##### 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 June 30, 2001

OR



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

For the transition period from
          to

Commission File Number: 333-12977



---

IMPSAT Fiber Networks, Inc.

IMPSAT S.A.


(Exact name of registrant as specified in its
charter)


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

Alférez Pareja 256 (1107)

Buenos Aires, Argentina


(5411) 5170-0000








---

Indicate by check mark whether the Registrants (1) have
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and
(2) have been subject to such filing requirements for the
past 90 days.  YES 
x  NO 
o

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS


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

APPLICABLE ONLY TO CORPORATE ISSUERS

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









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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                           
|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                                                                                   
|Master Loan Agreement dated as of June 6, 2001
|Amended and Restated Financing Agreement      



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##### Table of Contents






IMPSAT Fiber Networks, Inc.


IMPSAT S.A.





INDEX

|                               |          |  |                                                                                        |          |  |     | 
|------------------------------ | -------- |  | -------------------------------------------------------------------------------------- | -------- |  | --- | 
|                               |          |  |                                                                                        | Page No.
|                               |          |  |                                                                                        |         
|                              
|                              
|                              
|                              
|PART I  FINANCIAL
	INFORMATION |          |  | F-1                                                                                    |         
|                              
|                              
|                              
|                              
|                               | Item  1. |  | Financial Statements                                                                   |          |  | F-1 | 
|                              
|                              
|                              
|                              
|                               | Item  2. |  | Managements Discussion and Analysis of
	Financial Condition and Results of Operations |          |  | 1   | 
|                              
|                              
|                              
|                              
|                               | Item  3. |  | Quantitative And Qualitative Disclosures About
	Market Risk                            |          |  | 9   | 
|                              
|                              
|                              
|                              
|PART II  OTHER INFORMATION     |          |  | 11                                                                                     |         
|                              
|                              
|                              
|                              
|                               | Item  1. |  | Legal Proceedings                                                                      |          |  | 11  | 
|                              
|                              
|                              
|                              
|                               | Item  2. |  | Changes in Securities                                                                  |          |  | 11  | 
|                              
|                              
|                              
|                              
|                               | Item  3. |  | Defaults Upon Senior Securities                                                        |          |  | 11  | 
|                              
|                              
|                              
|                              
|                               | Item  4. |  | Submission of Matters to a Vote of
	Security-Holders                                   |          |  | 12  | 
|                              
|                              
|                              
|                              
|                               | Item  5. |  | Other Information                                                                      |          |  | 12  | 
|                              
|                              
|                              
|                              
|                               | Item  6. |  | Exhibits and Reports on Form 8-K                                                       |          |  | 12  | 
|                              
|                              
|                              
|                              
|SIGNATURES                     |          |  | 15                                                                                     |         



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##### Table of Contents






PART I

FINANCIAL INFORMATION





Item 1. Financial Statements

IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of U.S. Dollars)


(Unaudited)


|                                                |                                                                                                                                                 |                                      |           |          |         |   |           |          |         |  
|----------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------ | --------- | -------- | ------- | - | --------- | -------- | ------- | -
|                                                |                                                                                                                                                 | December 31,                         |           | June 30,
|                                                |                                                                                                                                                 | 2000                                 |           | 2001    
|                                                |                                                                                                                                                 |                                      |           |         
|                                               
|                                               
|                                               
|                                               
|ASSETS                                         
|                                               
|                                               
|                                               
|                                               
|CURRENT ASSETS:                                 |                                                                                                                                                 |                                      |           |          |         |   |           |         
|                                               
|                                               
|                                               
|                                               
|                                                | Cash and cash equivalents                                                                                                                       |                                      | $         | 67,737   |         |   | $         | 66,953   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Trading investments                                                                                                                             |                                      |           | 240,892  |         |   |           | 77,539   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Trade accounts receivable, net                                                                                                                  |                                      |           | 83,351   |         |   |           | 87,336   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Other receivables                                                                                                                               |                                      |           | 63,171   |         |   |           | 62,100   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Prepaid expenses                                                                                                                                |                                      |           | 3,722    |         |   |           | 5,942    |        
|                                                |                                                                                                                                                 |                                      |           |          |         |   |           |         
|                                                |                                                                                                                                                 | Total current assets                 |           |          | 458,873 |   |           |          | 299,870 |  
|                                                |                                                                                                                                                 |                                      |           |          |         |   |           |         
|BROADBAND NETWORK, Net                          |                                                                                                                                                 |                                      | 364,221   |          |         |   | 435,857   |         
|                                                |                                                                                                                                                 |                                      |           |          |         |   |           |         
|PROPERTY, PLANT AND EQUIPMENT, Net              |                                                                                                                                                 |                                      | 381,674   |          |         |   | 399,564   |         
|                                                |                                                                                                                                                 |                                      |           |          |         |   |           |         
|NON-CURRENT ASSETS:                             |                                                                                                                                                 |                                      |           |          |         |   |           |         
|                                               
|                                               
|                                               
|                                               
|                                                | Investments                                                                                                                                     |                                      |           | 15,091   |         |   |           | 13,306   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Intangible assets                                                                                                                               |                                      |           | 87,693   |         |   |           | 84,336   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Deferred income taxes, net                                                                                                                      |                                      |           | 33,059   |         |   |           |          |        
|                                               
|                                               
|                                               
|                                               
|                                                | Deferred financing costs, net                                                                                                                   |                                      |           | 14,804   |         |   |           | 12,203   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Other non-current assets                                                                                                                        |                                      |           | 19,335   |         |   |           | 20,359   |        
|                                                |                                                                                                                                                 |                                      |           |          |         |   |           |         
|                                                |                                                                                                                                                 | Total non-current assets             |           |          | 169,982 |   |           |          | 130,204 |  
|                                                |                                                                                                                                                 |                                      |           |          |         |   |           |         
|TOTAL                                           |                                                                                                                                                 | $                                    | 1,374,750 |          |         | $ | 1,265,495 |         
|                                                |                                                                                                                                                 |                                      |           |          |         |   |           |         
|                                               
|                                               
|                                               
|                                               
|LIABILITIES AND STOCKHOLDERS EQUITY
	(DEFICIT)
|                                               
|                                               
|                                               
|                                               
|CURRENT LIABILITIES:                            |                                                                                                                                                 |                                      |           |          |         |   |           |         
|                                               
|                                               
|                                               
|                                               
|                                                | Accounts payable  trade                                                                                                                        |                                      | $         | 113,516  |         |   | $         | 119,709  |        
|                                               
|                                               
|                                               
|                                               
|                                                | Short-term debt                                                                                                                                 |                                      |           | 14,603   |         |   |           | 16,155   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Current portion of long-term debt                                                                                                               |                                      |           | 38,377   |         |   |           | 56,985   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Accrued and other liabilities                                                                                                                   |                                      |           | 53,809   |         |   |           | 53,413   |        
|                                                |                                                                                                                                                 |                                      |           |          |         |   |           |         
|                                                |                                                                                                                                                 | Total current liabilities            |           |          | 220,305 |   |           |          | 246,262 |  
|                                                |                                                                                                                                                 |                                      |           |          |         |   |           |         
|LONG-TERM DEBT, Net                             |                                                                                                                                                 |                                      | 915,263   |          |         |   | 933,559   |         
|                                                |                                                                                                                                                 |                                      |           |          |         |   |           |         
|OTHER LONG-TERM LIABILITIES                     |                                                                                                                                                 |                                      | 28,307    |          |         |   | 16,214    |         
|                                                |                                                                                                                                                 |                                      |           |          |         |   |           |         
|DEFERRED REVENUES                               |                                                                                                                                                 |                                      | 52,290    |          |         |   | 91,939    |         
|                                                |                                                                                                                                                 |                                      |           |          |         |   |           |         
|COMMITMENTS AND CONTINGENCIES (NOTE 12)         |                                                                                                                                                 |                                      |           |          |         |   |           |         
|                                               
|                                               
|                                               
|                                               
|STOCKHOLDERS EQUITY (DEFICIT):                 |                                                                                                                                                 |                                      |           |          |         |   |           |         
|                                               
|                                               
|                                               
|                                               
|                                                | Common Stock, $0.01 par value; 300,000,000 shares
	authorized, 91,428,570 shares issued and outstanding at
	December 31, 2000 and June 30, 2001 |                                      |           | 914      |         |   |           | 914      |        
|                                               
|                                               
|                                               
|                                               
|                                                | Additional paid in capital                                                                                                                      |                                      |           | 537,356  |         |   |           | 537,640  |        
|                                               
|                                               
|                                               
|                                               
|                                                | Accumulated deficit                                                                                                                             |                                      |           | (357,075 | )       |   |           | (524,996 | )      
|                                               
|                                               
|                                               
|                                               
|                                                | Deferred stock-based compensation                                                                                                               |                                      |           | (5,438   | )       |   |           | (5,438   | )      
|                                               
|                                               
|                                               
|                                               
|                                                | Accumulated other comprehensive loss                                                                                                            |                                      |           | (17,172  | )       |   |           | (30,599  | )      
|                                                |                                                                                                                                                 |                                      |           |          |         |   |           |         
|                                                |                                                                                                                                                 | Total stockholders equity (deficit) |           |          | 158,585 |   |           |          | (22,479 | )
|                                                |                                                                                                                                                 |                                      |           |          |         |   |           |         
|TOTAL                                           |                                                                                                                                                 | $                                    | 1,374,750 |          |         | $ | 1,265,495 |         
|                                                |                                                                                                                                                 |                                      |           |          |         |   |           |         

See notes to condensed consolidated financial statements.

F-1



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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


|                                             |                                      |                        |                          |                  |        |         |         |         |        |         |         |         |        |         |          |         |        |         |  
|-------------------------------------------- | ------------------------------------ | ---------------------- | ------------------------ | ---------------- | ------ | ------- | ------- | ------- | ------ | ------- | ------- | ------- | ------ | ------- | -------- | ------- | ------ | ------- | -
|                                             |                                      |                        |                          |                 
|                                             |                                      | Three Months Ended     |                          | Six Months Ended
|                                             |                                      | June 30,               |                          | June 30,        
|                                             |                                      |                        |                          |                 
|                                             |                                      | 2000                   |                          | 2001             |        | 2000    |         | 2001   
|                                             |                                      |                        |                          |                  |        |         |         |        
|                                             |                                      |                        |                          |                 
|                                             |                                      | (Unaudited)            |                          | (Unaudited)     
|                                            
|                                            
|                                            
|                                            
|NET REVENUES:                                |                                      |                        |                          |                  |        |         |         |         |        |         |         |         |        |         |          |        
|                                            
|                                            
|                                            
|                                            
|                                             | Data and value added services        |                        | $                        | 52,782           |        |         | $       | 55,813  |        |         | $       | 103,856 |        |         | $        | 112,964 |       
|                                            
|                                            
|                                            
|                                            
|                                             | Telephony                            |                        |                          |                  |        |         |         | 1,885   |        |         |         |         |        |         |          | 3,155   |       
|                                            
|                                            
|                                            
|                                            
|                                             | Internet                             |                        |                          | 7,992            |        |         |         | 11,679  |        |         |         | 14,668  |        |         |          | 22,847  |       
|                                            
|                                            
|                                            
|                                            
|                                             | Services to carriers                 |                        |                          |                  |        |         |         | 5,759   |        |         |         |         |        |         |          | 10,411  |       
|                                            
|                                            
|                                            
|                                            
|                                             | Sales of equipment                   |                        |                          | 3,980            |        |         |         | 3,391   |        |         |         | 4,993   |        |         |          | 17,895  |       
|                                             |                                      |                        |                          |                  |        |         |         |         |        |         |         |         |        |         |          |        
|                                             |                                      |                        | Total net revenues       |                  |        | 64,754  |         |         |        | 78,527  |         |         |        | 123,517 |          |         |        | 167,272 |  
|                                             |                                      |                        |                          |                  |        |         |         |         |        |         |         |         |        |         |          |        
|COSTS AND EXPENSES:                          |                                      |                        |                          |                  |        |         |         |         |        |         |         |         |        |         |          |        
|                                            
|                                            
|                                            
|                                            
|                                             | Direct costs:                        |                        |                          |                  |        |         |         |         |        |         |         |         |        |         |          |         |       
|                                            
|                                            
|                                            
|                                            
|                                             |                                      | Contracted services    |                          |                  | 6,787  |         |         |         | 8,859  |         |         |         | 13,261 |         |          |         | 19,945 |        
|                                            
|                                            
|                                            
|                                            
|                                             |                                      | Other direct costs     |                          |                  | 5,803  |         |         |         | 7,371  |         |         |         | 10,986 |         |          |         | 13,163 |        
|                                            
|                                            
|                                            
|                                            
|                                             |                                      | Leased capacity        |                          |                  | 17,503 |         |         |         | 23,452 |         |         |         | 31,585 |         |          |         | 45,385 |        
|                                            
|                                            
|                                            
|                                            
|                                             |                                      | Cost of equipment sold |                          |                  | 3,777  |         |         |         | 2,105  |         |         |         | 4,597  |         |          |         | 10,832 |        
|                                             |                                      |                        |                          |                  |        |         |         |         |        |         |         |         |        |         |          |        
|                                             |                                      |                        | Total direct costs       |                  |        | 33,870  |         |         |        | 41,787  |         |         |        | 60,429  |          |         |        | 89,325  |  
|                                            
|                                            
|                                            
|                                            
|                                             | Salaries and wages                   |                        |                          | 15,940           |        |         |         | 21,900  |        |         |         | 30,170  |        |         |          | 44,097  |       
|                                            
|                                            
|                                            
|                                            
|                                             | Selling, general and administrative  |                        |                          | 12,987           |        |         |         | 14,782  |        |         |         | 24,488  |        |         |          | 29,470  |       
|                                            
|                                            
|                                            
|                                            
|                                             | Depreciation and amortization        |                        |                          | 20,873           |        |         |         | 30,245  |        |         |         | 40,809  |        |         |          | 59,677  |       
|                                             |                                      |                        |                          |                  |        |         |         |         |        |         |         |         |        |         |          |        
|                                             |                                      |                        | Total costs and expenses |                  |        | 83,670  |         |         |        | 108,714 |         |         |        | 155,896 |          |         |        | 222,569 |  
|                                             |                                      |                        |                          |                  |        |         |         |         |        |         |         |         |        |         |          |        
|Operating loss                               |                                      |                        | (18,916                  | )                |        |         | (30,187 | )       |        |         | (32,379 | )       |        |         | (55,297  | )      
|                                             |                                      |                        |                          |                  |        |         |         |         |        |         |         |         |        |         |          |        
|OTHER INCOME (EXPENSES):                     |                                      |                        |                          |                  |        |         |         |         |        |         |         |         |        |         |          |        
|                                            
|                                            
|                                            
|                                            
|                                             | Interest income and investment gains |                        |                          | 8,378            |        |         |         | 3,582   |        |         |         | 13,145  |        |         |          | 8,092   |       
|                                            
|                                            
|                                            
|                                            
|                                             | Interest expense                     |                        |                          | (28,102          | )      |         |         | (36,714 | )      |         |         | (50,483 | )      |         |          | (70,223 | )     
|                                            
|                                            
|                                            
|                                            
|                                             | Net gain (loss) on foreign exchange  |                        |                          | (1,761           | )      |         |         | (10,369 | )      |         |         | 804     |        |         |          | (24,150 | )     
|                                            
|                                            
|                                            
|                                            
|                                             | Other income, net                    |                        |                          | 2,306            |        |         |         | 138     |        |         |         | 2,484   |        |         |          | 145     |       
|                                             |                                      |                        |                          |                  |        |         |         |         |        |         |         |         |        |         |          |        
|                                             |                                      |                        | Total other expenses     |                  |        | (19,179 | )       |         |        | (43,363 | )       |         |        | (34,050 | )        |         |        | (86,136 | )
|                                             |                                      |                        |                          |                  |        |         |         |         |        |         |         |         |        |         |          |        
|LOSS BEFORE INCOME TAXES                     |                                      |                        | (38,095                  | )                |        |         | (73,550 | )       |        |         | (66,429 | )       |        |         | (141,433 | )      
|                                            
|                                            
|                                            
|                                            
|PROVISION FOR FOREIGN INCOME TAXES           |                                      |                        | (1,730                   | )                |        |         | (26,122 | )       |        |         | (1,070  | )       |        |         | (26,488  | )      
|                                             |                                      |                        |                          |                  |        |         |         |         |        |         |         |         |        |         |          |        
|NET LOSS                                     |                                      |                        | (39,825                  | )                |        |         | (99,672 | )       |        |         | (67,499 | )       |        |         | (167,921 | )      
|                                            
|                                            
|                                            
|                                            
|DIVIDENDS ON REDEEMABLE PREFERRED STOCK      |                                      |                        |                          |                  |        |         |         |         |        |         | (1,393  | )       |        |         |          |        
|                                             |                                      |                        |                          |                  |        |         |         |         |        |         |         |         |        |         |          |        
|NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS |                                      | $                      | (39,825                  | )                |        | $       | (99,672 | )       |        | $       | (68,892 | )       |        | $       | (167,921 | )      
|                                             |                                      |                        |                          |                  |        |         |         |         |        |         |         |         |        |         |          |        
|NET LOSS PER COMMON SHARE:                   |                                      |                        |                          |                  |        |         |         |         |        |         |         |         |        |         |          |        
|                                            
|                                            
|                                            
|                                            
|                                             | BASIC AND DILUTED                    |                        | $                        | (0.44            | )      |         | $       | (1.09   | )      |         | $       | (0.80   | )      |         | $        | (1.84   | )     
|                                             |                                      |                        |                          |                  |        |         |         |         |        |         |         |         |        |         |          |        
|WEIGHTED AVERAGE NUMBER OF COMMON SHARES:    |                                      |                        |                          |                  |        |         |         |         |        |         |         |         |        |         |          |        
|                                            
|                                            
|                                            
|                                            
|                                             | BASIC AND DILUTED                    |                        |                          | 91,428           |        |         |         | 91,429  |        |         |         | 85,638  |        |         |          | 91,429  |       
|                                             |                                      |                        |                          |                  |        |         |         |         |        |         |         |         |        |         |          |        

See notes to condensed consolidated financial statements.

F-2



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands of U.S. Dollars)


(Unaudited)


|                                              |                                                                            |                    |         |                  |         |      |         |        |        |   |          |          |          |   |          |        |         |  
|--------------------------------------------- | -------------------------------------------------------------------------- | ------------------ | ------- | ---------------- | ------- | ---- | ------- | ------ | ------ | - | -------- | -------- | -------- | - | -------- | ------ | ------- | -
|                                              |                                                                            |                    |         |                 
|                                              |                                                                            | Three Months Ended |         | Six Months Ended
|                                              |                                                                            | June 30,           |         | June 30,        
|                                              |                                                                            |                    |         |                 
|                                              |                                                                            | 2000               |         | 2001             |         | 2000 |         | 2001  
|                                              |                                                                            |                    |         |                  |         |      |         |       
|NET LOSS ATTRIBUTABLE TO COMMON
	STOCKHOLDERS |                                                                            | $                  | (39,825 | )                |         | $    | (99,672 | )      |        | $ | (68,892  | )        |          | $ | (167,921 | )     
|                                              |                                                                            |                    |         |                  |         |      |         |        |        |   |          |          |          |   |          |       
|OTHER COMPREHENSIVE LOSS, net of tax:         |                                                                            |                    |         |                  |         |      |         |        |        |   |          |          |          |   |          |       
|                                             
|                                             
|                                             
|                                             
|                                              | Foreign currency translation adjustment                                    |                    |         | (633             | )       |      |         | (1,230 | )      |   |          | (330     | )        |   |          | (4,982 | )      
|                                             
|                                             
|                                             
|                                             
|                                              | Change in unrealized loss on investments
	available for sale, net of taxes |                    |         | (55,374          | )       |      |         | (3,254 | )      |   |          | (114,618 | )        |   |          | (8,445 | )      
|                                              |                                                                            |                    |         |                  |         |      |         |        |        |   |          |          |          |   |          |       
|                                              |                                                                            | TOTAL              |         |                  | (56,007 | )    |         |        | (4,484 | ) |          |          | (114,948 | ) |          |        | (13,427 | )
|                                              |                                                                            |                    |         |                  |         |      |         |        |        |   |          |          |          |   |          |       
|COMPREHENSIVE LOSS                            |                                                                            | $                  | (95,832 | )                |         | $    | (78,687 | )      |        | $ | (183,840 | )        |          | $ | (181,348 | )     
|                                              |                                                                            |                    |         |                  |         |      |         |        |        |   |          |          |          |   |          |       

See notes to condensed consolidated financial statements.

