                                |        |   |         |  |             |         |               |  |       |          |         |   |   |      |      |   |   |          |        

See notes to condensed financial statements.

F-26



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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,                     
|                                                                         |                                                                                                                   |                                   
|                                                                         |                                                                                                                   | 2001                               |                                                                           | 2002                                                   
|                                                                         |                                                                                                                   |                                    |                                                                           |                                                        
|CASH FLOWS FROM OPERATING ACTIVITIES:                                    |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        
|                                                                         | Net loss                                                                                                          |                                    | $                                                                         | (169,986                                                | )      |        | $       | (57,348 | )     
|                                                                         | Adjustments to reconcile net loss to net cash
    provided by (used in) operating activities, net of acquisition: |                                    |                                                                           |                                                         |        |        |         |         |       
|                                                                         |                                                                                                                   | Amortization and depreciation      |                                                                           |                                                         | 40,781 |        |         |         | 21,371 |       
|                                                                         |                                                                                                                   | Provision for asset impairment     |                                                                           |                                                         | 98,330 |        |         |         |        |       
|                                                                         |                                                                                                                   | Provision for doubtful accounts    |                                                                           |                                                         | 5,177  |        |         |         | 5,896  |       
|                                                                         |                                                                                                                   | Deferred income tax provision      |                                                                           |                                                         | 8,667  |        |         |         |        |       
|                                                                         |                                                                                                                   | Changes in assets and liabilities: |                                                                           |                                                         |        |        |         |         |        |       
|                                                                         |                                                                                                                   |                                    | (Increase) decrease in trade accounts receivable                          |                                                         |        | (9,328 | )       |         |        | 10,154 |      
|                                                                         |                                                                                                                   |                                    | (Increase) decrease in prepaid expenses                                   |                                                         |        | (356   | )       |         |        | 687    |      
|                                                                         |                                                                                                                   |                                    | (Increase) decrease in other receivables and
    other non-current assets |                                                         |        | (8,970 | )       |         |        | 19,631 |      
|                                                                         |                                                                                                                   |                                    | Increase (decrease) in accounts
    payable  trade                       |                                                         |        | 28,155 |         |         |        | (8,956 | )    
|                                                                         |                                                                                                                   |                                    | Increase (decrease) in deferred revenues                                  |                                                         |        | 17,651 |         |         |        | (1,783 | )    
|                                                                         |                                                                                                                   |                                    | Increase in accrued and other liabilities                                 |                                                         |        | 3,155  |         |         |        | 9,975  |      
|                                                                         |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        
|                                                                         |                                                                                                                   |                                    |                                                                           | Net cash provided by (used in) operating
    activities |        |        | 13,276  |         |        |        | (373  | )
|                                                                         |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        
|CASH FLOWS FROM INVESTING ACTIVITIES:                                    |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        
|                                                                         | Purchases of broadband network, net of disposals                                                                  |                                    |                                                                           | (51,780                                                 | )      |        |         | (453    | )     
|                                                                         | Purchases of property, plant and equipment, net
    of disposals                                                  |                                    |                                                                           | (25,711                                                 | )      |        |         | (446    | )     
|                                                                         | (Increase) decrease in other investment                                                                           |                                    |                                                                           | (391                                                    | )      |        |         | 295     |       
|                                                                         |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        
|                                                                         |                                                                                                                   |                                    |                                                                           | Net cash used in investing activities                   |        |        | (77,882 | )       |        |        | (604  | )
|                                                                         |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        
|CASH FLOWS FROM FINANCING ACTIVITIES:                                    |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        
|                                                                         | Net borrowings from short-term debt                                                                               |                                    |                                                                           | (8,860                                                  | )      |        |         |         |       
|                                                                         | Changes in advances to/from affiliates                                                                            |                                    |                                                                           | (10,268                                                 | )      |        |         | 4,235   |       
|                                                                         | Repayments of long-term debt                                                                                      |                                    |                                                                           | (1,077                                                  | )      |        |         | (1,609  | )     
|                                                                         | Shareholders capital contribution                                                                                |                                    |                                                                           | 80,854                                                  |        |        |         |         |       
|                                                                         |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        
|                                                                         |                                                                                                                   |                                    |                                                                           | Net cash provided by financing activities               |        |        | 60,649  |         |        |        | 2,626 |  
|                                                                         |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        
|NET (DECREASE) INCREASE IN CASH AND CASH
    EQUIVALENTS                 |                                                                                                                   |                                    | (3,957                                                                    | )                                                       |        |        | 1,649   |        
|CASH AND CASH EQUIVALENTS AT BEGINNING OF THE
    PERIOD                 |                                                                                                                   |                                    | 12,051                                                                    |                                                         |        |        | 3,979   |        
|                                                                         |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        
|CASH AND CASH EQUIVALENTS AT END OF THE PERIOD                           |                                                                                                                   | $                                  | 8,094                                                                     |                                                         |        | $      | 5,628   |        
|                                                                         |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        
|SUPPLEMENTAL CASH FLOW INFORMATION:                                      |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        
|                                                                         | Interest paid                                                                                                     |                                    | $                                                                         | 8,912                                                   |        |        | $       | 2,149   |       
|                                                                         |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        
|                                                                         | Income taxes paid                                                                                                 |                                    |                                                                           |                                                         |        |        | $       | 793     |       
|                                                                         |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        
|SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
    FINANCING ACTIVITIES: |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        
|                                                                         | Change to unrealized loss on investment available
    for sale                                                    |                                    | $                                                                         | (820                                                    | )      |        | $       | (597    | )     
|                                                                         |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        
|                                                                         | Broadband Network Vendor financing                                                                                |                                    | $                                                                         | 20,597                                                  |        |        |         |         |       
|                                                                         |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        

See notes to condensed financial statements.

F-27



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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, 2002,
the Company is a 100% owned subsidiary of IMPSAT Fiber Networks,
Inc. (the Parent Company).

Financial
Restructuring On
March 11, 2002, the Parent Company, which has been advised
by Houlihan Lokey Howard & Zukin Capital, concluded
negotiations with an ad hoc committee representing certain
creditors under the Parent Companys Broadband Network
Vendor Financing Agreements and certain holders of its
$125.0 million 12.125% Senior Guaranteed Notes due 2003,
$300.0 million 13.75% Senior Notes due 2005 and
$225.0 million 12.375% Senior Notes due 2008 of a
non-binding term sheet agreement in principle (the
Restructuring Term Sheet) relating to the terms of a
proposed restructuring of these long-term obligations, as part
of a comprehensive financial restructuring of the Parent Company
and the Company. The Restructuring Term Sheet, contemplates the
following principal components of the proposed restructuring
plan:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | all of the shares of the Parent Companys
    existing common stock, options granted under the Parent
    Companys stock option plans, and any other Parent Company
    equity interests would be cancelled, retired and eliminated with
    no consideration paid therefor, and the Parent Company would
    issue new common stock in accordance with the
    proposed restructuring plan;
|
| |  | creditors under the Broadband Network Vendor
    Financing Agreements would receive                                                                                                                                                                                                                                                                                                            



| |   |                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $140.7 million senior secured debt issued by
    the Company and IMPSAT Brazil and guaranteed by the Parent
    Company;                                                                    
|
| |  | $22.5 million of new senior convertible
    notes guaranteed by the Company and initially convertible into
    5% of the Parent Companys new common stock on a
    fully-diluted basis; and
|
| |  | warrants to acquire up to 15% of the Parent
    Companys new common stock on a fully-diluted basis.                                                                                        



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | holders of the Notes due 2003 would receive
    $67.5 million of new senior convertible notes of the Parent
    Company guaranteed by the Company and initially convertible into
    23% of the Parent Companys new common stock on a
    fully-diluted basis                                                                                                                                                                                                    
|
| |  | holders of the Notes due 2005 and the Notes due
    2008 would exchange those securities for 98% of the Parent
    Companys new common stock, subject to certain dilutive
    events                                                                                                                                                                                                                                                                             
|
| |  | the Parent Companys guarantees of certain
    indebtedness owed by the operating subsidiaries to certain of
    their respective creditors will either be restructured in
    exchange for new senior convertible notes and warrants
    consistent with and proportionate to the restructuring treatment
    of analogous indebtedness under the Broadband Network Vendor
    Financing Agreements, or canceled in exchange for equity in the
    Parent Company
|
| |  | no distribution to the existing stockholders of
    the Parent Company                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | management would receive 2% of the Parent
    Companys new common stock plus stock options representing
    8% of the Parent Companys new common stock.                                                                                                                                                                                                                                                                                                         

The Restructuring Term Sheet provided that
completion of the proposed restructuring plan would be subject
to certain conditions in the event the Parent Company files its
plan with the Bankruptcy Court,

F-28



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##### Table of Contents



IMPSAT S.A.




NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS  (Continued)


(Tables in thousands of U.S.
dollars)


including the plans acceptance by affected
classes of the Parent Companys securities holders in
accordance with the United States Bankruptcy Code (the
Bankruptcy Code).

Petition for Relief Under
Chapter 11 On
June 11, 2002, the Parent Company filed a voluntary
petition for relief under Chapter 11 of the federal
bankruptcy laws in the United States Bankruptcy Court for the
Southern District of New York. Under Chapter 11, certain
claims against the Parent Company in existence prior to the
filing of the petition for relief under the federal bankruptcy
laws are stayed while the Parent Company continues business
operations as debtor-in-possession.

On September 4, 2002, the Parent Company
filed a Disclosure Statement (the Disclosure
Statement) and a Plan of Reorganization (the
Plan) with the Bankruptcy Court. The Plan reflects
the terms of the pre-arranged plan of reorganization that
holders of a majority of our indebtedness under the
Companys Vendor Financing Agreements and Parent
Companys Senior Notes agreed to support pursuant to
certain binding lock-up agreements they signed with the Parent
Company prior to the Petition Date. The Plan, if approved, would
restructure the Parent Companys indebtedness in the manner
described above under the caption, Financial
Restructuring.

On or around November 1, 2002, the Plan and
Disclosure Statement were mailed to the impaired creditors and
other interests who are entitled to vote on confirmation of the
Plan. Notice of the Plan was also mailed to the Parent
Companys equity holders, but because they will receive
nothing on account of their claims under the Plan, the votes of
the equity holder class were not solicited. December 3,
2002 has been established as the deadline for the receipt of
votes to accept or reject the Plan. The Bankruptcy Court has
scheduled a hearing for December 11, 2002 to consider
confirmation of the Plan. At the confirmation hearing, the
Bankruptcy Court will determine whether sufficient acceptances
have been received to confirm the Plan or, if not, whether it is
nevertheless confirmable under applicable bankruptcy law.
Assuming the Bankruptcy Court approves the Plan, the Parent
Company currently expects the Plan to become effective and the
Companys Chapter 11 restructuring proceeding to be
completed prior to December 31, 2002. No assurance can be
given, however, that the Bankruptcy Court will confirm the Plan
or, if confirmed, that the Plan will be consummated in the
manner that the Parent Company anticipates or at all.

Going Concern
Matters The Companys
history of losses, negative working capital, stockholders
deficit and the Parent Companys Chapter 11
proceedings raise substantial doubt about the Companys
ability to continue as a going concern. The financial statements
do not include any adjustments relating to recoverability and
classification of recorded asset amounts or the amount and
classification of liabilities that might be necessary should the
Company be unable to continue as a going concern. The ability of
the Company to continue as a going concern and to appropriately
use the going concern basis is dependent upon, among other
things, (i) the Companys ability to revise and
implement its business plan, (ii) confirmation of the
Parent Companys reorganization plan under the Bankruptcy
Code, (iii) the Parent Companys and the
Companys ability to achieve profitable operations after
such confirmation, and (iv) the Companys ability to
generate sufficient cash from operations to meet its
obligations. The financial statements do not give effect to any
adjustment to the carrying value of assets or amounts and
classifications of liabilities that might result from the
uncertainties described above.

2.     SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES

Interim Financial
Information The unaudited
condensed financial statements as of September 30, 2002 and
for the three and nine months ended September 30, 2001 and
2002 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 three and nine months ended September 30,
2001 and

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##### Table of Contents



IMPSAT S.A.




NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS  (Continued)


(Tables in thousands of U.S.
dollars)


2002 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 condensed 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 condensed financial statements and the reported amounts of
revenues and expenses during the reporting period. Significant
assumptions and estimates were used in determining the carrying
value of the Companys telecommunications infrastructure
and collectibility of receivables. Actual results could differ
from those estimates.

Market
Risk The Companys
financial performance may be affected by inflation, exchange
rates and controls, price controls, interest rates, changes in
governmental economic policy, taxation and political, economic
or other developments in or affecting the country in which the
Company operates. The Company has not entered into derivative
transactions to hedge against potential foreign exchange or
interest rate risks.

Currency
Risks In early January
2002, as Argentinas ongoing political and financial crisis
deepened, the country defaulted on its massive foreign debt and
the government of President Eduardo Duhalde, who entered office
on January 1, 2002, abandoned the decade-old fixed
peso-dollar exchange rate and permitted the pesoto float freely against the U.S. dollar. The pesofree market opened on January 11, 2002 at 1.65 pesosto the U.S. dollar and has been volatile since. At
September 30, 2002, the Argentine pesotraded at
pesos3,75 to the U.S. dollar. The devaluation of the
Argentine pesowill generally affect the Companys
condensed financial statements by generating foreign exchange
gains or losses on peso-denominated monetary liabilities
and assets of the Company and will generally result in a
decrease, in U.S. dollar terms, in the Companys revenues,
costs and expenses in Argentina.

During December 2001, the Argentine government
instituted a system for the freezing of the deposits in its
financial system. In February 2002, these measures led to, among
other things, the pesificationdecree.
Generally, this decree mandates that all monetary obligations
arising from agreements subject to Argentine law denominated in
foreign currency and existing as of January 6, 2002 are
mandatorily converted into monetary obligations denominated in
pesosat an exchange rate of one U.S. dollar to one
peso. Such obligations generally may be adjusted pursuant
to the coeficiente de estabilizacion de referencia
(CER), as published by the Argentine central bank
based on the Argentine consumer price index. Under the
pesificationdecree, after the foreign
currency denominated contracts are converted to pesos(at
the one pesoto one U.S. dollar), the contracts may be
privately renegotiated by the parties back into foreign currency
denominated terms. Under the pesificationdecree, if a contract governed by Argentine law is entered
into after the decrees enactment, that contract may be
denominated in either U.S. dollars or pesos. However, if
the parties choose to denominate the new contract in pesos,payments under that contract are not entitled to be adjusted
according to the CER or any other consumer price index.
Contracts denominated in pesosbefore the decree continue
to be denominated in pesos, unaffected by the decree.
Finally, the decree provides that if the value of the goods sold
or services rendered is higher or lesser than the price payable
after the mandatory pesification, either
party may request an equitable adjustment of such
price. If the parties do not agree on the equitable
adjustment, the dispute is to be settled by the courts,
which will attempt to preserve the contractual agreement between
the parties. The devaluation and the pesificationof agreements of the Company governed by Argentine law may
have adverse, unknown and unforeseeable effects on the Company.

Since the pesificationdecree,
the Companys customer contracts and operating cash inflows
are now predominantly denominated in pesos. Moreover, the
Companys debt service payments and a significant portion
of its costs (including capital equipment purchases and payments
for certain leased telecommunication capacity) are denominated
in U.S. dollars. Accordingly, the Companys financial
condition and results of operations in Argentina are dependent
upon the Companys ability to generate sufficient pesos(in U.S. dollar

F-30



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##### Table of Contents



IMPSAT S.A.




NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS  (Continued)


(Tables in thousands of U.S.
dollars)


terms) to pay its costs, expenses and to satisfy
its debt service requirements. Because of the recent nature of
these events and the significant uncertainties regarding the
extent and duration of the devaluation and the direction of the
fiscal policies in Argentina, management cannot presently
determine or reasonably estimate the impact a continued economic
crisis in that country could possibly have on the Companys
and the Companys overall cash flows, financial condition,
and results of operations.

