##### 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,
2002

OR



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

For the transition period
from                               to

Commission File Number: 000-29085



---

IMPSAT Fiber Networks, Inc.

IMPSAT S.A.


(Exact name of registrant as specified in its
charter)


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

Alférez Pareja 256 (1107)

Buenos Aires, Argentina


(5411) 5170-0000


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


of registrants principal executive offices)


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

APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE
YEARS


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

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of
each of the issuers classes of common stock, as of the
latest practicable date:As of
June 30, 2002, the Company had outstanding 91,428,570
shares of Common Stock, $0.01 par value.









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TABLE OF CONTENTS



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



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##### Table of Contents






IMPSAT Fiber Networks, Inc.


IMPSAT S.A.





INDEX

|                                  |         |  |                                                                                           |  |  |     | 
|--------------------------------- | ------- |  | ----------------------------------------------------------------------------------------- |  |  | --- | 
|                                  |         |  |                                                                                           | 
|PART I  FINANCIAL
    INFORMATION |         |  | F-1                                                                                       | 
|                                  | Item 1. |  | Financial Statements                                                                      |  |  | F-1 | 
|                                  | Item 2. |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations |  |  | 1   | 
|                                  | Item 3. |  | Quantitative and Qualitative Disclosures About
    Market Risk                            |  |  | 17  | 
|PART II  OTHER INFORMATION        |         |  | 19                                                                                        | 
|                                  | Item 1. |  | Legal Proceedings                                                                         |  |  | 19  | 
|                                  | Item 2. |  | Changes in Securities                                                                     |  |  | 19  | 
|                                  | Item 3. |  | Defaults Upon Senior Securities                                                           |  |  | 19  | 
|                                  | Item 4. |  | Submission of Matters to a Vote of
    Security-Holders                                   |  |  | 19  | 
|                                  | Item 5. |  | Other Information                                                                         |  |  | 19  | 
|                                  | Item 6. |  | Exhibits and Reports on Form 8-K                                                          |  |  | 19  | 
|SIGNATURES                        |         |  | 22                                                                                        | 



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##### Table of Contents






PART I

FINANCIAL INFORMATION





Item 1.     Financial
Statements

IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES

(DEBTOR-IN-POSSESSION)


CONDENSED CONSOLIDATED BALANCE
SHEETS

(In thousands of U.S. Dollars)


(Unaudited)


|                                             |                                                                                                                                                       |                                |         |            |           |   |         |            |          |  
|-------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------ | ------- | ---------- | --------- | - | ------- | ---------- | -------- | -
|                                             |                                                                                                                                                       | December 31,                   |         | June 30,  
|                                             |                                                                                                                                                       | 2001                           |         | 2002      
|                                             |                                                                                                                                                       |                                |         |           
|ASSETS                                      
|CURRENT ASSETS:                              |                                                                                                                                                       |                                |         |            |           |   |         |           
|                                             | Cash and cash equivalents                                                                                                                             |                                | $       | 35,606     |           |   | $       | 30,016     |         
|                                             | Trading investments                                                                                                                                   |                                |         | 29,319     |           |   |         | 25,896     |         
|                                             | Trade accounts receivable, net                                                                                                                        |                                |         | 58,411     |           |   |         | 42,840     |         
|                                             | Other receivables                                                                                                                                     |                                |         | 39,003     |           |   |         | 19,133     |         
|                                             | Prepaid expenses                                                                                                                                      |                                |         | 3,429      |           |   |         | 3,820      |         
|                                             |                                                                                                                                                       |                                |         |            |           |   |         |           
|                                             |                                                                                                                                                       | Total current assets           |         |            | 165,768   |   |         |            | 121,705  |  
|                                             |                                                                                                                                                       |                                |         |            |           |   |         |           
|BROADBAND NETWORK, Net                       |                                                                                                                                                       |                                | 310,598 |            |           |   | 274,639 |           
|                                             |                                                                                                                                                       |                                |         |            |           |   |         |           
|PROPERTY, PLANT AND EQUIPMENT, Net           |                                                                                                                                                       |                                | 214,459 |            |           |   | 177,302 |           
|                                             |                                                                                                                                                       |                                |         |            |           |   |         |           
|NON-CURRENT ASSETS:                          |                                                                                                                                                       |                                |         |            |           |   |         |           
|                                             | Investments in common stock                                                                                                                           |                                |         | 3,307      |           |   |         | 1,784      |         
|                                             | Deferred financing costs, net                                                                                                                         |                                |         | 10,752     |           |   |         | 8,609      |         
|                                             | Other non-current assets                                                                                                                              |                                |         | 13,690     |           |   |         | 11,615     |         
|                                             |                                                                                                                                                       |                                |         |            |           |   |         |           
|                                             |                                                                                                                                                       | Total non-current assets       |         |            | 27,749    |   |         |            | 22,008   |  
|                                             |                                                                                                                                                       |                                |         |            |           |   |         |           
|TOTAL                                        |                                                                                                                                                       | $                              | 718,574 |            |           | $ | 595,654 |           
|                                             |                                                                                                                                                       |                                |         |            |           |   |         |           
|LIABILITIES AND STOCKHOLDERS
    DEFICIENCY
|LIABILITIES NOT SUBJECT TO COMPROMISE        |                                                                                                                                                       |                                |         |            |           |   |         |           
|CURRENT LIABILITIES:                         |                                                                                                                                                       |                                |         |            |           |   |         |           
|                                             | Accounts payable  trade                                                                                                                              |                                | $       | 86,999     |           |   | $       | 71,261     |         
|                                             | Short-term debt                                                                                                                                       |                                |         | 8,323      |           |   |         | 7,670      |         
|                                             | Current portion of long-term debt                                                                                                                     |                                |         | 959,076    |           |   |         | 292,742    |         
|                                             | Accrued and other liabilities                                                                                                                         |                                |         | 79,237     |           |   |         | 56,379     |         
|                                             |                                                                                                                                                       |                                |         |            |           |   |         |           
|                                             |                                                                                                                                                       | Total current liabilities      |         |            | 1,133,635 |   |         |            | 428,052  |  
|                                             |                                                                                                                                                       |                                |         |            |           |   |         |           
|LONG-TERM DEBT, Net                          |                                                                                                                                                       |                                | 23,189  |            |           |   | 19,231  |           
|                                             |                                                                                                                                                       |                                |         |            |           |   |         |           
|OTHER LONG-TERM LIABILITIES                  |                                                                                                                                                       |                                | 14,973  |            |           |   | 12,599  |           
|                                             |                                                                                                                                                       |                                |         |            |           |   |         |           
|DEFERRED REVENUES                            |                                                                                                                                                       |                                | 99,419  |            |           |   | 97,422  |           
|                                             |                                                                                                                                                       |                                |         |            |           |   |         |           
|LIABILITIES SUBJECT TO COMPROMISE            |                                                                                                                                                       |                                |         |            |           |   | 727,522 |           
|                                             |                                                                                                                                                       |                                |         |            |           |   |         |           
|COMMITMENTS AND CONTINGENCIES (NOTE 13)      |                                                                                                                                                       |                                |         |            |           |   |         |           
|STOCKHOLDERS DEFICIENCY:                    |                                                                                                                                                       |                                |         |            |           |   |         |           
|                                             | Common Stock, $0.01 par value; 300,000,000 shares
    authorized, 91,428,570 shares issued and outstanding at
    December 31, 2001 and June 30, 2002 |                                |         | 914        |           |   |         | 914        |         
|                                             | Additional paid in capital                                                                                                                            |                                |         | 537,924    |           |   |         | 538,207    |         
|                                             | Accumulated deficit                                                                                                                                   |                                |         | (1,072,330 | )         |   |         | (1,216,437 | )       
|                                             | Deferred stock-based compensation                                                                                                                     |                                |         | (5,438     | )         |   |         | (5,438     | )       
|                                             | Accumulated other comprehensive loss                                                                                                                  |                                |         | (13,712    | )         |   |         | (6,418     | )       
|                                             |                                                                                                                                                       |                                |         |            |           |   |         |           
|                                             |                                                                                                                                                       | Total stockholders deficiency |         |            | (552,642  | ) |         |            | (689,172 | )
|                                             |                                                                                                                                                       |                                |         |            |           |   |         |           
|TOTAL                                        |                                                                                                                                                       | $                              | 718,574 |            |           | $ | 595,654 |           
|                                             |                                                                                                                                                       |                                |         |            |           |   |         |           

See notes to condensed consolidated financial
statements.