F-3



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY (DEFICIT)

(In thousands of U.S. Dollars)


(Unaudited)


|                             |                                                                                                    |              |            |            |  |             |     |             |  |               |         |      |  |       |          |          |   |   |        |   |  |   |         |        |   |   |         |          |  
|---------------------------- | -------------------------------------------------------------------------------------------------- | ------------ | ---------- | ---------- |  | ----------- | --- | ----------- |  | ------------- | ------- | ---- |  | ----- | -------- | -------- | - | - | ------ | - |  | - | ------- | ------ | - | - | ------- | -------- | -
|                             |                                                                                                    |              |            |            |  |             |     |             |  | Accumulated   |         |     
|                             |                                                                                                    | Common Stock |            | Additional |  |             |     | Deferred    |  | Other         |         |     
|                             |                                                                                                    |              |            | Paid In    |  | Accumulated |     | Stock-Based |  | Comprehensive |         |     
|                             |                                                                                                    | Shares       |            | Stock      |  | Capital     |     | Deficit     |  | Compensation  |         | Loss |  | Total
|                             |                                                                                                    |              |            |            |  |             |     |             |  |               |         |      |  |      
|BALANCE AT DECEMBER 31, 2000 |                                                                                                    |              | 91,428,570 |            |  | $           | 914 |             |  | $             | 537,356 |      |  | $     | (357,075 | )        |   | $ | (5,438 | ) |  | $ | (17,172 | )      |   | $ | 158,585 |         
|                            
|                            
|                            
|                            
|                             | Amortization of amount paid in excess of carrying
	value of net assets acquired from related party |              |            |            |  |             |     |             |  |               |         | 284  |  |       |          |          |   |   |        |   |  |   |         |        |   |   |         | 284      |  
|                            
|                            
|                            
|                            
|                             | Change in unrealized loss on investment available
	for sale                                        |              |            |            |  |             |     |             |  |               |         |      |  |       |          |          |   |   |        |   |  |   |         | (8,445 | ) |   |         | (8,445   | )
|                            
|                            
|                            
|                            
|                             | Foreign currency translation adjustment                                                            |              |            |            |  |             |     |             |  |               |         |      |  |       |          |          |   |   |        |   |  |   |         | (4,982 | ) |   |         | (4,982   | )
|                            
|                            
|                            
|                            
|                             | Net loss for the period                                                                            |              |            |            |  |             |     |             |  |               |         |      |  |       |          | (167,921 | ) |   |        |   |  |   |         |        |   |   |         | (167,921 | )
|                             |                                                                                                    |              |            |            |  |             |     |             |  |               |         |      |  |       |          |          |   |   |        |   |  |   |         |        |   |   |         |         
|BALANCE AT JUNE 30, 2001     |                                                                                                    |              | 91,428,570 |            |  | $           | 914 |             |  | $             | 537,640 |      |  | $     | (524,996 | )        |   | $ | (5,438 | ) |  | $ | (30,599 | )      |   | $ | (22,479 | )       
|                             |                                                                                                    |              |            |            |  |             |     |             |  |               |         |      |  |       |          |          |   |   |        |   |  |   |         |        |   |   |         |         

See notes to condensed consolidated financial statements.

F-4



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. Dollars)


(Unaudited)


|                                                                      |                                                                                            |                                                         |                                                                        |                                                      |        |        |          |          |        |         |         |  
|--------------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | ------------------------------------------------------- | ---------------------------------------------------------------------- | ---------------------------------------------------- | ------ | ------ | -------- | -------- | ------ | ------- | ------- | -
|                                                                      |                                                                                            |                                                        
|                                                                      |                                                                                            | Six Months Ended                                       
|                                                                      |                                                                                            | June 30,                                               
|                                                                      |                                                                                            |                                                        
|                                                                      |                                                                                            | 2000                                                    |                                                                        | 2001                                                
|                                                                      |                                                                                            |                                                         |                                                                        |                                                     
|CASH FLOWS FROM OPERATING ACTIVITIES:                                 |                                                                                            |                                                         |                                                                        |                                                      |        |        |          |         
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Net loss                                                                                   |                                                         | $                                                                      | (67,499                                              | )      |        | $        | (167,921 | )     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Adjustments to reconcile net loss to net cash
	provided by (used in) operating activities: |                                                         |                                                                        |                                                      |        |        |          |          |       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                            | Amortization and depreciation                           |                                                                        |                                                      | 40,809 |        |          |          | 59,677 |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                            | Provision for doubtful accounts                         |                                                                        |                                                      | 3,018  |        |          |          | 4,248  |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                            | Deferred income tax (benefit) provision                 |                                                                        |                                                      | (831   | )      |          |          | 25,880 |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                            | Changes in assets and liabilities:                      |                                                                        |                                                      |        |        |          |          |        |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                            |                                                         | Increase in trade accounts receivable, net                             |                                                      |        | (6,734 | )        |          |        | (8,233  | )      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                            |                                                         | Decrease (increase) in prepaid expenses                                |                                                      |        | (1,393 | )        |          |        | (2,220  | )      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                            |                                                         | (Increase) decrease in other receivables and
	other non-current assets |                                                      |        | (6,376 | )        |          |        | 3,258   |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                            |                                                         | Increase in accounts payable  trade                                   |                                                      |        | 6,549  |          |          |        | 6,193   |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                            |                                                         | Increase in deferred revenues                                          |                                                      |        | 31,606 |          |          |        | 39,649  |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                            |                                                         | Increase in accrued and other liabilities                              |                                                      |        | 17,068 |          |          |        | (396    | )      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                            |                                                         | Increase (decrease) in other long-term
	liabilities                    |                                                      |        |        |          |          |        | (12,093 | )      
|                                                                      |                                                                                            |                                                         |                                                                        |                                                      |        |        |          |         
|                                                                      |                                                                                            |                                                         |                                                                        | Net cash provided by (used in) operating
	activities |        |        | 16,217   |          |        |         | (51,958 | )
|                                                                      |                                                                                            |                                                         |                                                                        |                                                      |        |        |          |         
|CASH FLOWS FROM INVESTING ACTIVITIES:                                 |                                                                                            |                                                         |                                                                        |                                                      |        |        |          |         
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Net (increase) decrease in trading investments                                             |                                                         |                                                                        | (388,410                                             | )      |        |          | 163,353  |       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Build-out of broadband network                                                             |                                                         |                                                                        | (31,281                                              | )      |        |          | (59,060  | )     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Purchases of property, plant and equipment                                                 |                                                         |                                                                        | (68,472                                              | )      |        |          | (53,663  | )     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | (Increase) decrease in other investment                                                    |                                                         |                                                                        | (26                                                  | )      |        |          | (306     | )     
|                                                                      |                                                                                            |                                                         |                                                                        |                                                      |        |        |          |         
|                                                                      |                                                                                            |                                                         |                                                                        | Net cash (used in) provided by investing
	activities |        |        | (488,189 | )        |        |         | 50,324  |  
|                                                                      |                                                                                            |                                                         |                                                                        |                                                      |        |        |          |         
|CASH FLOWS FROM FINANCING ACTIVITIES:                                 |                                                                                            |                                                         |                                                                        |                                                      |        |        |          |         
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Net (repayments on) borrowings from short-term
	debt                                       |                                                         |                                                                        | (1,103                                               | )      |        |          | 1,552    |       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Proceeds from long-term debt, net of deferred
	financing costs                             |                                                         |                                                                        | 297,679                                              |        |        |          | 16,129   |       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Repayments of long-term debt                                                               |                                                         |                                                                        | (9,696                                               | )      |        |          | (11,849  | )     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Proceeds from issuance of common stock, net                                                |                                                         |                                                                        | 229,350                                              |        |        |          |          |       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Cash paid in redemption of preferred stock                                                 |                                                         |                                                                        | (32,500                                              | )      |        |          |          |       
|                                                                      |                                                                                            |                                                         |                                                                        |                                                      |        |        |          |         
|                                                                      |                                                                                            |                                                         |                                                                        | Net cash provided by financing activities            |        |        | 483,730  |          |        |         | 5,832   |  
|                                                                      |                                                                                            |                                                         |                                                                        |                                                      |        |        |          |         
|EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH
	EQUIVALENTS          |                                                                                            |                                                         | 330                                                                    |                                                      |        |        | (4,982   | )       
|                                                                      |                                                                                            |                                                         |                                                                        |                                                      |        |        |          |         
|NET INCREASE (DECREASE) IN CASH AND CASH
	EQUIVALENTS                 |                                                                                            |                                                         | 12,088                                                                 |                                                      |        |        | (784     | )       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|CASH AND CASH EQUIVALENTS AT BEGINNING OF THE
	PERIOD                 |                                                                                            |                                                         | 97,507                                                                 |                                                      |        |        | 67,737   |         
|                                                                      |                                                                                            |                                                         |                                                                        |                                                      |        |        |          |         
|CASH AND CASH EQUIVALENTS AT END OF THE PERIOD                        |                                                                                            | $                                                       | 109,595                                                                |                                                      |        | $      | 66,953   |         
|                                                                      |                                                                                            |                                                         |                                                                        |                                                      |        |        |          |         
|SUPPLEMENTAL CASH FLOW INFORMATION:                                   |                                                                                            |                                                         |                                                                        |                                                      |        |        |          |         
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Interest paid                                                                              |                                                         | $                                                                      | 32,611                                               |        |        | $        | 69,723   |       
|                                                                      |                                                                                            |                                                         |                                                                        |                                                      |        |        |          |         
|                                                                      | Foreign income taxes paid                                                                  |                                                         | $                                                                      |                                                     |        |        | $        | 190      |       
|                                                                      |                                                                                            |                                                         |                                                                        |                                                      |        |        |          |         
|SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
	FINANCING ACTIVITIES: |                                                                                            |                                                         |                                                                        |                                                      |        |        |          |         
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Accrued dividends on redeemable preferred stock                                            |                                                         | $                                                                      | 1,393                                                |        |        |          |          |       
|                                                                      |                                                                                            |                                                         |                                                                        |                                                      |        |        |          |         
|                                                                      | Change to unrealized gain on investment available
	for sale, net of tax                    |                                                         | $                                                                      | (114,618                                             | )      |        | $        | (8,445   | )     
|                                                                      |                                                                                            |                                                         |                                                                        |                                                      |        |        |          |         
|                                                                      | Broadband network vendor financing                                                         |                                                         | $                                                                      | 70,935                                               |        |        | $        | 32,624   |       
|                                                                      |                                                                                            |                                                         |                                                                        |                                                      |        |        |          |         
|                                                                      | Broadband network financed through other
	long-term liabilities                            |                                                         | $                                                                      | 12,573                                               |        |        |          |          |       
|                                                                      |                                                                                            |                                                         |                                                                        |                                                      |        |        |          |         
|                                                                      | Issuance of treasury stock upon conversion of
	preferred stock                             |                                                         | $                                                                      | 115,142                                              |        |        |          |          |       
|                                                                      |                                                                                            |                                                         |                                                                        |                                                      |        |        |          |         
|                                                                      | Issuance of common stock in exchange for minority
	interests of                            |                                                         |                                                                        |                                                      |        |        |          |          |       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                            | IMPSAT Argentina, IMPSAT Colombia and IMPSAT
	Venezuela |                                                                        | $                                                    | 93,034 |        |          |          |        |        
|                                                                      |                                                                                            |                                                         |                                                                        |                                                      |        |        |          |         

See notes to condensed consolidated financial statements.

F-5



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS

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


1.  GENERAL

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

The Company currently provides telecommunications services to
its customers using its local access and long haul fiber optic
and satellite networks. The deployed facilities include 15
metropolitan area networks in the largest cities of the region,
long haul networks across Argentina, Brazil, Chile and Colombia,
and leased submarine capacity to link South America to the
United States. Finally, the Company has 510,000 gross
square feet of premises housing advanced hosting capabilities.

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

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

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

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

F-6



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


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

The Company has begun evaluating the availability of additional
financing to meet its financial requirements and objectives.
Additionally, the Company is closely monitoring the level of
cash payments and commitments. The Company has begun to take
actions to substantially reduce its commitments requiring cash
payments in the remainder of 2001. The Company has commenced
evaluating various alternatives to improve its liquidity,
including raising additional equity capital from financial
and/or strategic partners or restructuring its debt. However,
there is no assurance that the Company will reach a definitive
agreement with any potential strategic partner, obtain
additional funds or restructure its debt without seeking
protection under the United States Bankruptcy Code. In the event
the Company is unable to satisfy its obligations to third
parties, which could result in defaults under its debt and other
financing agreements and, after the passage of any applicable
time and notice provisions, the Companys creditors would
be able to accelerate the indebtedness and assert other remedies
against the Company. Such events would have a material adverse
effect upon the Company and would threaten its ability to
continue as a going concern.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

Market Risk  The Company currently operates in
countries throughout Latin America. The Companys financial
performance may be affected by inflation, exchange rates and
controls, price controls, interest rates, changes in
governmental economic policy, taxation and political, economic
or other developments in or affecting the Latin America
countries in which the Company operates. The Companys
foreign exchange rate risk, other than in Brazil, is limited
because the majority of its assets are either non-monetary in
nature or denominated in US dollars, and the majority of its
debt is denominated in US dollars. Additionally, a significant
portion of the Companys debt has a fixed interest rate
thereby limiting the Companys interest rate risk exposure.
Accordingly, the Company does not enter into derivative
transactions to hedge against these potential risks.

Cash and Cash Equivalents  Cash and cash
equivalents are 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, IT Solutions and Internet services are
recognized monthly as the services are provided. Equipment sales
are recorded upon delivery and

F-7



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


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

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

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

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

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

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

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

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

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

Deferred Financing Costs  Debt issuance costs
and transaction fees, which are associated with the issuance of
the Companys 12 1/8% Senior Guaranteed Notes due 2003
(the Senior Guaranteed Notes), the

F-8



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


13 3/4% Senior Notes due 2005 (the Senior Notes
2005) and the 12 3/8% Senior Notes due 2008 (the
Senior Notes 2008) are being amortized (and charged
to interest expense) over the term of the related notes on a
method which approximates the level yield method.

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

Long-Lived Assets  Long-lived assets, included
goodwill, are reviewed on an ongoing basis for impairment based
on a comparison of carrying values to undiscounted future cash
flows. If an impairment is identified, the assets carrying
amount is adjusted to fair value. No such adjustments were
recorded for the three and six months ended June 30, 2000
and 2001.

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.

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

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

|                                         |  |              |         |          |  |   |         | 
|---------------------------------------- |  | ------------ | ------- | -------- |  | - | ------- | 
|                                         |  | December 31, |         | June 30,
|                                         |  | 2000         |         | 2001    
|                                         |  |              |         |         
|12.125% Senior Guaranteed Notes due 2003 |  | $            | 98,750  |          |  | $ | 70,000  | 
|                                        
|                                        
|                                        
|                                        
|13.75% Senior Notes due 2005             |  |              | 198,000 |          |  |   | 138,000 | 
|                                        
|                                        
|                                        
|                                        
|12.375% Senior Notes due 2008            |  |              | 124,875 |          |  |   | 81,000  | 
|                                        
|                                        
|                                        
|                                        
|Trading Investments                      |  |              | 240,892 |          |  |   | 77,529  | 
|                                        
|                                        
|                                        
|                                        
|Available for sale investments           |  |              | 7,166   |          |  |   | 5,075   | 

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

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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


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

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

|                             |  |             |         |                 |  |       |         |   |  |   |         |  
|---------------------------- |  | ----------- | ------- | --------------- |  | ----- | ------- | - |  | - | ------- | -
|                             |  |             |         | Unrealized      |  |      
|                             |  | Foreign     |         | Gain (Loss)     |  |      
|                             |  | Currency    |         | Available for   |  |      
|                             |  | Translation |         | Sale Investment |  | Total
|                             |  |             |         |                 |  |      
|Balance at December 31, 2000 |  | $           | (6,417  | )               |  | $     | (10,755 | ) |  | $ | (17,172 | )
|                            
|                            
|                            
|                            
|Change during the period     |  |             | (4,982  | )               |  |       | (8,445  | ) |  |   | (13,427 | )
|                             |  |             |         |                 |  |       |         |   |  |   |         |  
|Balance at June 30, 2001     |  | $           | (11,399 | )               |  | $     | (19,200 | ) |  | $ | (30,599 | )
|                             |  |             |         |                 |  |       |         |   |  |   |         |  

New Accounting Pronouncement  The Financial
Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 142 (SFAS 142),
Goodwill and Other Intangible Assets, which addresses the
accounting for goodwill and other intangible assets. SFAS 142
specifies that, among other things, intangible assets with an
indefinite useful life and goodwill will no longer be amortized.
The standard requires goodwill to be periodically tested for
impairment and written down to fair value if considered
impaired. The provisions of SFAS 142 are effective for fiscal
years beginning after December 15, 2001, and are effective
for interim periods in the initial year of adoption. The Company
is currently assessing the financial statement impact of the
adoption of SFAS 142.

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

3.  INVESTMENTS

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

|                                                             |       |              |         |          |  |   |        |        | 
|------------------------------------------------------------ | ----- | ------------ | ------- | -------- |  | - | ------ | ------ | 
|                                                             |       | December 31, |         | June 30,
|                                                             |       | 2000         |         | 2001    
|                                                             |       |              |         |         
|Trading investments, at fair value                           |       | $            | 240,892 |          |  | $ | 77,539 |       
|                                                             |       |              |         |          |  |   |        |       
|Investment, at cost                                          |       | $            | 7,925   |          |  | $ | 8,231  |       
|                                                            
|                                                            
|                                                            
|                                                            
|Investment in common stock, at fair value
	($24,275 at cost) |       |              | 7,166   |          |  |   | 5,075  |       
|                                                             |       |              |         |          |  |   |        |       
|                                                             | Total |              | $       | 15,091   |  |   | $      | 13,306 | 
|                                                             |       |              |         |          |  |   |        |       

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

The Companys cost basis investment represents a less than
1% ownership in an unaffiliated entity established for the
purchase and leasing of satellite capacity time. 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.

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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


4.  TRADE ACCOUNTS RECEIVABLE

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

|                                      |       |              |         |          |  |   |         |         | 
|------------------------------------- | ----- | ------------ | ------- | -------- |  | - | ------- | ------- | 
|                                      |       | December 31, |         | June 30,
|                                      |       | 2000         |         | 2001    
|                                      |       |              |         |         
|IMPSAT Argentina                      |       | $            | 75,116  |          |  | $ | 79,848  |        
|                                     
|                                     
|                                     
|                                     
|IMPSAT Brasil                         |       |              | 6,553   |          |  |   | 8,173   |        
|                                     
|                                     
|                                     
|                                     
|IMPSAT Colombia                       |       |              | 6,662   |          |  |   | 5,598   |        
|                                     
|                                     
|                                     
|                                     
|IMPSAT Venezuela                      |       |              | 6,311   |          |  |   | 7,243   |        
|                                     
|                                     
|                                     
|                                     
|All other countries                   |       |              | 11,218  |          |  |   | 12,194  |        
|                                      |       |              |         |          |  |   |         |        
|                                      | Total |              |         | 105,860  |  |   |         | 113,056 | 
|                                     
|                                     
|                                     
|                                     
|Less: allowance for doubtful accounts |       |              | (22,509 | )        |  |   | (25,720 | )      
|                                      |       |              |         |          |  |   |         |        
|Trade accounts receivable, net        |       | $            | 83,351  |          |  | $ | 87,336  |        
|                                      |       |              |         |          |  |   |         |        

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

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

|                                |  |              |        |          |  |   |        |  
|------------------------------- |  | ------------ | ------ | -------- |  | - | ------ | -
|                                |  | December 31, |        | June 30,
|                                |  | 2000         |        | 2001    
|                                |  |              |        |         
|Beginning balance               |  | $            | 19,820 |          |  | $ | 22,509 |  
|                               
|                               
|                               
|                               
|Provision for doubtful accounts |  |              | 4,806  |          |  |   | 4,248  |  
|                               
|                               
|                               
|                               
|Write-offs, net of recoveries   |  |              | (2,117 | )        |  |   | (1,037 | )
|                                |  |              |        |          |  |   |        |  
|Ending balance                  |  | $            | 22,509 |          |  | $ | 25,720 |  
|                                |  |              |        |          |  |   |        |  

5.  OTHER RECEIVABLES

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

|                    |       |              |        |          |  |   |        |        | 
|------------------- | ----- | ------------ | ------ | -------- |  | - | ------ | ------ | 
|                    |       | December 31, |        | June 30,
|                    |       | 2000         |        | 2001    
|                    |       |              |        |         
|IMPSAT Argentina    |       | $            | 33,678 |          |  | $ | 42,062 |       
|                   
|                   
|                   
|                   
|IMPSAT Brazil       |       |              | 12,538 |          |  |   | 7,969  |       
|                   
|                   
|                   
|                   
|IMPSAT Colombia     |       |              | 4,149  |          |  |   | 2,194  |       
|                   
|                   
|                   
|                   
|IMPSAT Venezuela    |       |              | 2,156  |          |  |   | 2,617  |       
|                   
|                   
|                   
|                   
|All other countries |       |              | 10,650 |          |  |   | 7,258  |       
|                    |       |              |        |          |  |   |        |       
|                    | Total |              | $      | 63,171   |  |   | $      | 62,100 | 
|                    |       |              |        |          |  |   |        |       

F-11



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


6.  BROADBAND NETWORK AND AGREEMENTS

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

|                                            |       |              |         |          |  |   |         |         | 
|------------------------------------------- | ----- | ------------ | ------- | -------- |  | - | ------- | ------- | 
|                                            |       | December 31, |         | June 30,
|                                            |       | 2000         |         | 2001    
|                                            |       |              |         |         
|Network infrastructure                      |       | $            | 201,372 |          |  | $ | 232,289 |        
|                                           
|                                           
|                                           
|                                           
|Right of ways                               |       |              | 19,666  |          |  |   | 16,554  |        
|                                           
|                                           
|                                           
|                                           
|Equipment and materials                     |       |              | 151,185 |          |  |   | 170,167 |        
|                                           
|                                           
|                                           
|                                           
|IRU investments                             |       |              | 33,610  |          |  |   | 40,642  |        
|                                            |       |              |         |          |  |   |         |        
|                                            | Total |              |         | 405,833  |  |   |         | 459,652 | 
|                                           
|                                           
|                                           
|                                           
|Less: accumulated depreciation              |       |              | (46,433 | )        |  |   | (63,754 | )      
|                                            |       |              |         |          |  |   |         |        
|                                            | Total |              |         | 359,400  |  |   |         | 395,898 | 
|                                           
|                                           
|                                           
|                                           
|Under construction  Network infrastructure |       |              | 3,424   |          |  |   | 39,959  |        
|                                           
|                                           
|                                           
|                                           
|Under construction  Global Crossing ducts  |       |              | 1,397   |          |  |   |         |        
|                                            |       |              |         |          |  |   |         |        
|                                            | Total |              | $       | 364,221  |  |   | $       | 435,857 | 
|                                            |       |              |         |          |  |   |         |        

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

|                          |  |              |        |          |  |   |        |  
|------------------------- |  | ------------ | ------ | -------- |  | - | ------ | -
|                          |  | December 31, |        | June 30,
|                          |  | 2000         |        | 2001    
|                          |  |              |        |         
|Beginning balance         |  | $            | 42,368 |          |  | $ | 46,433 |  
|                         
|                         
|                         
|                         
|Depreciation expense      |  |              | 4,365  |          |  |   | 20,048 |  
|                         
|                         
|                         
|                         
|Disposals and retirements |  |              | (300   | )        |  |   | (2,727 | )
|                          |  |              |        |          |  |   |        |  
|Ending balance            |  | $            | 46,433 |          |  | $ | 63,754 |  
|                          |  |              |        |          |  |   |        |  

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 will be disbursed over a two
year period with final maturity in 2006, and will be 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.
Additionally, the Company has obtained additional vendor
financing from Lucent Technologies, Ericsson, Tellabs OY, DMC
and Harris Canadá, Inc. for the acquisition of fiber optic
cable and other telecommunications equipment for the Broadband
Network for an aggregate of up to approximately
$74.2 million. The Company had amounts due under Broadband
Network vendor financing totaling approximately
$247.1 million and $279.8 million as of
December 31, 2000 and June 30, 2001, respectively.