Numerous uncertainties exist surrounding the
ultimate resolution of Argentinas economic and political
instability and actual results could differ from those estimates
and assumptions utilized. The Argentine economic and political
situation continues to evolve and the Argentine government may
enact future regulations or policies that, when finalized and
adopted, may adversely and materially impact, among other items,
(i) the realized revenues the Company receives for services
offered in Argentina; (ii) the timing of repatriations of
any dividends or other cash flows from the Company to the Parent
Company, in the United States; (iii) the Companys
asset valuations; and (iv) the Companys
pesos-denominated monetary assets and liabilities.

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 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 (IRU) and access to portions of the
Companys 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
Condensed 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, 2001 and 2002.

Non-Monetary
Transactions The Company
may exchange capacity on its Broadband Network for capacity from
other carriers through the exchange of IRUs. These transactions
are accounted for in accordance with Accounting Principles Board
Opinion No. 29, Accounting for Nonmonetary
Transactions, where an exchange of similar IRUs is recorded
at a historical carryover basis with no revenue or any gain or
loss being recorded.

Broadband
Network The Broadband
Network was 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-31



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##### Table of Contents



IMPSAT S.A.




NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS  (Continued)


(Tables in thousands of U.S.
dollars)


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 and are carried at fair value. Unrealized gains
or losses, net of tax, for available for sale investments are
included in accumulated other comprehensive 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 the related undiscounted future
cash flows. If the carrying amounts exceed such cash flows,
identifying a possible impairment, the assets carrying
amount is adjusted to fair value.

During the three month period 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 month period ended September 30, 2001, the Company
recorded a non-cash impairment charge of $98.3 million. The
Company recorded this impairment charge based on internal
estimates of fair value, other indicators and not on an
independent valuations of its telecommunication infrastructure

During the three and nine month periods ended
September 30, 2002, no impairments were recorded.

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 condensed 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 equity (deficiency) accounts 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 year-end
exchange rate. 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.

New Accounting
Pronouncements 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

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IMPSAT S.A.




NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS  (Continued)


(Tables in thousands of U.S.
dollars)


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 unaudited
condensed 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 years within those fiscal
years, with early adoption encouraged. The provisions of SFAS
No. 144 generally are to be applied prospectively. The
adoption of SFAS No. 144 did not have a material effect on
the Companys unaudited condensed financial statements or
disclosures.

In April 2002, the FASB issued SFAS No. 145,
Rescission of the FASB Statements No. 44 and 64,
Amendment of FASB Statement No. 13, and Technical
Corrections. SFAS No. 145 eliminates the requirement to
classify gains and losses from the extinguishment of
indebtedness as extraordinary, requires certain lease
modifications to be treated the same as a sale-leaseback
transaction, and makes other non-substantive technical
corrections to existing pronouncements. SFAS No. 145 is
effective for fiscal years beginning after May 15, 2002, with
earlier adoption encouraged. The Company does not expect the
adoption of SFAS 145 to have a material effect on its financial
statements.

In July 2002, the FASB issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities. SFAS No. 146 requires companies to
recognize costs associated with exit or disposal activities when
they are incurred rather than at the date of a commitment to an
exit or disposal plan. Examples of costs covered by the standard
include lease termination costs and certain employee severance
costs that are associated with a restructuring, discontinued
operations, plant closing, or other exit or disposal activities.
SFAS No. 146 is effective prospectively for exit or
disposal activities initiated after December 31, 2002, with
earlier adoption encouraged. As the provisions of SFAS
No. 146 are required to be applied prospectively after the
adoption date, the Company cannot determine the potential
effects that adoption of SFAS No. 146 will have on its
financial statements.

Reclassifications
Certain amounts in the 2001 condensed financial statements have
been reclassified to conform with the 2002 presentation.

3.     TRADE ACCOUNTS
RECEIVABLE

Trade accounts receivable at December 31,
2001 and September 30, 2002 are summarized as follows:

|                                      |  |              |         |               |  |   |         |  
|------------------------------------- |  | ------------ | ------- | ------------- |  | - | ------- | -
|                                      |  | December 31, |         | September 30,
|                                      |  | 2001         |         | 2002         
|                                      |  |              |         |              
|Trade accounts receivable             |  | $            | 51,037  |               |  | $ | 29,083  |  
|Less: allowance for doubtful accounts |  |              | (17,113 | )             |  |   | (11,209 | )
|                                      |  |              |         |               |  |   |         |  
|Trade accounts receivable, net        |  | $            | 33,924  |               |  | $ | 17,874  |  
|                                      |  |              |         |               |  |   |         |  

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

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##### Table of Contents



IMPSAT S.A.




NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS  (Continued)


(Tables in thousands of U.S.
dollars)


The activity for the allowance for doubtful
accounts for the year ended December 31, 2001 and for the
nine months ended September 30, 2002 is as follows:

|                                |  |              |        |               |  |   |        |  
|------------------------------- |  | ------------ | ------ | ------------- |  | - | ------ | -
|                                |  | December 31, |        | September 30,
|                                |  | 2001         |        | 2002         
|                                |  |              |        |              
|Beginning balance               |  | $            | 16,436 |               |  | $ | 17,113 |  
|Provision for doubtful accounts |  |              | 15,590 |               |  |   | 5,896  |  
|Write-offs, net of recoveries   |  |              | (7,099 | )             |  |   | (1,984 | )
|Effect of exchange rate change  |  |              | (7,814 | )             |  |   | (9,816 | )
|                                |  |              |        |               |  |   |        |  
|Ending balance                  |  | $            | 17,113 |               |  | $ | 11,209 |  
|                                |  |              |        |               |  |   |        |  

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.

5.     BROADBAND
NETWORK AND AGREEMENTS

Broadband network and related equipment at
December 31, 2001 and September 30, 2002 consists of:

|                               |       |              |         |               |  |   |         |         | 
|------------------------------ | ----- | ------------ | ------- | ------------- |  | - | ------- | ------- | 
|                               |       | December 31, |         | September 30,
|                               |       | 2001         |         | 2002         
|                               |       |              |         |              
|Network infrastructure         |       | $            | 76,693  |               |  | $ | 76,956  |        
|Equipment and materials        |       |              | 90,222  |               |  |   | 92,366  |        
|IRU investments                |       |              | 2,616   |               |  |   | 2,616   |        
|                               |       |              |         |               |  |   |         |        
|                               | Total |              |         | 169,531       |  |   |         | 171,938 | 
|Less: accumulated depreciation |       |              | (63,536 | )             |  |   | (74,961 | )      
|                               |       |              |         |               |  |   |         |        
|                               | Total |              | $       | 105,995       |  |   | $       | 96,977  | 
|                               |       |              |         |               |  |   |         |        

The recap of accumulated depreciation for the
year ended December 31, 2001 and for the nine months ended
September 30, 2002 is as follows:

|                          |  |              |        |               |  |   |        |  
|------------------------- |  | ------------ | ------ | ------------- |  | - | ------ | -
|                          |  | December 31, |        | September 30,
|                          |  | 2001         |        | 2002         
|                          |  |              |        |              
|Beginning balance         |  | $            | 42,084 |               |  | $ | 63,536 |  
|Depreciation expense      |  |              | 23,673 |               |  |   | 12,731 |  
|Disposals and retirements |  |              | (2,221 | )             |  |   | (1,306 | )
|                          |  |              |        |               |  |   |        |  
|Ending balance            |  | $            | 63,536 |               |  | $ | 74,961 |  
|                          |  |              |        |               |  |   |        |  

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, 2002, a total
of $120.3 million was outstanding under the Nortel
Financing Agreement (see Note 8).

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IMPSAT S.A.




NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS  (Continued)


(Tables in thousands of U.S.
dollars)


Additionally, the Company has obtained additional
vendor financing from Ericsson, Tellabs OY, DMC, Harris Canada,
Inc. and Clarent Financial Services Ltd. for the acquisition of
fiber optic cable and other telecommunications equipment for the
Broadband Network for an aggregate of up to approximately
$13.7 million.

Global
Crossing During the
year ended December 31, 2000 the Company completed and
delivered to Global Crossing the portion of the Trans-Andean
Crossing System connecting Las Toninas, Argentina and Santiago,
Chile.

As part of its arrangements with Global Crossing,
the Parent Company or its affiliates have agreed to purchase
from Global Crossing indefeasible rights of use of capacity
valued at not less than $46 million on any of Global
Crossings fiber optic cable networks worldwide. These
rights enable the Parent Company to interconnect the Parent
Companys networks in Argentina and Brazil and give the
Parent Company global international access. The Parent Company
had purchased approximately $9.7 million under this
agreement as of December 31, 2001 and has not purchased any
amount during the nine months ended September 30, 2002,
respectively.

IRU
Agreements The Company
has entered into several agreements granting IRUs of up to
25 years to the Companys broadband network, including
network maintenance services and telehousing space. The Company
has received advance payments related to these agreements. These
advance payments are recorded as deferred revenue in the
accompanying condensed balance sheet. During the three and nine
months period ended September 30, 2002, the Company
recognized approximately $0.6 million and
$1.8 million, respectively, from these agreements, which
are reflected as services to carriers in the accompanying
condensed statement of operations.

6.     PROPERTY,
PLANT AND EQUIPMENT

Property, plant and equipment at
December 31, 2001 and September 30, 2002 consists of:

|                                        |       |              |          |               |  |   |          |         | 
|--------------------------------------- | ----- | ------------ | -------- | ------------- |  | - | -------- | ------- | 
|                                        |       | December 31, |          | September 30,
|                                        |       | 2001         |          | 2002         
|                                        |       |              |          |              
|Land                                    |       | $            | 3,106    |               |  | $ | 3,106    |        
|Building and improvements               |       |              | 30,909   |               |  |   | 30,424   |        
|Operating communications equipment      |       |              | 142,318  |               |  |   | 133,439  |        
|Furniture, fixtures and other equipment |       |              | 17,629   |               |  |   | 19,897   |        
|                                        |       |              |          |               |  |   |          |        
|                                        | Total |              |          | 193,962       |  |   |          | 186,866 | 
|Less: accumulated depreciation          |       |              | (158,278 | )             |  |   | (160,235 | )      
|                                        |       |              |          |               |  |   |          |        
|                                        | Total |              |          | 35,684        |  |   |          | 26,631  | 
|Equipment in transit                    |       |              | 3,047    |               |  |   | 2,063    |        
|Works in process                        |       |              | 1,418    |               |  |   |          |        
|                                        |       |              |          |               |  |   |          |        
|Property, plant and equipment, net      |       | $            | 40,149   |               |  | $ | 28,694   |        
|                                        |       |              |          |               |  |   |          |        

The recap of accumulated depreciation for the
year ended December 31,2001 and for the nine months ended
September 30,2002, is as follows:

|                          |  |              |         |               |  |   |         |  
|------------------------- |  | ------------ | ------- | ------------- |  | - | ------- | -
|                          |  | December 31, |         | September 30,
|                          |  | 2001         |         | 2002         
|                          |  |              |         |              
|Beginning balance         |  | $            | 131,378 |               |  | $ | 158,278 |  
|Depreciation expense      |  |              | 31,717  |               |  |   | 8,640   |  
|Disposals and retirements |  |              | (4,817  | )             |  |   | (6,683  | )
|                          |  |              |         |               |  |   |         |  
|Ending balance            |  | $            | 158,278 |               |  | $ | 160,235 |  
|                          |  |              |         |               |  |   |         |  

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IMPSAT S.A.




NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS  (Continued)


(Tables in thousands of U.S.
dollars)


7.     INVESTMENTS

The Companys investments at
December 31, 2001 and September 30, 2002 consist of:

|                                                                                                                                                          |  |              |       |               |  |   |       | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ----- | ------------- |  | - | ----- | 
|                                                                                                                                                          |  | December 31, |       | September 30,
|                                                                                                                                                          |  | 2001         |       | 2002         
|                                                                                                                                                          |  |              |       |              
|Investment in common stock, at fair
    value  New Skies Satellites N.V ($2,748 cost at
    December 31, 2001 and $2,455 cost at September 30,
    2002) |  | $            | 2,429 |               |  | $ | 1,538 | 
|                                                                                                                                                          |  |              |       |               |  |   |       | 

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.

8.     LONG-TERM
DEBT

The Companys long-term debt at
December 31, 2001 and September 30, 2002 is detailed
as follows:

|                                                                                                                            |                      |              |          |               |  |   |          |         | 
|--------------------------------------------------------------------------------------------------------------------------- | -------------------- | ------------ | -------- | ------------- |  | - | -------- | ------- | 
|                                                                                                                            |                      | December 31, |          | September 30,
|                                                                                                                            |                      | 2001         |          | 2002         
|                                                                                                                            |                      |              |          |              
|Term notes payable, maturing from 2001 through
    2004, collateralized by certain assets; denominated in U.S.
    dollars: |                      | $            | 2,590    |               |  | $ | 782      |        
|Eximbank notes payable (6.27% 
    10.09%), maturing semiannually through 200l and 2004.                                   |                      |              | 13,513   |               |  |   | 13,513   |        
|Vendor financing (5.21%  24.68%), due
    2006.                                                                            |                      |              | 149,470  |               |  |   | 134,005  |        
|                                                                                                                            |                      |              |          |               |  |   |          |        
|                                                                                                                            | Total long-term debt |              |          | 165,573       |  |   |          | 148,300 | 
|Less: current portion, including defaulted
    indebtedness                                                                 |                      |              | (162,390 | )             |  |   | (148,215 | )      
|                                                                                                                            |                      |              |          |               |  |   |          |        
|Long-term debt, net                                                                                                         |                      | $            | 3,183    |               |  |   | 85       |        
|                                                                                                                            |                      |              |          |               |  |   |          |        

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

The Companys liquidity difficulties 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
for 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 expired on November 25, 2001 and the Broadbank
Network Vendor Financing Agreements became due and payable. The
Company is in default under the Broadbank Network Vendor
Financing Agreements, and as a result of the default, an
aggregate of $118.0 million and $92,9 million of the
defaulted amounts have been reclassified to current portion of
long-term debt as of December 31, 2001 and
September 30, 2002, respectively.

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##### Table of Contents



IMPSAT S.A.




NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS  (Continued)


(Tables in thousands of U.S.
dollars)


9.     Income
Taxes

The composition of the provision for income
taxes, all of which is for foreign taxes, for the nine months
ended September 30, 2001 and 2002 is as follows:

|         |       |               |   |               |  |      |   |      |  |   |        |        |   |   |   |   | 
|-------- | ----- | ------------- | - | ------------- |  | ---- | - | ---- |  | - | ------ | ------ | - | - | - | - | 
|         |       |               |   |              
|         |       | Three Months  |   | Nine Months  
|         |       | Ended         |   | Ended        
|         |       | September 30, |   | September 30,
|         |       |               |   |              
|         |       | 2001          |   | 2002          |  | 2001 |   | 2002
|         |       |               |   |               |  |      |   |     
|Deferred |       | $             |  |               |  | $    |  |      |  | $ | (8,667 | )      |   | $ |  |  
|         |       |               |   |               |  |      |   |      |  |   |        |        |   |   |   |  
|         | Total |               | $ |              |  |      | $ |     |  |   | $      | (8,667 | ) |   | $ |  | 
|         |       |               |   |               |  |      |   |      |  |   |        |        |   |   |   |  

The statutory tax rate in Argentina is 35%.

As of September 30, 2002, the Company has
recorded a valuation allowance to offset its entire net deferred
tax asset.