F-1



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES

(DEBTOR-IN-POSSESSION)


CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS

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


(Unaudited)


|                                                                       |                                                                            |                        |                                                |                  |        |         |          |         |        |         |          |         |        |         |          |         |        |          |  
|---------------------------------------------------------------------- | -------------------------------------------------------------------------- | ---------------------- | ---------------------------------------------- | ---------------- | ------ | ------- | -------- | ------- | ------ | ------- | -------- | ------- | ------ | ------- | -------- | ------- | ------ | -------- | -
|                                                                       |                                                                            |                        |                                                |                 
|                                                                       |                                                                            | Three Months Ended     |                                                | Six Months Ended
|                                                                       |                                                                            | June 30,               |                                                | June 30,        
|                                                                       |                                                                            |                        |                                                |                 
|                                                                       |                                                                            | 2001                   |                                                | 2002             |        | 2001    |          | 2002   
|                                                                       |                                                                            |                        |                                                |                  |        |         |          |        
|NET REVENUES:                                                          |                                                                            |                        |                                                |                  |        |         |          |         |        |         |          |         |        |         |          |        
|                                                                       | Data and value added services                                              |                        | $                                              | 59,333           |        |         | $        | 46,021  |        |         | $        | 119,060 |        |         | $        | 94,384  |       
|                                                                       | Internet                                                                   |                        |                                                | 11,679           |        |         |          | 7,269   |        |         |          | 22,840  |        |         |          | 15,123  |       
|                                                                       | Telephony                                                                  |                        |                                                | 1,881            |        |         |          | 3,971   |        |         |          | 3,154   |        |         |          | 8,317   |       
|                                                                       | Services to carriers                                                       |                        |                                                | 2,167            |        |         |          | 1,934   |        |         |          | 4,096   |        |         |          | 3,501   |       
|                                                                       | Sales of equipment                                                         |                        |                                                | 2,842            |        |         |          | 146     |        |         |          | 10,925  |        |         |          | 429     |       
|                                                                       |                                                                            |                        |                                                |                  |        |         |          |         |        |         |          |         |        |         |          |        
|                                                                       |                                                                            |                        | Total net revenues from services and equipment |                  |        | 77,902  |          |         |        | 59,341  |          |         |        | 160,075 |          |         |        | 121,754  |  
|                                                                       |                                                                            |                        |                                                |                  |        |         |          |         |        |         |          |         |        |         |          |        
|                                                                       | Broadband network development revenues                                     |                        |                                                | 625              |        |         |          |         |        |         |          | 7,197   |        |         |          |         |       
|                                                                       |                                                                            |                        |                                                |                  |        |         |          |         |        |         |          |         |        |         |          |        
|                                                                       |                                                                            |                        | Total net revenues                             |                  |        | 78,527  |          |         |        | 59,341  |          |         |        | 167,272 |          |         |        | 121,754  |  
|                                                                       |                                                                            |                        |                                                |                  |        |         |          |         |        |         |          |         |        |         |          |        
|COSTS AND EXPENSES:                                                    |                                                                            |                        |                                                |                  |        |         |          |         |        |         |          |         |        |         |          |        
|                                                                       | Direct costs:                                                              |                        |                                                |                  |        |         |          |         |        |         |          |         |        |         |          |         |       
|                                                                       |                                                                            | Contracted services    |                                                |                  | 8,859  |         |          |         | 5,104  |         |          |         | 19,945 |         |          |         | 11,337 |         
|                                                                       |                                                                            | Other direct costs     |                                                |                  | 7,371  |         |          |         | 5,025  |         |          |         | 13,163 |         |          |         | 11,560 |         
|                                                                       |                                                                            | Leased capacity        |                                                |                  | 23,452 |         |          |         | 19,514 |         |          |         | 45,385 |         |          |         | 39,899 |         
|                                                                       |                                                                            | Broadband network cost |                                                |                  |        |         |          |         |        |         |          |         | 3,335  |         |          |         |        |         
|                                                                       |                                                                            | Cost of equipment sold |                                                |                  | 2,105  |         |          |         | 123    |         |          |         | 7,497  |         |          |         | 241    |         
|                                                                       |                                                                            |                        |                                                |                  |        |         |          |         |        |         |          |         |        |         |          |        
|                                                                       |                                                                            |                        | Total direct costs                             |                  |        | 41,787  |          |         |        | 29,766  |          |         |        | 89,325  |          |         |        | 63,037   |  
|                                                                       |                                                                            |                        |                                                |                  |        |         |          |         |        |         |          |         |        |         |          |        
|                                                                       | Salaries and wages                                                         |                        |                                                | 21,900           |        |         |          | 12,593  |        |         |          | 44,097  |        |         |          | 25,635  |       
|                                                                       | Selling, general and administrative                                        |                        |                                                | 14,782           |        |         |          | 6,809   |        |         |          | 29,470  |        |         |          | 14,160  |       
|                                                                       | Depreciation and amortization                                              |                        |                                                | 30,245           |        |         |          | 23,359  |        |         |          | 59,677  |        |         |          | 47,268  |       
|                                                                       |                                                                            |                        |                                                |                  |        |         |          |         |        |         |          |         |        |         |          |        
|                                                                       |                                                                            |                        | Total costs and expenses                       |                  |        | 108,714 |          |         |        | 72,527  |          |         |        | 222,569 |          |         |        | 150,100  |  
|                                                                       |                                                                            |                        |                                                |                  |        |         |          |         |        |         |          |         |        |         |          |        
|Operating loss                                                         |                                                                            |                        | (30,187                                        | )                |        |         | (13,186  | )       |        |         | (55,297  | )       |        |         | (28,346  | )      
|                                                                       |                                                                            |                        |                                                |                  |        |         |          |         |        |         |          |         |        |         |          |        
|OTHER INCOME (EXPENSES):                                               |                                                                            |                        |                                                |                  |        |         |          |         |        |         |          |         |        |         |          |        
|                                                                       | Interest income and investment gains                                       |                        |                                                | 3,582            |        |         |          | 1,172   |        |         |          | 8,092   |        |         |          | 1,527   |       
|                                                                       | Interest expense (contractual interest of $43,686
    and $77,486 in 2002) |                        |                                                | (36,714          | )      |         |          | (38,879 | )      |         |          | (70,223 | )      |         |          | (72,679 | )     
|                                                                       | Net loss on foreign exchange                                               |                        |                                                | (10,369          | )      |         |          | (45,065 | )      |         |          | (24,150 | )      |         |          | (52,431 | )     
|                                                                       | Reorganization items                                                       |                        |                                                |                  |        |         |          | (5,574  | )      |         |          |         |        |         |          | (5,692  | )     
|                                                                       | Other income (loss), net                                                   |                        |                                                | 138              |        |         |          | 246     |        |         |          | 145     |        |         |          | (1,704  | )     
|                                                                       |                                                                            |                        |                                                |                  |        |         |          |         |        |         |          |         |        |         |          |        
|                                                                       |                                                                            |                        | Total other expenses                           |                  |        | (43,363 | )        |         |        | (88,100 | )        |         |        | (86,136 | )        |         |        | (130,979 | )
|                                                                       |                                                                            |                        |                                                |                  |        |         |          |         |        |         |          |         |        |         |          |        
|LOSS BEFORE INCOME TAXES                                               |                                                                            |                        | (73,550                                        | )                |        |         | (101,286 | )       |        |         | (141,433 | )       |        |         | (159,325 | )      
|PROVISION FOR FOREIGN INCOME TAXES                                     |                                                                            |                        | (26,122                                        | )                |        |         | (711     | )       |        |         | (26,488  | )       |        |         | (1,149   | )      
|                                                                       |                                                                            |                        |                                                |                  |        |         |          |         |        |         |          |         |        |         |          |        
|NET LOSS BEFORE EXTRAORDINARY GAIN ON EARLY
    EXTINGUISHMENT OF DEBT |                                                                            |                        | (99,672                                        | )                |        |         | (101,997 | )       |        |         | (167,921 | )       |        |         | (160,474 | )      
|GAIN ON EARLY EXTINGUISHMENT OF DEBT                                   |                                                                            |                        |                                                |                  |        |         | 16,367   |         |        |         |          |         |        |         | 16,367   |        
|                                                                       |                                                                            |                        |                                                |                  |        |         |          |         |        |         |          |         |        |         |          |        
|NET LOSS                                                               |                                                                            | $                      | (99,672                                        | )                |        | $       | (85,630  | )       |        | $       | (167,921 | )       |        | $       | (144,107 | )      
|                                                                       |                                                                            |                        |                                                |                  |        |         |          |         |        |         |          |         |        |         |          |        
|NET LOSS PER COMMON SHARE:                                             |                                                                            |                        |                                                |                  |        |         |          |         |        |         |          |         |        |         |          |        
|                                                                       | NET LOSS BEFORE EXTRAORDINARY ITEM                                         |                        | $                                              | (1.09            | )      |         | $        | (1.12   | )      |         | $        | (1.84   | )      |         | $        | (1.76   | )     
|                                                                       | EXTRAORDINARY ITEM                                                         |                        |                                                |                  |        |         |          | 0.18    |        |         |          |         |        |         |          | 0.18    |       
|                                                                       |                                                                            |                        |                                                |                  |        |         |          |         |        |         |          |         |        |         |          |        
|                                                                       | BASIC AND DILUTED                                                          |                        | $                                              | (1.09            | )      |         | $        | (0.94   | )      |         | $        | (1.84   | )      |         | $        | (1.58   | )     
|                                                                       |                                                                            |                        |                                                |                  |        |         |          |         |        |         |          |         |        |         |          |        
|WEIGHTED AVERAGE NUMBER OF COMMON SHARES:                              |                                                                            |                        |                                                |                  |        |         |          |         |        |         |          |         |        |         |          |        
|                                                                       | BASIC AND DILUTED                                                          |                        |                                                | 91,429           |        |         |          | 91,429  |        |         |          | 91,429  |        |         |          | 91,429  |       
|                                                                       |                                                                            |                        |                                                |                  |        |         |          |         |        |         |          |         |        |         |          |        

See notes to condensed consolidated financial
statements.