IRU Agreements  The Company has entered
into several framework agreements granting IRUs of up to
25 years on the Companys broadband network, including
network maintenance services and telehousing space. The Company
has received approximately $40.8 million during the
six months ended June 30, 2001 related to these
agreements. These advance payments are recorded as deferred
revenue in the accompanying

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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


condensed balance sheet. During the six months ended
June 30, 2001, the Company recognized approximately
$1.9 million from these agreements, which are reflected as
services to carriers in the accompanying condensed statement of
operations.

7.  PROPERTY, PLANT AND EQUIPMENT

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

|                                        |       |              |          |          |  |   |          |         | 
|--------------------------------------- | ----- | ------------ | -------- | -------- |  | - | -------- | ------- | 
|                                        |       | December 31, |          | June 30,
|                                        |       | 2000         |          | 2001    
|                                        |       |              |          |         
|Land                                    |       | $            | 10,398   |          |  | $ | 12,652   |        
|                                       
|                                       
|                                       
|                                       
|Building and improvements               |       |              | 55,792   |          |  |   | 84,034   |        
|                                       
|                                       
|                                       
|                                       
|Operating communications equipment      |       |              | 513,287  |          |  |   | 548,191  |        
|                                       
|                                       
|                                       
|                                       
|Furniture, fixtures and other equipment |       |              | 33,703   |          |  |   | 40,217   |        
|                                        |       |              |          |          |  |   |          |        
|                                        | Total |              |          | 613,180  |  |   |          | 685,094 | 
|                                       
|                                       
|                                       
|                                       
|Less: accumulated depreciation          |       |              | (265,354 | )        |  |   | (298,299 | )      
|                                        |       |              |          |          |  |   |          |        
|                                        | Total |              |          | 347,826  |  |   |          | 386,795 | 
|                                       
|                                       
|                                       
|                                       
|Equipment in transit                    |       |              | 15,285   |          |  |   | 8,414    |        
|                                       
|                                       
|                                       
|                                       
|Works in process                        |       |              | 18,563   |          |  |   | 4,355    |        
|                                        |       |              |          |          |  |   |          |        
|Property, plant and equipment, net      |       | $            | 381,674  |          |  | $ | 399,564  |        
|                                        |       |              |          |          |  |   |          |        

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

|                          |  |              |         |          |  |   |         |  
|------------------------- |  | ------------ | ------- | -------- |  | - | ------- | -
|                          |  | December 31, |         | June 30,
|                          |  | 2000         |         | 2001    
|                          |  |              |         |         
|Beginning balance         |  | $            | 201,656 |          |  | $ | 265,354 |  
|                         
|                         
|                         
|                         
|Depreciation expense      |  |              | 74,156  |          |  |   | 35,773  |  
|                         
|                         
|                         
|                         
|Disposals and retirements |  |              | (10,458 | )        |  |   | (2,828  | )
|                          |  |              |         |          |  |   |         |  
|Ending balance            |  | $            | 265,354 |          |  | $ | 298,299 |  
|                          |  |              |         |          |  |   |         |  

8.  SHORT-TERM DEBT

Several of the Companys subsidiaries maintain short-term
credit facilities with local banks. These credit facilities are
denominated in U.S. dollars, with interest rates ranging from 5%
to 22%. The Companys subsidiaries have historically
refinanced these short term credit facilities on an annual
basis. As of December 31, 2000 and June 30, 2001,
amounts outstanding under these credit facilities totaled
approximately $14.6 million and $16.2 million,
respectively.

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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


9.  LONG-TERM DEBT

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

|                                                                                                                                                         |                                              |                      |         |          |         |   |         |        |         | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------- | -------------------- | ------- | -------- | ------- | - | ------- | ------ | ------- | 
|                                                                                                                                                         |                                              | December 31,         |         | June 30,
|                                                                                                                                                         |                                              | 2000                 |         | 2001    
|                                                                                                                                                         |                                              |                      |         |         
|12.125% Senior Guaranteed Notes due 2003                                                                                                                 |                                              | $                    | 125,000 |          |         | $ | 125,000 |       
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|13.75% Senior Notes due 2005                                                                                                                             |                                              |                      | 300,000 |          |         |   | 300,000 |       
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|12.375% Senior Notes due 2008                                                                                                                            |                                              |                      | 225,000 |          |         |   | 225,000 |       
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|Term notes payable, maturing from 2001 through
	2004; collateralized by equipment, the assignment of customer
	contracts and investment; denominated in: |                                              |                      |         |          |         |   |         |       
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                         | U.S. dollars (interest rates 8.0% 
	13.0%)  |                      |         | 27,959   |         |   |         | 28,162 |        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                         | Local currency (interest rates 9% 
	19.67%) |                      |         | 17,177   |         |   |         | 17,184 |        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|Eximbank notes payable (7.61%), maturing
	semiannually through 200l and 2004                                                                             |                                              |                      | 11,359  |          |         |   | 15,429  |       
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|Vendor financing (6.33%  13%),
	maturing 2004 to 2008                                                                                                   |                                              |                      | 247,145 |          |         |   | 279,769 |       
|                                                                                                                                                         |                                              |                      |         |          |         |   |         |       
|                                                                                                                                                         |                                              | Total long-term debt |         |          | 953,640 |   |         |        | 990,544 | 
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|Less: current portion                                                                                                                                    |                                              |                      | (38,377 | )        |         |   | (56,985 | )     
|                                                                                                                                                         |                                              |                      |         |          |         |   |         |       
|Long-term debt, net                                                                                                                                      |                                              | $                    | 915,263 |          |         | $ | 933,559 |       
|                                                                                                                                                         |                                              |                      |         |          |         |   |         |       

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

10.  INCOME TAXES

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

|         |       |                    |        |                  |   |      |         |         |   |   |        |        |   |   |         |         |  
|-------- | ----- | ------------------ | ------ | ---------------- | - | ---- | ------- | ------- | - | - | ------ | ------ | - | - | ------- | ------- | -
|         |       |                    |        |                 
|         |       | Three Months Ended |        | Six Months Ended
|         |       | June 30,           |        | June 30,        
|         |       |                    |        |                 
|         |       | 2000               |        | 2001             |   | 2000 |         | 2001   
|         |       |                    |        |                  |   |      |         |        
|Current  |       | $                  | (1,004 | )                |   | $    | (37     | )       |   | $ | (1,901 | )      |   | $ | (608    | )      
|        
|        
|        
|        
|Deferred |       |                    | (726   | )                |   |      | (26,085 | )       |   |   | 831    |        |   |   | (25,880 | )      
|         |       |                    |        |                  |   |      |         |         |   |   |        |        |   |   |         |        
|         | Total |                    | $      | (1,730           | ) |      | $       | (26,122 | ) |   | $      | (1,070 | ) |   | $       | (26,488 | )
|         |       |                    |        |                  |   |      |         |         |   |   |        |        |   |   |         |        

The foreign statutory tax rates range from 15% to 35% depending
on the particular country. During the three and six months ended
June 30, 2001, the Company recorded a valuation allowance
of approximately $25.5 million because it is not clear that
utilization of the tax benefits resulting from operating losses
and other temporary differences are more likely than
not to be realized, as required by SFAS 109.

F-14



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


11.  OPERATING SEGMENT INFORMATION

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

|                                 |                      |                                  |         |        |        |          |         |           |        |           |         |              |        |       |        |       |       |   |         |        |        |  |        |        |        |   |           |        |        | 
|-------------------------------- | -------------------- | -------------------------------- | ------- | ------ | ------ | -------- | ------- | --------- | ------ | --------- | ------- | ------------ | ------ | ----- | ------ | ----- | ----- | - | ------- | ------ | ------ |  | ------ | ------ | ------ | - | --------- | ------ | ------ | 
|                                 |                      |                                  |         |        |        |          |         |           |        | All other |         |              |        |      
|                                 |                      | Argentina                        |         | Brazil |        | Colombia |         | Venezuela |        | countries |         | Eliminations |        | Total
|Three Months Ended June 30, 2001 |                      |                                  |         |        |        |          |         |           |        |           |         |              |        |      
|                                
|                                
|                                
|                                
|Net Revenues                     |                      |                                  |         |        |        |          |         |           |        |           |         |              |        |       |        |       |       |   |         |        |        |  |        |        |        |   |           |       
|                                
|                                
|                                
|                                
|Data and value added services:   |                      |                                  |         |        |        |          |         |           |        |           |         |              |        |       |        |       |       |   |         |        |        |  |        |        |        |   |           |       
|                                
|                                
|                                
|                                
|                                 | Satellite            |                                  | $       | 12,863 |        |          | $       | 3,117     |        |           | $       | 5,453        |        |       | $      | 6,113 |       |   | $       | 8,722  |        |  | $      | (2,085 | )      |   | $         | 34,183 |       
|                                
|                                
|                                
|                                
|                                 | Broad Band           |                                  |         | 7,999  |        |          |         | 2,002     |        |           |         | 8,400        |        |       |        | 816   |       |   |         | 2,522  |        |  |        | (1,452 | )      |   |           | 20,287 |       
|                                
|                                
|                                
|                                
|                                 | Value added services |                                  |         | 853    |        |          |         | 953       |        |           |         | 49           |        |       |        |       |       |   |         | 3,045  |        |  |        | (3,557 | )      |   |           | 1,343  |       
|                                 |                      |                                  |         |        |        |          |         |           |        |           |         |              |        |       |        |       |       |   |         |        |        |  |        |        |        |   |           |       
|                                 | Subtotal             |                                  |         | 21,715 |        |          |         | 6,072     |        |           |         | 13,902       |        |       |        | 6,929 |       |   |         | 14,289 |        |  |        | (7,094 | )      |   |           | 55,813 |       
|                                
|                                
|                                
|                                
|Telephony                        |                      |                                  | 1,674   |        |        |          |         |           |        |           |         |              |        |       |        |       |       |   | 531     |        |        |  | (320   | )      |        |   | 1,885     |       
|                                
|                                
|                                
|                                
|Internet                         |                      |                                  | 4,376   |        |        |          | 3,126   |           |        |           | 1,111   |              |        |       | 457    |       |       |   | 4,085   |        |        |  | (1,476 | )      |        |   | 11,679    |       
|                                
|                                
|                                
|                                
|Services to carriers             |                      |                                  | 1,560   |        |        |          | 1,715   |           |        |           | 155     |              |        |       | 394    |       |       |   | 2,459   |        |        |  | (524   | )      |        |   | 5,759     |       
|                                
|                                
|                                
|                                
|Sales of equipment               |                      |                                  | 2,034   |        |        |          | 625     |           |        |           | 478     |              |        |       | 40     |       |       |   | 214     |        |        |  |        |        |        |   | 3,391     |       
|                                 |                      |                                  |         |        |        |          |         |           |        |           |         |              |        |       |        |       |       |   |         |        |        |  |        |        |        |   |           |       
|                                 |                      | Total net revenues from services |         | $      | 31,359 |          |         | $         | 11,538 |           |         | $            | 15,646 |       |        | $     | 7,820 |   |         | $      | 21,578 |  |        | $      | (9,414 | ) |           | $      | 78,527 | 
|                                 |                      |                                  |         |        |        |          |         |           |        |           |         |              |        |       |        |       |       |   |         |        |        |  |        |        |        |   |           |       
|Operating income (loss)          |                      | $                                | (16,256 | )      |        | $        | (9,312  | )         |        | $         | (184    | )            |        | $     | 194    |       |       | $ | (4,629  | )      |        |  |        |        |        | $ | (30,187   | )     
|                                 |                      |                                  |         |        |        |          |         |           |        |           |         |              |        |       |        |       |       |   |         |        |        |  |        |        |        |   |           |       
|Total assets                     |                      | $                                | 557,968 |        |        | $        | 218,956 |           |        | $         | 120,847 |              |        | $     | 61,383 |       |       | $ | 306,341 |        |        |  |        |        |        | $ | 1,265,495 |       
|                                 |                      |                                  |         |        |        |          |         |           |        |           |         |              |        |       |        |       |       |   |         |        |        |  |        |        |        |   |           |       

|                               |                      |                                  |         |        |        |          |         |           |       |           |        |              |        |       |        |       |       |   |         |       |        |  |        |        |        |   |           |        |        | 
|------------------------------ | -------------------- | -------------------------------- | ------- | ------ | ------ | -------- | ------- | --------- | ----- | --------- | ------ | ------------ | ------ | ----- | ------ | ----- | ----- | - | ------- | ----- | ------ |  | ------ | ------ | ------ | - | --------- | ------ | ------ | 
|                               |                      |                                  |         |        |        |          |         |           |       | All other |        |              |        |      
|2000                           |                      | Argentina                        |         | Brazil |        | Colombia |         | Venezuela |       | countries |        | Eliminations |        | Total
|                               |                      |                                  |         |        |        |          |         |           |       |           |        |              |        |      
|                              
|                              
|                              
|                              
|Net Revenues                   |                      |                                  |         |        |        |          |         |           |       |           |        |              |        |       |        |       |       |   |         |       |        |  |        |        |        |   |           |       
|                              
|                              
|                              
|                              
|Data and value added services: |                      |                                  |         |        |        |          |         |           |       |           |        |              |        |       |        |       |       |   |         |       |        |  |        |        |        |   |           |       
|                              
|                              
|                              
|                              
|                               | Satellite            |                                  | $       | 18,501 |        |          | $       | 3,693     |       |           | $      | 7,579        |        |       | $      | 6,616 |       |   | $       | 8,323 |        |  | $      | (4,214 | )      |   | $         | 40,498 |       
|                              
|                              
|                              
|                              
|                               | Broad Band           |                                  |         | 5,462  |        |          |         | 399       |       |           |        | 4,797        |        |       |        | 501   |       |   |         | 507   |        |  |        | (36    | )      |   |           | 11,630 |       
|                              
|                              
|                              
|                              
|                               | Value added services |                                  |         | 593    |        |          |         | 4         |       |           |        | 27           |        |       |        | 30    |       |   |         | 14    |        |  |        | (14    | )      |   |           | 654    |       
|                               |                      |                                  |         |        |        |          |         |           |       |           |        |              |        |       |        |       |       |   |         |       |        |  |        |        |        |   |           |       
|                               | Subtotal             |                                  |         | 24,556 |        |          |         | 4,096     |       |           |        | 12,403       |        |       |        | 7,147 |       |   |         | 8,844 |        |  |        | (4,264 | )      |   |           | 52,782 |       
|                              
|                              
|                              
|                              
|Telephony                      |                      |                                  |         |        |        |          |         |           |       |           |        |              |        |       |        |       |       |   |         |       |        |  |        |        |        |   |           |       
|                              
|                              
|                              
|                              
|Internet                       |                      |                                  | 2,579   |        |        |          | 2,053   |           |       |           | 892    |              |        |       | 333    |       |       |   | 3,581   |       |        |  | (1,446 | )      |        |   | 7,992     |       
|                              
|                              
|                              
|                              
|Services to carriers           |                      |                                  |         |        |        |          |         |           |       |           |        |              |        |       |        |       |       |   |         |       |        |  |        |        |        |   |           |       
|                              
|                              
|                              
|                              
|Sales of equipment             |                      |                                  | 3,634   |        |        |          | 298     |           |       |           |        |              |        |       | 24     |       |       |   | 24      |       |        |  |        |        |        |   | 3,980     |       
|                               |                      |                                  |         |        |        |          |         |           |       |           |        |              |        |       |        |       |       |   |         |       |        |  |        |        |        |   |           |       
|                               |                      | Total net revenues from services |         | $      | 30,769 |          |         | $         | 6,447 |           |        | $            | 13,295 |       |        | $     | 7,504 |   |         | $     | 12,449 |  |        | $      | (5,710 | ) |           | $      | 64,754 | 
|                               |                      |                                  |         |        |        |          |         |           |       |           |        |              |        |       |        |       |       |   |         |       |        |  |        |        |        |   |           |       
|Operating income (loss)        |                      | $                                | (8,352  | )      |        | $        | (6,887  | )         |       | $         | 355    |              |        | $     | 837    |       |       | $ | (4,869  | )     |        |  |        |        |        | $ | (18,916   | )     
|                               |                      |                                  |         |        |        |          |         |           |       |           |        |              |        |       |        |       |       |   |         |       |        |  |        |        |        |   |           |       
|Total assets                   |                      | $                                | 337,726 |        |        | $        | 158,353 |           |       | $         | 92,017 |              |        | $     | 45,880 |       |       | $ | 676,925 |       |        |  |        |        |        | $ | 1,310,901 |       
|                               |                      |                                  |         |        |        |          |         |           |       |           |        |              |        |       |        |       |       |   |         |       |        |  |        |        |        |   |           |       