10.     COMMITMENTS
AND CONTINGENCIES

Commitments
The Company leases satellite capacity with annual rental
commitments of approximately $6.4 million through the year
2006. The Company leases telecommunications links with annual
rental commitments of approximately $2.0 million through
the year 2006. In addition, the Company has commitments to
purchase communications and data center equipment amounting to
approximately $1.3 million at September 30, 2002.
These commitments are not included in the balance sheet as of
September 30, 2002.

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, another wholly-owned subsidiary of
IMPSAT Fiber Networks, Inc., 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, 2002, the balance outstanding was
approximately $2.2 million.

360Networks
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 360americas networks (Bermuda)
ltd., a subsidiary of 360 networks, Inc., and certain other
subsidiaries of 360 networks, Inc. (collectively
360networks) to construct and provide IRU dark
fiber, capacity services and conduit to 360networks over the
Companys Broadband Network in Argentina and Brazil, as a
result of the breach by 360networks of its payment obligation
under those contracts, including the new Argentina 
Brazil link that the Companies has recently completed. Between
March and May 2001, the Company and IMPSAT Brazil made available
segments of the IRU desk fiber and capacity services to
360networks for acceptance, but 360networks failed to make
certain payments as required by the contracts. 360networks 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 well. The Parent Company has
also more recently terminated a contract with 360networks for
collocation space in Caracas, Venezuela, also for payment
default by 360networks.

The Parent Company has commenced arbitration and
litigation proceedings against 360networks for damages under the
terminated contracts for the provision of IRU dark fiber and
capacity services, as contemplated by the relevant agreements.
360americas and the other subsidiaries with which the Parent
Company had contracted were 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 for its South American undersea fiber optic cable
system, which is owned by 360americas. The Parent Company
intends to aggressively pursue its remedies against

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##### Table of Contents



IMPSAT S.A.




NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS  (Continued)


(Tables in thousands of U.S.
dollars)


360networks, 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 360networks 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 balance sheet the amount received from
360networks 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, 2002,
the balance of such deferred revenue was $8.0 million.

Other
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
collectability of this matter continues to be negotiated for
settlement; however, the Company has valued this receivable at a
net realizable value of zero.

* * * * * *

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

New Developments and Critical
Considerations

IMPSATs Chapter 11
Filing.On June 11, 2002 (the
Petition Date), IMPSAT Fiber Networks, Inc. (the
Parent Company) filed a voluntary petition for
relief under Chapter 11 of the United States Code (the
Bankruptcy Code) with the United States Bankruptcy
Court for the Southern District of New York (the
Bankruptcy Court). Since the Petition Date, the
Parent Company has been operating its business and managing its
properties as a debtor in possession.

Our operating subsidiaries did not commence
bankruptcy proceedings and we expect them to continue to operate
in the ordinary course of business without any court-imposed
restrictions.

We are currently paying the post-petition claims
of our trade vendors in the ordinary course of business pursuant
to an order of the Bankruptcy Court issued following the
petition date. The Bankruptcy Court has also issued orders
approving, among other things: (i) maintenance and use of
our existing cash management system; (ii) establishing
procedures for interim compensation and reimbursement of
expenses of professionals; and (iii) maintenance of our
existing bank accounts for normal business operations. In
addition, on June 25, 2002, the Bankruptcy Court appointed
a committee of our unsecured creditors, which is responsible
for, among other things, representing the various interests and
concerns of the creditors it represents in respect of the
formulation of the plan of reorganization and monitoring the
Parent Companys financial condition and the operation of
its business during the bankruptcy. The creditors committee is
constituted by representatives of the primary entities with
which the Parent Company has been negotiating the terms of its
Chapter 11 plan of reorganization, including
representatives of the holders of our indebtedness under our
Broadband Network vendor financing agreements (the Vendor
Financing Agreements), our 12 1/8% Senior Guaranteed
Notes due 2003 (Senior Notes due 2003), our
13 3/4% Senior Notes due 2005 (Senior Notes due
2005), and our 12 3/8% Senior Notes due 2008
(Senior Notes 2008) (collectively, the Senior
Notes).

On September 4, 2002, the Parent Company
filed a Disclosure Statement (the Disclosure
Statement) and a Plan of Reorganization (the
Plan) with the Bankruptcy Court, which documents
were filed in amended form on October 23, 2002. The Plan
reflects the terms of the pre-arranged plan of reorganization
that holders of a majority of the indebtedness under our Vendor
Financing Agreements and our Senior Notes agreed to support
pursuant to certain binding lock-up agreements they signed with
us prior to the Petition Date. The Plan, if approved, would
restructure our indebtedness in the manner described in our
Quarterly Report on Form 10-Q for the second quarter of
2002 (accessible on the SECs website at www.sec.gov). The
Disclosure Statement summarizes the Plan and contains
information concerning, among other matters, the history,
business, results of operations, management, properties,
liabilities and the assets available for distribution under the
Plan as well as the anticipated organization and operation of a
reorganized Parent Company. The Disclosure Statement also
describes certain effects of Plan confirmation, certain risk
factors associated with the Plan, the manner in which
distributions will be made to our creditors under the Plan for
all amounts that were owed to such parties on the Petition Date
and the confirmation process and voting procedures that holders
of claims in impaired classes must follow for their votes to be
counted.

On or around November 1, 2002, the Plan and
Disclosure Statement were mailed to the impaired creditors and
other interests who are entitled to vote on confirmation of the
Plan. Notice of the Plan was also mailed to the Parent
Companys equity holders, but because they will receive
nothing on account of their claims under the Plan, the votes of
the equity holder class were not solicited. December 3,
2002 has been established as the deadline for the receipt of
votes to accept or reject the Plan. The Bankruptcy Court has
scheduled a hearing for December 11, 2002 to consider
confirmation of the Plan. At the confirmation hearing, the
Bankruptcy Court will determine whether sufficient acceptances
have been received to confirm the Plan or, if not, whether it is
nevertheless confirmable under applicable bankruptcy law.
Assuming the Bankruptcy Court approves the Plan, we currently
expect the Plan to become effective and our Chapter 11
restructuring proceeding to be completed prior to
December 31, 2002. No assurance can be given, however, that
the Bankruptcy Court will confirm the Plan or, if confirmed,
that the Plan will be consummated in the manner we anticipate or
at all.

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Effect of Argentine Peso Devaluation and
Pesification Decree and Ongoing Economic and
Political Crisis on our Results of Operations.In early January 2002, the government
of Argentine President Eduardo Duhalde abandoned the decade-old
fixed peso-dollar exchange rate and permitted the pesoto float freely against the U.S. dollar. At March 31,
2002, the floating exchange rate was 2.96 pesosto the
U.S. dollar, at June 30, 2002, the rate was 3.82 pesosto the U.S. dollar, and at September 30, 2002, the rate
was 3.75 pesosto the U.S. dollar. The devaluation of the
Argentine pesoaffects our consolidated financial
statements by generating foreign exchange transaction gains or
losses on peso-denominated monetary liabilities and
assets of IMPSAT Argentina and will generally result in a
decrease, in U.S. dollar terms, in our revenues, costs and
expenses in Argentina.

In February 2002, the Argentine government
instituted the pesification decree.
Generally, this decree mandates that all monetary obligations
arising from agreements subject to Argentine law denominated in
foreign currency and existing as of January 6, 2002 are
mandatorily converted into monetary obligations denominated in
pesosat an exchange rate of one U.S. dollar to one
peso. Such obligations generally may be adjusted pursuant
to an index called the coeficiente de
estabilización de referencia(CER),
to be published by the Argentine central bank, which is based on
the Argentine consumer price index. Contracts denominated in
pesos before the decree continue to be denominated in
pesos, unaffected by the decree. The devaluation and the
pesificationof agreements of our company
governed by Argentine law may have adverse, unknown and
unforeseeable effects on our company.

Since the effective date of the
pesificationdecree, certain of IMPSAT
Argentinas customer contracts and operating cash inflows
are now denominated in pesos. However, IMPSAT
Argentinas debt service payments and a significant portion
of its costs (including capital equipment purchases and payments
for certain leased satellite and terrestrial capacity) remain
denominated and payable in U.S. dollars. Accordingly, our
financial condition and results of operations in Argentina are
dependent upon IMPSAT Argentinas ability to generate
sufficient pesos(in U.S. dollar terms) to pay its costs,
expenses and to satisfy its debt service requirements. Because
of the recent nature of these events and the significant
uncertainties regarding the extent and duration of the
devaluation and the direction of the fiscal policies in
Argentina, management cannot presently determine or reasonably
estimate the impact a continued economic crisis in that country
could have on IMPSAT Argentinas and our consolidated
companys overall cash flows, financial condition, and
results of operations.

Argentina is currently trying to negotiate a
multibillion-dollar financial aid package from the International
Monetary Fund to help overcome that countrys debilitating
economic crisis. To date, no such agreement has been reached. It
is unclear whether Argentinas current president, Eduardo
Duhalde, will be able to complete his term or, even if he is
able to remain in power, whether he will have the necessary
support to implement the reforms required to restore economic
growth and public confidence. The rapid and radical nature of
the recent changes in the Argentine social, political, economic
and legal environment, and the absence of a clear political
consensus in favor of the new government or any particular set
of economic policies, have created an atmosphere of great
uncertainty. The Argentine government may enact future
regulations or policies that, when finalized and adopted, may
adversely and materially impact, among other items: (i) the
realized revenues we receive for services offered in Argentina;
(ii) the timing of repatriations of any dividends or other
cash flows from IMPSAT Argentina to IMPSAT Fiber Networks, Inc.
in the United States; (iii) our asset valuations; and
(iv) our peso-denominated monetary assets and
liabilities.

Brazils Economic
Crisis.During the third quarter of
2002, Brazil experienced a significant decline in its financial
markets due largely to concerns over the refinancing of
Brazils foreign debt and the outcome of the October 2002
presidential election. These concerns, which have continued
during the fourth quarter, have contributed to higher interest
rates on local debt for the government and private sectors, have
significantly decreased the availability of funds from lenders
outside of Brazil and have decreased the amount of foreign
investment in the country. These factors have contributed to a
downgrade of Brazils foreign currency debt rating and a
36% devaluation of the real against the U.S. dollar during the
third quarter of 2002. At June 30, 2002, the real traded at
a rate of R$2.83 = $1.00, and at September 30,
2002 it had depreciated to R$3.84 = $1.00. To aid
Brazil in its economic recovery efforts, in August 2002, the
International Monetary Fund announced a $30 billion loan package
for Brazil. The release of the majority of the IMF loan package

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will, however, depend on Brazil committing to
specified fiscal targets in 2003. On October 27, 2002, Luiz
Inacio Lula da Silva of the left-wing Workers Party was
elected president of Brazil. Although, as a candidate, Mr. da
Silva expressed support for tightening of Brazils fiscal
policy as a condition of the IMFs loan and promised to
honor and stabilize government debt, anxiety has persisted
within the investor community regarding whether Mr. da Silva can
restore financial confidence and quickly establish trust in his
administration and its ability to govern. A protraction or
worsening of the economic difficulties in Brazil, including
further currency devaluations, could have a material adverse
effect on IMPSAT Brazils and our companys overall
financial condition and results of operations.


Effects of the Global Crossing
Insolvency.We are party to a series
of agreements initially signed in 1999 with several subsidiaries
of Global Crossing Ltd. (collectively, Global
Crossing) for the provision of telecommunications
services. These agreements are described in our Quarterly Report
on Form 10-Q for the second quarter of 2002 and in other of
our prior filings with the SEC (accessible on the SECs
website at www.sec.gov). In January 2002, Global Crossing Ltd.,
along with a number of its subsidiaries, filed for protection
under Chapter 11 of the U.S. Bankruptcy Code.

During the third quarter of 2002, we recognized
revenues totaling $3.7 million from Global Crossing for the
services provided under our agreements with Global Crossing. Of
this amount, $2.7 million represented services billed
through the third quarter and $1.0 million represented the
revenue recognition effect under the IRUs that we granted to
Global Crossing. During the same period, Global Crossing
invoiced us a total of $0.6 million, principally for
maintenance services on the IRUs that we have acquired from
Global Crossing. In general, invoices under our agreements with
Global Crossing are submitted quarterly in advance and are
payable 30 days after receipt.

Although the Global Crossing subsidiaries that
have amounts outstanding to us were not originally included in
Global Crossings Chapter 11 filing, during August
2002 Global Crossing amended its Chapter 11 proceeding to
include its subsidiaries that are counterparties to the
agreements with us. As of October 1, 2002, we submitted
invoices for a total of $3.5 million for services to be
rendered under our agreements with Global Crossing for the
fourth quarter of 2002. As of October 31, 2002, the due
date of such invoices, and as of the date of this Quarterly
Report, Global Crossing had paid $2.1 million of this
amount, and an additional $2.0 million from prior periods
was also unpaid. Global Crossing has disputed some of the
amounts invoiced. As of September 30, 2002, we have created
a doubtful debt reserve against $0.2 million of such amount.

In light of Global Crossings payment
defaults to us, we have declined to pay to Global Crossing a
total of $0.4 million that Global Crossing has invoiced us
for services through the end of 2002. The amounts that we owe
Global Crossing are principally owed to Global Crossing
Bandwidth, Inc., a subsidiary of Global Crossing that is among
the Global Crossing parties that have filed for relief under
Chapter 11.

We are monitoring the Global Crossing bankruptcy
proceedings and commercial relationship carefully. Our company
is currently evaluating its contractual rights in respect of
Global Crossings payment defaults and its alternatives
with respect to the acquisition of alternative capacity in light
of the uncertainty that Global Crossing will be able or willing
to perform its obligations under its agreements with us.

The difficulties being experienced by Global
Crossing, including Global Crossings Chapter 11
proceeding, could have an adverse effect on our financial
condition and operations. At a minimum, Global Crossings
bankruptcy proceedings are likely to cause delays in our receipt
of amounts due to us from Global Crossing. In addition, Global
Crossing could seek, in the applicable bankruptcy proceedings,
to reject the contracts or to make claims against us in
connection with such contracts. In the event of a rejection of
any such contracts by Global Crossing, any damages that we might
have in respect of such rejected contracts would be treated as
claims in the applicable Global Crossing bankruptcy proceedings,
which claims may not realize any meaningful recovery to us. In
that regard, in connection with Global Crossings filing at
the end of August 2002 of certain of its subsidiaries, Global
Crossing has indicated its intent to reject at least one of its
agreements with us, pursuant to which agreement IMPSAT Colombia
had agreed to lease space in its telehouse in Bogota, Colombia
to Global Crossing.

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In addition, if Global Crossing is unable to
successfully restructure its balance sheet, it could be forced
to liquidate its assets. If Global Crossing were to sell or
terminate its South American operations as part of its
bankruptcy proceedings, it is unclear what rights we would have
to continue to utilize the IRUs that we have purchased from
Global Crossing. It is possible that our agreements with Global
Crossing would be terminated and we would need to seek
substitute sources of IRU or other capacity from competing
undersea fiber optic systems to link our operations, including
our Broadband Network, to other parts of Latin America and the
world. The occurrence of these circumstances would have a
material adverse effect on our business, results of operations
and financial condition.

Critical Accounting Policies

In the ordinary course of business, our company
has made a number of estimates and assumptions relating to the
reporting of results of operations and financial position in the
preparation of its financial statements in conformity with GAAP.
Actual results could differ significantly from those estimates
under different assumptions and conditions. Our most critical
accounting policies (which were described within the following
captions in the notes to our audited consolidated financial
statements forming part of our 2001 Annual Report on
Form 10-K (accessible on the SECs website at
www.sec.gov)), are:



| |   |                              
| | - | -----------------------------
| |  | Revenue Recognition          
|
| |  | Non-Monetary Transactions    
|
| |  | Broadband Network            
|
| |  | Property, Plant and Equipment
|
| |  | Long-Lived Assets            
|
| |  | Foreign Currency Translation 

These policies, which are those that are most
important to the portrayal of our financial condition and
results of operations and require managements most
difficult, subjective and complex judgments, often are a result
of the need to make estimates about the effect of matters that
are inherently uncertain. We have not made any changes in any of
these critical accounting policies during the first three
quarters of 2002, nor have we made any material changes in any
of the critical accounting estimates underlying these accounting
policies during the first three quarters of 2002.