F-2



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES

(DEBTOR-IN-POSSESSION)


CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE LOSS

(In thousands of U.S. Dollars)


(Unaudited)


|                                   |                                                                        |                    |          |                  |         |      |         |       |       |   |          |        |         |   |          |        |       | 
|---------------------------------- | ---------------------------------------------------------------------- | ------------------ | -------- | ---------------- | ------- | ---- | ------- | ----- | ----- | - | -------- | ------ | ------- | - | -------- | ------ | ----- | 
|                                   |                                                                        |                    |          |                 
|                                   |                                                                        | Three Months Ended |          | Six Months Ended
|                                   |                                                                        | June 30,           |          | June 30,        
|                                   |                                                                        |                    |          |                 
|                                   |                                                                        | 2001               |          | 2002             |         | 2001 |         | 2002 
|                                   |                                                                        |                    |          |                  |         |      |         |      
|NET LOSS                           |                                                                        | $                  | (99,672  | )                |         | $    | (85,630 | )     |       | $ | (167,921 | )      |         | $ | (144,107 | )     
|                                   |                                                                        |                    |          |                  |         |      |         |       |       |   |          |        |         |   |          |       
|OTHER COMPREHENSIVE (LOSS) INCOME: |                                                                        |                    |          |                  |         |      |         |       |       |   |          |        |         |   |          |       
|                                   | Foreign currency translation adjustment                                |                    |          | (1,230           | )       |      |         | 7,972 |       |   |          | (4,982 | )       |   |          | 7,707  |      
|                                   | Change in unrealized loss on investments
    available for sale        |                    |          | (10,357          | )       |      |         | (362  | )     |   |          | (8,445 | )       |   |          | (1,229 | )    
|                                   | Recognition of other-than-temporary decline in
    value of investment |                    |          |                  |         |      |         | 142   |       |   |          |        |         |   |          | 816    |      
|                                   |                                                                        | TOTAL              |          |                  | (11,587 | )    |         |       | 7,752 |   |          |        | (13,427 | ) |          |        | 7,294 | 
|                                   |                                                                        |                    |          |                  |         |      |         |       |       |   |          |        |         |   |          |       
|COMPREHENSIVE LOSS                 |                                                                        | $                  | (111,259 | )                |         | $    | (77,878 | )     |       | $ | (181,348 | )      |         | $ | (136,813 | )     
|                                   |                                                                        |                    |          |                  |         |      |         |       |       |   |          |        |         |   |          |       

See notes to condensed consolidated financial
statements.

F-3



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES

(DEBTOR-IN-POSSESSION)


CONDENSED CONSOLIDATED STATEMENTS OF
STOCKHOLDERS DEFICIENCY

FOR SIX MONTHS ENDED JUNE 30,
2002


(In thousands of U.S. Dollars)


(Unaudited)


|                             |                                                                                                       |              |            |            |  |             |     |             |  |               |          |      |  |       |              |           |  |   |        |   |  |   |         |        |   |   |          |          |  
|---------------------------- | ----------------------------------------------------------------------------------------------------- | ------------ | ---------- | ---------- |  | ----------- | --- | ----------- |  | ------------- | -------- | ---- |  | ----- | ------------ | --------- |  | - | ------ | - |  | - | ------- | ------ | - | - | -------- | -------- | -
|                             |                                                                                                       |              |            |            |  |             |     |             |  | Accumulated   |          |     
|                             |                                                                                                       | Common Stock |            | Additional |  |             |     | Deferred    |  | Other         |          |     
|                             |                                                                                                       |              |            | Paid In    |  | Accumulated |     | Stock-Based |  | Comprehensive |          |     
|                             |                                                                                                       | Shares       |            | Amount     |  | Capital     |     | Deficit     |  | Compensation  |          | Loss |  | Total
|                             |                                                                                                       |              |            |            |  |             |     |             |  |               |          |      |  |      
|BALANCE AT DECEMBER 31, 2001 |                                                                                                       |              | 91,428,570 |            |  | $           | 914 |             |  |               | $537,924 |      |  |       | $(1,072,330) |           |  | $ | (5,438 | ) |  | $ | (13,712 | )      |   | $ | (552,642 | )       
|                             | Amortization of amount paid in excess of carrying
    value of net assets acquired from related party |              |            |            |  |             |     |             |  |               |          | 283  |  |       |              |           |  |   |        |   |  |   |         |        |   |   |          | 283      |  
|                             | Change in unrealized loss on investment available
    for sale                                        |              |            |            |  |             |     |             |  |               |          |      |  |       |              |           |  |   |        |   |  |   |         | (1,229 | ) |   |          | (1,229   | )
|                             | Recognition of other-than-temporary decline in
    value of investment                                |              |            |            |  |             |     |             |  |               |          |      |  |       |              |           |  |   |        |   |  |   |         | 816    |   |   |          | 816      |  
|                             | Foreign currency translation adjustment                                                               |              |            |            |  |             |     |             |  |               |          |      |  |       |              |           |  |   |        |   |  |   |         | 7,707  |   |   |          | 7,707    |  
|                             | Net loss for the period                                                                               |              |            |            |  |             |     |             |  |               |          |      |  |       |              | (144,107) |  |   |        |   |  |   |         |        |   |   |          | (144,107 | )
|                             |                                                                                                       |              |            |            |  |             |     |             |  |               |          |      |  |       |              |           |  |   |        |   |  |   |         |        |   |   |          |         
|BALANCE AT JUNE 30, 2002     |                                                                                                       |              | 91,428,570 |            |  | $           | 914 |             |  |               | $538,207 |      |  |       | $(1,216,437) |           |  | $ | (5,438 | ) |  | $ | (6,418  | )      |   | $ | (689,172 | )       
|                             |                                                                                                       |              |            |            |  |             |     |             |  |               |          |      |  |       |              |           |  |   |        |   |  |   |         |        |   |   |          |         

See notes to condensed consolidated financial
statements.

F-4



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES

(DEBTOR-IN-POSSESSION)


CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS

(In thousands of U.S. Dollars)


(Unaudited)


|                                                                         |                                                                                                                   |                                                                        |                                                                           |                                                         |        |         |         |          |         |         |        |  
|------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------- | ------------------------------------------------------------------------- | ------------------------------------------------------- | ------ | ------- | ------- | -------- | ------- | ------- | ------ | -
|                                                                         |                                                                                                                   |                                                                       
|                                                                         |                                                                                                                   | Six Months Ended                                                      
|                                                                         |                                                                                                                   | June 30,                                                              
|                                                                         |                                                                                                                   |                                                                       
|                                                                         |                                                                                                                   | 2001                                                                   |                                                                           | 2002                                                   
|                                                                         |                                                                                                                   |                                                                        |                                                                           |                                                        
|CASH FLOWS FROM OPERATING ACTIVITIES:                                    |                                                                                                                   |                                                                        |                                                                           |                                                         |        |         |         |         
|                                                                         | Net loss                                                                                                          |                                                                        | $                                                                         | (167,921                                                | )      |         | $       | (144,107 | )      
|                                                                         | Adjustments to reconcile net loss to net cash
    provided by (used in) operating activities, net of acquisition: |                                                                        |                                                                           |                                                         |        |         |         |          |        
|                                                                         |                                                                                                                   | Amortization and depreciation                                          |                                                                           |                                                         | 59,677 |         |         |          | 47,268  |        
|                                                                         |                                                                                                                   | Provision for doubtful accounts                                        |                                                                           |                                                         | 4,248  |         |         |          | 5,010   |        
|                                                                         |                                                                                                                   | Recognition of other-than-temporary decline in
    value of investment |                                                                           |                                                         |        |         |         |          | 816     |        
|                                                                         |                                                                                                                   | Gain on early extinguishment of debt                                   |                                                                           |                                                         |        |         |         |          | (16,367 | )      
|                                                                         |                                                                                                                   | Deferred income tax (benefit) provision                                |                                                                           |                                                         | 25,880 |         |         |          |         |        
|                                                                         |                                                                                                                   | Reorganization items                                                   |                                                                           |                                                         |        |         |         |          | 5,692   |        
|                                                                         |                                                                                                                   | Changes in assets and liabilities:                                     |                                                                           |                                                         |        |         |         |          |         |        
|                                                                         |                                                                                                                   |                                                                        | (Increase) decrease in trade accounts receivable,
    net                 |                                                         |        | (8,233  | )       |          |         | 10,561  |       
|                                                                         |                                                                                                                   |                                                                        | Increase in prepaid expenses                                              |                                                         |        | (2,220  | )       |          |         | (391    | )     
|                                                                         |                                                                                                                   |                                                                        | (Increase) decrease in other receivables and
    other non-current assets |                                                         |        | 3,258   |         |          |         | 52,663  |       
|                                                                         |                                                                                                                   |                                                                        | Increase (decrease) in accounts
    payable  trade                       |                                                         |        | 6,193   |         |          |         | (15,738 | )     
|                                                                         |                                                                                                                   |                                                                        | Increase in accrued and other liabilities                                 |                                                         |        | (396    | )       |          |         | 54,664  |       
|                                                                         |                                                                                                                   |                                                                        | Increase (decrease) in deferred revenues                                  |                                                         |        | 39,649  |         |          |         | (1,997  | )     
|                                                                         |                                                                                                                   |                                                                        | Decrease in other long-term liabilities                                   |                                                         |        | (12,093 | )       |          |         | (2,374  | )     
|                                                                         |                                                                                                                   |                                                                        |                                                                           |                                                         |        |         |         |         
|                                                                         |                                                                                                                   |                                                                        |                                                                           | Net cash provided by (used in) operating
    activities |        |         | (51,958 | )        |         |         | (4,300 | )
|                                                                         |                                                                                                                   |                                                                        |                                                                           |                                                         |        |         |         |         
|CASH FLOWS FROM INVESTING ACTIVITIES:                                    |                                                                                                                   |                                                                        |                                                                           |                                                         |        |         |         |         
|                                                                         | Net decrease in trading investments                                                                               |                                                                        |                                                                           | 163,353                                                 |        |         |         | 3,423    |        
|                                                                         | Purchases of broadband network, net of disposals                                                                  |                                                                        |                                                                           | (59,060                                                 | )      |         |         | (5,059   | )      
|                                                                         | Purchases of property, plant and equipment, net
    of disposals                                                  |                                                                        |                                                                           | (53,663                                                 | )      |         |         | (2,783   | )      
|                                                                         | Decrease in other investment                                                                                      |                                                                        |                                                                           | (306                                                    | )      |         |         |          |        
|                                                                         |                                                                                                                   |                                                                        |                                                                           |                                                         |        |         |         |         
|                                                                         |                                                                                                                   |                                                                        |                                                                           | Net cash provided by (used in) investing
    activities |        |         | 50,324  |          |         |         | (4,419 | )
|                                                                         |                                                                                                                   |                                                                        |                                                                           |                                                         |        |         |         |         
|CASH FLOWS FROM FINANCING ACTIVITIES:                                    |                                                                                                                   |                                                                        |                                                                           |                                                         |        |         |         |         
|                                                                         | Net borrowings from short-term debt                                                                               |                                                                        |                                                                           | 1,552                                                   |        |         |         | (653     | )      
|                                                                         | Proceeds from long-term debt, net of deferred
    financing costs                                                 |                                                                        |                                                                           | 16,129                                                  |        |         |         |          |        
|                                                                         | Repayments of long-term debt                                                                                      |                                                                        |                                                                           | (11,849                                                 | )      |         |         | (3,925   | )      
|                                                                         |                                                                                                                   |                                                                        |                                                                           |                                                         |        |         |         |         
|                                                                         |                                                                                                                   |                                                                        |                                                                           | Net cash provided by (used in) financing
    activities |        |         | 5,832   |          |         |         | (4,578 | )
|                                                                         |                                                                                                                   |                                                                        |                                                                           |                                                         |        |         |         |         
|EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH
    EQUIVALENTS          |                                                                                                                   |                                                                        | (4,982                                                                    | )                                                       |        |         | 7,707   |         
|                                                                         |                                                                                                                   |                                                                        |                                                                           |                                                         |        |         |         |         
|NET INCREASE (DECREASE) IN CASH AND CASH
    EQUIVALENTS                 |                                                                                                                   |                                                                        | (784                                                                      | )                                                       |        |         | (5,590  | )       
|CASH AND CASH EQUIVALENTS AT BEGINNING OF THE
    PERIOD                 |                                                                                                                   |                                                                        | 67,737                                                                    |                                                         |        |         | 35,606  |         
|                                                                         |                                                                                                                   |                                                                        |                                                                           |                                                         |        |         |         |         
|CASH AND CASH EQUIVALENTS AT END OF THE PERIOD                           |                                                                                                                   | $                                                                      | 66,953                                                                    |                                                         |        | $       | 30,616  |         
|                                                                         |                                                                                                                   |                                                                        |                                                                           |                                                         |        |         |         |         
|SUPPLEMENTAL CASH FLOW INFORMATION:                                      |                                                                                                                   |                                                                        |                                                                           |                                                         |        |         |         |         
|                                                                         | Interest paid                                                                                                     |                                                                        | $                                                                         | 69,723                                                  |        |         | $       | 10,827   |        
|                                                                         |                                                                                                                   |                                                                        |                                                                           |                                                         |        |         |         |         
|                                                                         | Foreign income taxes paid                                                                                         |                                                                        | $                                                                         | 190                                                     |        |         | $       | 1,377    |        
|                                                                         |                                                                                                                   |                                                                        |                                                                           |                                                         |        |         |         |         
|                                                                         | Cash paid during period for reorganization items:                                                                 |                                                                        |                                                                           |                                                         |        |         |         |          |        
|                                                                         |                                                                                                                   | Professional fees                                                      |                                                                           |                                                         |        |         |         | $        | 2,878   |        
|                                                                         |                                                                                                                   |                                                                        |                                                                           |                                                         |        |         |         |         
|                                                                         |                                                                                                                   | Other reorganization payments                                          |                                                                           |                                                         |        |         |         | $        | 2,814   |        
|                                                                         |                                                                                                                   |                                                                        |                                                                           |                                                         |        |         |         |         
|SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
    FINANCING ACTIVITIES: |                                                                                                                   |                                                                        |                                                                           |                                                         |        |         |         |         
|                                                                         | Change to unrealized gain (loss) in
    investment available for sale                                             |                                                                        | $                                                                         | (8,445                                                  | )      |         | $       | (1,229   | )      
|                                                                         |                                                                                                                   |                                                                        |                                                                           |                                                         |        |         |         |         
|                                                                         | Broadband network vendor financing                                                                                |                                                                        | $                                                                         | 32,624                                                  |        |         |         |          |        
|                                                                         |                                                                                                                   |                                                                        |                                                                           |                                                         |        |         |         |         