F-15



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                               |                      |                                  |         |        |        |          |         |           |        |           |         |              |        |       |        |        |        |   |         |        |        |  |        |         |         |   |           |         |         | 
|------------------------------ | -------------------- | -------------------------------- | ------- | ------ | ------ | -------- | ------- | --------- | ------ | --------- | ------- | ------------ | ------ | ----- | ------ | ------ | ------ | - | ------- | ------ | ------ |  | ------ | ------- | ------- | - | --------- | ------- | ------- | 
|                               |                      |                                  |         |        |        |          |         |           |        | All other |         |              |        |      
|                               |                      | Argentina                        |         | Brazil |        | Colombia |         | Venezuela |        | countries |         | Eliminations |        | Total
|Six Months Ended June 30, 2001 |                      |                                  |         |        |        |          |         |           |        |           |         |              |        |      
|                              
|                              
|                              
|                              
|Net Revenues                   |                      |                                  |         |        |        |          |         |           |        |           |         |              |        |       |        |        |        |   |         |        |        |  |        |         |         |   |           |        
|                              
|                              
|                              
|                              
|Data and value added services: |                      |                                  |         |        |        |          |         |           |        |           |         |              |        |       |        |        |        |   |         |        |        |  |        |         |         |   |           |        
|                              
|                              
|                              
|                              
|                               | Satellite            |                                  | $       | 28,994 |        |          | $       | 7,261     |        |           | $       | 11,798       |        |       | $      | 12,339 |        |   | $       | 17,376 |        |  | $      | (5,798  | )       |   | $         | 71,970  |        
|                              
|                              
|                              
|                              
|                               | Broad Band           |                                  |         | 15,469 |        |          |         | 3,666     |        |           |         | 16,490       |        |       |        | 1,424  |        |   |         | 4,226  |        |  |        | (2,548  | )       |   |           | 38,727  |        
|                              
|                              
|                              
|                              
|                               | Value added services |                                  |         | 1,628  |        |          |         | 1,110     |        |           |         | 97           |        |       |        |        |        |   |         | 5,595  |        |  |        | (6,163  | )       |   |           | 2,267   |        
|                               |                      |                                  |         |        |        |          |         |           |        |           |         |              |        |       |        |        |        |   |         |        |        |  |        |         |         |   |           |        
|                               | Subtotal             |                                  |         | 46,091 |        |          |         | 12,037    |        |           |         | 28,385       |        |       |        | 13,763 |        |   |         | 27,197 |        |  |        | (14,509 | )       |   |           | 112,964 |        
|                              
|                              
|                              
|                              
|Telephony                      |                      |                                  | 2,379   |        |        |          |         |           |        |           |         |              |        |       |        |        |        |   | 1,237   |        |        |  | (461   | )       |         |   | 3,155     |        
|                              
|                              
|                              
|                              
|Internet                       |                      |                                  | 8,400   |        |        |          | 6,273   |           |        |           | 2,159   |              |        |       | 882    |        |        |   | 8,018   |        |        |  | (2,885 | )       |         |   | 22,847    |        
|                              
|                              
|                              
|                              
|Services to carriers           |                      |                                  | 3,009   |        |        |          | 2,794   |           |        |           | 214     |              |        |       | 688    |        |        |   | 4,450   |        |        |  | (744   | )       |         |   | 10,411    |        
|                              
|                              
|                              
|                              
|Sales of equipment             |                      |                                  | 4,058   |        |        |          | 5,249   |           |        |           | 478     |              |        |       | 969    |        |        |   | 7,141   |        |        |  |        |         |         |   | 17,895    |        
|                               |                      |                                  |         |        |        |          |         |           |        |           |         |              |        |       |        |        |        |   |         |        |        |  |        |         |         |   |           |        
|                               |                      | Total net revenues from services |         | $      | 63,937 |          |         | $         | 26,353 |           |         | $            | 31,236 |       |        | $      | 16,302 |   |         | $      | 48,043 |  |        | $       | (18,599 | ) |           | $       | 167,272 | 
|                               |                      |                                  |         |        |        |          |         |           |        |           |         |              |        |       |        |        |        |   |         |        |        |  |        |         |         |   |           |        
|Operating income (loss)        |                      | $                                | (29,057 | )      |        | $        | (20,188 | )         |        | $         | 354     |              |        | $     | 323    |        |        | $ | (6,729  | )      |        |  |        |         |         | $ | (55,297   | )      
|                               |                      |                                  |         |        |        |          |         |           |        |           |         |              |        |       |        |        |        |   |         |        |        |  |        |         |         |   |           |        
|Total assets                   |                      | $                                | 557,968 |        |        | $        | 218,956 |           |        | $         | 120,847 |              |        | $     | 61,383 |        |        | $ | 306,341 |        |        |  |        |         |         | $ | 1,265,495 |        
|                               |                      |                                  |         |        |        |          |         |           |        |           |         |              |        |       |        |        |        |   |         |        |        |  |        |         |         |   |           |        

|                               |                      |                                  |         |        |        |          |         |           |        |           |        |              |        |       |        |        |        |   |         |        |        |  |        |        |         |   |           |         |         | 
|------------------------------ | -------------------- | -------------------------------- | ------- | ------ | ------ | -------- | ------- | --------- | ------ | --------- | ------ | ------------ | ------ | ----- | ------ | ------ | ------ | - | ------- | ------ | ------ |  | ------ | ------ | ------- | - | --------- | ------- | ------- | 
|                               |                      |                                  |         |        |        |          |         |           |        | All other |        |              |        |      
|2000                           |                      | Argentina                        |         | Brazil |        | Colombia |         | Venezuela |        | countries |        | Eliminations |        | Total
|                               |                      |                                  |         |        |        |          |         |           |        |           |        |              |        |      
|Net Revenues                   |                      |                                  |         |        |        |          |         |           |        |           |        |              |        |       |        |        |        |   |         |        |        |  |        |        |         |   |           |        
|                              
|                              
|                              
|                              
|Data and value added services: |                      |                                  |         |        |        |          |         |           |        |           |        |              |        |       |        |        |        |   |         |        |        |  |        |        |         |   |           |        
|                              
|                              
|                              
|                              
|                               | Satellite            |                                  | $       | 36,134 |        |          | $       | 7,136     |        |           | $      | 15,935       |        |       | $      | 12,437 |        |   | $       | 17,817 |        |  | $      | (9,230 | )       |   | $         | 80,229  |        
|                              
|                              
|                              
|                              
|                               | Broad Band           |                                  |         | 11,017 |        |          |         | 641       |        |           |        | 9,361        |        |       |        | 939    |        |   |         | 754    |        |  |        | (89    | )       |   |           | 22,623  |        
|                              
|                              
|                              
|                              
|                               | Value added services |                                  |         | 920    |        |          |         | 4         |        |           |        | 50           |        |       |        | 30     |        |   |         | 16     |        |  |        | (16    | )       |   |           | 1,004   |        
|                               |                      |                                  |         |        |        |          |         |           |        |           |        |              |        |       |        |        |        |   |         |        |        |  |        |        |         |   |           |        
|                               | Subtotal             |                                  |         | 48,071 |        |          |         | 7,781     |        |           |        | 25,346       |        |       |        | 13,406 |        |   |         | 18,587 |        |  |        | (9,335 | )       |   |           | 103,856 |        
|                              
|                              
|                              
|                              
|Telephony                      |                      |                                  |         |        |        |          |         |           |        |           |        |              |        |       |        |        |        |   |         |        |        |  |        |        |         |   |           |        
|                              
|                              
|                              
|                              
|Internet                       |                      |                                  | 5,006   |        |        |          | 3,434   |           |        |           | 1,763  |              |        |       | 583    |        |        |   | 6,539   |        |        |  | (2,657 | )      |         |   | 14,668    |        
|                              
|                              
|                              
|                              
|Services to carriers           |                      |                                  |         |        |        |          |         |           |        |           |        |              |        |       |        |        |        |   |         |        |        |  |        |        |         |   |           |        
|                              
|                              
|                              
|                              
|Sales of equipment             |                      |                                  | 4,496   |        |        |          | 327     |           |        |           |        |              |        |       | 51     |        |        |   | 119     |        |        |  |        |        |         |   | 4,993     |        
|                               |                      |                                  |         |        |        |          |         |           |        |           |        |              |        |       |        |        |        |   |         |        |        |  |        |        |         |   |           |        
|                               |                      | Total net revenues from services |         | $      | 57,573 |          |         | $         | 11,542 |           |        | $            | 27,110 |       |        | $      | 14,039 |   |         | $      | 25,245 |  |        | $      | (11,992 | ) |           | $       | 123,517 | 
|                               |                      |                                  |         |        |        |          |         |           |        |           |        |              |        |       |        |        |        |   |         |        |        |  |        |        |         |   |           |        
|Operating income (loss)        |                      | $                                | (14,603 | )      |        | $        | (11,356 | )         |        | $         | 743    |              |        | $     | 405    |        |        | $ | (7,568  | )      |        |  |        |        |         | $ | (32,379   | )      
|                               |                      |                                  |         |        |        |          |         |           |        |           |        |              |        |       |        |        |        |   |         |        |        |  |        |        |         |   |           |        
|Total assets                   |                      | $                                | 337,726 |        |        | $        | 158,353 |           |        | $         | 92,017 |              |        | $     | 45,880 |        |        | $ | 676,925 |        |        |  |        |        |         | $ | 1,310,901 |        
|                               |                      |                                  |         |        |        |          |         |           |        |           |        |              |        |       |        |        |        |   |         |        |        |  |        |        |         |   |           |        

12.  COMMITMENTS AND CONTINGENCIES

Commitments  The Company leases
satellite capacity with average annual rental commitments of
approximately $30.0 million, through the year 2005. The
Company has commitments to purchase communications equipment
amounting to approximately $9.2 million at June 30,
2001. The Company has commitments for additional IRU investments
totaling approximately $22.5 million in the aggregate under
its various IRU agreements.

IMPSAT Brazil has entered into a $5.9 million term note
with El Camino Resources, which is guaranteed by the Company and
IMPSAT Argentina. At June 30, 2001, the balance outstanding was
approximately $3.6 million.

F-16



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


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

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

During June 2001, the Company terminated a series of
contracts which the Company had signed in the first quarter of
2001 with subsidiaries of 360americas networks (Bermuda) ltd.
(collectively 360americas), a subsidiary of
360networks, Inc. to construct and provide IRU dark fiber,
capacity services and conduit to 360americas over the
Companys Broadband Network in Argentina and Brazil, as a
result of the breach by 360americas of its payment obligation
under the contracts. This Broadband Network includes the new
Argentina-Brazil link that the Company was currently
constructing. Between March and May 2001, the Company made
available segments of the IRU to 360americas for acceptance, but
360americas failed to make certain payments as required by the
Companys contract with them. 360americas also failed to
make certain 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 more recently
terminated a contract with 360americas for collocation space in
Caracas, Venezuela, also for payment default by 360americas.

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

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

F-17



---



##### Table of Contents



IMPSAT S.A.

CONDENSED BALANCE SHEETS

(In thousands of U.S. Dollars)


(Unaudited)


|                                        |                                                                                                                 |                            |         |          |         |   |         |         |         | 
|--------------------------------------- | --------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | -------- | ------- | - | ------- | ------- | ------- | 
|                                        |                                                                                                                 | December 31,               |         | June 30,
|                                        |                                                                                                                 | 2000                       |         | 2001    
|                                        |                                                                                                                 |                            |         |         
|                                       
|                                       
|                                       
|                                       
|ASSETS                                 
|                                       
|                                       
|                                       
|                                       
|CURRENT ASSETS:                         |                                                                                                                 |                            |         |          |         |   |         |        
|                                       
|                                       
|                                       
|                                       
|                                        | Cash and cash equivalents                                                                                       |                            | $       | 12,051   |         |   | $       | 13,873  |        
|                                       
|                                       
|                                       
|                                       
|                                        | Trade accounts receivable, net                                                                                  |                            |         | 58,680   |         |   |         | 61,135  |        
|                                       
|                                       
|                                       
|                                       
|                                        | Receivable from affiliated companies                                                                            |                            |         | 13,303   |         |   |         | 14,237  |        
|                                       
|                                       
|                                       
|                                       
|                                        | Other receivables                                                                                               |                            |         | 33,679   |         |   |         | 42,060  |        
|                                       
|                                       
|                                       
|                                       
|                                        | Prepaid expenses                                                                                                |                            |         | 2,584    |         |   |         | 2,665   |        
|                                        |                                                                                                                 |                            |         |          |         |   |         |        
|                                        |                                                                                                                 | Total current assets       |         |          | 120,297 |   |         |         | 133,970 | 
|                                        |                                                                                                                 |                            |         |          |         |   |         |        
|BROADBAND NETWORK, Net                  |                                                                                                                 |                            | 176,961 |          |         |   | 222,621 |        
|                                        |                                                                                                                 |                            |         |          |         |   |         |        
|PROPERTY, PLANT AND EQUIPMENT, Net      |                                                                                                                 |                            | 163,754 |          |         |   | 175,938 |        
|                                        |                                                                                                                 |                            |         |          |         |   |         |        
|NON-CURRENT ASSETS:                     |                                                                                                                 |                            |         |          |         |   |         |        
|                                       
|                                       
|                                       
|                                       
|                                        | Investments                                                                                                     |                            |         | 11,829   |         |   |         | 10,911  |        
|                                       
|                                       
|                                       
|                                       
|                                        | Deferred income taxes, net                                                                                      |                            |         | 8,262    |         |   |         |         |        
|                                       
|                                       
|                                       
|                                       
|                                        | Other non-current assets                                                                                        |                            |         | 13,672   |         |   |         | 14,528  |        
|                                        |                                                                                                                 |                            |         |          |         |   |         |        
|                                        |                                                                                                                 | Total non-current assets   |         |          | 33,763  |   |         |         | 25,439  | 
|                                        |                                                                                                                 |                            |         |          |         |   |         |        
|TOTAL                                   |                                                                                                                 | $                          | 494,775 |          |         | $ | 557,968 |        
|                                        |                                                                                                                 |                            |         |          |         |   |         |        
|                                       
|                                       
|                                       
|                                       
|LIABILITIES AND STOCKHOLDERS
	EQUITY  
|                                       
|                                       
|                                       
|                                       
|CURRENT LIABILITIES:                    |                                                                                                                 |                            |         |          |         |   |         |        
|                                       
|                                       
|                                       
|                                       
|                                        | Accounts payable  trade                                                                                        |                            | $       | 71,362   |         |   | $       | 87,141  |        
|                                       
|                                       
|                                       
|                                       
|                                        | Short-term debt                                                                                                 |                            |         | 8,860    |         |   |         | 8,900   |        
|                                       
|                                       
|                                       
|                                       
|                                        | Advances from affiliated companies                                                                              |                            |         | 7,523    |         |   |         | 7,010   |        
|                                       
|                                       
|                                       
|                                       
|                                        | Current portion of long-term debt                                                                               |                            |         | 15,385   |         |   |         | 29,359  |        
|                                       
|                                       
|                                       
|                                       
|                                        | Accrued and other liabilities                                                                                   |                            |         | 10,625   |         |   |         | 10,906  |        
|                                        |                                                                                                                 |                            |         |          |         |   |         |        
|                                        |                                                                                                                 | Total current liabilities  |         |          | 113,755 |   |         |         | 143,316 | 
|                                        |                                                                                                                 |                            |         |          |         |   |         |        
|LONG-TERM DEBT, Net                     |                                                                                                                 |                            | 127,626 |          |         |   | 136,689 |        
|                                        |                                                                                                                 |                            |         |          |         |   |         |        
|DEFERRED REVENUES                       |                                                                                                                 |                            | 32,561  |          |         |   | 47,866  |        
|                                        |                                                                                                                 |                            |         |          |         |   |         |        
|COMMITMENTS AND CONTINGENCIES (NOTE 11) |                                                                                                                 |                            |         |          |         |   |         |        
|                                       
|                                       
|                                       
|                                       
|STOCKHOLDERS EQUITY:                   |                                                                                                                 |                            |         |          |         |   |         |        
|                                       
|                                       
|                                       
|                                       
|                                        | Common Stock, $0.01 par value 14,755 shares
	issued and outstanding at December 31, 2000, and at
	June 30, 2001 |                            |         | 3        |         |   |         | 3       |        
|                                       
|                                       
|                                       
|                                       
|                                        | Paid in capital                                                                                                 |                            |         | 250,326  |         |   |         | 308,825 |        
|                                       
|                                       
|                                       
|                                       
|                                        | Accumulated deficit                                                                                             |                            |         | (30,247  | )       |   |         | (78,663 | )      
|                                       
|                                       
|                                       
|                                       
|                                        | Accumulated other comprehensive income (loss)                                                                   |                            |         | 751      |         |   |         | (68     | )      
|                                        |                                                                                                                 |                            |         |          |         |   |         |        
|                                        |                                                                                                                 | Total stockholders equity |         |          | 220,833 |   |         |         | 230,097 | 
|                                        |                                                                                                                 |                            |         |          |         |   |         |        
|TOTAL                                   |                                                                                                                 | $                          | 494,775 |          |         | $ | 557,968 |        
|                                        |                                                                                                                 |                            |         |          |         |   |         |        

See notes to condensed financial statements.

F-18



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##### Table of Contents



IMPSAT S.A.

CONDENSED STATEMENTS OF OPERATIONS

(In thousands of U.S. Dollars)


(Unaudited)


|                           |                                      |                        |                           |                  |       |        |         |        |       |        |         |        |        |        |         |         |        |         |  
|-------------------------- | ------------------------------------ | ---------------------- | ------------------------- | ---------------- | ----- | ------ | ------- | ------ | ----- | ------ | ------- | ------ | ------ | ------ | ------- | ------- | ------ | ------- | -
|                           |                                      |                        |                           |                 
|                           |                                      | Three Months Ended     |                           | Six Months Ended
|                           |                                      | June 30,               |                           | June 30,        
|                           |                                      |                        |                           |                 
|                           |                                      | 2000                   |                           | 2001             |       | 2000   |         | 2001  
|                           |                                      |                        |                           |                  |       |        |         |       
|NET REVENUES:              |                                      |                        |                           |                  |       |        |         |        |       |        |         |        |        |        |         |        
|                          
|                          
|                          
|                          
|                           | Data and value added services        |                        | $                         | 24,556           |       |        | $       | 21,715 |       |        | $       | 48,071 |        |        | $       | 46,091  |       
|                          
|                          
|                          
|                          
|                           | Telephony                            |                        |                           |                  |       |        |         | 1,674  |       |        |         |        |        |        |         | 2,379   |       
|                          
|                          
|                          
|                          
|                           | Internet                             |                        |                           | 2,579            |       |        |         | 4,376  |       |        |         | 5,006  |        |        |         | 8,400   |       
|                          
|                          
|                          
|                          
|                           | Services to carriers                 |                        |                           |                  |       |        |         | 1,560  |       |        |         |        |        |        |         | 3,009   |       
|                          
|                          
|                          
|                          
|                           | Sales of equipment                   |                        |                           | 3,634            |       |        |         | 2,034  |       |        |         | 4,496  |        |        |         | 4,058   |       
|                           |                                      |                        |                           |                  |       |        |         |        |       |        |         |        |        |        |         |        
|                           |                                      |                        | Total net revenues        |                  |       | 30,769 |         |        |       | 31,359 |         |        |        | 57,573 |         |         |        | 63,937  |  
|                           |                                      |                        |                           |                  |       |        |         |        |       |        |         |        |        |        |         |        
|COSTS AND EXPENSES:        |                                      |                        |                           |                  |       |        |         |        |       |        |         |        |        |        |         |        
|                          
|                          
|                          
|                          
|                           | Direct costs:                        |                        |                           |                  |       |        |         |        |       |        |         |        |        |        |         |         |       
|                          
|                          
|                          
|                          
|                           |                                      | Contracted services    |                           |                  | 3,771 |        |         |        | 3,251 |        |         |        | 6,876  |        |         |         | 8,540  |        
|                          
|                          
|                          
|                          
|                           |                                      | Other direct costs     |                           |                  | 3,748 |        |         |        | 5,052 |        |         |        | 5,931  |        |         |         | 8,212  |        
|                          
|                          
|                          
|                          
|                           |                                      | Leased capacity        |                           |                  | 6,512 |        |         |        | 9,300 |        |         |        | 12,431 |        |         |         | 17,950 |        
|                          
|                          
|                          
|                          
|                           |                                      | Cost of equipment sold |                           |                  | 3,495 |        |         |        | 1,574 |        |         |        | 4,257  |        |         |         | 3,414  |        
|                           |                                      |                        |                           |                  |       |        |         |        |       |        |         |        |        |        |         |        
|                           |                                      |                        | Total direct costs        |                  |       | 17,526 |         |        |       | 19,177 |         |        |        | 29,495 |         |         |        | 38,116  |  
|                          
|                          
|                          
|                          
|                           | Salaries and wages                   |                        |                           | 6,827            |       |        |         | 9,050  |       |        |         | 12,740 |        |        |         | 18,139  |       
|                          
|                          
|                          
|                          
|                           | Selling, general and administrative  |                        |                           | 6,376            |       |        |         | 5,979  |       |        |         | 12,497 |        |        |         | 10,939  |       
|                          
|                          
|                          
|                          
|                           | Depreciation and amortization        |                        |                           | 8,392            |       |        |         | 13,409 |       |        |         | 17,444 |        |        |         | 25,800  |       
|                           |                                      |                        |                           |                  |       |        |         |        |       |        |         |        |        |        |         |        
|                           |                                      |                        | Total costs and expenses  |                  |       | 39,121 |         |        |       | 47,615 |         |        |        | 72,176 |         |         |        | 92,994  |  
|                           |                                      |                        |                           |                  |       |        |         |        |       |        |         |        |        |        |         |        
|Operating loss             |                                      |                        | (8,352                    | )                |       |        | (16,256 | )      |       |        | (14,603 | )      |        |        | (29,057 | )      
|                           |                                      |                        |                           |                  |       |        |         |        |       |        |         |        |        |        |         |        
|OTHER INCOME (EXPENSES):   |                                      |                        |                           |                  |       |        |         |        |       |        |         |        |        |        |         |        
|                          
|                          
|                          
|                          
|                           | Interest income and investment gains |                        |                           | 183              |       |        |         | 473    |       |        |         | 345    |        |        |         | 754     |       
|                          
|                          
|                          
|                          
|                           | Interest expense                     |                        |                           | (2,417           | )     |        |         | (6,196 | )     |        |         | (5,527 | )      |        |         | (11,450 | )     
|                          
|                          
|                          
|                          
|                           | Net (loss) gain on foreign exchange  |                        |                           | (48              | )     |        |         | (327   | )     |        |         | 70     |        |        |         | (6      | )     
|                          
|                          
|                          
|                          
|                           | Other expenses, net                  |                        |                           | 12               |       |        |         | 10     |       |        |         | 4      |        |        |         | 10      |       
|                           |                                      |                        |                           |                  |       |        |         |        |       |        |         |        |        |        |         |        
|                           |                                      |                        | Total other expenses, net |                  |       | (2,270 | )       |        |       | (6,040 | )       |        |        | (5,108 | )       |         |        | (10,692 | )
|                           |                                      |                        |                           |                  |       |        |         |        |       |        |         |        |        |        |         |        
|LOSS BEFORE INCOME TAXES   |                                      |                        | (10,622                   | )                |       |        | (22,296 | )      |       |        | (19,711 | )      |        |        | (39,749 | )      
|                          
|                          
|                          
|                          
|PROVISION FOR INCOME TAXES |                                      |                        | (735                      | )                |       |        | (9,046  | )      |       |        | (1,336  | )      |        |        | (8,667  | )      
|                           |                                      |                        |                           |                  |       |        |         |        |       |        |         |        |        |        |         |        
|NET LOSS                   |                                      | $                      | (11,357                   | )                |       | $      | (31,342 | )      |       | $      | (21,047 | )      |        | $      | (48,416 | )      
|                           |                                      |                        |                           |                  |       |        |         |        |       |        |         |        |        |        |         |        

See notes to condensed financial statements.