Forward Looking Statements

Statements regarding our financial restructuring
or about future results made in this Quarterly Report may
constitute forward looking statements within the meaning of the
Private Securities Litigation Reform act of 1995. In some cases,
forward looking statements can be identified by the use of
terminology such as may, will,
expects, plans, anticipates,
estimates, potential, or
continue, or the negative thereof or other
comparable terminology. These statements are based on current
expectations and the current economic environment. Forward
looking statements speak only as of the date they are made, and
we undertake no obligation to update or revise any forward
looking statement. If we do update any forward looking
statement, no inference should be drawn that we will make
additional updates with respect to that statement or any other
forward looking statements.

We caution that forward looking statements are
not guarantees of future performance. They involve a number of
risks and uncertainties that are difficult to predict. Actual
results could differ materially from those expressed or implied
in these statements. Important assumptions and other important
factors that could cause actual results to differ materially
from those in the forward looking statements are specified
elsewhere in this Quarterly Report and in our other SEC reports,
accessible on the SECs website at www.sec.gov.

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##### Table of Contents



Results of Operations

The following financial table summarizes our
results of operations:

|                                                                        |                                        |                                                             |                                  |                                 |        |        |        |      |      |       |         |        |        |        |        |      |      |       |          |        |         |         |        |      |      |       |          |        |         |         |        |      |      |       | 
|----------------------------------------------------------------------- | -------------------------------------- | ----------------------------------------------------------- | -------------------------------- | ------------------------------- | ------ | ------ | ------ | ---- | ---- | ----- | ------- | ------ | ------ | ------ | ------ | ---- | ---- | ----- | -------- | ------ | ------- | ------- | ------ | ---- | ---- | ----- | -------- | ------ | ------- | ------- | ------ | ---- | ---- | ----- | 
|                                                                        |                                        |                                                             |                                  |                                
|                                                                        |                                        | Three Months Ended September 30,                            |                                  | Nine Months Ended September 30,
|                                                                        |                                        |                                                             |                                  |                                
|                                                                        |                                        |                                                             |                                  |                                 |        |        |        |     
|                                                                        |                                        | 2001                                                        |                                  | 2002                            |        | 2001   |        | 2002
|                                                                        |                                        |                                                             |                                  |                                 |        |        |        |     
|                                                                        |                                        |                                                             |                                  |                                 |        |        |        |      |      |       |         |        |        |       
|                                                                        |                                        |                                                            
|                                                                        |                                        | (In thousands and as a percentage of consolidated revenues)
|Net revenues:                                                           |                                        |                                                             |                                  |                                 |        |        |        |      |      |       |         |        |        |        |        |      |      |       |          |        |         |         |        |      |      |       |          |        |         |         |        |     
|                                                                        | Net revenues from services:            |                                                             |                                  |                                 |        |        |        |      |      |       |         |        |        |        |        |      |      |       |          |        |         |         |        |      |      |       |          |        |         |         |        |      |     
|                                                                        |                                        | Data and value added services                               |                                  | $                               | 59,097 |        |        |      | 77.2 | %     |         | $      | 43,901 |        |        |      | 79.4 | %     |          | $      | 178,186 |         |        |      | 73.1 | %     |          | $      | 138,289 |         |        | $    | 78.1 | %    
|                                                                        |                                        | Internet                                                    |                                  |                                 | 11,612 |        |        |      | 15.2 |       |         |        | 6,333  |        |        |      | 11.5 |       |          |        | 34,453  |         |        |      | 14.1 |       |          |        | 21,454  |         |        |      | 12.1 |      
|                                                                        |                                        | Telephony                                                   |                                  |                                 | 3,406  |        |        |      | 4.5  |       |         |        | 2,915  |        |        |      | 5.3  |       |          |        | 6,562   |         |        |      | 2.7  |       |          |        | 11,234  |         |        |      | 6.3  |      
|                                                                        |                                        | Services to carriers                                        |                                  |                                 | 1,560  |        |        |      | 2.0  |       |         |        | 1,823  |        |        |      | 3.3  |       |          |        | 5,727   |         |        |      | 2.4  |       |          |        | 5,323   |         |        |      | 3.0  |      
|                                                                        |                                        |                                                             |                                  |                                 |        |        |        |      |      |       |         |        |        |        |        |      |      |       |          |        |         |         |        |      |      |       |          |        |         |         |        |     
|                                                                        |                                        |                                                             | Total net revenues from services |                                 |        | 75,675 |        |      |      | 98.8  |         |        |        | 54,972 |        |      |      | 99.4  |          |        |         | 224,928 |        |      |      | 92.2  |          |        |         | 176,300 |        |      |      | 99.6  | 
|                                                                        | Sales of equipment                     |                                                             |                                  | 895                             |        |        |        | 1.2  |      |       |         | 336    |        |        |        | 0.6  |      |       |          | 11,718 |         |         |        | 4.8  |      |       |          | 762    |         |         |        | 0.4  |     
|                                                                        | Broadband network development revenues |                                                             |                                  |                                |        |        |        |     |      |       |         |       |        |        |        |     |      |       |          | 7,197  |         |         |        | 3.0  |      |       |          |       |         |         |        |     |     
|                                                                        |                                        |                                                             |                                  |                                 |        |        |        |      |      |       |         |        |        |        |        |      |      |       |          |        |         |         |        |      |      |       |          |        |         |         |        |     
|                                                                        |                                        |                                                             | Total net revenues               |                                 |        | 76,570 |        |      |      | 100.0 |         |        |        | 55,308 |        |      |      | 100.0 |          |        |         | 243,843 |        |      |      | 100.0 |          |        |         | 177,062 |        |      |      | 100.0 | 
|Direct costs:                                                           |                                        |                                                             |                                  |                                 |        |        |        |      |      |       |         |        |        |        |        |      |      |       |          |        |         |         |        |      |      |       |          |        |         |         |        |     
|                                                                        | Contracted services                    |                                                             |                                  | 10,150                          |        |        |        | 13.3 |      |       |         | 3,676  |        |        |        | 6.7  |      |       |          | 30,094 |         |         |        | 12.3 |      |       |          | 15,013 |         |         |        | 8.5  |     
|                                                                        | Other direct costs                     |                                                             |                                  | 7,653                           |        |        |        | 10.0 |      |       |         | 5,629  |        |        |        | 10.2 |      |       |          | 20,816 |         |         |        | 8.5  |      |       |          | 17,190 |         |         |        | 9.7  |     
|                                                                        | Leased capacity                        |                                                             |                                  | 21,851                          |        |        |        | 28.5 |      |       |         | 17,422 |        |        |        | 31.5 |      |       |          | 67,236 |         |         |        | 27.6 |      |       |          | 57,321 |         |         |        | 32.4 |     
|                                                                        | Broadband network cost                 |                                                             |                                  |                                |        |        |        |     |      |       |         |       |        |        |        |     |      |       |          | 3,335  |         |         |        | 1.4  |      |       |          |       |         |         |        |     |     
|                                                                        | Cost of equipment sold                 |                                                             |                                  | 722                             |        |        |        | 0.9  |      |       |         | 67     |        |        |        | 0.1  |      |       |          | 8,219  |         |         |        | 3.4  |      |       |          | 307    |         |         |        | 0.2  |     
|                                                                        |                                        |                                                             |                                  |                                 |        |        |        |      |      |       |         |        |        |        |        |      |      |       |          |        |         |         |        |      |      |       |          |        |         |         |        |     
|Total direct costs                                                      |                                        |                                                             | 40,376                           |                                 |        |        | 52.7   |      |      |       | 26,794  |        |        |        | 48.5   |      |      |       | 129,700  |        |         |         | 53.2   |      |      |       | 89,831   |        |         |         | 50.7   |     
|Salaries and wages                                                      |                                        |                                                             | 20,835                           |                                 |        |        | 27.2   |      |      |       | 10,852  |        |        |        | 19.6   |      |      |       | 64,932   |        |         |         | 26.6   |      |      |       | 36,487   |        |         |         | 20.6   |     
|Selling, general and administrative expenses                            |                                        |                                                             | 12,251                           |                                 |        |        | 16.0   |      |      |       | 6,243   |        |        |        | 11.3   |      |      |       | 41,721   |        |         |         | 17.1   |      |      |       | 20,406   |        |         |         | 11.5   |     
|Provision for asset impairment                                          |                                        |                                                             | 234,625                          |                                 |        |        | 306.4  |      |      |       |        |        |        |        |       |      |      |       | 234,625  |        |         |         | 96.2   |      |      |       |         |        |         |         |       |     
|Depreciation and amortization                                           |                                        |                                                             | 32,888                           |                                 |        |        | 43.0   |      |      |       | 16,706  |        |        |        | 30.2   |      |      |       | 92,566   |        |         |         | 38.0   |      |      |       | 63,974   |        |         |         | 36.1   |     
|Interest expense, net                                                   |                                        |                                                             | 34,055                           |                                 |        |        | 44.5   |      |      |       | 13,002  |        |        |        | 23.5   |      |      |       | 96,185   |        |         |         | 39.4   |      |      |       | 84,154   |        |         |         | 47.5   |     
|Net loss on foreign exchange                                            |                                        |                                                             | 26,132                           |                                 |        |        | 34.1   |      |      |       | 62,621  |        |        |        | 113.2  |      |      |       | 50,282   |        |         |         | 20.6   |      |      |       | 115,052  |        |         |         | 65.0   |     
|Recognition of other-than-temporary decline in
    value of investments |                                        |                                                             | 19,537                           |                                 |        |        | 25.5   |      |      |       |        |        |        |        |       |      |      |       | 19,537   |        |         |         | 8.0    |      |      |       |         |        |         |         |       |     
|Reorganization items                                                    |                                        |                                                             |                                 |                                 |        |        |       |      |      |       | (9,297  | )      |        |        | (16.8  | )    |      |       |         |        |         |         |       |      |      |       | (14,989  | )      |         |         | (8.5   | )   
|Other income (loss), net                                                |                                        |                                                             | (311                             | )                               |        |        | (0.4   | )    |      |       | (2,105  | )      |        |        | (3.8   | )    |      |       | (163     | )      |         |         | (0.1   | )    |      |       | (3,805   | )      |         |         | (2.1   | )   
|Gain on early extinguishment of debt                                    |                                        |                                                             |                                  |                                 |        |        |        |      |      |       |         |        |        |        |        |      |      |       |          |        |         |         |        |      |      |       | 16,367   |        |         |         | 9.2    |     
|Benefit from (provision for) foreign income taxes                       |                                        |                                                             | 84                               |                                 |        |        | 0.1    |      |      |       | (407    | )      |        |        | (0.7   | )    |      |       | (26,403  | )      |         |         | (10.8  | )    |      |       | (1,558   | )      |         |         | (0.9   | )   
|                                                                        |                                        |                                                             |                                  |                                 |        |        |        |      |      |       |         |        |        |        |        |      |      |       |          |        |         |         |        |      |      |       |          |        |         |         |        |     
|Net loss                                                                |                                        | $                                                           | (344,356                         | )                               |        |        | (449.7 | )%   |      | $     | (92,719 | )      |        |        | (167.6 | )%   |      | $     | (512,271 | )      |         |         | (210.1 | )%   |      | $     | (236,827 | )      |         |         | (133.8 | )%  
|                                                                        |                                        |                                                             |                                  |                                 |        |        |        |      |      |       |         |        |        |        |        |      |      |       |          |        |         |         |        |      |      |       |          |        |         |         |        |     

Nine Months Ended September 30, 2002
Compared to Nine Months Ended September 30, 2001

Revenues.Our total
net revenues for the three and nine months ended
September 30, 2002 totaled $55.3 million and
$177.1 million, a decrease of $21.3 million (or 27.8%)
and $66.8 million (or 27.4%) from total net revenues for
the same periods in 2001. Our total net revenues in the third
quarter of 2002 decreased by $4.0 million (or 6.8%)
compared to our total net revenues for the second quarter of
2002.

Our net revenues from services for the three and
nine months ended September 30, 2002, totaled
$55.0 million and $176.3 million, a decrease of
$20.7 million (or 27.4%) and $48.6 million (or 21.6%)
from net revenues from services for the same periods in 2001.
Compared to our net revenues from services for the second
quarter of 2002, our net revenues from services in the third
quarter of 2002 decreased by $4.2 million (or 7.1%). The
decrease in our net revenues was principally due to the
continuing adverse economic conditions being experienced
throughout Latin America. In particular, significant
devaluations of the Argentine pesoand the Brazilian
real against the U.S. dollar had adversely affected our
revenues.

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##### Table of Contents



Our net revenues from services include net
revenues from:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | data and value added services, which include
    satellite and broadband data transmission services, data center
    services, and other value-added services                                                                                                                                                                                                                                   
|
| |  | Internet, which is composed of our Internet
    backbone access and managed modem services                                                                                                                                                                                                                                                                                                      
|
| |  | telephony, including local, national and
    international long-distance services, and                                                                                                                                                                                                                                                                                                          
|
| |  | services to carriers, 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 services
    to those carriers.

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,
|                               |                               |                                  |        |                                
|                               |                               | 2001                             |        | 2002                            |        | % Change(1) |       | 2001   |        | 2002 |       | % Change(1)
|                               |                               |                                  |        |                                 |        |             |       |        |        |      |       |            
|                               |                               |                                 
|                               |                               | (dollar amounts in thousands)   
|Data and value added services: |                               |                                  |        |                                 |        |             |       |        |        |      |       |             |       |    |        |         |         |  |        |        |         |  |       |      
|                               | Broadband                     |                                  | $      | 21,955                          |        |             | $     | 19,109 |        |      |       | (13.0       | )     |    | $      | 60,697  |         |  | $      | 58,919 |         |  |       | (2.9  | )%   
|                               | Satellite                     |                                  |        | 32,826                          |        |             |       | 21,382 |        |      |       | (34.9       |       |    |        | 104,994 |         |  |        | 68,840 |         |  |       | (34.4 | )    
|                               | Other value added services(2) |                                  |        | 4,316                           |        |             |       | 3,410  |        |      |       | (21.0       | )     |    |        | 12,495  |         |  |        | 10,530 |         |  |       | (15.7 | )    
|                               |                               |                                  |        |                                 |        |             |       |        |        |      |       |             |       |    |        |         |         |  |        |        |         |  |       |      
|                               |                               | Total                            |        | $                               | 59,097 |             |       | $      | 43,901 |      |       |             | (25.7 | )% |        | $       | 178,186 |  |        | $      | 138,289 |  |       |       | (22.4 | )%
|Internet                       |                               |                                  | 11,612 |                                 |        |             | 6,333 |        |        |      | (45.5 | )           |       |    | 34,453 |         |         |  | 21,454 |        |         |  | (37.7 | )    
|Telephony                      |                               |                                  | 3,406  |                                 |        |             | 2,915 |        |        |      | (14.4 | )           |       |    | 6,562  |         |         |  | 11,234 |        |         |  | 71.2  |      
|Services to carriers           |                               |                                  | 1,560  |                                 |        |             | 1,823 |        |        |      | 16.9  |             |       |    | 5,727  |         |         |  | 5,323  |        |         |  | (7.1  | )    
|                               |                               |                                  |        |                                 |        |             |       |        |        |      |       |             |       |    |        |         |         |  |        |        |         |  |       |      
|                               |                               | Total net revenues from services |        | $                               | 75,675 |             |       | $      | 54,972 |      |       |             | (27.4 | )% |        | $       | 224,928 |  |        | $      | 176,300 |  |       |       | (21.6 | )%
|                               |                               |                                  |        |                                 |        |             |       |        |        |      |       |             |       |    |        |         |         |  |        |        |         |  |       |      






|    |                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------
|(1) | Percentage increase (decrease) in relevant
    period in 2002 compared to corresponding period in 2001.
|   
|(2) | Includes data center services and systems
    integration and other information technology services.   