See notes to condensed consolidated financial
statements.


F-5



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES

(DEBTOR-IN-POSSESSION)


NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS

(Tables in thousands of U.S. dollars, except
for per share amounts)


1.     GENERAL

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

The Company currently provides telecommunications
services to its customers using its local access and long haul
fiber optic and satellite networks. The deployed facilities
include 15 metropolitan area networks in the largest cities of
the region, long haul networks across Argentina, Brazil, Chile
and Colombia, and leased submarine capacity to link South
America to the United States. Finally, the Company has 500,000
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 Peru 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.

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

The Holding Company anticipates it will file a
reorganization plan in accordance with the terms of the
Restructuring Term Sheet (described below under Financial
Restructuring) during the third quarter of 2002 that will
provide for emergence from bankruptcy upon completion of a
financial restructuring described below. There can be no
assurances that any reorganization will be approved by the
Bankruptcy Court. If the Holding Company is unable to obtain
confirmation of a plan of reorganization, the Holding
Companys creditors may seek other alternatives for the
Holding Company, including accepting bids for the Holding

F-6



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


Company or parts thereof through an auction
process or forcing the Holding Company into a liquidation
proceeding under the federal bankruptcy laws. The Holding
Companys operating subsidiaries did not commence
bankruptcy proceedings and we expect them to continue to operate
in the ordinary course of business without any court-imposed
restrictions.

The Holding Companys balance sheet as of
June 30, 2002 consists primarily of cash and trading
investments of approximately $26.0 million, other assets of
approximately $9.0 million and the net investment in each
of its consolidated subsidiaries. The Holding Companys
liabilities are described in Note 11 under
liabilities subject to compromise.

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

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



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



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



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

F-7



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




| |   |                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | management would receive 2% of the Holding
    Companys new common stock plus stock options representing
    8% of the Holding Companys new common stock.

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

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

2.     SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES

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

Interim Financial Information The unaudited condensed consolidated
financial statements as of June 30, 2002 and for the three
and six months ended June 30, 2001 and 2002 have been
prepared on the same basis as the Companys audited
consolidated financial statements. In the opinion of management,
the unaudited condensed consolidated financial statements
include all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the results for such
period. The operating results for the three and six months ended
June 30, 2002 are not necessarily indicative of the
operating results to be expected for the full fiscal year or for
any future period.

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

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

Currency Risks In early January 2002, as
Argentinas ongoing political and financial crisis
deepened, the country defaulted on its massive foreign debt and
the government of President Eduardo Duhalde, who entered office
on January 1, 2002, abandoned the decade-old fixed
peso-dollar exchange rate and permitted

F-8



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


the pesoto float freely against the U.S.
dollar. The pesofree market opened on January 11,
2002 at 1.65 pesosto the U.S. dollar and has been
volatile since. At June 30, 2002, the Argentine pesotraded at pesos3.90 to the U.S. dollar. The
devaluation of the Argentine pesowill generally affect
the Companys condensed consolidated financial statements
by generating foreign exchange gains or losses on
peso-denominated monetary liabilities and assets of
IMPSAT Argentina and will generally result in a decrease, in
U.S. dollar terms, in the Companys revenues, costs and
expenses in Argentina.

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

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

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

The Companys results in Brazil also were
adversely affected during the period by the devaluation of the
Brazilian real against the U.S. dollar. At June 30, 2001,
the real traded at a rate of R$2.31 = $1.00, and at
June 30, 2002 it had depreciated to R$2.83 = $1.00. As of
August 9, 2002, the real traded at a rate of

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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


R$2.94 = $1.00. These and prior devaluations
have had a negative effect on the Companys
real-denominated revenues. The devaluation of the realand the decline in growth in the Brazilian economy have been
caused in part by the continued recession in the region, a
general aversion to emerging markets by foreign direct and
financial investors and the overall decline in worldwide
economic production. Recently, fears have mounted in the
international investor community that left-wing candidate, Luiz
Inacio Lula da Silva, could win Brazils upcoming
presidential elections and cause Brazil to alter its policies in
a manner that would adversely affect its economy. These
conditions have had, and can be expected to continue to have, an
adverse effect on IMPSAT Brazils and the Companys
overall financial condition and results of operations.

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

Revenue Recognition Revenues from data, value-added
telephony, IT Solutions and Internet services are recognized
monthly as the services are provided. Equipment sales are
recorded upon delivery to and acceptance by the customer. In
addition, the Company has entered into, and may enter into in
the future, agreements with carriers granting indefeasible
rights of use (IRUs) and access to portions the
Companys broadband network capacity and infrastructure.
Pursuant to these agreements, the Company will receive fixed
advance payments for the IRU and will recognize the revenue from
the IRU ratably over the life of the IRU. Amounts received in
advance are recorded as deferred revenue in the accompanying
condensed consolidated balance sheets. The Securities and
Exchange Commission (the SEC) issued Staff
Accounting Bulletin (SAB) No. 101, Revenue
Recognition in Financial Statements. SAB No. 101
summarizes the SECs views on the application of generally
accepted accounting principles to revenue recognition. The
Company has 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, 2001 and 2002.

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

Broadband Network Costs in connection with the
construction, installation and expansion of the Broadband
Network are capitalized. Rights of way agreements represent the
fees paid and the net present value of fees to be paid per
signed agreements entered into for obtaining rights of way and
other permits for the Broadband Network. These capitalized
agreements are being amortized over the term of the rights of
way, which range from 10 to 20 years.

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

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

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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


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

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

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

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

Deferred Financing Costs Debt issuance costs and transaction
fees, which are associated with the issuance of the Senior
Notes, are being amortized (and charged to interest expense)
over the term of the related Senior Notes on a method which
approximates the level yield method.