F-19



---



##### Table of Contents



IMPSAT S.A.

CONDENSED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands of U.S. Dollars)


(Unaudited)


|                                      |                                                             |                    |         |                  |  |      |         |      |   |   |         |   |  |   |         |      |  
|------------------------------------- | ----------------------------------------------------------- | ------------------ | ------- | ---------------- |  | ---- | ------- | ---- | - | - | ------- | - |  | - | ------- | ---- | -
|                                      |                                                             |                    |         |                 
|                                      |                                                             | Three Months Ended |         | Six Months Ended
|                                      |                                                             | June 30,           |         | June 30,        
|                                      |                                                             |                    |         |                 
|                                      |                                                             | 2000               |         | 2001             |  | 2000 |         | 2001
|                                      |                                                             |                    |         |                  |  |      |         |     
|NET LOSS                              |                                                             | $                  | (11,357 | )                |  | $    | (31,342 | )    |   | $ | (21,047 | ) |  | $ | (48,416 | )   
|                                     
|                                     
|                                     
|                                     
|OTHER COMPREHENSIVE LOSS, net of tax: |                                                             |                    |         |                  |  |      |         |      |   |   |         |   |  |   |         |     
|                                     
|                                     
|                                     
|                                     
|                                      | Change in unrealized loss on investment available
	for sale |                    |         |                  |  |      |         | (224 | ) |   |         |   |  |   |         | (819 | )
|                                      |                                                             |                    |         |                  |  |      |         |      |   |   |         |   |  |   |         |     
|COMPREHENSIVE LOSS                    |                                                             | $                  | (11,357 | )                |  | $    | (31,566 | )    |   | $ | (21,047 | ) |  | $ | (49,235 | )   
|                                      |                                                             |                    |         |                  |  |      |         |      |   |   |         |   |  |   |         |     

See notes to condensed financial statements.

F-20



---



##### Table of Contents



IMPSAT S.A.

CONDENSED STATEMENTS OF STOCKHOLDERS EQUITY

(In thousands of U.S. Dollars)


|                             |                                                                           |        |   |         |  |             |         |               |  |       |         |         |   |   |     |      |   |   |         |         |  
|---------------------------- | ------------------------------------------------------------------------- | ------ | - | ------- |  | ----------- | ------- | ------------- |  | ----- | ------- | ------- | - | - | --- | ---- | - | - | ------- | ------- | -
|                             |                                                                           |        |   |         |  |             |         | Accumulated   |  |      
|                             |                                                                           |        |   |         |  |             |         | Other         |  |      
|                             |                                                                           |        |   |         |  |             |         | Comprehensive |  |      
|                             |                                                                           | Common |   | Paid In |  | Accumulated |         | Income        |  |      
|                             |                                                                           | Stock  |   | Capital |  | Deficit     |         | (Loss)        |  | Total
|                             |                                                                           |        |   |         |  |             |         |               |  |      
|BALANCE AT DECEMBER 31, 2000 |                                                                           | $      | 3 |         |  | $           | 250,326 |               |  | $     | (30,247 | )       |   | $ | 751 |      |   | $ | 220,833 |        
|                            
|                            
|                            
|                            
|                             | Change on unrealized loss on investment available
	for sale, net of taxes |        |   |         |  |             |         |               |  |       |         |         |   |   |     | (819 | ) |   |         | (795    | )
|                            
|                            
|                            
|                            
|                             | Shareholders contribution                                                |        |   |         |  |             |         | 58,499        |  |       |         |         |   |   |     |      |   |   |         | 58,499  |  
|                            
|                            
|                            
|                            
|                             | Net loss for the period                                                   |        |   |         |  |             |         |               |  |       |         | (48,416 | ) |   |     |      |   |   |         | (48,416 | )
|                             |                                                                           |        |   |         |  |             |         |               |  |       |         |         |   |   |     |      |   |   |         |        
|BALANCE AT JUNE 30, 2001     |                                                                           | $      | 3 |         |  | $           | 308,825 |               |  | $     | (78,663 | )       |   | $ | (68 | )    |   | $ | 230,097 |        
|                             |                                                                           |        |   |         |  |             |         |               |  |       |         |         |   |   |     |      |   |   |         |        

See notes to condensed financial statements.

F-21



---



##### Table of Contents



IMPSAT S.A.

CONDENSED STATEMENTS OF CASH FLOWS

(In thousands of U.S. Dollars)


|                                                                      |                                                                                                      |                                    |                                                             |                                           |        |        |         |         |        |        |         |  
|--------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------- | ---------------------------------- | ----------------------------------------------------------- | ----------------------------------------- | ------ | ------ | ------- | ------- | ------ | ------ | ------- | -
|                                                                      |                                                                                                      |                                   
|                                                                      |                                                                                                      | Six Months Ended                  
|                                                                      |                                                                                                      | June 30,                          
|                                                                      |                                                                                                      |                                   
|                                                                      |                                                                                                      | 2000                               |                                                             | 2001                                     
|                                                                      |                                                                                                      |                                    |                                                             |                                          
|                                                                      |                                                                                                      |                                   
|                                                                      |                                                                                                      | (Unaudited)                       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|CASH FLOWS FROM OPERATING ACTIVITIES:                                 |                                                                                                      |                                    |                                                             |                                           |        |        |         |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Net loss                                                                                             |                                    | $                                                           | (21,047                                   | )      |        | $       | (48,416 | )     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Adjustments to reconcile net loss to net cash
	provided by operating activities, net of acquisition: |                                    |                                                             |                                           |        |        |         |         |       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                      | Depreciation and amortization      |                                                             |                                           | 17,444 |        |         |         | 25,800 |       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                      | Provision for doubtful accounts    |                                                             |                                           | 3,667  |        |         |         | 3,170  |       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                      | Deferred income tax provision      |                                                             |                                           |        |        |         |         | 8,667  |       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                      | Changes in assets and liabilities: |                                                             |                                           |        |        |         |         |        |       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                      |                                    | Increase in trade accounts receivable                       |                                           |        | (6,390 | )       |         |        | (5,625 | )      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                      |                                    | Increase in prepaid expenses                                |                                           |        | (44    | )       |         |        | (81    | )      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                      |                                    | Increase in other receivables and other
	non-current assets |                                           |        | (148   | )       |         |        | (9,237 | )      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                      |                                    | Increase in accounts payable  trade                        |                                           |        | 2,913  |         |         |        | 15,779 |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                      |                                    | Increase in deferred revenues                               |                                           |        | 20,056 |         |         |        | 15,305 |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                      |                                    | (Decrease) Increase in accrued and other
	liabilities       |                                           |        | (2,487 | )       |         |        | 281    |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                                      |                                    | Decrease in other long-term liabilities                     |                                           |        | (358   | )       |         |        |        |        
|                                                                      |                                                                                                      |                                    |                                                             |                                           |        |        |         |        
|                                                                      |                                                                                                      |                                    |                                                             | Net cash provided by operating activities |        |        | 13,606  |         |        |        | 5,643   |  
|                                                                      |                                                                                                      |                                    |                                                             |                                           |        |        |         |        
|CASH FLOWS FROM INVESTING ACTIVITIES:                                 |                                                                                                      |                                    |                                                             |                                           |        |        |         |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Purchases of broadband network                                                                       |                                    |                                                             | (12,457                                   | )      |        |         | (40,227 | )     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Purchases of property, plant and equipment                                                           |                                    |                                                             | (32,451                                   | )      |        |         | (19,430 | )     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Increase in other investment                                                                         |                                    |                                                             | (26                                       | )      |        |         | (306    | )     
|                                                                      |                                                                                                      |                                    |                                                             |                                           |        |        |         |        
|                                                                      |                                                                                                      |                                    |                                                             | Net cash used in investing activities     |        |        | (44,934 | )       |        |        | (59,963 | )
|                                                                      |                                                                                                      |                                    |                                                             |                                           |        |        |         |        
|CASH FLOWS FROM FINANCING ACTIVITIES:                                 |                                                                                                      |                                    |                                                             |                                           |        |        |         |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Net borrowings from short-term debt                                                                  |                                    |                                                             | (1,602                                    | )      |        |         | 40      |       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Changes in advances to/from affiliates                                                               |                                    |                                                             | (61,322                                   | )      |        |         | (1,447  | )     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Repayments of long-term debt                                                                         |                                    |                                                             | (453                                      | )      |        |         | (950    | )     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Capital contribution                                                                                 |                                    |                                                             | 92,022                                    |        |        |         | 58,499  |       
|                                                                      |                                                                                                      |                                    |                                                             |                                           |        |        |         |        
|                                                                      |                                                                                                      |                                    |                                                             | Net cash provided by financing activities |        |        | 28,645  |         |        |        | 56,142  |  
|                                                                      |                                                                                                      |                                    |                                                             |                                           |        |        |         |        
|NET INCREASE IN CASH AND CASH EQUIVALENTS                             |                                                                                                      |                                    | (2,683                                                      | )                                         |        |        | 1,822   |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|CASH AND CASH EQUIVALENTS AT BEGINNING OF THE
	PERIOD                 |                                                                                                      |                                    | 4,199                                                       |                                           |        |        | 12,051  |        
|                                                                      |                                                                                                      |                                    |                                                             |                                           |        |        |         |        
|CASH AND CASH EQUIVALENTS AT END OF THE PERIOD                        |                                                                                                      | $                                  | 1,516                                                       |                                           |        | $      | 13,873  |        
|                                                                      |                                                                                                      |                                    |                                                             |                                           |        |        |         |        
|SUPPLEMENTAL CASH FLOW INFORMATION:                                   |                                                                                                      |                                    |                                                             |                                           |        |        |         |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Interest paid                                                                                        |                                    | $                                                           | 3,933                                     |        |        | $       | 6,749   |       
|                                                                      |                                                                                                      |                                    |                                                             |                                           |        |        |         |        
|SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
	FINANCING ACTIVITIES: |                                                                                                      |                                    |                                                             |                                           |        |        |         |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Change to unrealized loss on investment available
	for sale, net of tax                              |                                    |                                                             |                                           |        |        | $       | (819    | )     
|                                                                      |                                                                                                      |                                    |                                                             |                                           |        |        |         |        
|                                                                      | Broadband network vendor financing                                                                   |                                    | $                                                           | 37,008                                    |        |        | $       | 19,919  |       
|                                                                      |                                                                                                      |                                    |                                                             |                                           |        |        |         |        

See notes to condensed financial statements.

F-22



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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 June 30, 2001, the Company is a
100% owned subsidiary of IMPSAT Fiber Networks, Inc. (the
Parent Company).

Liquidity and Going Concern Considerations 
The accompanying condensed consolidated financial statements
have been prepared on a going concern basis, which contemplates
the realization of assets and the satisfaction of liabilities in
the normal course of business; and, as a consequence the
financial statements do not include any adjustments relating to
the recoverability and classification of recorded assets amounts
or the amounts and classifications of liabilities that might be
necessary should the Company be unable to continue as a going
concern. The Parent Company and the Company currently face
significant near-term cash flow and liquidity problems. The
Parent Companys capital requirements under the business
plan for fiscal year 2001 are greater than available capital
resources, and the Parent Companys cash flows and
liquidity are insufficient to satisfy all of the Parent
Companys obligations beyond the end of 2001. In
particular, the payment default by 360networks during the second
quarter of its contracts with the Company and IMPSAT Brazil for
the provision of IRU dark fiber and capacity services and
backhaul construction services and the subsequent termination of
those contracts will result in the Parent Companys receipt
of approximately $77.4 million less than anticipated during
the remainder of 2001 (see Note 11). Although the Parent
Companys management is taking action to attempt to reduce
expenditures relating to the 360networks contracts and utilize
the network assets that were to be provided to 360networks, it
will not be possible in the short-term to replace the cash
inflows contemplated by the termination of 360networks contracts
and the nonpayment by 360networks of the amount originally
scheduled to be paid to the Company during 2001. Such conditions
raise substantial doubt that the Company will be able to
continue as a going concern for a reasonable period of time.

The Parent Company has begun evaluating the availability of
additional financing to meet its financial requirements and
objectives. Additionally, the Parent Company is closely
monitoring the level of cash payments and commitments. The
Parent Company has begun to take actions to substantially reduce
its commitments requiring cash payments in the remainder of
2001. The Parent Company has commenced evaluating various
alternatives to improve its liquidity, including raising
additional equity capital from financial and/ or strategic
partners or restructuring its debt. However, there is no
assurance that the Parent Company will reach a definitive
agreement with any potential strategic partner, obtain
additional funds or restructure its debt without seeking
protection under the United States Bankruptcy Code. In the event
the Parent Company is unable to satisfy its obligations to third
parties, which could result in defaults under its debt and other
financing agreements and, after the passage of any applicable
time and notice provisions, the Companys creditors would
be able to accelerate the indebtedness and assert other remedies
against the Parent Company. Such events would have a material
adverse effort upon the Parent Company and the Company and would
threaten their respective ability to continue as a going concern.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Interim Financial Information  The unaudited
condensed financial statements as of June 30, 2001 and for
the six months ended June 30, 2000 and 2001 have been
prepared on the same basis as the audited financial statements.
In the opinion of management, such unaudited condensed financial
statements include all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the results
for

F-23



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##### Table of Contents



IMPSAT S.A.




NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS  (Continued)


(Tables in Thousands of U.S. Dollars)


such period. The operating results for the six months ended
June 30, 2000 and 2001 are not necessarily indicative of
the operating results to be expected for the full fiscal year or
for any future period.

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

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

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

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

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

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

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.

F-24



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##### Table of Contents



IMPSAT S.A.




NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS  (Continued)


(Tables in Thousands of U.S. Dollars)


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

Long-Lived Assets  Long-lived assets are
reviewed on an ongoing basis for impairment based on a
comparison of carrying values to undiscounted future cash flows.
If an impairment is identified, the assets carrying amount
is adjusted to fair value. No such adjustments were recorded for
the six months ended June 30, 2000 and 2001.

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

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

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

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

3.  TRADE ACCOUNTS RECEIVABLE

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

|                                      |  |              |         |          |  |   |         |  
|------------------------------------- |  | ------------ | ------- | -------- |  | - | ------- | -
|                                      |  | December 31, |         | June 30,
|                                      |  | 2000         |         | 2001    
|                                      |  |              |         |         
|Trade accounts receivable             |  | $            | 75,116  |          |  | $ | 79,847  |  
|                                     
|                                     
|                                     
|                                     
|Less: allowance for doubtful accounts |  |              | (16,436 | )        |  |   | (18,712 | )
|                                      |  |              |         |          |  |   |         |  
|Trade accounts receivable, net        |  | $            | 58,680  |          |  | $ | 61,135  |  
|                                      |  |              |         |          |  |   |         |  

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

F-25



---



##### 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, 2000 and for the six months ended
June 30, 2001 is as follows:

|                                |  |              |        |          |  |   |        |  
|------------------------------- |  | ------------ | ------ | -------- |  | - | ------ | -
|                                |  | December 31, |        | June 30,
|                                |  | 2000         |        | 2001    
|                                |  |              |        |         
|Beginning balance               |  | $            | 13,943 |          |  | $ | 16,436 |  
|                               
|                               
|                               
|                               
|Provision for doubtful accounts |  |              | 3,035  |          |  |   | 3,170  |  
|                               
|                               
|                               
|                               
|Write-offs, net of recoveries   |  |              | (542   | )        |  |   | (894   | )
|                                |  |              |        |          |  |   |        |  
|Ending balance                  |  | $            | 16,436 |          |  | $ | 18,712 |  
|                                |  |              |        |          |  |   |        |  

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 and
June 30 consists of:

|                                            |       |              |         |          |  |   |         |         | 
|------------------------------------------- | ----- | ------------ | ------- | -------- |  | - | ------- | ------- | 
|                                            |       | December 31, |         | June 30,
|                                            |       | 2000         |         | 2001    
|                                            |       |              |         |         
|Network infrastructure                      |       | $            | 91,206  |          |  | $ | 124,285 |        
|                                           
|                                           
|                                           
|                                           
|Equipment and materials                     |       |              | 122,477 |          |  |   | 146,285 |        
|                                           
|                                           
|                                           
|                                           
|IRU investments                             |       |              | 4,395   |          |  |   | 4,396   |        
|                                            |       |              |         |          |  |   |         |        
|                                            | Total |              |         | 218,078  |  |   |         | 274,966 | 
|                                           
|                                           
|                                           
|                                           
|Less: accumulated depreciation              |       |              | (42,084 | )        |  |   | (52,345 | )      
|                                            |       |              |         |          |  |   |         |        
|                                            | Total |              |         | 175,994  |  |   |         | 222,621 | 
|                                           
|                                           
|                                           
|                                           
|Under construction  Network infrastructure |       |              | 967     |          |  |   |         |        
|                                            |       |              |         |          |  |   |         |        
|                                            | Total |              | $       | 176,961  |  |   | $       | 222,621 | 
|                                            |       |              |         |          |  |   |         |        

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

|                          |  |              |        |          |  |   |        |  
|------------------------- |  | ------------ | ------ | -------- |  | - | ------ | -
|                          |  | December 31, |        | June 30,
|                          |  | 2000         |        | 2001    
|                          |  |              |        |         
|Beginning balance         |  | $            | 39,763 |          |  | $ | 42,084 |  
|                         
|                         
|                         
|                         
|Depreciation expense      |  |              | 2,321  |          |  |   | 11,032 |  
|                         
|                         
|                         
|                         
|Disposals and retirements |  |              |        |          |  |   | (771   | )
|                          |  |              |        |          |  |   |        |  
|Ending balance            |  | $            | 42,084 |          |  | $ | 52,345 |  
|                          |  |              |        |          |  |   |        |  

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 will be disbursed
over a two year period with final maturity in 2006, will be used
to finance Nortels construction of the segments of the
Broadband Network and the purchase of additional equipment to be
used

F-26



---



##### Table of Contents



IMPSAT S.A.




NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS  (Continued)


(Tables in Thousands of U.S. Dollars)


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
agreements. Additionally, the Company has obtained additional
vendor financing from Lucent Technologies, Ericsson, Tellabs OY,
DMC and Harris Canada, Inc. for the acquisition of fiber optic
cable and other telecommunications equipment for the Broadband
Network for an aggregate of up to approximately
$54.2 million. The Company had amounts due under Broadband
Network vendor financing totaled $129.8 million and $149.7
million as of December 31, 2000 and June 30, 2001,
respectively.

IRU Agreements  The Company has entered
into several framework agreements granting IRUs of up to
25 years on the Companys broadband network, including
network maintenance services and telehousing space. The Company
has received approximately $15.8 million during the six
months ended June 30, 2001 related to these agreements. These
advance payments are recorded as deferred revenue in the
accompanying balance sheet.