The decrease in our net revenues from services
during the three and nine months ended September 30, 2002
as compared to the corresponding periods in 2001 resulted from
lower revenues from data and value added services, Internet and
services to carriers (offset in part by an increase in our
revenues from telephony services during the nine-month period in
2002). Our revenues from broadband services decreased during
these periods in 2002 as compared to the corresponding periods
in 2001 due to the negative effect on these revenues (in U.S.
dollar terms) primarily attributable to the devaluation of the
Argentine pesoand the Brazilian real. In addition
to the foregoing:



| |   |                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our revenues from satellite services during the
    three and nine months ended September 30, 2002 declined in
    comparison to the same periods in 2001 due to: (i) lower
    satellite-based services volume

(as we transferred telecommunications services to
our Broadband Network), (ii) downward pressure on our
prices (because of competition and adverse economic conditions),
and (iii) a number of customer cancellations or
non-renewals.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our telephony services revenues declined during
    the three months, but increased during the nine months, ended
    September 30, 2002 (as compared to the same periods in
    2001). The decrease in our telephony services revenues during
    the third quarter of 2002 over the same period in 2001 was
    attributable to (i) lower volume, as fewer calls were
    carried over our network; (ii) our termination of certain
    customer contracts due to payment defaults; (iii) downward
    pressure on our prices because of competition, adverse economic
    conditions and the devaluation of the peso. Our telephony
    services in Argentina, which we introduced as a new service in
    2001, are utilized by third-party resellers. The overall
    increase in our telephony services revenues for the three
    quarters ended September 30, 2002 over the same period in
    2001 was generated in connection with our increased delivery
    during that

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | period of switched voice services to corporate
    customers in Argentina and international call terminations to
    end-user customers in Peru and the United States.                                                                                                                                                                                                                                                                                                      
|
| |  | Our revenues from services to carriers increased
    in the third quarter, and decreased in the first nine months of
    2002 (compared to the corresponding periods in 2001). Our
    revenues from services to carriers during the first three
    quarters of 2002 have been impacted by the cancellation of our
    contracts with 360networks in June 2001 and a general decline in
    demand by telecommunications companies for dark and
    lit fiber capacity.

Global Crossing and 360networks were the
principal customers for our data center services and services to
carriers during 2001. 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, you may
refer to see the section captioned Legal Proceedings
in our Quarterly Report on Form 10-Q for the first quarter
of 2002.)

During the third quarter of 2002, and at
September 30, 2002 compared to at September 30, 2001,
we experienced a net decrease in the number of our customers. We
had 2,840 customers as of September 30, 2002, compared to
2,854 customers at June 30, 2002 and 3,047 customers at
September 30, 2001. The following table shows the evolution
of our customer base as of the dates indicated:

|                 |       |                            |      |          |  |               |       |             |  |             |       |       |  |  |       |      |   |  |      |      |  
|---------------- | ----- | -------------------------- | ---- | -------- |  | ------------- | ----- | ----------- |  | ----------- | ----- | ----- |  |  | ----- | ---- | - |  | ---- | ---- | -
|                 |       |                            |      |          |  |              
|                 |       | Number of Customers as of: |      |          |  |              
|                 |       |                            |      |          |  |              
|                 |       | September 30,              |      | June 30, |  | September 30, |       |             |  |            
|                 |       | 2001                       |      | 2002     |  | 2002          |       | % Change(1) |  | % Change(2)
|                 |       |                            |      |          |  |               |       |             |  |            
|IMPSAT Argentina |       |                            | 1162 |          |  |               | 1,097 |             |  |             | 1,103 |       |  |  | (5.1  | )    |   |  | 0.5  |     
|IMPSAT Colombia  |       |                            | 746  |          |  |               | 697   |             |  |             | 698   |       |  |  | (6.4  | )    |   |  | 0.1  |     
|IMPSAT Brazil    |       |                            | 378  |          |  |               | 371   |             |  |             | 368   |       |  |  | (2.6  | )    |   |  | (0.8 | )   
|IMPSAT Venezuela |       |                            | 291  |          |  |               | 239   |             |  |             | 216   |       |  |  | (25.8 | )    |   |  | (9.6 | )   
|IMPSAT Ecuador   |       |                            | 259  |          |  |               | 226   |             |  |             | 221   |       |  |  | (14.7 | )    |   |  | (2.2 | )   
|IMPSAT Mexico    |       |                            | 56   |          |  |               | 47    |             |  |             | 47    |       |  |  | (16.1 | )    |   |  | 0.0  |     
|IMPSAT Chile     |       |                            | 49   |          |  |               | 53    |             |  |             | 56    |       |  |  | 14.3  |      |   |  | 5.7  |     
|IMPSAT Peru      |       |                            | 33   |          |  |               | 55    |             |  |             | 63    |       |  |  | 90.9  |      |   |  | 14.5 |     
|IMPSAT USA       |       |                            | 73   |          |  |               | 69    |             |  |             | 68    |       |  |  | (6.8  | )    |   |  | (1.4 | )   
|                 |       |                            |      |          |  |               |       |             |  |             |       |       |  |  |       |      |   |  |      |     
|                 | Total |                            |      | 3,047    |  |               |       | 2,854       |  |             |       | 2,840 |  |  |       | (6.8 | ) |  |      | (0.5 | )
|                 |       |                            |      |          |  |               |       |             |  |             |       |       |  |  |       |      |   |  |      |     





|    |                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------
|(1) | Net increase (decrease) as of
    September 30, 2002 compared to end of third quarter of 2001.             
|   
|(2) | Net increase (decrease) as of
    September 30, 2002 compared to the end of the second
    quarter of 2001.

In addition to poor economic conditions in
Argentina and Brazil, negative or sluggish economic growth
persisted throughout most of the Latin American region during
the nine months ended September 30 2002. During 2002, we
have not experienced any significant customer losses to our
competitors.

In addition to net revenues from services, our
total net revenues for the three and nine months ended
September 30, 2002 included $0.3 million and
$0.8 million in equipment sales, which represent decreases
of $0.6 million (or 62.5%) and $11.0 million (or
93.5%) from the same periods in 2001. We did not record any
Broadband network development revenues during the first nine
months of 2002 or the third quarter of 2001. Our Broadband
Network development revenues totaled $7.2 million for the
nine months ended September 30, 2001. We currently
anticipate only minimal sales of equipment during the remainder
of 2002, and we do not anticipate any Broadband Network
development revenues during 2002 or in the future.

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The following table shows by operating subsidiary
our revenues from services and total revenues (in each case,
including intercompany transactions) for the periods indicated:

|                 |               |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       |  
|---------------- | ------------- | -------------------------------- | - | ------------------------------- |  | ----------- | - | ------ |  | ---- |  | ----------- | - |  | - | ------ |  |  | - | ------ |  |  |  | ----- | -
|                 |               |                                  |   |                                
|                 |               | Three Months Ended September 30, |   | Nine Months Ended September 30,
|                 |               |                                  |   |                                
|                 |               | 2001                             |   | 2002                            |  | % Change(1) |   | 2001   |  | 2002 |  | % Change(1)
|                 |               |                                  |   |                                 |  |             |   |        |  |      |  |            
|                 |               |                                 
|                 |               | (dollar amounts in thousands)   
|IMPSAT Argentina |               |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |      
|                 | From services |                                  | $ | 31,242                          |  |             | $ | 13,385 |  |      |  | (57.2       | ) |  | $ | 91,122 |  |  | $ | 43,398 |  |  |  | (52.4 | )
|                 | Total         |                                  |   | 32,072                          |  |             |   | 13,589 |  |      |  | (57.6       | ) |  |   | 96,008 |  |  |   | 43,706 |  |  |  | (54.5 | )
|IMPSAT Colombia  |               |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |      
|                 | From services |                                  |   | 15,479                          |  |             |   | 14,185 |  |      |  | (8.4        | ) |  |   | 46,228 |  |  |   | 44,196 |  |  |  | (4.4  | )
|                 | Total         |                                  |   | 15,485                          |  |             |   | 14,190 |  |      |  | (8.4        | ) |  |   | 46,713 |  |  |   | 44,210 |  |  |  | (5.4  | )
|IMPSAT Brazil    |               |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |      
|                 | From services |                                  |   | 9,657                           |  |             |   | 7,899  |  |      |  | (18.2       | ) |  |   | 30,839 |  |  |   | 28,718 |  |  |  | (6.9  | )
|                 | Total         |                                  |   | 9,657                           |  |             |   | 7,908  |  |      |  | (18.1       | ) |  |   | 36,016 |  |  |   | 28,727 |  |  |  | (20.2 | )
|IMPSAT Venezuela |               |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |      
|                 | From services |                                  |   | 8,054                           |  |             |   | 7,541  |  |      |  | (6.4        | ) |  |   | 23,188 |  |  |   | 22,975 |  |  |  | (0.9  | )
|                 | Total         |                                  |   | 8,080                           |  |             |   | 7,627  |  |      |  | (5.6        | ) |  |   | 24,382 |  |  |   | 23,185 |  |  |  | (4.9  | )
|IMPSAT Ecuador   |               |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |      
|                 | From services |                                  |   | 3,991                           |  |             |   | 3,965  |  |      |  | (0.7        | ) |  |   | 11,681 |  |  |   | 12,725 |  |  |  | 8.9   |  
|                 | Total         |                                  |   | 3,991                           |  |             |   | 3,965  |  |      |  | (0.7        | ) |  |   | 11,681 |  |  |   | 12,813 |  |  |  | 9.7   |  
|IMPSAT Chile     |               |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |      
|                 | From services |                                  |   | 1,983                           |  |             |   | 2,340  |  |      |  | 18.0        |   |  |   | 5,521  |  |  |   | 7,079  |  |  |  | 28.2  |  
|                 | Total         |                                  |   | 1,983                           |  |             |   | 2,340  |  |      |  | 18.0        |   |  |   | 11,581 |  |  |   | 7,079  |  |  |  | (38.9 | )
|IMPSAT Peru      |               |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |      
|                 | From services |                                  |   | 1,782                           |  |             |   | 2,580  |  |      |  | 44.8        |   |  |   | 3,774  |  |  |   | 8,224  |  |  |  | 117.9 |  
|                 | Total         |                                  |   | 1,799                           |  |             |   | 2,627  |  |      |  | 46.0        |   |  |   | 4,792  |  |  |   | 8,352  |  |  |  | 74.3  |  
|IMPSAT USA       |               |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |      
|                 | From services |                                  |   | 9,066                           |  |             |   | 7,113  |  |      |  | (21.5       | ) |  |   | 27,715 |  |  |   | 25,970 |  |  |  | (6.3  | )
|                 | Total         |                                  |   | 9,084                           |  |             |   | 7,113  |  |      |  | (21.7       | ) |  |   | 27,833 |  |  |   | 25,970 |  |  |  | (6.7  | )
|Other            |               |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |      
|                 | From services |                                  |   | 5,256                           |  |             |   | 5,232  |  |      |  | (0.5        | ) |  |   | 14,263 |  |  |   | 15,962 |  |  |  | 11.9  |  
|                 | Total         |                                  |   | 5,259                           |  |             |   | 5,233  |  |      |  | (0.5        | ) |  |   | 14,266 |  |  |   | 15,967 |  |  |  | 11.9  |  





|    |                                                                                             
|--- | --------------------------------------------------------------------------------------------
|(1) | Increase (decrease) in relevant period in
    2002 compared to corresponding period in 2001.

In the beginning of January 2002, the Government
of Argentina defaulted on its external debt payments and
devalued its currency, exacerbating declining commercial
confidence and activity and further inflating already high costs
of financing for Argentine companies. Argentina continues to
experience recessionary conditions, a lack of access to
international capital markets, internal disruption and social
unrest. For the foreseeable future, we do not expect the
recession affecting the Argentine economy will subside or that
future economic and political developments in Argentina will
improve in any significant manner. Since the inauguration in
January 2002 of the administration of Argentinas President
Eduardo Duhalde, Argentinas government has been unable to
achieve political consensus and support for the introduction of
economic measures demanded by the International Monetary Fund
and other international lending agencies in exchange for an
emergency loan package. The Argentine economic and political
environment has continued to deteriorate. It is possible that
the political and economic crisis in Argentina could worsen in
coming weeks or months. The continued or worsening political and
economic crisis in Argentina, our largest country of operation,
will continue to have a materially adverse impact on our
financial condition and results of operations.

During the first nine months of 2002, IMPSAT
Argentinas financial condition and results of operations
continued to be severely and negatively affected by currency
fluctuations, inflation, interest rates, and other unfavorable
political, social and economic developments. Our net revenues
from services at IMPSAT Argentina for the three and nine months
ended September 30, 2002 totaled $13.4 million and
$43.4 million, a

8



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decrease of $17.9 million (or 57.2%) and
$47.7 million (or 52.4%) compared to the same periods in
2001. This decrease was primarily caused by the devaluation of
the Argentine pesofollowing the implementation of the
pesification decree and general recessionary
conditions in that country.


Our results in Brazil also were adversely
affected during the first nine months of 2002 as compared to the
corresponding period in 2001 by the devaluation of the Brazilian
real against the U.S. dollar. At September 30, 2001,
the real traded at a rate of R$2.76 = $1.00,
and at September 30, 2002 it had depreciated to
R$3.84 = $1.00. As of November 11, 2002, the
real traded at a rate of R$3.63 = $1.00. These
and prior devaluations have had a negative effect on our
real-denominated revenues. The devaluation of the
real and the decline in growth in the Brazilian economy
have been caused in part by the continued recession in the
region, a general aversion to emerging markets by foreign direct
and financial investors and the overall decline in worldwide
economic production. In addition, there is some concern among
the international investor community that Mr. da Silva, who was
elected president of Brazil on October 27, 2002, will cause
Brazil to alter its policies in a manner that would adversely
affect its economy. These conditions have had, and can be
expected to continue to have, an adverse effect on IMPSAT
Brazils and our companys overall financial condition
and results of operations.

IMPSAT Brazils revenues from services for
the three and nine months ended September 30, 2002 totaled
$7.9 million and $28.7 million, a decrease of $1.8
million (or 18.2%) and $2.1 million (or 6.9%) compared to
the same periods in 2001. This decrease in revenues relates
primarily to the effect of the devaluation of the real.
In local currency terms, IMPSAT Brazils revenues for the
three and nine months ended September 30, 2002 increased by
5.2% and 13.1% as compared to the same periods in 2001.

IMPSAT Colombia recorded revenues from services
of $14.2 million and $44.2 million during the three
and nine months ended September 30, 2002, compared to
$15.5 million and $46.2 million for the same periods
in 2001. Our net revenues from services in Colombia have been
negatively impacted by sustained adverse economic conditions in
that country. Colombias economy continues to suffer as a
result of devaluations of the Colombian peso, an enduring
civil war, as well as general recessionary conditions.

Revenues from services at IMPSAT Venezuela
equaled $7.5 million and $23.0 million for the three
and nine months ended September 30, 2002, compared to
$8.1 million and $23.2 million for the corresponding
periods in 2001. On February 12, 2002, Venezuelas
government floated its currency, ending a five-year-old regime
that permitted the bolivarto trade only within a
fixed-band against the U.S. dollar. As a result, devaluation of
the bolivaroccurred. Venezuela is currently experiencing
political and economic uncertainty following the attempted
military coup staged against that countrys President Hugo
Chavez during the first weeks of April 2002. Any resurgence of
the recent crisis in Venezuela could have a material adverse
effect on IMPSAT Venezuelas results of operations and
financial condition.