Long-Lived Assets Long-lived assets, including goodwill,
are reviewed on an ongoing basis for impairment based on a
comparison of carrying values to the related undiscounted future
cash flows. If the carrying amounts exceed such cash flows,
identifying a possible impairment, the assets carrying
amount is adjusted to fair value. During the three and six month
periods ended June 30, 2001 and 2002, no impairments were
recorded.

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

Foreign Currency Translation The Companys subsidiaries
generally use the U.S. dollar as the functional currency.
Accordingly, the financial statements of the subsidiaries were
remeasured. The effects of foreign currency transactions and of
remeasuring the financial position and results of operations
into the functional currency are included as net gain or loss on
foreign exchange except for IMPSAT Brazil, which uses the local
currency as the functional currency and which is included in
accumulated other comprehensive income (loss) in
stockholders equity.

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

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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)




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 Gain |  |      
|                             |  |             |         | (Loss) on       |  |      
|                             |  | Foreign     |         | Investments     |  |      
|                             |  | Currency    |         | Available for   |  |      
|                             |  | Translation |         | Sale            |  | Total
|                             |  |             |         |                 |  |      
|Balance at December 31, 2001 |  | $           | (13,395 | )               |  | $     | (317 | ) |  | $ | (13,712 | )
|Change during the period     |  |             | 7,707   |                 |  |       | (413 | ) |  |   | 7,294   |  
|                             |  |             |         |                 |  |       |      |   |  |   |         |  
|Balance at June 30, 2002     |  | $           | (5,688  | )               |  | $     | (730 | ) |  | $ | (6,418  | )
|                             |  |             |         |                 |  |       |      |   |  |   |         |  

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

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

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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


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

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

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

3.     INVESTMENTS

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

|                                   |  |              |        |          |  |   |        | 
|---------------------------------- |  | ------------ | ------ | -------- |  | - | ------ | 
|                                   |  | December 31, |        | June 30,
|                                   |  | 2001         |        | 2002    
|                                   |  |              |        |         
|Trading investments, at fair value |  | $            | 29,319 |          |  | $ | 25,896 | 
|Investments in common stock        |  |              | 3,307  |          |  |   | 1,784  | 

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

The Companys investments in common stock
includes a 3.3% ownership interest in the outstanding common
stock of Claxson Interactive Group Inc., an integrated media
company with operations in Latin America. This investment is
subject to equity price risk. The Company has not taken any
actions to hedge this market risk exposure. During the period
ended June 30, 2002, the Company recorded a non-cash charge
of $0.8 million, which reflected an other-than-temporary
decline in value of this investment based upon a sustained
reduction in the quoted market price of $0.10 per share compared
to the adjusted cost basis of $1.43 per share.

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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


4.  TRADE ACCOUNTS
RECEIVABLE

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

|                                      |       |              |         |          |  |   |         |        | 
|------------------------------------- | ----- | ------------ | ------- | -------- |  | - | ------- | ------ | 
|                                      |       | December 31, |         | June 30,
|                                      |       | 2001         |         | 2002    
|                                      |       |              |         |         
|IMPSAT Argentina                      |       | $            | 51,037  |          |  | $ | 30,405  |       
|IMPSAT Brasil                         |       |              | 6,714   |          |  |   | 5,343   |       
|IMPSAT Colombia                       |       |              | 5,033   |          |  |   | 4,665   |       
|IMPSAT Venezuela                      |       |              | 6,637   |          |  |   | 8,272   |       
|All other countries                   |       |              | 12,772  |          |  |   | 11,873  |       
|                                      |       |              |         |          |  |   |         |       
|                                      | Total |              |         | 82,193   |  |   |         | 60,558 | 
|Less: allowance for doubtful accounts |       |              | (23,782 | )        |  |   | (17,718 | )     
|                                      |       |              |         |          |  |   |         |       
|Trade accounts receivable, net        |       | $            | 58,411  |          |  | $ | 42,840  |       
|                                      |       |              |         |          |  |   |         |       

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

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

|                                |  |              |        |          |  |   |         |  
|------------------------------- |  | ------------ | ------ | -------- |  | - | ------- | -
|                                |  | December 31, |        | June 30,
|                                |  | 2001         |        | 2002    
|                                |  |              |        |         
|Beginning balance               |  | $            | 22,509 |          |  | $ | 23,782  |  
|Provision for doubtful accounts |  |              | 16,784 |          |  |   | 5,010   |  
|Write-offs, net of recoveries   |  |              | (7,697 | )        |  |   | (609    | )
|Effect of exchange rate change  |  |              | (7,814 | )        |  |   | (10,465 | )
|                                |  |              |        |          |  |   |         |  
|Ending balance                  |  | $            | 23,782 |          |  | $ | 17,718  |  
|                                |  |              |        |          |  |   |         |  

5.  OTHER RECEIVABLES

Other receivables consist primarily of refunds or
credits pending from local governments for taxes other than
income, advances to suppliers, and other miscellaneous amounts
due to the Company and its operating subsidiaries and are as
follows at December 31, 2001 and June 30, 2002:

|                    |       |              |        |          |  |   |       |        | 
|------------------- | ----- | ------------ | ------ | -------- |  | - | ----- | ------ | 
|                    |       | December 31, |        | June 30,
|                    |       | 2001         |        | 2002    
|                    |       |              |        |         
|IMPSAT Argentina    |       | $            | 22,155 |          |  | $ | 6,612 |       
|IMPSAT Brazil       |       |              | 3,209  |          |  |   | 2,937 |       
|IMPSAT Colombia     |       |              | 3,777  |          |  |   | 2,431 |       
|IMPSAT Venezuela    |       |              | 2,667  |          |  |   | 1,315 |       
|All other countries |       |              | 7,195  |          |  |   | 5,838 |       
|                    |       |              |        |          |  |   |       |       
|                    | Total |              | $      | 39,003   |  |   | $     | 19,133 | 
|                    |       |              |        |          |  |   |       |       

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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


6.  BROADBAND NETWORK AND
AGREEMENTS

Broadband network and related equipment consists
of the following at December 31, 2001 and June 30,
2002:

|                                                |       |              |         |          |  |   |         |         | 
|----------------------------------------------- | ----- | ------------ | ------- | -------- |  | - | ------- | ------- | 
|                                                |       | December 31, |         | June 30,
|                                                |       | 2001         |         | 2002    
|                                                |       |              |         |         
|Network infrastructure                          |       | $            | 168,301 |          |  | $ | 155,411 |        
|Equipment and materials                         |       |              | 132,494 |          |  |   | 125,931 |        
|Right of ways                                   |       |              | 16,056  |          |  |   | 14,106  |        
|IRU investments                                 |       |              | 46,913  |          |  |   | 48,650  |        
|                                                |       |              |         |          |  |   |         |        
|                                                | Total |              |         | 363,764  |  |   |         | 344,098 | 
|Less: accumulated depreciation                  |       |              | (83,373 | )        |  |   | (96,895 | )      
|                                                |       |              |         |          |  |   |         |        
|                                                | Total |              |         | 280,391  |  |   |         | 247,203 | 
|Under construction  Network
    infrastructure |       |              | 30,207  |          |  |   | 27,436  |        
|                                                |       |              |         |          |  |   |         |        
|                                                | Total |              | $       | 310,598  |  |   | $       | 274,639 | 
|                                                |       |              |         |          |  |   |         |        

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

|                          |  |              |        |          |  |   |        |  
|------------------------- |  | ------------ | ------ | -------- |  | - | ------ | -
|                          |  | December 31, |        | June 30,
|                          |  | 2001         |        | 2002    
|                          |  |              |        |         
|Beginning balance         |  | $            | 46,433 |          |  | $ | 83,373 |  
|Depreciation expense      |  |              | 41,173 |          |  |   | 18,465 |  
|Disposals and retirements |  |              | (4,233 | )        |  |   | (4,943 | )
|                          |  |              |        |          |  |   |        |  
|Ending balance            |  | $            | 83,373 |          |  | $ | 96,895 |  
|                          |  |              |        |          |  |   |        |  

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, IMPSAT Argentina and
IMPSAT Brazil each signed definitive agreements with Nortel to
borrow an aggregate of up to approximately $149.1 million
and $148.3 million, respectively, of long-term vendor
financing. The financing, which has a final maturity in 2006,
was used to finance Nortels construction of the segments
of the Broadband Network in Argentina and Brazil as well as
additional purchases of telecommunications equipment. The
Company has guaranteed the obligations of each of IMPSAT
Argentina and IMPSAT Brazil under the Nortel financing
agreements. At June 30, 2002, a total of $245.4 million was
outstanding. (See Note 1 for a description of the restructuring
of these amounts under the Holding Companys proposed
restructuring plan.)

The Companys subsidiaries have obtained
additional vendor financing from Ericsson, Tellabs OY, DMC and
Harris Canada, Inc. for the acquisition of fiber optic cable and
other telecommunications equipment for the Broadband Network,
with respect to which an aggregate of $14.6 million was
disbursed and outstanding as of June 30, 2002, which are
guaranteed by the Company.

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

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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


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

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

IRU
Agreements The Company
has entered into several framework agreements granting IRUs of
up to 25 years on the Companys Broadband Network,
including network maintenance services and telehousing space.
The Company has received advance payments related to these
agreements. These advance payments are recorded as deferred
revenue in the accompanying condensed consolidated balance
sheets. During the three and six months ended June 30,
2002, the Company recognized approximately $1.1 million and
$2.0 million, respectively, from these agreements, which
are reflected as services to carriers in the accompanying
condensed consolidated statement of operations.