6.  PROPERTY, PLANT AND EQUIPMENT

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

|                                        |       |              |          |          |  |   |          |         | 
|--------------------------------------- | ----- | ------------ | -------- | -------- |  | - | -------- | ------- | 
|                                        |       | December 31, |          | June 30,
|                                        |       | 2000         |          | 2001    
|                                        |       |              |          |         
|Land                                    |       | $            | 3,160    |          |  | $ | 3,079    |        
|                                       
|                                       
|                                       
|                                       
|Building and improvements               |       |              | 37,369   |          |  |   | 51,041   |        
|                                       
|                                       
|                                       
|                                       
|Operating communications equipment      |       |              | 224,293  |          |  |   | 238,346  |        
|                                       
|                                       
|                                       
|                                       
|Furniture, fixtures and other equipment |       |              | 16,594   |          |  |   | 22,194   |        
|                                        |       |              |          |          |  |   |          |        
|                                        | Total |              |          | 281,416  |  |   |          | 314,660 | 
|                                       
|                                       
|                                       
|                                       
|Less: accumulated depreciation          |       |              | (131,378 | )        |  |   | (144,971 | )      
|                                        |       |              |          |          |  |   |          |        
|                                        | Total |              |          | 150,038  |  |   |          | 169,689 | 
|                                       
|                                       
|                                       
|                                       
|Equipment in transit                    |       |              | 12,928   |          |  |   | 5,841    |        
|                                       
|                                       
|                                       
|                                       
|Works in process                        |       |              | 788      |          |  |   | 408      |        
|                                        |       |              |          |          |  |   |          |        
|Property, plant and equipment, net      |       | $            | 163,754  |          |  | $ | 175,938  |        
|                                        |       |              |          |          |  |   |          |        

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

|                          |  |              |         |          |  |   |         |  
|------------------------- |  | ------------ | ------- | -------- |  | - | ------- | -
|                          |  | December 31, |         | June 30,
|                          |  | 2000         |         | 2001    
|                          |  |              |         |         
|Beginning balance         |  | $            | 105,801 |          |  | $ | 131,378 |  
|                         
|                         
|                         
|                         
|Depreciation expense      |  |              | 35,850  |          |  |   | 14,768  |  
|                         
|                         
|                         
|                         
|Disposals and retirements |  |              | (10,273 | )        |  |   | (1,175  | )
|                          |  |              |         |          |  |   |         |  
|Ending balance            |  | $            | 131,378 |          |  | $ | 144,971 |  
|                          |  |              |         |          |  |   |         |  

F-27



---



##### Table of Contents



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 and
June 30 consist of:

|                                          |                                         |              |       |          |        |   |       |       |        | 
|----------------------------------------- | --------------------------------------- | ------------ | ----- | -------- | ------ | - | ----- | ----- | ------ | 
|                                          |                                         | December 31, |       | June 30,
|                                          |                                         | 2000         |       | 2001    
|                                          |                                         |              |       |         
|Investment, at cost                       |                                         | $            | 7,925 |          |        | $ | 8,231 |      
|Investment in common stock, at fair value |                                         |              |       |          |        |   |       |      
|                                         
|                                         
|                                         
|                                         
|                                          | New Skies Satellites N.V. ($2,748 cost) |              |       | 3,904    |        |   |       | 2,680 |       
|                                          |                                         |              |       |          |        |   |       |      
|                                          |                                         | Total        |       | $        | 11,829 |   |       | $     | 10,911 | 
|                                          |                                         |              |       |          |        |   |       |      

The Companys cost basis investment represents a less than
1% ownership in an unaffiliated entity established for the
purchase and leasing of satellite capacity time. 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.  SHORT-TERM DEBT

The Companys short-term debt consists of short-term credit
facilities, denominated in U.S. dollars with interest rates
ranging from 11% to 15.5%. As of December 31, 2000 and
June 30, 2001, amounts outstanding under these credit
facilities totaled approximately $8.9 million and
$8.9 million, respectively.

9.  LONG-TERM DEBT

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

|                                                                              |                      |              |         |          |  |   |         |         | 
|----------------------------------------------------------------------------- | -------------------- | ------------ | ------- | -------- |  | - | ------- | ------- | 
|                                                                              |                      | December 31, |         | June 30,
|                                                                              |                      | 2000         |         | 2001    
|                                                                              |                      |              |         |         
|Term notes payable, maturing through 2004,
	collateralized by certain assets: |                      | $            | 1,861   |          |  | $ | 910     |        
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Eximbank notes payable (9.30%), maturing
	semiannually through 200l and 2004. |                      |              | 11,359  |          |  |   | 15,428  |        
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Vendor financing (6.33%  12%), due 2006                                      |                      |              | 129,791 |          |  |   | 149,710 |        
|                                                                              |                      |              |         |          |  |   |         |        
|                                                                              | Total long-term debt |              |         | 143,011  |  |   |         | 166,048 | 
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Less: current portion                                                         |                      |              | (15,385 | )        |  |   | (29,359 | )      
|                                                                              |                      |              |         |          |  |   |         |        
|Long-term debt, net                                                           |                      | $            | 127,626 |          |  | $ | 136,689 |        
|                                                                              |                      |              |         |          |  |   |         |        

10.  INCOME TAXES

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

|         |       |                    |      |                  |   |      |        |        |   |   |        |        |   |   |        |        |  
|-------- | ----- | ------------------ | ---- | ---------------- | - | ---- | ------ | ------ | - | - | ------ | ------ | - | - | ------ | ------ | -
|         |       |                    |      |                 
|         |       | Three Months Ended |      | Six Months Ended
|         |       | June 30,           |      | June 30,        
|         |       |                    |      |                 
|         |       | 2000               |      | 2001             |   | 2000 |        | 2001  
|         |       |                    |      |                  |   |      |        |       
|Current  |       | $                  | (735 | )                |   | $    |        |        |   | $ | (1,336 | )      |   | $ |        |       
|        
|        
|        
|        
|Deferred |       |                    |      |                  |   |      | (9,046 | )      |   |   |        |        |   |   | (8,667 | )     
|         |       |                    |      |                  |   |      |        |        |   |   |        |        |   |   |        |       
|         | Total |                    | $    | (735             | ) |      | $      | (9,046 | ) |   | $      | (1,336 | ) |   | $      | (8,667 | )
|         |       |                    |      |                  |   |      |        |        |   |   |        |        |   |   |        |       

The statutory tax rate in Argentina is 35%. During the three and
six months ended June 30, 2001, the Company recorded a
valuation allowance of approximately $7.4 million because
it is not clear that utilization

F-28



---



##### Table of Contents



IMPSAT S.A.




NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS  (Continued)


(Tables in Thousands of U.S. Dollars)


of the tax benefits resulting from operating losses and other
temporary differences are more likely than not to be
realized, as required by SFAS 109.

11.  COMMITMENTS AND CONTINGENCIES

Commitments  The Company leases a
telecommunications link with annual rental commitments of
approximately $8.1 million through the year 2005. In
addition, the Company has commitments to purchase communications
equipment amounting to approximately $4.4 million at
June 30, 2001.

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

IMPSAT Brazil has entered into a $5.9 million term note
with El Camino Resources, which is guaranteed by the Company and
the Parent Company. At June 30, 2001, the balance
outstanding was approximately $3.6 million.

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

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

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

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

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

F-29



---



##### Table of Contents






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

Results of Operations

The following financial table summarizes our results of
operations:

|                                             |                                        |                                                             |                    |                           |        |        |       |      |       |       |         |       |        |        |        |     |       |       |         |       |         |         |       |     |      |       |          |        |         |         |        |     |      |       | 
|-------------------------------------------- | -------------------------------------- | ----------------------------------------------------------- | ------------------ | ------------------------- | ------ | ------ | ----- | ---- | ----- | ----- | ------- | ----- | ------ | ------ | ------ | --- | ----- | ----- | ------- | ----- | ------- | ------- | ----- | --- | ---- | ----- | -------- | ------ | ------- | ------- | ------ | --- | ---- | ----- | 
|                                             |                                        |                                                             |                    |                          
|                                             |                                        | Three Months Ended June 30,                                 |                    | Six Months Ended June 30,
|                                             |                                        |                                                             |                    |                          
|                                             |                                        |                                                             |                    |                           |        |        |       |     
|                                             |                                        | 2000                                                        |                    | 2001                      |        | 2000   |       | 2001
|                                             |                                        |                                                             |                    |                           |        |        |       |     
|                                             |                                        |                                                             |                    |                           |        |        |       |      |       |       |         |       |        |       
|                                             |                                        |                                                            
|                                             |                                        | (In thousands and as a percentage of consolidated revenues)
|                                            
|                                            
|                                            
|                                            
|Net revenues:                                |                                        |                                                             |                    |                           |        |        |       |      |       |       |         |       |        |        |        |     |       |       |         |       |         |         |       |     |      |       |          |        |         |         |        |    
|                                            
|                                            
|                                            
|                                            
|                                             | Net Revenues from services:            |                                                             |                    |                           |        |        |       |      |       |       |         |       |        |        |        |     |       |       |         |       |         |         |       |     |      |       |          |        |         |         |        |     |     
|                                            
|                                            
|                                            
|                                            
|                                             |                                        | Data and value added services                               |                    | $                         | 52,782 |        |       |      | 81.5% |       |         | $     | 55,813 |        |        |     | 71.1% |       |         | $     | 103,856 |         |       |     | 84.1 | %     |          | $      | 112,964 |         |        |     | 67.5 | %    
|                                            
|                                            
|                                            
|                                            
|                                             |                                        | Telephony                                                   |                    |                           |       |        |       |      |      |       |         |       | 1,885  |        |        |     | 2.4   |       |         |       |        |         |       |     |     |       |          |        | 3,155   |         |        |     | 1.9  |      
|                                            
|                                            
|                                            
|                                            
|                                             |                                        | Internet                                                    |                    |                           | 7,992  |        |       |      | 12.3  |       |         |       | 11,679 |        |        |     | 14.9  |       |         |       | 14,668  |         |       |     | 11.9 |       |          |        | 22,847  |         |        |     | 13.7 |      
|                                            
|                                            
|                                            
|                                            
|                                             |                                        | Services to carriers                                        |                    |                           |       |        |       |      |      |       |         |       | 5,759  |        |        |     | 7.3   |       |         |       |        |         |       |     |     |       |          |        | 10,411  |         |        |     | 6.2  |      
|                                            
|                                            
|                                            
|                                            
|                                             | Sale of equipment                      |                                                             |                    | 3,980                     |        |        |       | 6.1  |       |       |         | 2,765 |        |        |        | 3.5 |       |       |         | 4,993 |         |         |       | 4.0 |      |       |          | 10,698 |         |         |        | 6.4 |     
|                                            
|                                            
|                                            
|                                            
|                                             | Broadband network development revenues |                                                             |                    |                          |        |        |       |     |       |       |         | 626   |        |        |        | 0.8 |       |       |         |      |         |         |       |    |      |       |          | 7,197  |         |         |        | 4.3 |     
|                                             |                                        |                                                             |                    |                           |        |        |       |      |       |       |         |       |        |        |        |     |       |       |         |       |         |         |       |     |      |       |          |        |         |         |        |    
|                                             |                                        |                                                             | Total net revenues |                           |        | 64,754 |       |      |       | 100.0 |         |       |        | 78,527 |        |     |       | 100.0 |         |       |         | 123,517 |       |     |      | 100.0 |          |        |         | 167,272 |        |     |      | 100.0 | 
|                                            
|                                            
|                                            
|                                            
|Direct Costs:                                |                                        |                                                             |                    |                           |        |        |       |      |       |       |         |       |        |        |        |     |       |       |         |       |         |         |       |     |      |       |          |        |         |         |        |    
|                                            
|                                            
|                                            
|                                            
|                                             |                                        | Contracted services                                         |                    |                           | 6,787  |        |       |      | 10.5  |       |         |       | 8,859  |        |        |     | 11.3  |       |         |       | 13,261  |         |       |     | 10.7 |       |          |        | 19,945  |         |        |     | 11.9 |      
|                                            
|                                            
|                                            
|                                            
|                                             |                                        | Other direct costs                                          |                    |                           | 5,803  |        |       |      | 9.0   |       |         |       | 7,371  |        |        |     | 9.4   |       |         |       | 10,986  |         |       |     | 8.9  |       |          |        | 13,163  |         |        |     | 7.9  |      
|                                            
|                                            
|                                            
|                                            
|                                             |                                        | Leased capacity                                             |                    |                           | 17,503 |        |       |      | 27.0  |       |         |       | 23,452 |        |        |     | 29.9  |       |         |       | 31,585  |         |       |     | 25.6 |       |          |        | 45,385  |         |        |     | 27.1 |      
|                                            
|                                            
|                                            
|                                            
|                                             |                                        | Cost of sold equipment                                      |                    |                           | 3,777  |        |       |      | 5.8   |       |         |       | 2,105  |        |        |     | 2.7   |       |         |       | 4,597   |         |       |     | 3.7  |       |          |        | 10,832  |         |        |     | 6.5  |      
|                                             |                                        |                                                             |                    |                           |        |        |       |      |       |       |         |       |        |        |        |     |       |       |         |       |         |         |       |     |      |       |          |        |         |         |        |    
|                                             |                                        |                                                             | Total Direct Costs |                           |        | 33,870 |       |      |       | 52.3  |         |       |        | 41,787 |        |     |       | 53.2  |         |       |         | 60,429  |       |     |      | 48.9  |          |        |         | 89,325  |        |     |      | 53.4  | 
|                                            
|                                            
|                                            
|                                            
|Salaries and wages                           |                                        |                                                             | 15,940             |                           |        |        | 24.6  |      |       |       | 21,900  |       |        |        | 27.9   |     |       |       | 30,170  |       |         |         | 24.4  |     |      |       | 44,097   |        |         |         | 26.4   |    
|                                            
|                                            
|                                            
|                                            
|Selling, general and administrative expenses |                                        |                                                             | 12,987             |                           |        |        | 20.0  |      |       |       | 14,782  |       |        |        | 18.8   |     |       |       | 24,488  |       |         |         | 19.8  |     |      |       | 29,470   |        |         |         | 17.6   |    
|                                            
|                                            
|                                            
|                                            
|Depreciation and amortization                |                                        |                                                             | 20,873             |                           |        |        | 32.2  |      |       |       | 30,245  |       |        |        | 38.5   |     |       |       | 40,809  |       |         |         | 33.0  |     |      |       | 59,677   |        |         |         | 35.7   |    
|                                            
|                                            
|                                            
|                                            
|Interest expense, net                        |                                        |                                                             | (19,724            | )                         |        |        | (30.5 | )    |       |       | (33,132 | )     |        |        | (42.2  | )   |       |       | (37,338 | )     |         |         | (30.2 | )   |      |       | (62,131  | )      |         |         | (37.1  | )  
|                                            
|                                            
|                                            
|                                            
|Net (loss) gain on foreign exchange          |                                        |                                                             | (1,761             | )                         |        |        | (2.7  | )    |       |       | (10,369 | )     |        |        | (13.2  | )   |       |       | 804     |       |         |         | 0.7   |     |      |       | (24,150  | )      |         |         | (14.4  | )  
|                                            
|                                            
|                                            
|                                            
|Other income, net                            |                                        |                                                             | 2,306              |                           |        |        | 3.6   |      |       |       | 138     |       |        |        | 0.2    |     |       |       | 2,484   |       |         |         | 2.0   |     |      |       | 145      |        |         |         | 0.1    |    
|                                            
|                                            
|                                            
|                                            
|Provision for foreign income taxes           |                                        |                                                             | (1,730             | )                         |        |        | (2.7  | )    |       |       | (26,122 | )     |        |        | (33.3  | )   |       |       | (1,070  | )     |         |         | (0.9  | )   |      |       | (26,488  | )      |         |         | (15.8  | )  
|                                            
|                                            
|                                            
|                                            
|Net loss attributable to common stockholders |                                        |                                                             | (39,825            | )                         |        |        | (61.5 | )    |       |       | (99,672 | )     |        |        | (126.9 | )   |       |       | (68,892 | )     |         |         | (55.8 | )   |      |       | (167,921 | )      |         |         | (100.4 | )  

Six Months Ended June 30, 2001 Compared to Six Months
Ended June 30, 2000

Revenues. Our total net revenues for the first half of
2001 were composed of net revenues from services, equipment
sales and Broadband Network development revenues. Our total net
revenues for the three and six months ended June 30, 2001
totaled $78.5 million and $167.3 million, an increase
of $13.8 million (or 21.3%) and $43.8 million (or
35.4%) from total net revenues for the same periods in 2000.

Our net revenues from services for the three and six months
ended June 30, 2001, totaled $75.1 million and
$149.4 million, an increase of $14.4 million (or
23.6%) and $30.8 million (or 26.0%) from net revenues from
services for the same periods in 2000. Net revenues from
services totaled $74.2 million for the first three months
of 2001. Our net revenues from services include net revenues
from:



| |   |                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | data and value added services, which include satellite and
	broadband data transmission services revenues, systems
	integration and other information technology revenues and other
	value-added services
|
| |  | telephony, including local, national and international
	long-distance services                                                                                                                           

1



---



##### Table of Contents





| |   |                                                                                                                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Internet, which is composed of our Internet backbone access and
	managed modem services to ISPs and other telecommunications
	providers, and related collocation and web hosting services
	which we provide through our advanced hosting facilities, and                                                                                                                  
|
| |  | carriers carrier services, which consist of our wholesale
	long-haul services to other telecommunications carriers
	(including the sale of IRU capacity on our Broadband Network to,
	and our provision of switching and transportation of
	telecommunications traffic services for, such carriers), and
	related maintenance and collocation services to those carriers.

In addition to net revenues from services, our total net
revenues for the three and six months ended June 30, 2001
included $2.8 million and $10.7 million in equipment
sales, a $1.2 million (or 30.5%) decrease and a
$5.7 million (or 114.3%) increase from the same periods in
2000. We expect to enter into additional equipment sales for
some of our customers in the remainder of 2001.

Our net revenues for the six months ended June 30, 2001
also included $7.2 million of Broadband Network development
revenues, which related to our construction on behalf of
affiliates of Global Crossing Ltd. and 360networks, Inc. of
certain backhaul segments connecting those companies
undersea fiber optic cable systems with the terrestrial portions
of their networks that have been constructed to link with our
Broadband Network in Argentina, Brazil, Chile and Peru. These
revenues were mostly recorded during the first quarter of 2001
upon our delivery of the constructed segments to Global Crossing
and 360networks. These amounts include a total of
$1.9 million recognized upon the delivery of certain
segments to 360networks for which payment of $0.4 million
has not been received to date. In June 2001, we terminated
a series of contracts that we had signed with 360networks due to
the latters payment default of its obligations under those
contracts to us. For a description of this matter, refer to
Legal Proceedings in Part II of this Quarterly
Report on Form 10-Q.