Direct Costs.Our
direct costs for the three and nine months ended
September 30, 2002 totaled $26.8 million and
$89.8 million, a decrease of $13.6 million (or 33.6%)
and $39.9 million (or 30.7%), compared to the same periods
in 2001. As compared to the corresponding periods in 2001, this
reduction during the third quarter and first nine months of 2002
was caused principally by (i) the devaluation of local
currencies in Argentina, Brazil, Colombia and Venezuela during
those periods in 2002, which had the effect of decreasing our
direct costs in those countries in U.S. dollar terms, and
(ii) our incurring significantly lower total costs of
equipment sold and no Broadband Network development costs during
those periods in 2002. Of our total direct costs for the three
and nine months ended September 30, 2002, $9.4 million
and $32.6 million related to the operations of IMPSAT
Argentina. This compares to $20.5 million and
$58.6 million at IMPSAT Argentina for the same periods in
2001. Direct costs for IMPSAT Brazil totaled $4.4 million
and $17.2 million for the second quarter and first nine
months of 2002, compared to $7.2 million and
$25.9 million for the corresponding periods in 2001. Direct
costs of our subsidiaries are described prior to the elimination
of intercompany transactions.

(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, 2002,
our contracted services costs totaled $3.7 million and
$15.0 million, a decrease of $6.5 million (or 63.8%)
and $15.1 million (or 50.1%) from the same periods in 2001.
Of this amount, maintenance costs

9



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for our telecommunications network
infrastructure, including the Broadband Network, totaled
$2.6 million and $11.5 million for the three and nine
months ended September 30, 2002, compared to
$6.7 million and $19.5 million during the same periods
in 2001. Installation costs totaled $1.0 million and
$3.5 million for the three and nine months ended
September 30, 2002, compared to $3.4 million and
$10.6 million for the same periods in 2001. The decrease in
our maintenance costs and installation costs is partially
attributable to the effect of the devaluation of the pesoon such costs in Argentina and the favorable renegotiation
of certain of our agreements for maintenance services with
third-party contractors in that country. Also, our installation
costs decreased because we had fewer new customers in the first
nine months of 2002 compared to the same period in 2001. Of our
total contracted services costs for the third quarter and first
nine months of 2002, $1.2 million and $4.5 million
related to the operations of IMPSAT Argentina, compared to
$5.0 million and $13.6 million at IMPSAT Argentina for
the same periods in 2001. In local currency terms, IMPSAT
Argentinas contracted services costs decreased by
0.4 million pesos(or 8.4%) and 0.5 million
pesos(or 3.5%) during the third quarter and first nine
months of 2002 as compared to the corresponding periods in 2001.


(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, 2002 totaled $1.2 million and
$3.8 million, compared to $2.1 million and
$6.0 million for the corresponding periods in 2001. The
majority of these commissions related to customers of IMPSAT
Argentina. The period over period decline in these commissions
is primarily attributable to the effect of the devaluation of
the pesoon such costs in Argentina, which resulted in
lower amounts of such commissions in U.S. dollar terms.

We recorded a net provision for doubtful accounts
of $2.6 million and $7.7 million for the three and
nine months ended September 30, 2002, compared to
$2.7 million and $6.9 million for the same periods in
2001. At September 30, 2002, approximately 37.3% of our
gross trade accounts receivable were past due more than six
months, compared to 31.9% for the same period in 2001. At
September 30, 2002, our allowance for doubtful accounts
covered approximately 86.8% of our gross trade accounts
receivable past due more than six months. The average days in
quarterly gross trade accounts receivable increased from 80 at
June 30, 2002 to 85 at September 30, 2002. At
September 30, 2001, average days of gross trade accounts
receivable equaled 113. The recession in Argentina has adversely
affected the quality of our accounts receivable from our
customers in that country. IMPSAT Argentinas allowance for
doubtful accounts at September 30, 2002 covered approximately
82.5% of its gross trade accounts receivable past due more than
six months.

(3) Leased Capacity. Our leased
capacity costs for the three and nine months ended
September 30, 2002 totaled $17.4 million and
$57.3 million, which represented a decrease of
$4.4 million (or 20.3%) and $9.9 million (or 14.7%)
from the corresponding periods in 2001. This decrease occurred
notwithstanding an increase in costs for interconnection and
telephony termination costs (which are components of our leased
capacity costs), as described below. The decrease in our leased
capacity costs is attributable to a combination of the effects
of currency devaluations in our countries of operation during
the first nine months of 2002, as well as our favorable
renegotiation of the terms of certain of the underlying capacity
leases. As a percentage of our total revenues, our leased
capacity costs increased, principally because such costs are
incurred in US. dollars, while our revenues in Argentina and
Brazil are principally denominated and generated in local
currency.

Our leased capacity costs for satellite capacity
for the three and nine months ended September 30, 2002
totaled $7.1 million and $24.3 million, a decrease of
$3.0 million (or 29.9%) and $6.6 million (or 21.4%),
from the corresponding periods in 2001. In Argentina, our leased
satellite capacity costs totaled $1.7 million and
$6.1 million for the three and nine months ended
September 30, 2002, as compared to $3.1 million and
$7.6 million for the same periods in 2001. Our leased
satellite capacity costs for IMPSAT Brazil totaled
$0.9 million and $3.2 million for the three and six
months ended September 30, 2002, as compared to
$1.0 million and $4.8 million for the same periods in
2001. Our satellite capacity costs decreased in Argentina and
Brazil, in part because of (i) our favorable renegotiation
of certain of our agreements satellite capacity providers,
(ii) our transitioning customers from satellite-based
solutions onto the Broadband Network, and

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(iii) the effect on such costs of the
devaluations of the pesoand the real. We had
approximately 895 MHz of leased satellite capacity at
September 30, 2002 and 908 MHz at September 30,
2001.


Our costs for dedicated leased capacity on
third-party fiber optic networks totaled $5.8 million and
$19.6 million for the third quarter and first nine months
of 2002, a decrease of $3.0 million (or 33.8%) and
$8.1 million (or 29.2%) compared to the corresponding
periods in 2001. These costs were incurred principally in
Argentina, Brazil, Colombia and the United States. Prior to the
implementation of our Broadband Network, we had 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 have transferred increasing amounts of our
telecommunications traffic to the Broadband Network as we
migrated 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. The decrease in these
costs were also due, in part, to the effect on such costs of the
currency devaluations experienced during the period in certain
of our countries of operation.

In connection with certain new services that 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 are incurring costs for interconnection and telephony
termination (I&T) and frequency rights. Our
I&T and frequency rights costs totaled $3.9 million and
$11.7 million during the third quarter and first nine
months of 2002. These totals are composed of $3.0 million
and $9.2 million of I&T costs. This compares to
$2.9 million and $8.6 million of I&T and frequency
rights costs during the third quarter and first nine months of
2001 (composed of $1.8 million and $4.8 million of
I&T costs). Our interconnection and telephony termination
costs have increased in connection with the growth of our
telephony revenues (as discussed under
 Revenues).

Our I&T and frequency rights costs in
Argentina totaled $1.7 million and $6.0 million during
the three and nine months ended September 30, 2002. These
totals are composed of $1.5 million and $5.5 million
of I&T costs. This compares to $1.7 million and
$4.4 million of I&T and frequency rights costs for the
three and nine months ended September 30, 2001 (composed of
$1.0 million and $2.1 million of I&T costs).

(4) Costs of Equipment Sold and Broadband
Network Development. In the three and nine months ended
September 30, 2002, we incurred costs of equipment sold of
$0.1 million and $0.3 million, compared to
$0.7 million and $8.2 million for the same periods in
2001. During the three and nine months ended September 30,
2002, we incurred no Broadband Network development costs as
compared to zero and $3.3 million of such costs during the
same periods of 2001.

Salaries and Wages.Salaries and wages for the three and nine months ended
September 30, 2002 totaled $10.9 million and
$36.5 million, a decrease of $10.0 million (or 47.9%)
and $28.4 million (or 43.8%), from the same periods in
2001. 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 commencing at
the end of the first quarter of 2001, our aggregate number of
employees has fallen from 1,401 at September 30, 2001 to
1,331 at September 30, 2002. Management expects to continue
to monitor the size of its total workforce and to make
appropriate adjustments if required by financial and competitive
circumstances. The decrease in these costs were also due, in
part, to the effect on such costs of the currency devaluations
experienced during the period in certain of our countries of
operation.

IMPSAT Argentina incurred salaries and wages for
the three and nine months ended September 30, 2002, of
$2.0 million and $6.8 million, a decrease of
$7.6 million (or 79.3%) and $20.9 million (or 75.5%)
compared to the same periods in 2001. This decrease was due to
(i) the devaluation of the peso, which decreased the
dollar value of our salaries and wages expenses incurred in
Argentina during the first nine months of 2002; and (ii) a
reduction in the number of employees at IMPSAT Argentina. In
pesos, IMPSAT Argentinas salaries and wages
expenses for the first nine months 2002 decreased by 28.5% as
compared to the same period in 2001. IMPSAT Argentina had 320
employees as of September 30, 2002 as compared to 349
employees as of September 30, 2001.

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IMPSAT Brazil incurred salaries and wages
expenses for the three and nine months ended September 30,
2002 of $2.3 million and $8.8 million, a decrease of
$1.2 million (or 33.2%) and $4.0 million (or 31.2%)
over the same periods in 2001. IMPSAT Brazil decreased its
number of employees to 287 persons at September 30, 2002,
compared to 339 persons at September 30, 2001. In addition
to our reduced employee headcount in that country, the decrease
in salaries and wages at IMPSAT Brazil during the first nine
months of 2002 is in part related to the devaluation of the
real against the U.S. dollar, which resulted in a
decrease in U.S. dollar terms of our salaries and wages expense
in Brazil.

During the remainder of 2002, we expect that the
devaluation of local currencies in our countries of operations
(in particular, in Argentina, Brazil, Colombia and Venezuela),
in addition to the reduction in the number of our employees,
will result in a stabilization, in U.S. dollar terms, of our
consolidated salaries and wages expense.

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



| |   |                                                             
| | - | ------------------------------------------------------------
| |  | publicity and promotion costs                               
|
| |  | professional fees and other remuneration                    
|
| |  | travel and entertainment                                    
|
| |  | rent                                                        
|
| |  | plant services, insurance, telephone and energy
    expenses

We incurred SG&A expenses of
$6.2 million and $20.4 million for the three and nine
months ended September 30, 2002. These SG&A expenses
represented a decrease of $6.0 million (or 49.0%) and
$21.3 million (or 51.1%), from the three and nine months
ended September 30, 2001. This decline in our SG&A
expenses is due principally to a decrease in our publicity and
promotion costs, the effect of the devaluation of
Argentinas pesoand Brazils real
against the U.S. dollar, which decreased the dollar value of our
SG&A expenses incurred in those countries, and overall cost
control measures undertaken by management.

SG&A expenses at IMPSAT Argentina for the
three and nine months ended September 30, 2002 totaled
$1.5 million and $5.4 million, which represented
decreases of $3.2 million (or 68.6%) and $10.2 million
(or 65.4%), from SG&A expenses incurred by IMPSAT Argentina
for the three and nine months ended September 30, 2001.
Management intends to take efforts throughout the remainder of
2002 to control or reduce SG&A expenses. Such efforts, along
with the effects of the devaluations of the Argentine
peso, are anticipated to result in a further decline in
SG&A expenses during the remainder of 2002.

Depreciation and
Amortization.Our depreciation and
amortization expenses for the three and nine months ended
September 30, 2002 totaled $16.7 million and
$64.0 million. This represents a decrease of
$16.2 million (or 49.2%) and $28.6 million (or 30.9%),
compared to our depreciation and amortization for the three and
nine months ended September 30, 2001. Depreciation and
amortization for IMPSAT Argentina for the three and nine months
ended September 30, 2002, totaled $5.2 million and
$21.4 million. This represents a decrease of
$9.7 million (or 65.0%) and $19.4 million (or 47.6%),
compared to IMPSAT Argentinas depreciation and
amortization for the three and nine months ended
September 30, 2001. The decrease in depreciation and
amortization primarily is the result of the asset impairment
charge of $234.6 million recorded in the third quarter of
2001, which reduced the dollar value of our depreciable fixed
asset base.

Interest Expense,
Net.Our net interest expense for the
three months ended September 30, 2002 totaled
$13.0 million, consisting of interest expense of
$13.4 million and interest income of $0.4 million. Our
net interest expense for the nine months ended
September 30, 2002 totaled $84.2 million, consisting
of interest expense of $86.1 million and interest income of
$2.0 million. Our net interest expense decreased
$21.1 million (or 61.8%) and $12.0 million (or 12.5%)
for the three and nine months ended September 30, 2002 from
net interest expense for the same periods in 2001. Pursuant to
the provisions of the Bankruptcy Code, as of June 11, 2002,
the date of our Chapter 11 filing, contractually accrued
interest on our unsecured, pre-petition obligations, which are
entirely constituted by the Senior Notes, ceased to accrue at
and after such date. Such

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post-petition contractual interest, which is
excluded in our reported interest expense for the three and nine
months ended September 30, 2002, totaled $23.5 million
and $28.3 million.


We are also in default on certain amounts of
accrued and unpaid interest under our Vendor Financing
Agreements and certain other subsidiary indebtedness. Such
defaulted interest components, which aggregated
$8.7 million and $33.2 million for the third quarter
and first nine months of 2002, are included in our net interest
expense for such periods as discussed in the preceding paragraph.

In accordance with U.S. generally accepted
accounting principles (GAAP), the filing of our
Chapter 11 petition resulted in the classification as of
the Petition Date of our primary obligations under the Senior
Notes and certain other accounts payables (which, including
accrued interest, totaled $727.5 million as of such date)
as liabilities subject to compromise on our
consolidated balance sheet. (See Notes 1 and 11 to our
consolidated financial statements, included in Part 1,
Item 1 of this Quarterly Report.) Also in accordance with
GAAP, our contingent liabilities as guarantor under the Vendor
Financing Agreements and certain other indebtedness of our
subsidiaries, which aggregated $282.3 million as of
September 30, 2002, have been classified as current portion
of long-term indebtedness.

For the three and nine months ended
September 30, 2002 IMPSAT Argentinas net interest
expense totaled $5.6 million and $23.2 million,
compared to $5.3 million and $16.0 million for the
corresponding periods in 2001.

Net (Loss) Gain on Foreign
Exchange.We recorded net losses on
foreign exchange for the three and nine months ended
September 30, 2002 of $62.6 million and
$115.1 million, compared to net losses of
$26.1 million and $50.3 million for the same periods
in 2001.

The increase in our losses on foreign exchange
was primarily due to the devaluation of the Brazilian
real and the Argentine pesoagainst the U.S.
dollar during the first nine months of 2002. IMPSAT Brazil
recorded net losses on foreign exchange for the third quarter
and first nine months of 2002 totaling $66.0 million and
$105.1 million, compared to net losses of
$26.2 million and $51.6 million for the same periods
during 2001. This net loss on foreign exchange reflects the
effect of the devaluation of the real against the U.S.
dollar in the first nine months of 2002 on the book value of the
dollar-denominated debt of IMPSAT Brazil under the Vendor
Financing Agreements. At September 30, 2002, the
real traded at a rate of R$3.84 = $1.00. At
September 30, 2001, the real traded at a rate of
R$2.76 = $1.00.

Decreases in U.S. dollar terms of IMPSAT
Argentinas peso-denominated assets during the first
nine months of 2002 caused by the devaluation were partially
offset by the effects of decreases in U.S. dollar terms of
peso-denominated liabilities during the same period.
IMPSAT Argentina recorded net income on foreign exchange for the
third quarter of 2002 totaling $1.1 million, and net losses
on foreign exchange for the first nine months of 2002 totaling
$11.7 million. In comparison, IMPSAT Argentina recorded net
losses on foreign exchange of $0.6 million and
$0.6 million for the same periods during 2001.