7.  PROPERTY, PLANT AND
EQUIPMENT

Property, plant and equipment at
December 31, 2001 and June 30, 2002, consisted of:

|                                        |       |              |          |          |  |   |          |         | 
|--------------------------------------- | ----- | ------------ | -------- | -------- |  | - | -------- | ------- | 
|                                        |       | December 31, |          | June 30,
|                                        |       | 2001         |          | 2002    
|                                        |       |              |          |         
|Land                                    |       | $            | 11,223   |          |  | $ | 11,184   |        
|Building and improvements               |       |              | 68,350   |          |  |   | 67,186   |        
|Operating communications equipment      |       |              | 424,428  |          |  |   | 410,896  |        
|Furniture, fixtures and other equipment |       |              | 36,376   |          |  |   | 37,748   |        
|                                        |       |              |          |          |  |   |          |        
|                                        | Total |              |          | 540,377  |  |   |          | 527,014 | 
|Less: accumulated depreciation          |       |              | (332,345 | )        |  |   | (354,254 | )      
|                                        |       |              |          |          |  |   |          |        
|                                        | Total |              |          | 208,032  |  |   |          | 172,760 | 
|Equipment in transit                    |       |              | 3,413    |          |  |   | 2,147    |        
|Works in process                        |       |              | 3,014    |          |  |   | 2,395    |        
|                                        |       |              |          |          |  |   |          |        
|Property, plant and equipment, net      |       | $            | 214,459  |          |  | $ | 177,302  |        
|                                        |       |              |          |          |  |   |          |        

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

|                          |  |              |         |          |  |   |         |  
|------------------------- |  | ------------ | ------- | -------- |  | - | ------- | -
|                          |  | December 31, |         | June 30,
|                          |  | 2001         |         | 2002    
|                          |  |              |         |         
|Beginning balance         |  | $            | 265,354 |          |  | $ | 332,345 |  
|Depreciation expense      |  |              | 76,465  |          |  |   | 28,518  |  
|Disposals and retirements |  |              | (9,474  | )        |  |   | (6,609  | )
|                          |  |              |         |          |  |   |         |  
|Ending balance            |  | $            | 332,345 |          |  | $ | 354,254 |  
|                          |  |              |         |          |  |   |         |  

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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


8.  SHORT-TERM DEBT

Several of the Companys subsidiaries
maintain short-term credit facilities with local banks. These
credit facilities are denominated in local currencies and U.S.
dollars, with interest rates ranging from 14.24% to 18.75%. The
Companys subsidiaries have historically refinanced these
short-term credit facilities on an annual basis. As of
December 31, 2001 and June 30, 2002, amounts
outstanding under these credit facilities totaled approximately
$8.3 million and $7.7 million, respectively.

9.  LONG-TERM DEBT

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

|                                                                                                                                                                     |                                          |                                                    |                      |          |        |         |          |   |        |         | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------- | -------------------------------------------------- | -------------------- | -------- | ------ | ------- | -------- | - | ------ | ------- | 
|                                                                                                                                                                     |                                          | December 31,                                       |                      | June 30,
|                                                                                                                                                                     |                                          | 2001                                               |                      | 2002    
|                                                                                                                                                                     |                                          |                                                    |                      |         
|Senior Notes:                                                                                                                                                        |                                          |                                                    |                      |          |        |         |          |  
|                                                                                                                                                                     | 12.125% Senior Guaranteed Notes due 2003 |                                                    | $                    | 125,000  |        |         |          |   |       
|                                                                                                                                                                     | 13.75% Senior Notes due 2005             |                                                    |                      | 300,000  |        |         |          |   |       
|                                                                                                                                                                     | 12.375% Senior Notes due 2008            |                                                    |                      | 225,000  |        |         |          |   |       
|Term notes, maturing from 2001 through 2005;
    collateralized by buildings and equipment, the assignment of
    customer contracts and investment; denominated in: |                                          |                                                    |                      |          |        |         |          |  
|                                                                                                                                                                     |                                          | U.S. dollars (interest rates
    5.75%  38.37%)   |                      |          | 16,325 |         |          | $ | 12,792 |        
|                                                                                                                                                                     |                                          | Local currency (interest rates
    12.76  18.42%) |                      |          | 21,904 |         |          |   | 20,854 |        
|Eximbank notes (interest rates
    3.97%  10.09%), maturing semiannually through
    2002 and 2004                                                                  |                                          |                                                    | 18,585               |          |        |         | 18,308   |  
|Vendor financing (3.59%  24.68%),
    maturing 2004 to 2008                                                                                                         |                                          |                                                    | 275,451              |          |        |         | 260,019  |  
|                                                                                                                                                                     |                                          |                                                    |                      |          |        |         |          |  
|                                                                                                                                                                     |                                          |                                                    | Total long-term debt |          |        | 982,265 |          |   |        | 311,973 | 
|Less: current portion including defaulted
    indebtedness                                                                                                           |                                          |                                                    | (959,076             | )        |        |         | (292,742 | )
|                                                                                                                                                                     |                                          |                                                    |                      |          |        |         |          |  
|Long-term debt, net                                                                                                                                                  |                                          | $                                                  | 23,189               |          |        | $       | 19,231   |  
|                                                                                                                                                                     |                                          |                                                    |                      |          |        |         |          |  

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

The Companys liquidity difficulties have
led to non-compliance with certain covenant requirements and
payment provisions under the Companys Broadband Network
Vendor Financing Agreements. On October 25, 2001, the
Company obtained a waiver of covenant defaults and an extension
from these lenders for scheduled principal and interest payments
under the Broadband Network Vendor Financing Agreements totaling
approximately $36.3 million that were due on that date. The
waiver expired on November 25, 2001 and the Broadband
Network Vendor Financing Agreements became due and payable, and
the Company is in default see Note 1. The Company did not
make the semi-annual interest payments on the Senior Notes due
2003 (which were due on January 15, 2002 and July 15,
2002), on the Senior Notes due 2005 (which were due on
February 15, 2002), or on the Senior Notes due 2008 (which
were due on December 15, 2001 and June 15, 2002). See
Note 1. As a result of the Companys default under the
Broadband Network Vendor Financing Agreements, the defaulted
amounts have been reclassified the current portion of long-term
debts as of December 31, 2001 and June 30, 2002,
respectively.

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

F-17



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


10.  INCOME TAXES

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

|         |       |                    |         |                  |   |      |      |      |   |   |         |         |   |   |      |        |  
|-------- | ----- | ------------------ | ------- | ---------------- | - | ---- | ---- | ---- | - | - | ------- | ------- | - | - | ---- | ------ | -
|         |       |                    |         |                 
|         |       | Three Months Ended |         | Six Months Ended
|         |       | June 30,           |         | June 30,        
|         |       |                    |         |                 
|         |       | 2001               |         | 2002             |   | 2001 |      | 2002
|         |       |                    |         |                  |   |      |      |     
|Current  |       | $                  | (37     | )                |   | $    | (565 | )    |   | $ | (608    | )       |   | $ | (979 | )     
|Deferred |       |                    | (26,085 | )                |   |      | (146 | )    |   |   | (25,880 | )       |   |   | 170  |       
|         |       |                    |         |                  |   |      |      |      |   |   |         |         |   |   |      |       
|         | Total |                    | $       | (26,122          | ) |      | $    | (711 | ) |   | $       | (26,488 | ) |   | $    | (1,149 | )
|         |       |                    |         |                  |   |      |      |      |   |   |         |         |   |   |      |       

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

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

11.  LIABILITIES SUBJECT TO
COMPROMISE AND REORGANIZATION ITEMS

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

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

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

Contractual interest expense not accrued on
pre-petition debt totaled $4.8 million for the period that began
as of June 11, 2002, the date of the Holding Companys
petition for relief under Chapter 11 of the Bankruptcy
Code, and ended at June 30, 2002.

Reorganization
Items Reorganization
items during the three-month period ended June 30, 2002
represent professional fees and other costs related to the
Companys proposed reorganization.

F-18



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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


12.  OPERATING SEGMENT
INFORMATION

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

Three Months Ended June 30,

|                             |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |       |  |   |         |        |  |   |         |        |   |   |         |        | 
|---------------------------- | -------------------- | --------- | ------- | ------ |  | -------- | ------- | --------- |  | --------- | ------ | ------------ |  | ----- | ------ | ----- |  | - | ------- | ------ |  | - | ------- | ------ | - | - | ------- | ------ | 
|                             |                      |           |         |        |  |          |         |           |  | All other |        |              |  |      
|2002                         |                      | Argentina |         | Brazil |  | Colombia |         | Venezuela |  | countries |        | Eliminations |  | Total
|                             |                      |           |         |        |  |          |         |           |  |           |        |              |  |      
|Net Revenues                 |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |       |  |   |         |        |  |   |         |        |   |   |         |       
|Data & value added services: |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |       |  |   |         |        |  |   |         |        |   |   |         |       
|                             | Satellite            |           | $       | 4,092  |  |          | $       | 3,177     |  |           | $      | 4,491        |  |       | $      | 5,430 |  |   | $       | 7,627  |  |   | $       | (2,220 | ) |   | $       | 22,597 | 
|                             | Broad Band           |           |         | 3,690  |  |          |         | 4,171     |  |           |        | 9,117        |  |       |        | 1,164 |  |   |         | 5,340  |  |   |         | (3,562 | ) |   |         | 19,920 | 
|                             | Value added services |           |         | 1,118  |  |          |         | 784       |  |           |        | 191          |  |       |        | 405   |  |   |         | 3,815  |  |   |         | (2,809 | ) |   |         | 3,504  | 
|                             |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |       |  |   |         |        |  |   |         |        |   |   |         |       
|                             | Subtotal             |           | $       | 8,900  |  |          | $       | 8,132     |  |           | $      | 13,799       |  |       | $      | 6,999 |  |   | $       | 16,782 |  |   | $       | (8,591 | ) |   | $       | 46,021 | 
|                             |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |       |  |   |         |        |  |   |         |        |   |   |         |       
|Internet                     |                      |           | 1,517   |        |  |          | 1,190   |           |  |           | 1,093  |              |  |       | 634    |       |  |   | 3,731   |        |  |   | (896    | )      |   |   | 7,269   |       
|Telephony                    |                      |           | 2,925   |        |  |          |         |           |  |           |        |              |  |       |        |       |  |   | 3,150   |        |  |   | (2,104  | )      |   |   | 3,971   |       
|Services to carriers         |                      |           | 888     |        |  |          | 764     |           |  |           | 59     |              |  |       |        |       |  |   | 265     |        |  |   | (42     | )      |   |   | 1,934   |       
|Sales of equipment           |                      |           | 43      |        |  |          |         |           |  |           |        |              |  |       | 71     |       |  |   | 32      |        |  |   |         |        |   |   | 146     |       
|                             |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |       |  |   |         |        |  |   |         |        |   |   |         |       
|Total net revenues           |                      | $         | 14,273  |        |  | $        | 10,086  |           |  | $         | 14,951 |              |  | $     | 7,704  |       |  | $ | 23,960  |        |  | $ | (11,633 | )      |   | $ | 59,341  |       
|                             |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |       |  |   |         |        |  |   |         |        |   |   |         |       
|Operating income (loss)      |                      | $         | (8,617  | )      |  | $        | (5,595  | )         |  | $         | 797    |              |  | $     | 1,425  |       |  | $ | (1,196  | )      |  |   |         |        |   | $ | (13,186 | )     
|                             |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |       |  |   |         |        |  |   |         |        |   |   |         |       
|Total assets                 |                      | $         | 184,653 |        |  | $        | 145,704 |           |  | $         | 97,254 |              |  | $     | 54,441 |       |  | $ | 113,603 |        |  |   |         |        |   | $ | 595,654 |       
|                             |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |       |  |   |         |        |  |   |         |        |   |   |         |       