The following table shows our revenues by operating subsidiary
(including intercompany transactions) for the periods indicated:

|                 |  |                               |        |                           |  |             |        |      |  |      |         |             |  |   |        |  |  |   |        |  |  |  |         |  
|---------------- |  | ----------------------------- | ------ | ------------------------- |  | ----------- | ------ | ---- |  | ---- | ------- | ----------- |  | - | ------ |  |  | - | ------ |  |  |  | ------- | -
|                 |  |                               |        |                          
|                 |  | Three Months Ended June 30,   |        | Six Months Ended June 30,
|                 |  |                               |        |                          
|                 |  | 2000                          |        | 2001                      |  | % change(1) |        | 2000 |  | 2001 |         | % change(1)
|                 |  |                               |        |                           |  |             |        |      |  |      |         |            
|                 |  |                              
|                 |  | (dollar amounts in thousands)
|                
|                
|                
|                
|IMPSAT Argentina |  | $                             | 30,769 |                           |  | $           | 31,359 |      |  |      | 1.9     | %           |  | $ | 57,573 |  |  | $ | 63,937 |  |  |  | 11.1    | %
|                
|                
|                
|                
|IMPSAT Colombia  |  |                               | 13,295 |                           |  |             | 15,646 |      |  |      | 17.7    |             |  |   | 27,110 |  |  |   | 31,236 |  |  |  | 15.2    |  
|                
|                
|                
|                
|IMPSAT Brazil    |  |                               | 6,447  |                           |  |             | 11,538 |      |  |      | 79.0    |             |  |   | 11,542 |  |  |   | 26,353 |  |  |  | 128.3   |  
|                
|                
|                
|                
|IMPSAT Venezuela |  |                               | 7,504  |                           |  |             | 7,820  |      |  |      | 4.2     |             |  |   | 14,039 |  |  |   | 16,302 |  |  |  | 16.1    |  
|                
|                
|                
|                
|IMPSAT Ecuador   |  |                               | 3,533  |                           |  |             | 4,045  |      |  |      | 14.5    |             |  |   | 7,028  |  |  |   | 7,690  |  |  |  | 9.4     |  
|                
|                
|                
|                
|IMPSAT Mexico    |  |                               | 855    |                           |  |             | 1,103  |      |  |      | 29.0    |             |  |   | 1,684  |  |  |   | 2,150  |  |  |  | 27.7    |  
|                
|                
|                
|                
|IMPSAT Chile     |  |                               | 210    |                           |  |             | 2,216  |      |  |      | 955.2   |             |  |   | 225    |  |  |   | 9,598  |  |  |  | 4,165.8 |  
|                
|                
|                
|                
|IMPSAT Peru      |  |                               | 111    |                           |  |             | 1,236  |      |  |      | 1,013.5 |             |  |   | 230    |  |  |   | 2,994  |  |  |  | 1,201.7 |  
|                
|                
|                
|                
|IMPSAT USA       |  |                               | 6,030  |                           |  |             | 9,470  |      |  |      | 57.0    |             |  |   | 11,773 |  |  |   | 18,750 |  |  |  | 59.3    |  
|                
|                
|                
|                
|Other            |  |                               | 120    |                           |  |             | 3      |      |  |      | (97.5   | )           |  |   | 144    |  |  |   | 100    |  |  |  | (30.6   | )




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

2



---



##### Table of Contents



Growth in our net revenues from services resulted primarily from
broadband, Internet services and services to carriers. We also
experienced growth in our revenues from telephony services. The
following table shows our revenues from services by business
lines (after elimination of intercompany transactions) for the
periods indicated:

|                               |           |                                  |       |                           |        |             |        |        |        |      |      |             |      |   |        |        |         |  |        |        |         |  |      |       |      |  
|------------------------------ | --------- | -------------------------------- | ----- | ------------------------- | ------ | ----------- | ------ | ------ | ------ | ---- | ---- | ----------- | ---- | - | ------ | ------ | ------- |  | ------ | ------ | ------- |  | ---- | ----- | ---- | -
|                               |           |                                  |       |                          
|                               |           | Three Months Ended June 30,      |       | Six Months Ended June 30,
|                               |           |                                  |       |                          
|                               |           | 2000                             |       | 2001                      |        | % change(1) |        | 2000   |        | 2001 |      | % change(1)
|                               |           |                                  |       |                           |        |             |        |        |        |      |      |            
|                               |           |                                 
|                               |           | (dollar amounts in thousands)   
|                              
|                              
|                              
|                              
|Data and value added services: |           |                                  |       |                           |        |             |        |        |        |      |      |             |      |   |        |        |         |  |        |        |         |  |      |      
|                              
|                              
|                              
|                              
|                               | Broadband |                                  | $     | 11,630                    |        |             | $      | 20,287 |        |      |      | 74.4        | %    |   | $      | 22,623 |         |  | $      | 38,727 |         |  |      | 71.2  | %   
|                              
|                              
|                              
|                              
|                               | Satellite |                                  |       | 40,498                    |        |             |        | 34,183 |        |      |      | (15.6       | )    |   |        | 80,229 |         |  |        | 71,970 |         |  |      | (10.3 | )   
|                              
|                              
|                              
|                              
|                               | Other     |                                  |       | 654                       |        |             |        | 1,343  |        |      |      | 105.4       |      |   |        | 1,004  |         |  |        | 2,267  |         |  |      | 125.8 |     
|                               |           |                                  |       |                           |        |             |        |        |        |      |      |             |      |   |        |        |         |  |        |        |         |  |      |      
|                               |           | Total                            |       | $                         | 52,782 |             |        | $      | 55,813 |      |      |             | 5.7  | % |        | $      | 103,856 |  |        | $      | 112,964 |  |      |       | 8.8  | %
|                              
|                              
|                              
|                              
|Telephony                      |           |                                  |      |                           |        |             | 1,885  |        |        |      |     |             |      |   |       |        |         |  | 3,155  |        |         |  |     |      
|                              
|                              
|                              
|                              
|Internet                       |           |                                  | 7,992 |                           |        |             | 11,679 |        |        |      | 46.1 |             |      |   | 14,668 |        |         |  | 22,847 |        |         |  | 55.8 |      
|                              
|                              
|                              
|                              
|Services to carriers           |           |                                  |      |                           |        |             | 5,759  |        |        |      |     |             |      |   |       |        |         |  | 10,411 |        |         |  |     |      
|                               |           |                                  |       |                           |        |             |        |        |        |      |      |             |      |   |        |        |         |  |        |        |         |  |      |      
|                               |           | Total net revenues from services |       | $                         | 60,774 |             |        | $      | 75,136 |      |      |             | 23.6 | % |        | $      | 118,524 |  |        | $      | 149,377 |  |      |       | 26.0 | %
|                               |           |                                  |       |                           |        |             |        |        |        |      |      |             |      |   |        |        |         |  |        |        |         |  |      |      




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

Our revenue growth for the first six months of 2001 as compared
to the prior years corresponding period was achieved
principally because of an overall increase in the number of
customers and scope of services we provided, offset in part by
decreasing prices. Excluding fax store and forward customers, we
had 3,079 customers at June 30, 2001, compared to 2,127
customers at June 30, 2000. In the three months ended
June 30, 2001, we gained a net total of 126 new customers,
an increase of 4.3% from the period ended March 31, 2001.
Customer growth was most pronounced in Brazil, where our
customer base increased from 125 at June 30, 2000, to 314
at March 31, 2001, and 360 at June 30, 2001. In
Argentina, we experienced a net decrease in 45 customers during
the second quarter of 2001 and ended the quarter with 1,202
customers. Due to the adverse economic conditions in our
principal markets during the first half of 2001, we experienced
lower rates of customer growth during the second quarter of 2001
than in prior quarters. In particular, the economic recessions
experienced in Argentina and Brazil have led us to reduce our
customer expansion efforts in the small and medium customer
segments as these customers have declined to commit to increased
expenditures for their telecommunications needs pending their
own assessments as to the expected length and severity of the
current economic crisis. As a result of the reduced emphasis
that will be given to the small and medium customer segment, we
have effected a workforce reduction in the group of employees
established to serve this segment and have reduced our capital
expenditures budget allocated to this segment.

Notwithstanding the negative effect that the Argentine and
Brazilian economic crises have had on the growth in our
revenues, we have been able to utilize our new Broadband Network
to capture telecommunications revenues from new corporate
customers. Our carriers carrier business expanded in
second quarter of 2001 as we signed new contracts for the
provision of IRUs and collocation services on our Broadband
Network infrastructure with customers in Peru, Chile and
Argentina. These contracts, which have an average term of
15 years, are expected to generate aggregate revenues of
$3.9 million.

Our net revenues from services at IMPSAT Argentina for the
second quarter of 2001 totaled $29.3 million, an increase
of $2.2 million from the second quarter of 2000 and a
decrease of $1.2 million from the first quarter of 2001.
IMPSAT Argentinas revenue growth during the first half of
2001 has been adversely affected by the continued recession in
Argentina. These difficulties became more pronounced during the
second quarter of 2001 than in previous periods as questions
concerning the ability of the Argentine Government to remain
current in its external debt payments led to a decline in
commercial confidence and activity and an increase in the cost
of financing for Argentine companies. While the introduction of
the Broadband Network in the fourth quarter of 2000 has enabled
us to expand our range of services and attract additional
sources of revenue, the ongoing severe economic downturn in
Argentina has adversely affected

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IMPSAT Brazils net revenues from services totaled
$10.9 million for the three months ended June 30,
2001, an increase of $4.8 million from the same period in
2000 and an increase of $0.7 million from the first quarter of
2001. IMPSAT Brazils results were affected by the adverse
economic situation in Brazil, including the devaluation of the
Brazilian real against the U.S. dollar. As of
June 30, 2001, the real had devalued against the
U.S. dollar by 7.4% and 18.8%, compared to the exchange rate as
of March 31, 2001 and December 31, 2000. The
devaluation of the real caused IMPSAT Brazils
revenues in U.S. dollar terms to be lower than expected. In
local currency terms, IMPSAT Brazils second quarter 2001
revenues from services increased by 11.9% as compared to the
first quarter of 2001. See  Net (Loss) Gain on
Foreign Exchange and Item 3. Quantitative and
Qualitative Disclosures About Market Risk. The devaluation
of the real and the decline in growth in the Brazilian
economy have been caused in part by the continued recession in
Argentina, a key trading partner of Brazil, an energy crisis and
rationing brought about by a continued period of drought that
has affected Brazils hydroelectric generating capacity and
a general aversion to emerging markets by foreign direct and
financial investors. Unlike the other countries in which we
operate, pursuant to Brazilian law our contracts for services in
Brazil must be denominated in reals and may not be
indexed or linked to the exchange rate between the real
and the U.S. dollar, although they generally may include
provision for inflation adjustments. As a result, continued
devaluation of the real against the U.S. dollar would
adversely affect our revenues from Brazil for the remainder of
2001.

In Colombia, after a period of declining revenues throughout
2000 due to the general deterioration in the Colombian economy,
we recorded an increase in revenues during the first half of
2001 of 15.2% over the same period in 2000. We expect that our
revenues in Colombia will stabilize at current levels throughout
the remainder of 2001 as a result of the marginal improvement
anticipated for the Colombian economy.

Our operations in the United States showed improved results.
IMPSAT USAs revenues totaled $9.5 million and
$18.8 million for the three and six months ended
June 30, 2001, an increase of $3.4 million (or 57.1%)
and $7.0 million (or 59.3%) as compared to the same periods
in 2000. This is primarily a result of increased network
services and Internet backbone access services to multinational
corporations with operations in Latin America.

Direct Costs. Our direct costs for the three and six
months ended June 30, 2001 totaled $41.8 million and
$89.3 million, an increase of $7.9 million (or 23.4%) and
$28.9 million (or 47.8%), compared to the same periods in
2000. Of our total direct costs for the three and six months
ended June 30, 2001, $19.2 million and
$38.1 million related to the operations of IMPSAT
Argentina. This compares to $17.5 million and
$29.5 million at IMPSAT Argentina for the same periods in
2000. Direct costs for IMPSAT Brazil totaled $18.8 million
for the first half of 2001, compared to $10.8 million for
the corresponding period in 2000. 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 six months ended June 30, 2001, our
contracted services costs totaled $8.9 million and
$20.0 million, an increase of $2.1 million (or 30.5%)
and $6.7 million (or 50.4%) from the same periods in 2000.
Of this amount, maintenance costs for our telecommunications
network infrastructure totaled $6.6 million and
$12.7 million for the three and six months ended
June 30, 2001, compared to $4.0 million and
$7.4 million during the same periods in 2000. Our
maintenance costs increased because we had more infrastructure,
including the Broadband Network. Installation costs totaled
$2.3 million and $7.2 million for the three and six
months ended June 30, 2001, compared to $2.8 million
and $5.9 million for the same periods in 2000. Our
installation costs for the first quarter of 2001 totaled
$5.0 million. The decline in installation costs as compared
to the corresponding periods in 2000 related to the decline in
customer growth due to the Argentine and Brazilian recessions.

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(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 six months ended June 30, 2001 totaled
$1.8 million and $3.9 million, compared to
$2.0 million and $4.2 million for the corresponding
periods in 2000. The majority of these commissions related to
customers of IMPSAT Argentina.

We recorded a net provision for doubtful accounts of
$3.0 million and $4.2 million for the three and six
months ended June 30, 2001, compared to $1.8 million
and $3.0 million for the same periods in 2000. At
June 30, 2001 approximately 28.9% of our gross trade
accounts receivable were past due more than six months compared
to 30.4% for the same period in 2000. At the same date, our
allowance for doubtful accounts covered approximately 87.7% of
our gross trade accounts receivable past due more than six
months. The average days in quarterly gross trade accounts
receivable increased from 71 at March 31, 2001 to 108 at
June 30, 2001. At June 30, 2000, average days of gross
trade accounts receivable equaled 76.

In particular, we made provision of a total of $0.7 million
in respect of several contracts for which we determined that
collection was unlikely even though the underlying receivables
were not yet 180 past due as set forth in our general policy.
Those amounts include $0.4 million in respect of a
$6.7 million information technology integration contract
entered into with the Province of Mendoza in Argentina. After a
series of negotiations with the Province of Mendoza after
delivery of the solution during the first quarter of 2001, the
Province of Mendoza has proposed a revised payment schedule with
the Province that calls for a reduced amount of
$6.4 million to be paid in 30 monthly installments. We
are currently considering the Provinces proposal and have
taken a provision of the amount representing the difference
between the original invoiced amount and the amount contained in
the Provinces proposal. Depending on the ultimate outcome
of our negotiations, we may make additional provisions to our
allowance for doubtful accounts for this contract.

(3)  Leased Capacity. Our leased capacity costs for
the three and six months ended June 30, 2001 totaled
$23.5 million and $45.4 million, which represented an
increase of $5.9 million (or 34.0%) and $13.8 million
(or 43.7%) from the corresponding periods in 2000.

Our leased capacity costs for satellite capacity for the three
and six months ended June 30, 2001 totaled
$10.4 million and $20.8 million, an increase of
$1.3 million (or 14.2%) and $3.2 million (or 18.5%),
from the corresponding periods in 2000. Our satellite capacity
costs increased principally in Venezuela and the United States,
where we increased our satellite capacity to satisfy customer
needs. Leased satellite capacity costs declined in Argentina
during the first quarter of 2001 as compared to the same period
in 2000, in part due to our transitioning customers from
satellite-based solutions onto the Broadband Network. Certain of
our satellite capacity leases are scheduled to terminate during
the second half of 2001, and we anticipate that our satellite
capacity costs will decline as a result throughout the remainder
of the year. We had approximately 998 MHz of leased
satellite capacity at June 30, 2001 and 912.4 MHz at
June 30, 2000.

Our costs for dedicated leased capacity on third-party fiber
optic networks totaled $18.9 million for the first half of
2001, an increase of $6.5 million (or 51.9%) from the
corresponding period in 2000. These costs were incurred
principally in Argentina, Brazil and the United States. Pending
implementation of our Broadband Network, we incurred these
higher costs of leased fiber optic capacity in Argentina and
Brazil due to the continued demand by our customers in those
countries for greater bandwidth and, in the United States, due
to the expansion of our Internet service offerings where we
provide a link between Latin America and the U.S. Internet
backbone. Although we are transferring increasing amounts of our
telecommunications traffic to the Broadband Network as we
migrate our customers to our Broadband Network, we believe that
our leased fiber optic capacity costs will continue to increase
in absolute terms in the latter half of 2001 as compared to 2000
and the first half of 2001. However, we believe that the rate of
growth in such costs will decrease, particularly in Argentina
and Brazil, where we have already implemented the 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.

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In connection with certain new services which we are offering as
a result of the implementation of our Broadband Network and the
effectiveness of our license in Argentina to provide domestic
and international long distance services, we also will incur
costs for interconnection and telephony termination costs and
frequency rights. These costs totaled $3.0 million and
$5.7 million during the three and six months ended
June 30, 2001 as compared to $0.8 million and
$1.6 million for the same periods in 2000.

(4)  Costs of Equipment Sold. In the three and six
months ended June 30, 2001, we incurred costs of equipment
sold and Broadband Network development of $2.1 million and
$10.8 million, a $1.7 million (or 44.3%) decrease
and a $6.2 million (or 135.6%) increase from the same
periods in 2000. We expect to enter into additional equipment
sales for some of our customers in the remainder of 2001.

Salaries and Wages. Salaries and wages for the three and
six months ended June 30, 2001 totaled $21.9 million
and $44.1 million, an increase of $6.0 million (or
37.4%) and $13.9 million (or 46.2%), from the same periods
in 2000. Salaries and wages for the first quarter of 2001
totaled $22.2 million.

The increase in salaries and wages as compared to the
corresponding periods in 2000 resulted primarily from an
increase in the number of employees, from 1,264 at June 30,
2000 to 1,590 at June 30, 2001, particularly in connection
with the progression of our operations in Brazil and the
development of the Broadband Network.

IMPSAT Argentina incurred salaries and wages for the three and
six months ended June 30, 2001, of $9.1 million and
$18.1 million, an increase of $2.2 million (or 32.6%)
and $5.4 million (or 42.4%) over the same periods in 2000.
IMPSAT Brazil incurred salaries and wages for the three and six
months ended June 30, 2001, of $4.1 million and
$9.3 million, an increase of $1.8 million (or 77.1%)
and $4.9 million (or 109.9%) over the same periods in 2000.
IMPSAT Brazil increased its number of employees to 387 persons
at June 30, 2001, compared to 219 persons at June 30,
2000.

As a result of the adverse economic conditions experienced in
Argentina and Brazil and as part of cost-control measures
implemented by management during the second quarter of 2001, we
decreased the total net number of employees by 200 people
compared to the end of the first quarter of 2001. The largest
number of terminated employees were employed in our business
unit that had been established to market our services to small
and medium customer segment. In connection with these layoffs,
our salaries and wages for the three months ended June 30,
2001 include one-time severance payments totaling approximately
$1.4 million. Management expects that the reduction in
headcount will result in savings of approximately
$0.6 million per month during the remainder of 2001.
Management expects to monitor the size of its total workforce
during the remainder of 2001 and make appropriate adjustments as
required by financial and competitive circumstances.

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, telephone and energy expenses

We incurred SG&A expenses of $14.8 million and
$29.5 million for the three and six months ended
June 30, 2001. These SG&A expenses represented an
increase of $1.8 million (or 13.8%) and
$5.0  million (or 20.3%), from the three and six
months ended June 30, 2000. SG&A expenses at IMPSAT
Argentina for the three and six months ended June 30, 2001
totaled $6.0 million and $10.9 million, decreases of
$0.4 million (or 6.2%) and $1.6 million (or 12.5%),
from SG&A expenses incurred by IMPSAT Argentina for the
three and six months ended June 30, 2000. Management
intends to take efforts throughout the remainder of 2001 to
control or reduce SG&A expenses.

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Depreciation and Amortization. Our depreciation and
amortization expenses for the three and six months ended
June 30, 2001 totaled $30.2 million and
$59.7 million. This represents an increase of
$9.4 million (or 44.9%) and $18.9 million (or 46.2%),
compared to our depreciation and amortization for the three and
six months ended June 30, 2000. The increase in our
depreciation and amortization expense reflects the continued
growth in our asset base. We expect these expenses to increase
in future periods.

Depreciation and amortization for IMPSAT Argentina for the three
and six months ended June 30, 2001, totaled
$13.4 million and $25.8 million. This represents an
increase of $5.0 million (or 59.8%) and $8.4 million
(or 47.9%), compared to IMPSAT Argentinas depreciation and
amortization for the three and six months ended June 30,
2000.

Interest Expense, Net. Our net interest expense for the
three months ended June 30, 2001 totaled
$33.1 million, consisting of interest expense of
$36.7 million and interest income of
$3.6  million. Our net interest expense for the six
months ended June 30, 2001 totaled $62.1 million,
consisting approximately of interest expense of
$70.2 million and interest income of $8.1 million. At
June 30, 2001, we had cash, cash equivalents and other
short-term investments of $144.5 million. Our net interest
expense increased $13.4 million (or 68.0%) and
$24.8 million (or 66.4%) for the three and six months ended
June 30, 2001 from net interest expense for the same
periods in 2000.

For the three and six months ended June 30, 2001 IMPSAT
Argentinas net interest expense totaled $5.7 million
and $10.7 million, compared to $2.2 million and
$5.2 million for the corresponding periods in 2000.

Our total indebtedness as of June 30, 2001 was
$1.0 billion as compared to $848.2 million as of
June 30, 2000. As of June 30, 2001, total outstanding
indebtedness at IMPSAT Argentina totaled $175.0 million,
compared to $96.2 million as of June 30, 2000. Our net
interest expense is expected to increase in the future based on:



| |   |                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | expected increased levels of borrowing associated with our
	development of the Broadband Network, and                                                    
|
| |  | decreases in interest income as we utilize our cash and trading
	investments in connection with our capital expenditures and
	general corporate purposes.

See  Liquidity and Capital Resources.

Net (Loss) Gain on Foreign Exchange. We recorded net
losses on foreign exchange for the three and six months ended
June 30, 2001 of $10.4 million and $24.2 million,
compared to a net loss of $1.8 million and a net gain of
$0.8 million for the same periods in 2000. The increase in
our losses on foreign exchange was primarily due to the
devaluation of the Brazilian real against the U.S. Dollar
during the first half of 2001. At December 31, 2000, the
real traded at a rate of R$1.95 = $1.00. At
June 30, 2001, the real traded at a rate of
R$2.31 = $1.00. The net losses on foreign exchange
reflect the effect of the devaluation of the real against
the U.S. dollar on the book value of our monetary assets in
Brazil, including the primarily dollar-denominated debt of
IMPSAT Brazil under the Nortel vendor financing agreement.

Other Income, Net. We recorded other income, net, for the
three and six months ended June 30, 2001 of
$0.1 million and $0.2 million, as compared to other
expense, net, of $2.3 million and $2.5 million for the
corresponding periods in 2000.

Provisions for Foreign Income Taxes. We recorded a
provision for foreign income taxes of $26.1 million and
$26.5 million, for the three and six months ended
June 30, 2001 compared to a provision for income taxes of
$1.7 million and $1.1 million for the corresponding
periods in 2000. The increase in the provision for foreign
income taxes was a result of a valuation allowance of
approximately $25.5 million recorded because it is not clear
that utilization of the tax benefits resulting from operating
losses and other temporary differences are more likely
than not to be realized, as required by SFAS  109.

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Net Loss Attributable to Common Stockholders. For the
three and six months ended June 30, 2001, we incurred a net
loss attributable to common stockholders of $99.7 million
and $167.9 million, an increase of $59.8 million (or
150.3%) and $99.0 million (or 143.8%) for same periods in
2000.