IMPSAT Colombia recorded net income on foreign
exchange for the third quarter and first nine months of 2002
totaling $2.9 million and $3.8 million. This compares
to net income on foreign exchange of $0.4 million and
$1.6 million for the corresponding periods in 2001.

Reorganization
Items.We recorded reorganization
items for the three and nine months ended September 30,
2002 of $9.3 million and $15.0 million. The majority
of these costs were incurred in connection with the negotiation
and formation of our Plan and Chapter 11 filing. These
amounts also include the remaining deferred financing costs on
our Senior Notes that were expensed during the third quarter of
2002.

Other Income, Net.We recorded other losses, net, for the three and nine months
ended September 30, 2002 of $2.1 million and
$3.8 million, as compared to $0.3 million and
$0.2 million for the corresponding periods in 2001.

Benefit from (Provision for) Foreign Income
Taxes.We recorded a provision for
foreign income taxes of $0.4 million and $1.6 million,
for the three and nine months ended September 30, 2002,
compared to a

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benefit from foreign income taxes of
$0.1 million and a provision for foreign income taxes for
$26.4 million for the corresponding periods in 2001. The
smaller provision for foreign income taxes during the first
three quarters of 2002 compared to the same period in 2001 was
principally caused by a one-time valuation allowance made in the
second quarter of 2001 totaling approximately $25.5 million
(which was required to be recorded because it was not clear that
utilization of tax benefits resulting from operating losses and
other temporary differences are more likely than not
to be realized under U.S. GAAP).


Extraordinary Item.We recorded an extraordinary item of $16.4 million for the
nine months ended September 30, 2002. This was primarily
attributable to the repurchase at a discount during the second
quarter of 2002 of $15.7 million in principal amount of
indebtedness, plus accrued interest, owed to an unrelated third
party by IMPSAT Argentina through our subsidiary International
Satellite Communication Holding Ltd. (a wholly-owned
Liechtenstein non-operating subsidiary of the Parent Company,
whose principal function is to lease telecommunications capacity
from carriers and then sublease this capacity at market rates to
our operating subsidiaries).

Net Loss.For the
three and nine months ended September 30, 2002, we incurred
a net loss of $92.7 million and $236.8 million, a
decrease of $251.6 million (or 73.1%) and
$275.4 million (or 53.8%) for same periods in 2001. IMPSAT
Argentina recorded net losses of $9.0 million and
$57.3 million for the three and nine months ended
September 30, 2002, compared to net losses of
$121.6 million and $170.0 million for the same periods
in 2001.

Liquidity and Capital Resources

At September 30, 2002, we had total cash,
cash equivalents and trading investments of $59.2 million,
as compared to $64.9 million as of December 31, 2001
and $55.9 million as of June 30, 2002. At
September 30, 2002, our total indebtedness was
$1.04 billion (as compared to $992.3 million as of
September 30, 2001), of which none represented short-term debt,
$282.3 million represented the current portion of long-term
debt, $29.2 million represented long-term debt, and
$727.5 million represented principal and accrued interest
of indebtedness subject to compromise. As discussed above (see
discussion under  Interest Expense, Net),
as a result of our default under our Senior Notes and the Vendor
Financing Agreements and the Chapter 11 filing, the Parent
Companys primary obligations under the Senior Notes and
certain other accounts payables have been classified as
liabilities subject to compromise, and the Parent
Companys contingent liability as guarantor under the
Vendor Financing Agreements has been classified as current
portion of long-term indebtedness. As of November 11, 2002,
our indebtedness under the Senior Notes and the Broadband
Network Vendor Financing Agreements had an aggregate outstanding
principal balance of $650.0 million and
$254.4 million, respectively.

We face significant cash flow and liquidity
problems and, as discussed further below, our cash flows and
liquidity are insufficient to satisfy all of our obligations.
Our company has no material working capital or other
debtor-in-possession financing or credit facility under which it
may borrow for working capital or other general corporate
purposes. Without a successful restructuring of our financial
obligations under the Plan, we are 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 us. There
can be no assurances that the Plan will be approved by the
Bankruptcy Court. If we are unable to secure confirmation of the
Plan, our creditors may seek other alternatives for our company,
including accepting bids for our company or parts thereof
through an auction process or forcing us into a liquidation
proceeding under the federal bankruptcy laws.

Our capital expenditures budget for 2002
contemplates that we will need approximately $18.9 million
(reduced from approximately $252.0 million) during the
period from December 31, 2001 (including amounts spent to
date) through the end of 2002 for capital expenditures.

As set forth in our consolidated statement of
cash flows, our operating activities provided $19.3 million
in net cash flow for the nine months ended September 30,
2002, compared to $95.5 million used by operating
activities during the same period in 2001. In addition to the
decrease in our operating losses discussed above, the increase
in cash flow from operating activities in the first nine months
of 2002 was primarily due to an increase in accrued and other
liabilities of $81.5 million (as compared to a decrease of
$1.3 million in the same

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period of 2001); a decrease in deferred revenue
of $3.8 million (as compared to an increase of
$43.5 million in the same period of 2001). Also, during the
first nine months of 2002, an increase in our trade accounts
payable of $45.7 million (as compared to an increase of
$17.0 million for the same period of 2001) and a decrease
in our trade accounts receivable of $14.9 million (compared
to an increase of $9.4 million for the first half of 2001),
contributed to the increase in net cash flow from operating
activities during the period. These changes to our accounts
receivable and payable during the first nine months of 2002
reflect actual operating cash flows, as well as changes in the
value of those accounts (in U.S. dollar terms) caused by the
devaluation of the Brazilian realand the Argentine
pesoduring that period.


For the first nine months of 2002, we used
$9.7 million in net cash flow from investing activities,
compared to $98.7 million of net cash flow generated by
investing activities during the corresponding period in 2001.
The decreased net cash flow from investing activities was
principally due to a decrease in our trading investments of
$3.2 million during the first nine months of 2002, compared
to decrease in our trading investments of $220.2 million
during the same period in 2001. During the first nine months of
2002, we used $12.7 million in net cash flows from
financing activities. This compares to $5.1 million in net
cash flows used in financing activities during the first nine
months of 2001.

At September 30, 2002, we had leased
satellite capacity with annual rental commitments of
approximately $25.4 million through the year 2006. In
addition, at September 30, 2002, we had commitments to
purchase telecommunications equipment amounting to approximately
$2.3 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. Commitments under contracts with 360networks and Global
Crossing totaling $41.4 million and $22.5 million,
respectively, constitute this $63.9 million total.
Depending on the outcome of our dispute with 360networks (see
note 13 to our consolidated financial statements, which appear
elsewhere in this Quarterly Report, and the section captioned
Legal Proceedings in our Quarterly Report on
Form 10-Q for the first quarter of 2002, accessible on the
SECs website at www.sec.gov) and Global Crossings
ongoing insolvency proceedings, some or all of our liability
under these commitments may be canceled or fail to materialize.
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 have committed to long term contracts for
the purchase of terrestrial links from third parties in
Argentina, Colombia, and the United States for approximately
$3.3 million per year through 2006. The remainder of the
leases are typically under one-year contracts, the early
cancellation of which is subject to a fee.

The following table sets forth due dates of our
contractual obligations:

|                                     |  |                |         |      |  |      |        |      |  |      |        |            |  |       |        |  |  |   |        |  |  |   |       |  |  |   |           | 
|------------------------------------ |  | -------------- | ------- | ---- |  | ---- | ------ | ---- |  | ---- | ------ | ---------- |  | ----- | ------ |  |  | - | ------ |  |  | - | ----- |  |  | - | --------- | 
|Type of Obligations                  |  | 2002           |         | 2003 |  | 2004 |        | 2005 |  | 2006 |        | Thereafter |  | Total
|                                     |  |                |         |      |  |      |        |      |  |      |        |            |  |      
|                                     |  |               
|                                     |  | (in thousands)
|Long-term debt(1)                    |  | $              | 73,795  |      |  | $    | 56,171 |      |  | $    | 57,762 |            |  | $     | 56,537 |  |  | $ | 52,179 |  |  | $ | 926   |  |  | $ | 297,370   | 
|Liabilities subject to compromise(2) |  |                | 727,522 |      |  |      |       |      |  |      |       |            |  |       |       |  |  |   |       |  |  |   |      |  |  |   | 727,522   | 
|Capital lease obligations            |  |                | 756     |      |  |      | 2,738  |      |  |      | 2,666  |            |  |       | 2,971  |  |  |   | 5,029  |  |  |   |      |  |  |   | 14,160    | 
|Operating leases                     |  |                | 21      |      |  |      | 66     |      |  |      | 6      |            |  |       |       |  |  |   |       |  |  |   |      |  |  |   | 93        | 
|Other long-term obligations          |  |                | 289     |      |  |      | 1,321  |      |  |      | 1,385  |            |  |       | 546    |  |  |   | 243    |  |  |   | 5,625 |  |  |   | 9,409     | 
|                                     |  |                |         |      |  |      |        |      |  |      |        |            |  |       |        |  |  |   |        |  |  |   |       |  |  |   |           | 
|Total contractual cash obligations   |  | $              | 802,383 |      |  | $    | 60,296 |      |  | $    | 61,819 |            |  | $     | 60,054 |  |  | $ | 57,451 |  |  | $ | 6,551 |  |  | $ | 1,048,554 | 
|                                     |  |                |         |      |  |      |        |      |  |      |        |            |  |       |        |  |  |   |        |  |  |   |       |  |  |   |           | 




|    |                                                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | As discussed above, the Parent Companys
    contingent liability as guarantor under the Vendor Financing
    Agreements, is included in our current portion of long-term
    indebtedness, which reclassified amounts are not included in
    this line item as being due in 2002, but instead are set forth
    based on their originally scheduled contractual due dates.
|   
|(2) | As discussed elsewhere in this quarterly report,
    as a result of our default under our Senior notes and the
    Chapter 11 filing, our liabilities subject to
    compromise are constituted by the Parent Companys
    primary obligations under the Senior Notes and certain other
    accounts payables.                                                           

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The following table illustrates expirations of
our commercial commitments as provided in corresponding
contracts:

|                                |  |                |        |      |  |      |        |      |  |      |        |            |  |       |        |  |  |   |        |  |  |   |        |  |  |   |         | 
|------------------------------- |  | -------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ | ---------- |  | ----- | ------ |  |  | - | ------ |  |  | - | ------ |  |  | - | ------- | 
|Type of Commitments(1)          |  | 2002           |        | 2003 |  | 2004 |        | 2005 |  | 2006 |        | Thereafter |  | Total
|                                |  |                |        |      |  |      |        |      |  |      |        |            |  |      
|                                |  |               
|                                |  | (in thousands)
|Lines of credit                 |  |                |       |      |  |      |       |      |  |      |       |            |  |       |       |  |  |   |       |  |  |   |       |  |  |   |        | 
|Standby letters of credit       |  |                |       |      |  |      |       |      |  |      |       |            |  |       |       |  |  |   |       |  |  |   |       |  |  |   |        | 
|Guarantees                      |  |                |       |      |  |      |       |      |  |      |       |            |  |       |       |  |  |   |       |  |  |   |       |  |  |   |        | 
|Standby repurchase obligations  |  |                |       |      |  |      |       |      |  |      |       |            |  |       |       |  |  |   |       |  |  |   |       |  |  |   |        | 
|Other commercial commitments(2) |  | $              | 12,099 |      |  | $    | 34,382 |      |  | $    | 31,069 |            |  | $     | 25,078 |  |  | $ | 21,411 |  |  | $ | 36,039 |  |  | $ | 160,078 | 
|                                |  |                |        |      |  |      |        |      |  |      |        |            |  |       |        |  |  |   |        |  |  |   |        |  |  |   |         | 
|Total commercial commitments    |  | $              | 12,099 |      |  | $    | 34,382 |      |  | $    | 31,069 |            |  | $     | 25,078 |  |  | $ | 21,411 |  |  | $ | 36,039 |  |  | $ | 160,078 | 
|                                |  |                |        |      |  |      |        |      |  |      |        |            |  |       |        |  |  |   |        |  |  |   |        |  |  |   |         | 




|    |                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Commitments are contractual obligations (other
    than indebtedness) that could potentially require our
    performance in the event of demands by third-parties or
    contingent events.
|(2) | This includes commitments to purchase
    communications and data center equipment and long-term contracts
    for the purchase of satellite capacity and terrestrial links.               






|        |                                                               
|------- | --------------------------------------------------------------
|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,
2002 and assuming that the hypothetical interest rate and
foreign exchange rate changes used in the analyses occurred
during 2002. 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. As of September 30, 2002, a hypothetical 100
basis point increase in the London Interbank Offered Rate
(LIBOR) would adversely affect our annual interest cost
related to our floating rate indebtedness by approximately $2.8
million annually.

16



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##### Table of Contents



|                                     |  |                        |         |      |  |      |         |      |  |      |        |            |  |       |         |       |  |   |        |   |  |   |         |   |  |   |         |   |  |   |         |  
|------------------------------------ |  | ---------------------- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------ | ---------- |  | ----- | ------- | ----- |  | - | ------ | - |  | - | ------- | - |  | - | ------- | - |  | - | ------- | -
|                                     |  |                        |         |     
|                                     |  | Expected Maturity Date |         |     
|                                     |  |                        |         | Fair
|September 30,                        |  | 2002                   |         | 2003 |  | 2004 |         | 2005 |  | 2006 |        | Thereafter |  | Total |         | Value
|                                     |  |                        |         |      |  |      |         |      |  |      |        |            |  |       |         |      
|Senior Notes (fixed rate)(1)         |  |                        |        |      |  | $    | 125,000 |      |  |      |       |            |  | $     | 300,000 |       |  |   |        |   |  | $ | 225,000 |   |  | $ | 650,000 |   |  |   | (x     | )
|                                     |  |                        |         |      |  |      |         |      |  |      |        |            |  |       |         |       |  |   |        |   |  |   |         |   |  |   |         |   |  |   |         |  
|Avg. interest rate                   |  |                        |         |      |  |      | 12.13   | %    |  |      |        |            |  |       | 13.75%  |       |  |   |        |   |  |   | 12.38   | % |  |   | 12.96   | % |  |   |         |  
|                                     |  |                        |         |      |  |      |         |      |  |      |        |            |  |       |         |       |  |   |        |   |  |   |         |   |  |   |         |   |  |   |         |  
|Term Notes (fixed rate)              |  | $                      | 21,479  |      |  | $    | 1,509   |      |  | $    | 7,243  |            |  | $     | 7,790   |       |  | $ | 12,685 |   |  | $ | 926     |   |  | $ | 51,632  |   |  | $ | 51,632  |  
|                                     |  |                        |         |      |  |      |         |      |  |      |        |            |  |       |         |       |  |   |        |   |  |   |         |   |  |   |         |   |  |   |         |  
|Avg. interest rate                   |  |                        | 14.73%  |      |  |      | 14.73   | %    |  |      | 14.73  | %          |  |       | 14.73%  |       |  |   | 14.73  | % |  |   | 14.73   | % |  |   | 14.73   | % |  |   |         |  
|Vendor Financing (variable rate) (1) |  | $                      | 179,783 |      |  | $    | 11,511  |      |  | $    | 22,975 |            |  | $     | 22,877  |       |  | $ | 22,751 |   |  |   |         |   |  | $ | 259,897 |   |  | $ | 259,897 |  
|                                     |  |                        |         |      |  |      |         |      |  |      |        |            |  |       |         |       |  |   |        |   |  |   |         |   |  |   |         |   |  |   |         |  
|Avg. interest rate                   |  |                        | 13.84%  |      |  |      | 13.84   | %    |  |      | 13.84  | %          |  |       | 13.84%  |       |  |   | 13.84  | % |  |   |         |   |  |   | 13.84   | % |  |   |         |  
|                                     |  |                        |         |      |  |      |         |      |  |      |        |            |  |       |         |       |  |   |        |   |  |   |         |   |  |   |         |   |  |   |         |  



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | As discussed elsewhere in this quarterly report,
    we are in default under our Senior Notes and the Vendor
    Financing Agreements. Accordingly, an aggregate of
    $727.5 million of our long-term indebtedness has been
    reclassified as liabilities subject to compromise. None of these
    reclassified amounts are included in this line item as being due
    in 2002, but instead are set forth based on their originally
    scheduled contractual due dates.
|   
|(2) | Quoted market prices for the Senior Notes are
    unavailable. Furthermore, in light of our default on the
    principal and interest on the Senior Notes and Chapter 11
    bankruptcy filing, it is not practicable to determine a quoted
    market rate for same or similar obligations or for management to
    estimate the fair value of the Senior Notes.                                                                                                            

Foreign Currency
Risk.A substantial portion of our
costs, including lease payments for certain satellite
transponder and fiber optic 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 have
provided 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.