|                                       |                      |           |         |        |  |          |         |           |  |           |         |              |  |       |        |       |  |   |         |        |  |   |        |        |   |   |           |        | 
|-------------------------------------- | -------------------- | --------- | ------- | ------ |  | -------- | ------- | --------- |  | --------- | ------- | ------------ |  | ----- | ------ | ----- |  | - | ------- | ------ |  | - | ------ | ------ | - | - | --------- | ------ | 
|                                       |                      |           |         |        |  |          |         |           |  | All other |         |              |  |      
|2001                                   |                      | Argentina |         | Brazil |  | Colombia |         | Venezuela |  | countries |         | Eliminations |  | Total
|                                       |                      |           |         |        |  |          |         |           |  |           |         |              |  |      
|Net Revenues                           |                      |           |         |        |  |          |         |           |  |           |         |              |  |       |        |       |  |   |         |        |  |   |        |        |   |   |           |       
|Data & value added services:           |                      |           |         |        |  |          |         |           |  |           |         |              |  |       |        |       |  |   |         |        |  |   |        |        |   |   |           |       
|                                       | Satellite            |           | $       | 12,863 |  |          | $       | 3,117     |  |           | $       | 5,457        |  |       | $      | 6,383 |  |   | $       | 8,723  |  |   |        | (2,161 | ) |   | $         | 34,382 | 
|                                       | Broad Band           |           |         | 7,999  |  |          |         | 2,003     |  |           |         | 8,401        |  |       |        | 815   |  |   |         | 2,521  |  |   |        | (1,452 | ) |   |           | 20,287 | 
|                                       | Value added services |           |         | 1,507  |  |          |         | 2,221     |  |           |         | 104          |  |       |        | 124   |  |   |         | 4,264  |  |   |        | (3,556 | ) |   |           | 4,664  | 
|                                       |                      |           |         |        |  |          |         |           |  |           |         |              |  |       |        |       |  |   |         |        |  |   |        |        |   |   |           |       
|                                       | Subtotal             |           |         | 22,369 |  |          |         | 7,341     |  |           |         | 13,962       |  |       |        | 7,322 |  |   |         | 15,508 |  |   |        | (7,169 | ) |   |           | 59,333 | 
|                                       |                      |           |         |        |  |          |         |           |  |           |         |              |  |       |        |       |  |   |         |        |  |   |        |        |   |   |           |       
|Internet                               |                      |           | 4,376   |        |  |          | 3,126   |           |  |           | 1,111   |              |  |       | 457    |       |  |   | 4,085   |        |  |   | (1,476 | )      |   |   | 11,679    |       
|Telephony                              |                      |           | 1,674   |        |  |          |         |           |  |           |         |              |  |       |        |       |  |   | 530     |        |  |   | (323   | )      |   |   | 1,881     |       
|Services to carriers                   |                      |           | 906     |        |  |          | 446     |           |  |           | 95      |              |  |       |        |       |  |   | 1,244   |        |  |   | (524   | )      |   |   | 2,167     |       
|Sales of equipment                     |                      |           | 2,034   |        |  |          |         |           |  |           | 478     |              |  |       | 41     |       |  |   | 289     |        |  |   |        |        |   |   | 2,842     |       
|                                       |                      |           |         |        |  |          |         |           |  |           |         |              |  |       |        |       |  |   |         |        |  |   |        |        |   |   |           |       
|Total net revenues from                |                      |           |         |        |  |          |         |           |  |           |         |              |  |       |        |       |  |   |         |        |  |   |        |        |   |   |           |       
|services and equipment                 |                      | $         | 31,359  |        |  | $        | 10,913  |           |  | $         | 15,646  |              |  | $     | 7,820  |       |  | $ | 21,656  |        |  |   | (9,492 | )      |   | $ | 77,902    |       
|                                       |                      |           |         |        |  |          |         |           |  |           |         |              |  |       |        |       |  |   |         |        |  |   |        |        |   |   |           |       
|Broadband network development revenues |                      |           |         |        |  |          | 625     |           |  |           |         |              |  |       |        |       |  |   |         |        |  |   |        |        |   |   | 625       |       
|                                       |                      |           |         |        |  |          |         |           |  |           |         |              |  |       |        |       |  |   |         |        |  |   |        |        |   |   |           |       
|Total net revenues                     |                      | $         | 31,359  |        |  | $        | 11,538  |           |  | $         | 15,646  |              |  | $     | 7,820  |       |  | $ | 21,656  |        |  | $ | (9,492 | )      |   | $ | 78,527    |       
|                                       |                      |           |         |        |  |          |         |           |  |           |         |              |  |       |        |       |  |   |         |        |  |   |        |        |   |   |           |       
|Operating income (loss)                |                      | $         | (16,256 | )      |  | $        | (9,312  | )         |  | $         | (184    | )            |  | $     | 194    |       |  | $ | (4,629  | )      |  |   |        |        |   | $ | (30,187   | )     
|                                       |                      |           |         |        |  |          |         |           |  |           |         |              |  |       |        |       |  |   |         |        |  |   |        |        |   |   |           |       
|Total assets                           |                      | $         | 557,968 |        |  | $        | 213,031 |           |  | $         | 109,479 |              |  | $     | 60,450 |       |  | $ | 324,567 |        |  |   |        |        |   | $ | 1,265,495 |       
|                                       |                      |           |         |        |  |          |         |           |  |           |         |              |  |       |        |       |  |   |         |        |  |   |        |        |   |   |           |       

F-19



---



##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


Six Months Ended June 30,

|                             |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |        |  |   |         |        |  |   |         |         |   |   |         |        | 
|---------------------------- | -------------------- | --------- | ------- | ------ |  | -------- | ------- | --------- |  | --------- | ------ | ------------ |  | ----- | ------ | ------ |  | - | ------- | ------ |  | - | ------- | ------- | - | - | ------- | ------ | 
|                             |                      |           |         |        |  |          |         |           |  | All other |        |              |  |      
|2002                         |                      | Argentina |         | Brazil |  | Colombia |         | Venezuela |  | countries |        | Eliminations |  | Total
|                             |                      |           |         |        |  |          |         |           |  |           |        |              |  |      
|Net Revenues                 |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |        |  |   |         |        |  |   |         |         |   |   |         |       
|Data & value added services: |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |        |  |   |         |        |  |   |         |         |   |   |         |       
|                             | Satellite            |           | $       | 8,964  |  |          | $       | 6,873     |  |           | $      | 9,023        |  |       | $      | 11,126 |  |   | $       | 15,992 |  |   |         | (4,519  | ) |   | $       | 47,459 | 
|                             | Broad Band           |           |         | 7,771  |  |          |         | 8,426     |  |           |        | 18,261       |  |       |        | 2,234  |  |   |         | 10,019 |  |   |         | (6,907  | ) |   |         | 39,804 | 
|                             | Value added services |           |         | 2,579  |  |          |         | 1,609     |  |           |        | 361          |  |       |        | 808    |  |   |         | 7,652  |  |   |         | (5,888  | ) |   |         | 7,121  | 
|                             |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |        |  |   |         |        |  |   |         |         |   |   |         |       
|                             | Subtotal             |           | $       | 19,314 |  |          | $       | 16,908    |  |           | $      | 27,645       |  |       | $      | 14,168 |  |   | $       | 33,663 |  |   | $       | (17,314 | ) |   | $       | 94,384 | 
|                             |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |        |  |   |         |        |  |   |         |         |   |   |         |       
|Internet                     |                      |           | 3,699   |        |  |          | 2,510   |           |  |           | 2,247  |              |  |       | 1,266  |        |  |   | 7,301   |        |  |   | (1,900  | )       |   |   | 15,123  |       
|Telephony                    |                      |           | 5,422   |        |  |          |         |           |  |           |        |              |  |       |        |        |  |   | 6,729   |        |  |   | (3,834  | )       |   |   | 8,317   |       
|Services to carriers         |                      |           | 1,576   |        |  |          | 1,401   |           |  |           | 119    |              |  |       |        |        |  |   | 454     |        |  |   | (49     | )       |   |   | 3,501   |       
|Sales of equipment           |                      |           | 105     |        |  |          |         |           |  |           | 10     |              |  |       | 125    |        |  |   | 189     |        |  |   |         |         |   |   | 429     |       
|                             |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |        |  |   |         |        |  |   |         |         |   |   |         |       
|Total net revenues           |                      | $         | 30,116  |        |  | $        | 20,819  |           |  | $         | 30,021 |              |  | $     | 15,559 |        |  | $ | 48,336  |        |  | $ | (23,097 | )       |   | $ | 121,754 |       
|                             |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |        |  |   |         |        |  |   |         |         |   |   |         |       
|Operating income (loss)      |                      | $         | (17,986 | )      |  | $        | (12,096 | )         |  | $         | 1,201  |              |  | $     | 2,005  |        |  | $ | (1,470  | )      |  |   |         |         |   | $ | (28,346 | )     
|                             |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |        |  |   |         |        |  |   |         |         |   |   |         |       
|Total assets                 |                      | $         | 184,653 |        |  | $        | 145,704 |           |  | $         | 97,254 |              |  | $     | 54,441 |        |  | $ | 113,603 |        |  |   |         |         |   | $ | 595,654 |       
|                             |                      |           |         |        |  |          |         |           |  |           |        |              |  |       |        |        |  |   |         |        |  |   |         |         |   |   |         |       