Liquidity and Capital Resources

At June 30, 2001, we had total cash, cash equivalents and
short-term investments of $144.5 million and our total
indebtedness was $1.0 billion, of which $73.1 million
represented short-term debt and the current portion of our
long-term debt. We currently face significant near-term cash
flow and liquidity problems. Our capital requirements under our
business plan for fiscal year 2001 are greater than available
capital resources, and our cash flows and liquidity are
insufficient to satisfy all of our obligations beyond the end of
2001. In particular, the payment default by 360networks during
the second quarter of its contracts with us for the provision of
IRU dark fiber and capacity services and backhaul construction
services and the subsequent termination of those contracts will
result in our receipt of $77.4 million less than anticipated
during the remainder of 2001. See Part II, Item 1. Legal
Proceedings for a description of the status and background
of our contracts with 360networks. Although Management is taking
action to attempt to reduce expenditures relating to the
360networks contracts and utilize the network assets that were
to be provided to 360networks, it will not be possible in the
short-term to replace the cash inflows contemplated by the
termination of 360networks contracts and the nonpayment by
360networks of the amounts originally scheduled to be paid to us
during 2001.

We have begun evaluating the availability of additional
financing to meet our financial requirements and objectives.
Additionally, we are closely monitoring the level of cash
payments and commitments. We have begun to take actions to
substantially reduce our commitments requiring cash payments in
the remainder of 2001. We have commenced evaluating various
alternatives to improve our liquidity, including raising
additional equity capital from financial and/or strategic
partners or restructuring our debt. However, there is no
assurance that we will reach a definitive agreement with any
potential strategic partner, obtain additional funds or
restructure our debt without seeking protection under the United
States Bankruptcy Code. In the event we are unable to consummate
any strategic alliance, obtain such capital or financing or
restructure our debt, we could be unable to satisfy our
obligations to third parties, which could result in defaults
under our debt and other financing agreements and, after the
passage of any applicable time and notice provisions, would
enable creditors in respect to those obligations to accelerate
the indebtedness and assert other remedies against us. Such
events would have a material adverse effect upon us and would
threaten our ability to continue as a going concern.

We are currently completing the construction of the 2,000
kilometer long-haul link of the Broadband Network between the
cities of Curitiba and Porto Alegre in Brazil and the city of
Parana in Argentina. The new link will connect with the
Broadband Network that is currently deployed in Argentina,
Brazil and Chile and will result in the creation of a fully
integrated terrestrial fiber optic network connecting Santiago,
Chile; Buenos Aires, Argentina; and São Paulo and Rio de
Janeiro, Brazil with points in between. Construction of the
Argentine portion of the link was completed at the end of the
second quarter of 2001. We have entered into a capacity IRU
agreement with Convexx, a Brazilian construction and fiber-optic
network provider for the delivery of the Brazilian portion of
the link, which is expected to be completed by the end of the
September 2001.

Including the costs of the new link described in the preceding
paragraph, our budget contemplates that we will need
approximately $240 million (including amounts spent to
date) for capital expenditures during the remainder of 2001.
Among others, we have executed definitive long-term vendor
financing agreements and commitments during the first half of
2001 totaling $105.7 million with several of our equipment
suppliers, including Nortel Networks, Lucent Technologies, Inc.,
Harris Corporation, Hughes Networks, Clarent and DMC Stratex.
The availability of such financing will be dependent on the
satisfaction of applicable conditions precedent at the time of
requested disbursement.

Due to the continued adverse macroeconomic conditions in
Argentina and Brazil and to the termination of certain contracts
with a subsidiary of 360networks, Inc. (see Part II,
Item 1. Legal Proceedings), we have

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As set forth in our consolidated statement of cash flows, our
operating activities used $52.0 million of net cash flow
during the first half of 2001, compared to $16.2 million
generated during the same period in 2000. The decrease in cash
flow from operating activities in the first half of 2001
compared to the corresponding period in 2000 was primarily
attributable to an increase in our net loss and an increase in
our net trade receivables, as discussed above.

Financing activities provided $5.8 million in net cash for
the first half of 2001, compared with $483.7 million for
the same period in 2000. For the first half of 2001, net cash
flow from investing activities (including a decrease in our
trading investments) generated $50.3 million, compared to
$488.2 million used during the corresponding period in
2000. We have used $32.6 million in non-cash investing and
financing activities related to the development of the Broadband
Network for the first half of 2001, principally as a result of
disbursements under the vendor financing agreements with Nortel.

At June 30, 2001, we had leased satellite and fiber optic
capacity with total annual rental commitments of approximately
$30.0 million through the year 2005. In addition, at
June 30, 2001, we had commitments to purchase
telecommunications equipment amounting to approximately
$9.2 million. We also have commitments of approximately
$22.5 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.

Government of Argentina Zero-Deficit Law; Public Sector
Customers

On July 30, 2001, the Argentine Government passed a
zero deficit law under which the Federal Government
would only make payments, including transfers to the Argentine
Provinces, equal to the actual revenue received by the
Government. The zero-deficit law was enacted against pressure
within the international capital markets that the Argentine
Government might be unable to make payments on its international
debt. Initial unofficial estimates indicate that the
zero-deficit law could result in reductions of approximately 13%
of current payments of the Argentine Government. To date, no
regulations have been passed or announced to clarify the means
by which the Argentine Government intends to implement the
zero-deficit law nor have the various Provinces announced how
they would propose to implement their own mechanisms to take
into account the anticipated lower receipts from the Federal
Government. It is expected that at least certain Provinces will
make partial payment of their trade and other credits in
negotiable instruments, for which a discounted secondary market
is expected to develop.

The Company provides telecommunications services in Argentina to
a number of public sector entities that will be impacted by the
zero-deficit law, including the National Bank of Argentina, the
National Border Police and the National Social Security
Administration. In total, 3.5% of the Companys total
revenues for the three months ended June 30, 2001 were
attributable to Argentine public sector entities that are
expected to be affected by the zero-deficit law. The Company,
along with all other companies providing goods and services to
the Argentine public sector, is unable at this time to estimate
the potential effect of the zero-deficit law on its financial
results. As the law is implemented and as the financial results
of the Argentine Government are reported, the Company will take
appropriate actions to record the effect of the law on its
financial situation. The Company may decline to provide services
to particular public sector customers if the terms of payment
for such customers become uneconomic.




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

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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 and is expected to increase
further as we draw down commitments under our vendor financing
agreements to cover expenditures relating to existing and
anticipated capital expenditures, including the Broadband
Network. Our actual interest rate is not quantifiable or
predictable because of the variability of future interest rates
and business requirements. We do not believe such risk is
material and we do not customarily use derivative instruments to
adjust interest rate risk.

|                                 |  |                        |        |      |  |      |        |      |  |      |         |            |  |       |        |       |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         | 
|-------------------------------- |  | ---------------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------- | ---------- |  | ----- | ------ | ----- |  | - | ------- | - |  | - | ------- | - |  | - | ------- | - |  | - | ------- | 
|                                 |  |                        |        |     
|                                 |  | Expected Maturity Date |        |     
|                                 |  |                        |        | Fair
|June 30,                         |  | 2001                   |        | 2002 |  | 2003 |        | 2004 |  | 2005 |         | Thereafter |  | Total |        | Value
|                                 |  |                        |        |      |  |      |        |      |  |      |         |            |  |       |        |      
|Senior Notes (fixed rate)        |  |                        |       |      |  |      |       |      |  | $    | 125,000 |            |  |       |       |       |  | $ | 300,000 |   |  | $ | 225,000 |   |  | $ | 650,000 |   |  | $ | 289,000 | 
|                                 |  |                        |        |      |  |      |        |      |  |      |         |            |  |       |        |       |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         | 
|Avg. interest rate               |  |                        |        |      |  |      |        |      |  |      | 12.13   | %          |  |       |        |       |  |   | 13.75   | % |  |   | 12.38   | % |  |   | 12.96   | % |  |   |         | 
|                                 |  |                        |        |      |  |      |        |      |  |      |         |            |  |       |        |       |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         | 
|Term Notes (fixed rate)          |  | $                      | 20,185 |      |  | $    | 8,258  |      |  | $    | 14,252  |            |  | $     | 10,119 |       |  | $ | 6,085   |   |  | $ | 1,903   |   |  | $ | 60,775  |   |  | $ | 60,775  | 
|                                 |  |                        |        |      |  |      |        |      |  |      |         |            |  |       |        |       |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         | 
|Avg. interest rate               |  |                        | 11.08  | %    |  |      | 11.08  | %    |  |      | 11.08   | %          |  |       | 11.08  | %     |  |   | 11.08   | % |  |   | 11.08   | % |  |   | 11.08   | % |  |   |         | 
|                                
|                                
|                                
|                                
|Vendor Financing (variable rate) |  | $                      | 36,827 |      |  | $    | 38,100 |      |  | $    | 50,602  |            |  | $     | 50,650 |       |  | $ | 50,351  |   |  | $ | 53,239  |   |  | $ | 279,769 |   |  | $ | 279,769 | 
|                                 |  |                        |        |      |  |      |        |      |  |      |         |            |  |       |        |       |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         | 
|Avg. interest rate               |  |                        | 9.67   | %    |  |      | 9.67   | %    |  |      | 9.67    | %          |  |       | 9.67   | %     |  |   | 9.67    | % |  |   | 9.67    | % |  |   | 9.67    | % |  |   |         | 
|                                 |  |                        |        |      |  |      |        |      |  |      |         |            |  |       |        |       |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         | 

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

Pursuant to Brazilian law, our contracts with customers in
Brazil cannot be denominated in dollars or linked to the
exchange rate between the Brazilian real and the U.S.
dollar. Pursuant to these Brazilian legal requirements, we are
permitted to amend the pricing of our services for our long-term
telecommunication services contracts with our customers annually
based on changes in the consumer price index in Brazil for the
prior year. Changes in the consumer price index may lag or be
lower than changes in the exchange rate between Brazil
real and the U.S. dollar and therefore may not fully
allow us to address the impact of a devaluation of the Brazilian
real against the U.S. dollar. Our expansion in Brazil,
including our development of the Broadband Network in Brazil,
has, and will continue to, increase our exposure to exchange
rate risks. Revenues from services from our Brazilian operations
for the first six months of each of 2000 and 2001 represented
approximately 9.3% and 15.8% of our total net revenues from
services for such periods. However, this proportion can be
expected to increase significantly in future periods in
connection with the progression of our operations in Brazil and
the development of the Broadband Network. At June 30, 2001,
the real traded at a rate of R$2.38 = $1.00.

10



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##### Table of Contents






PART II

OTHER INFORMATION





Item 1.  Legal Proceedings

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

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

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

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




Item 2.  Changes in Securities

Not applicable.




Item 3.  Defaults Upon Senior
Securities

Not applicable.

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##### Table of Contents






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

On April 30, 2001, we held our annual meeting of
stockholders. At the meeting, there were present or represented
by proxy 87.95% of the 91,428,570 shares outstanding and
eligible to vote. The proposals voted upon at the Annual Meeting
and the results with respect to each proposal are set forth
below.



| |                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------
| | 1.  To elect three directors to serve for a term of three
	years and until their respective successors are duly elected and
	qualified.

|                 |  |                  |            |          |  |  |         | 
|---------------- |  | ---------------- | ---------- | -------- |  |  | ------- | 
|                 |  |                 
|                 |  | Number of Shares
|                 |  | Being Voted     
|                 |  |                 
|                 |  | For              |            | Withheld
|                 |  |                  |            |         
|Carlos Zamora    |  |                  | 80,248,547 |          |  |  | 160,466 | 
|                
|                
|                
|                
|Lucas Pescarmona |  |                  | 80,244,777 |          |  |  | 164,237 | 
|                
|                
|                
|                
|Sofia Pescarmona |  |                  | 80,191,948 |          |  |  | 217,073 | 



| |                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------
| | 2.  To ratify the appointment by our Board of Directors of
	Deloitte & Touche LLP as our independent auditors for the
	year ending December 31, 2001.

|           |  |         |  |         |       | 
|---------- |  | ------- |  | ------- | ----- | 
|For        |  | Against |  | Abstain
|           |  |         |  |        
|80,262,507 |  | 139,342 |  |         | 7,164 | 




Item 5.  Other Information

On August 3, 2001, Mr. Morris Jones was appointed to
our board of directors to fill a vacancy created by the
resignation of Mr. John McElligott. Mr. Jones, who is
currently an officer of British Telecommunications plc., will
have a term that will expire at our annual stockholders meeting
in 2003.




Item 6.  Exhibits and Reports on
Form 8-K

(a)(1)

Exhibit Index:

|        |  |                                                                                                                                                                                                                                                                                                               
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                               
|No.     |  | Description                                                                                                                                                                                                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                               
|3.1     |  | Amended and Restated Certificate of Incorporation
	of the Company (filed on January 14, 2000 as
	Exhibit No. 3.1 to the Companys Registration
	Statement on Form S-1 (No.  333-88389) and
	incorporated herein by reference).                                                                                
|3.2     |  | Amended and Restated Bylaws of the Company (filed
	on January 14, 2000 as Exhibit No. 3.2 to the
	Companys Registration Statement on Form S-1
	(No. 333-88389) and incorporated herein by reference).                                                                                                        
|4.1     |  | Indenture for the Notes, dated as of
	February 16, 2000, among the Company, The Bank of New York,
	as Trustee and Banque Internationale a Luxembourg (including
	form of Note) (filed on March 10, 2000 as an exhibit to the
	Companys 1999 Annual Report on Form 10K and
	incorporated herein by reference).
|4.2     |  | Indenture for the Notes, dated as of
	June 17, 1998, between the Company and The Bank of New
	York, as Trustee (including form of Note) (filed on
	July 21, 1998 as an exhibit to the Companys
	Registration Statement on Form S-4 (No.  333-59469)
	and incorporated herein by reference).                  
|4.3     |  | Securityholders Agreement dated as of
	March 19, 1998, among Nevasa Holdings, the Morgan Stanley
	investors and certain other parties (filed on April 15,
	1998, as an exhibit to the Companys Annual Report on
	Form 10-K for 1997 and incorporated herein by reference).                                   

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|        |  |                                                                                                                                                                                                                                                                                                                                                             
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                             
|No.     |  | Description                                                                                                                                                                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                             
|4.4     |  | Supplemental Indenture dated as of May 13,
	1997 among IMPSAT Corporation, IMPSAT S.A. and The Bank of New
	York (filed on April 15, 1998 as an exhibit to the
	Companys Annual Report on Form 10-K for 1997 and
	incorporated herein by reference).                                                                                                       
|4.5     |  | Indenture dated as of July 31, 1996, among
	the Company, IMPSAT Argentina as Guarantor and the Bank of New
	York as Trustee (including form of Note) (filed on
	November 20, 1996 as an exhibit to the Companys
	Registration Statement on Form S-4 (No. 333-12977) and
	incorporated herein by reference).                                                
|4.6     |  | Shareholders Agreement dated as of March 10,
	1999 (filed on January 14, 2000 as an exhibit to the
	Companys Registration Statement on Form S-1
	(No. 333-88389) and incorporated herein by reference).                                                                                                                                                    
|4.7     |  | Specimen Stock Certificate (filed on
	January 14, 2000 as an exhibit to the Companys
	Registration Statement on Form S-1 (No. 333-88389) and
	incorporated herein by reference).                                                                                                                                                                           
|4.8     |  | Form of Stockholder Rights Plan Agreement between
	the Company and The Bank of New York, as Rights Agent (filed on
	June 21, 2000 as an exhibit to the Companys
	Registration Statement on Form S-4 (No. 333-34954) and
	incorporated herein by reference).                                                                                                
|4.9     |  | Certificate of Designations dated as of
	June 7, 2000 (filed on June 21, 2000 as an exhibit to
	the Companys Registration Statement on Form S-4
	(No. 333-34954) and incorporated herein by reference).                                                                                                                                                    
|9.1     |  | 1998 Stock Option Plan (filed on March 31,
	1999 as an exhibit to the Companys 1998 Annual Report on
	Form 10-K and incorporated herein by reference).                                                                                                                                                                                                     
|9.2     |  | 1999 Stock Option Plan (filed on January 14,
	2000 as an exhibit to the Companys Registration Statement
	on Form S-1 (No. 333-88389) and incorporated herein by
	reference).                                                                                                                                                                               
|10.1   |  | Global Crossing Framework Agreement (filed on
	October 4, 1999 as an exhibit to the Companys
	Registration Statement on Form S-1 (No. 333-88389) and
	incorporated herein by reference).                                                                                                                                                                   
|10.2   |  | Turnkey Backhaul Construction and IRU Agreement
	between IMPSAT Brazil and South American Crossing, Ltd. (Rio de
	Janeiro), dated as of February 17, 2000 (filed on
	April  17, 2000 as an exhibit to the Companys
	Registration Statement on Form S-4 (No. 333-34954) and
	incorporated herein by reference).                                             
|        |  | In accordance with Instruction 2 to Item 601
	of Regulation S-K, the following agreement was not filed as an
	exhibit because it is substantially identical in all material
	respects to Exhibit 10.2: Turnkey Backhaul Construction and
	IRU Agreement between IMPSAT Brazil and South American Crossing,
	Ltd. (São Paolo), dated as of February 17, 2000.
|10.3   |  | Turnkey Project Agreement between IMPSAT
	Argentina and Nortel (filed on October 4, 1999 as an
	exhibit to the Companys Registration Statement on
	Form S-1 (No.  333-88389) and incorporated herein by
	reference).                                                                                                                                       
|        |  | 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).                                                                                   

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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|No.     |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.6   |  | Capacity Purchase Agreement dated as of
	November 10, 2000, between Global Crossing Bandwidth, Inc.
	and International Satellite Communication Holding Ltd. (filed on
	March 30, 2001, as an exhibit to the Companys Annual
	Report on Form  10-K for 2000 and incorporated herein by
	reference).                                                                                                                                                                           
|10.7   |  | Capacity IRU Agreement dated as of
	February 15, 2001, by and between 360americas network
	(Bermuda) ltd. and IMPSAT Fiber Networks, Inc.                                                                                                                                                                                                                                                                                                                                     
|10.8   |  | IRU Fiber Agreement (Argentina) dated as of
	February 15, 2001, by and between IMPSAT S.A. (Argentina)
	and 360networks de Argentina S.R.L. (filed on March 30,
	2001 as an exhibit to the Companys 2000 Annual Report on
	Form 10K and incorporated herein by reference).                                                                                                                                                                                                   
|        |  | In accordance with Instruction 2 to Item 601
	of Regulation S-K, the following agreement was not filed as an
	exhibit because it is substantially identical in all material
	respects to Exhibit 10.9: IRU Fiber Agreement (Brazil)
	dated as of February 15, 2001, by and between Impsat
	Comunicações Ltda. and 360networks do Brasil Ltda.
	(filed on March 30, 2001 as an exhibit to the
	Companys 2000 Annual Report on Form 10K and
	incorporated herein by reference).
|10.9   |  | Service Agreement dated as of February 15,
	2001, by and between Impsat Comunicações Ltda. and
	360networks do Brasil Ltda. (filed on March 30, 2001 as an
	exhibit to the Companys 2000 Annual Report on
	Form 10K and incorporated herein by reference).                                                                                                                                                                                                                   
|10.10*  |  | Master Loan Agreement dated as of June 6,
	2001 among Harris Canada, Inc. and the Company, IMPSAT
	Argentina, IMPSAT Brazil, IMPSAT Colombia, IMPSAT Ecuador, and
	IMPSAT Venezuela.                                                                                                                                                                                                                                                                                          
|10.11*  |  | Amended and Restated Financing Agreement between
	IMPSAT Argentina and Nortel.                                                                                                                                                                                                                                                                                                                                                                                                
|        |  | In accordance with Instruction 2 to Item 601
	of Regulation S-K, the following agreement was not filed as an
	exhibit because it is substantially identical in all material
	respects to Exhibit 10.11: Amended and Restated Financing
	Agreement between IMPSAT Brazil and Nortel.                                                                                                                                                                                           
|21.1    |  | List of subsidiaries of the registrants
	(incorporated by reference to the Business 
	General section of the Companys Annual Report on
	Form 10-K for 2000 and incorporated herein by reference).                                                                                                                                                                                                                                                                         
|24.1    |  | Power of Attorney (included on the signature page
	hereto).                                                                                                                                                                                                                                                                                                                                                                                                                   




|  |                
|- | ---------------
|* | 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.

14



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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/ GUILLERMO JOFRE

| |                        
| | -----------------------
| |                        
| | Guillermo Jofre        
| | Chief Financial Officer
|
| | Date: August 14, 2001  
|
| | IMPSAT S.A.            



| |     |                
| | --- | ---------------
| | By: | /s/ JOSE TORRES

| |                         
| | ------------------------
| |                         
| | Jose Torres             
| | Director and            
| | Chief Accounting Officer
|
| | Date: August 16, 2001   

15