As previously discussed in this Quarterly Report,
during January 2002, Argentina abandoned the fixed
dollar-to-pesoexchange rate and devalued the Argentine
pesoand, on February 3, 2002, pursuant to the
pesification decree, the Argentine government
announced the mandatory conversion of all foreign currency
denominated contractual obligations governed by Argentine law
into Argentine pesosat a rate of one Argentine pesoto one U.S. dollar. The floating exchange rate at
November 11, 2002 was pesos3.55 = $1.00.
These and any further devaluations of the pesohave and
will adversely affect IMPSAT Argentinas results of
operations and, in turn, our companys consolidated results
of operations and financial condition. Management is currently
unable to predict the most likely average or end-of-period
peso/dollar exchange rates for 2002 or provide estimates
of the impacts that the changes in Argentine laws, the potential
impacts of the currency devaluation and other recent events in
Argentina could have on our companys consolidated results
of operation and financial condition. There is likely to occur
during the remainder of 2002 increases to our consolidated net
losses that would result from transaction gains or losses on our
peso-denominated monetary assets and liabilities. Also,
operating income reductions are likely to result from the
potential impacts on our consolidated revenues from services of
the conversion to pesosof contract obligations that were
previously tied to the dollar. Balance sheet exposures include
the reduction to our consolidated stockholders equity due
to the effects of lower net income on retained earnings. Our
management is continuing to assess the impacts that the events
in Argentina could have on our consolidated results of
operations and financial condition.

As discussed under  New
Developments and Critical Considerations 
Brazils Economic Crisis, In Brazil, the real
has devalued by 35% during the third quarter, mostly related to
uncertainty surrounding the presidential elections. At
June 30, 2002, the real traded at a rate of
R$2.83 = $1.00, and at September 30, 2002 it had
depreciated to R$3.84 = $1.00. These and prior
devaluations have had a negative effect on our
real-denominated revenues.

Pursuant to laws in Brazil, 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. In Brazil, we are permitted to amend the pricing of
our services for our long-term telecommunication services
contracts with our customers

17



---



##### Table of Contents



annually based on changes in the consumer price
index in Brazil for the prior year. In Argentina, obligations
that were mandatorily converted to pesosunder the
pesification decree may be adjusted pursuant
to the CER, an index rate based on variations in the Argentine
consumer price index. These aspects of the laws in Brazil and
Argentina do not eliminate the currency exchange risk facing our
operations in those countries. Changes in the consumer price
indices in Brazil and Argentina may lag or be lower than changes
in the exchange rate between the Brazil and Argentine local
currency and the U.S. dollar and therefore may not fully allow
us to address the impact of a devaluation of those currencies
against the U.S. dollar. Also, contracts entered into after the
pesification decrees enactment that are
initially denominated in pesosare not entitled to be
adjusted according to the CER or any other consumer price index.
Accordingly, our operations in Brazil and Argentina have exposed
us, and will increase our exposure, to exchange rate risks.


Revenues from services from our Argentine
operations for the three months ended September 30, 2002
and 2001 represented approximately 24.3% and 41.3% of our total
net revenues from services for such periods. Revenues from
services from our Brazilian operations for the three months
ended September 30, 2002 and 2001 represented approximately
14.4% and 12.8% of our total net revenues from services for such
periods. At November 11, 2002, the pesotraded at a
rate of pesos3.55 = $1.00. At
September 30, 2002 and November 11, 2002, the
real traded at a rate of R$3.84 = $1.00 and
R$3.63 = $1.00.






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

Under the supervision and with the participation
of the Companys President and Chief Executive Officer, and
its Chief Financial Officer (i.e., its principal executive
officer and its principal financial officer), management has
evaluated the effectiveness of the design and operation of the
Companys disclosure controls and procedures within
90 days of the filing date of this quarterly report. Based
on that evaluation, the President and Chief Executive Officer
and the Chief Financial Officer have concluded that these
disclosure controls and procedures are effective. There were no
significant changes in our internal controls or in other factors
that could significantly affect these controls subsequent to the
date of the evaluation.

18



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##### Table of Contents






PART II

OTHER INFORMATION





Item 1.     Legal
Proceedings

Not applicable




Item 2.     Changes
in Securities

Not applicable.




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 Due 2005, 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 due 2008, 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 for the Notes Due 2003
    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 for the Notes Due 2003 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).

19



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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|No.     |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|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).                                                                                                                                                                                                                                                                                                                                                                                                                                     
|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 Networks (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). 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 10.3: Turnkey Project Agreement between
    IMPSAT Brazil and Nortel.                                                                                                                                                                                    
|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. (filed on
    May 15, 2001 as an exhibit to the Companys Quarterly
    Report on Form 10-Q for the quarterly period ended
    March 31, 2001 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                         

20



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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|No.     |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|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 May 15, 2001
    as an exhibit to the Companys Quarterly Report on
    Form 10-Q for the quarterly period ended March 31,
    2001 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 10.8: IRU Fiber Agreement (Brazil) dated as of
    February 15, 2001, by and between IMPSAT Brazil and
    360networks do Brasil Ltda.
|10.9   |  | Service Agreement dated as of February 15,
    2001, by and between IMPSAT Brazil and 360networks do Brasil
    Ltda. (filed on May 15, 2001 as an exhibit to the
    Companys Quarterly Report on Form 10-Q for the
    quarterly period ended March 31, 2001 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 for the
    quarterly period ended June 30, 2001 and incorporated
    herein by reference).                                                                                                                                                                                                                                                                                                        
|10.11   |  | Amended and Restated Financing Agreement between
    IMPSAT Argentina and Nortel Networks (filed on August 16,
    2001 as an exhibit to the Companys Quarterly Report on
    Form 10-Q for the quarterly period ended June 30, 2001
    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 Networks.                                                                                              
|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 2001 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|99.1    |  | Certification by the Companys Chief
    Executive Officer pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002. Filed herewith.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|99.2    |  | Certification by the Companys Chief
    Financial Officer pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002. Filed herewith.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|99.3    |  | Certification by IMPSAT Argentinas
    principal executive officer pursuant to 18 U.S.C.
    Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002. Filed herewith.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|99.4    |  | Certification by IMPSAT Argentinas
    principal financial officer pursuant to 18 U.S.C.
    Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002. Filed herewith.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      



---



|  |                                                                                                                                       
|- | --------------------------------------------------------------------------------------------------------------------------------------
| | 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.

21



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##### Table of Contents






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/ HÉCTOR ALONSO

| |                        
| | -----------------------
| |                        
| | Héctor Alonso          
| | Chief Financial Officer
|
| | Date: November 14, 2002
|
| | IMPSAT S.A.            



| |     |                      
| | --- | ---------------------
| | By: | /s/ JORGE PATERNOSTRO

| |                         
| | ------------------------
| |                         
| | Jorge Paternostro       
| | Chief Accounting Officer
|
| | Date: November 14, 2002 

22



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##### Table of Contents



CERTIFICATIONS

Chief Executive Officer Certification pursuant
to

Section 302 of the Sarbanes-Oxley Act of
2002


I, Ricardo Verdaguer, certify that:



| |    |                                                                                                                                                                                                                                                                                                                                                   
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | I have reviewed this quarterly report on
    Form 10-Q of IMPSAT Fiber Networks, Inc.
    (registrant);                                                                                                                                                                                                                                         
|
| | 2. | Based on my knowledge, this quarterly report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    quarterly report;
|
| | 3. | Based on my knowledge, the financial statements,
    and other financial information included in this quarterly
    report, fairly present in all material respects the financial
    condition, results of operations and cash flows of the
    registrant as of, and for, the periods presented in this
    quarterly report;                   
|
| | 4. | The registrants other certifying officer
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                              



| |    |                                                                                                                                                                                                                                                                                                                
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | designed such disclosure controls and procedures
    to ensure that material information relating to the registrant,
    including its consolidated subsidiaries, is made known to us by
    others within those entities, particularly during the period in
    which this quarterly report is being prepared;
|
| | b) | evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this
    quarterly report (the Evaluation Date); and                                                                                                      
|
| | c) | presented in this quarterly report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



| |    |                                                                                                                                                                                                                                                              
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. | The registrants other certifying officer
    and I have disclosed, based on our most recent evaluation, to
    the registrants auditors and the audit committee of
    registrants board of directors (or persons performing the
    equivalent function):



| |    |                                                                                                                                                                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) | any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    registrants internal controls; and                                                                                                                                                    



| |    |                                                                                                                                                                                                                                                                                                                                                                                                                 
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. | The registrants other certifying officer
    and I have indicated in this quarterly report whether or not
    there were significant changes in internal controls or in other
    factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.



| |                                          
| | -----------------------------------------
| | /s/ RICARDO VERDAGUER                    
| | Ricardo A. Verdaguer                     
| | President and Chief Executive
    Officer

November 14, 2002

23



---



##### Table of Contents



Chief Financial Officer Certification pursuant
to

Section 302 of the Sarbanes-Oxley Act of
2002


I, Héctor Alonso, certify that:



| |    |                                                                                                                                                                                                                                                                                                                                                   
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | I have reviewed this quarterly report on
    Form 10-Q of IMPSAT Fiber Networks, Inc.
    (registrant);                                                                                                                                                                                                                                         
|
| | 2. | Based on my knowledge, this quarterly report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    quarterly report;
|
| | 3. | Based on my knowledge, the financial statements,
    and other financial information included in this quarterly
    report, fairly present in all material respects the financial
    condition, results of operations and cash flows of the
    registrant as of, and for, the periods presented in this
    quarterly report;                   
|
| | 4. | The registrants other certifying officer
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                              



| |    |                                                                                                                                                                                                                                                                                                                
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | designed such disclosure controls and procedures
    to ensure that material information relating to the registrant,
    including its consolidated subsidiaries, is made known to us by
    others within those entities, particularly during the period in
    which this quarterly report is being prepared;
|
| | b) | evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this
    quarterly report (the Evaluation Date); and                                                                                                      
|
| | c) | presented in this quarterly report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



| |    |                                                                                                                                                                                                                                                              
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. | The registrants other certifying officer
    and I have disclosed, based on our most recent evaluation, to
    the registrants auditors and the audit committee of
    registrants board of directors (or persons performing the
    equivalent function):



| |    |                                                                                                                                                                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) | any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    registrants internal controls; and                                                                                                                                                    



| |    |                                                                                                                                                                                                                                                                                                                                                                                                                 
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. | The registrants other certifying officer
    and I have indicated in this quarterly report whether or not
    there were significant changes in internal controls or in other
    factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.



| |                        
| | -----------------------
| | /s/ HÉCTOR ALONSO      
| | Héctor Alonso          
| | Chief Financial Officer

November 14, 2002

24



---



##### Table of Contents



Principal Executive Officer Certification
pursuant to

Section 302 of the Sarbanes-Oxley Act of
2002


I, Marcelo Girotti, certify that:



| |    |                                                                                                                                                                                                                                                                                                                                                        
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | I have reviewed this quarterly report on
    Form 10-Q of IMPSAT S.A. (co-registrant);                                                                                                                                                                                                                                                               
|
| | 2. | Based on my knowledge, this quarterly report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    quarterly report;     
|
| | 3. | Based on my knowledge, the financial statements,
    and other financial information of the co-registrant included in
    this quarterly report, fairly present in all material respects
    the financial condition, results of operations and cash flows of
    the co-registrant as of, and for, the periods presented in this
    quarterly report;
|
| | 4. | The co-registrants other certifying officer
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the co-registrant and we have:                                                                                                             



| |    |                                                                                                                                                                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | designed such disclosure controls and procedures
    to ensure that material information relating to the
    co-registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this quarterly report is being prepared;
|
| | b) | evaluated the effectiveness of the
    co-registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this
    quarterly report (the Evaluation Date); and                                                                                                      
|
| | c) | presented in this quarterly report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                   



| |    |                                                                                                                                                                                                                                                                       
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. | The co-registrants other certifying officer
    and I have disclosed, based on our most recent evaluation, to
    the co-registrants auditors and the audit committee of
    co-registrants board of directors (or persons performing
    the equivalent function):



| |    |                                                                                                                                                                                                                                                                                                                         
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    co-registrants ability to record, process, summarize and
    report financial data and have identified for the
    co-registrants auditors any material weaknesses in
    internal controls; and
|
| | b) | any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    co-registrants internal controls; and                                                                                                                                                       



| |    |                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. | The co-registrants other certifying officer
    and I have indicated in this quarterly report whether or not
    there were significant changes in internal controls or in other
    factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.



| |                                               
| | ----------------------------------------------
| | /s/ MARCELO GIROTTI                           
| | Marcelo Girotti                               
| | Regional Manager and Chairman of the
    Board

November 14, 2002

25



---



##### Table of Contents



Principal Financial Officer Certification
pursuant to

Section 302 of the Sarbanes-Oxley Act of
2002


I, Jorge Paternostro, certify that:



| |    |                                                                                                                                                                                                                                                                                                                                                        
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | I have reviewed this quarterly report on
    Form 10-Q of IMPSAT S.A. (co-registrant);                                                                                                                                                                                                                                                               
|
| | 2. | Based on my knowledge, this quarterly report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    quarterly report;     
|
| | 3. | Based on my knowledge, the financial statements,
    and other financial information of the co-registrant included in
    this quarterly report, fairly present in all material respects
    the financial condition, results of operations and cash flows of
    the co-registrant as of, and for, the periods presented in this
    quarterly report;
|
| | 4. | The co-registrants other certifying officer
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the co-registrant and we have:                                                                                                             



| |    |                                                                                                                                                                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | designed such disclosure controls and procedures
    to ensure that material information relating to the
    co-registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this quarterly report is being prepared;
|
| | b) | evaluated the effectiveness of the
    co-registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this
    quarterly report (the Evaluation Date); and                                                                                                      
|
| | c) | presented in this quarterly report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                   



| |    |                                                                                                                                                                                                                                                                       
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. | The co-registrants other certifying officer
    and I have disclosed, based on our most recent evaluation, to
    the co-registrants auditors and the audit committee of
    co-registrants board of directors (or persons performing
    the equivalent function):



| |    |                                                                                                                                                                                                                                                                                                                         
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    co-registrants ability to record, process, summarize and
    report financial data and have identified for the
    co-registrants auditors any material weaknesses in
    internal controls; and
|
| | b) | any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    co-registrants internal controls; and                                                                                                                                                       



| |    |                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. | The co-registrants other certifying officer
    and I have indicated in this quarterly report whether or not
    there were significant changes in internal controls or in other
    factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.



| |                         
| | ------------------------
| | /s/ JORGE PATERNOSTRO   
| | Jorge Paternostro       
| | Chief Accounting Officer

November 14, 2002

26