|                                                   |                      |           |         |        |  |          |         |           |  |           |         |              |  |       |        |        |  |   |         |        |  |   |         |         |   |   |           |         | 
|-------------------------------------------------- | -------------------- | --------- | ------- | ------ |  | -------- | ------- | --------- |  | --------- | ------- | ------------ |  | ----- | ------ | ------ |  | - | ------- | ------ |  | - | ------- | ------- | - | - | --------- | ------- | 
|                                                   |                      |           |         |        |  |          |         |           |  | All other |         |              |  |      
|2001                                               |                      | Argentina |         | Brazil |  | Colombia |         | Venezuela |  | countries |         | Eliminations |  | Total
|                                                   |                      |           |         |        |  |          |         |           |  |           |         |              |  |      
|Net Revenues                                       |                      |           |         |        |  |          |         |           |  |           |         |              |  |       |        |        |  |   |         |        |  |   |         |         |   |   |           |        
|Data & value added services:                       |                      |           |         |        |  |          |         |           |  |           |         |              |  |       |        |        |  |   |         |        |  |   |         |         |   |   |           |        
|                                                   | Satellite            |           | $       | 28,994 |  |          | $       | 7,256     |  |           | $       | 11,798       |  |       | $      | 12,532 |  |   | $       | 17,381 |  |   |         | (5,798  | ) |   | $         | 72,163  | 
|                                                   | Broad Band           |           |         | 15,468 |  |          |         | 3,659     |  |           |         | 16,492       |  |       |        | 1,423  |  |   |         | 4,228  |  |   |         | (2,550  | ) |   |           | 38,720  | 
|                                                   | Value added services |           |         | 2,960  |  |          |         | 3,138     |  |           |         | 204          |  |       |        | 295    |  |   |         | 7,742  |  |   |         | (6,162  | ) |   |           | 8,177   | 
|                                                   |                      |           |         |        |  |          |         |           |  |           |         |              |  |       |        |        |  |   |         |        |  |   |         |         |   |   |           |        
|                                                   | Subtotal             |           |         | 47,422 |  |          |         | 14,053    |  |           |         | 28,494       |  |       |        | 14,250 |  |   |         | 29,351 |  |   |         | (14,510 | ) |   |           | 119,060 | 
|                                                   |                      |           |         |        |  |          |         |           |  |           |         |              |  |       |        |        |  |   |         |        |  |   |         |         |   |   |           |        
|Internet                                           |                      |           | 8,400   |        |  |          | 6,273   |           |  |           | 2,159   |              |  |       | 882    |        |  |   | 8,011   |        |  |   | (2,885  | )       |   |   | 22,840    |        
|Telephony                                          |                      |           | 2,379   |        |  |          |         |           |  |           |         |              |  |       |        |        |  |   | 1,235   |        |  |   | (460    | )       |   |   | 3,154     |        
|Services to carriers                               |                      |           | 1,678   |        |  |          | 751     |           |  |           | 105     |              |  |       |        |        |  |   | 2,306   |        |  |   | (744    | )       |   |   | 4,096     |        
|Sales of equipment                                 |                      |           | 4,058   |        |  |          | 2,724   |           |  |           | 478     |              |  |       | 1,170  |        |  |   | 2,495   |        |  |   |         |         |   |   | 10,925    |        
|                                                   |                      |           |         |        |  |          |         |           |  |           |         |              |  |       |        |        |  |   |         |        |  |   |         |         |   |   |           |        
|Total net revenues from services and
    equipment |                      | $         | 63,937  |        |  | $        | 23,801  |           |  | $         | 31,236  |              |  | $     | 16,302 |        |  | $ | 43,398  |        |  | $ | (18,599 | )       |   | $ | 160,075   |        
|                                                   |                      |           |         |        |  |          |         |           |  |           |         |              |  |       |        |        |  |   |         |        |  |   |         |         |   |   |           |        
|Broadband network development revenues             |                      |           |         |        |  |          | 2,552   |           |  |           |         |              |  |       |        |        |  |   | 4,645   |        |  |   |         |         |   |   | 7,197     |        
|                                                   |                      |           |         |        |  |          |         |           |  |           |         |              |  |       |        |        |  |   |         |        |  |   |         |         |   |   |           |        
|Total net revenues                                 |                      | $         | 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 |        |  | $        | 213,031 |           |  | $         | 109,479 |              |  | $     | 60,450 |        |  | $ | 324,567 |        |  |   |         |         |   | $ | 1,265,495 |        
|                                                   |                      |           |         |        |  |          |         |           |  |           |         |              |  |       |        |        |  |   |         |        |  |   |         |         |   |   |           |        

13.  COMMITMENTS AND
CONTINGENCIES

Commitments
The Company leases satellite capacity with average annual rental
commitments of approximately $25.7 million through the year
2006. In addition, the Company had committed to long-term
contracts for the purchase of terrestrial links from third
parties in Argentina, Colombia, and the United States

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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


for approximately $3.1 million per year
through 2006. The Company has commitments to purchase
communications and data center equipment amounting to
approximately $2.3 million at June 30, 2002.

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

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,
2002, the balance outstanding was approximately
$2.4 million.

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

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

During the pendency of the arbitration and
litigation proceedings, the Company will continue to include as
deferred revenues on its condensed consolidated balance sheet
the amount received from 360networks as down payments under the
terminated contracts, after deducting amounts that were due and
payable at the time of the termination of the contracts. As of
June 30, 2002, the balance of such deferred revenue was
$22.6 million.

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

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##### Table of Contents



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES


(DEBTOR-IN-POSSESSION)




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


in the complaints and intends to defend the
litigation vigorously. However, due to the early stages of this
action, the Company cannot conclude as to the possible outcome.
The Company has certain insurance policies with respect to such
claims and has filed a claim with its carriers regarding this
matter.

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

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

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##### Table of Contents



IMPSAT S.A.

CONDENSED BALANCE SHEETS

(In thousands of U.S. Dollars)


(Unaudited)


|                                             |                                                                                                                   |                                |         |          |         |   |         |          |          |  
|-------------------------------------------- | ----------------------------------------------------------------------------------------------------------------- | ------------------------------ | ------- | -------- | ------- | - | ------- | -------- | -------- | -
|                                             |                                                                                                                   | December 31,                   |         | June 30,
|                                             |                                                                                                                   | 2001                           |         | 2002    
|                                             |                                                                                                                   |                                |         |         
|ASSETS                                      
|CURRENT ASSETS:                              |                                                                                                                   |                                |         |          |         |   |         |         
|                                             | Cash and cash equivalents                                                                                         |                                | $       | 3,979    |         |   | $       | 2,091    |         
|                                             | Trade accounts receivable, net                                                                                    |                                |         | 33,924   |         |   |         | 19,954   |         
|                                             | Receivable from affiliated companies                                                                              |                                |         | 17,715   |         |   |         | 17,647   |         
|                                             | Other receivables                                                                                                 |                                |         | 22,155   |         |   |         | 6,612    |         
|                                             | Prepaid expenses                                                                                                  |                                |         | 1,730    |         |   |         | 936      |         
|                                             |                                                                                                                   |                                |         |          |         |   |         |         
|                                             |                                                                                                                   | Total current assets           |         |          | 79,503  |   |         |          | 47,240   |  
|                                             |                                                                                                                   |                                |         |          |         |   |         |         
|BROADBAND NETWORK, Net                       |                                                                                                                   |                                | 105,995 |          |         |   | 100,781 |         
|                                             |                                                                                                                   |                                |         |          |         |   |         |         
|PROPERTY, PLANT AND EQUIPMENT, Net           |                                                                                                                   |                                | 40,149  |          |         |   | 29,572  |         
|                                             |                                                                                                                   |                                |         |          |         |   |         |         
|NON-CURRENT ASSETS:                          |                                                                                                                   |                                |         |          |         |   |         |         
|                                             | Investment in common stock                                                                                        |                                |         | 2,429    |         |   |         | 1,723    |         
|                                             | Other non-current assets                                                                                          |                                |         | 7,395    |         |   |         | 5,337    |         
|                                             |                                                                                                                   |                                |         |          |         |   |         |         
|                                             |                                                                                                                   | Total non-current assets       |         |          | 9,824   |   |         |          | 7,060    |  
|                                             |                                                                                                                   |                                |         |          |         |   |         |         
|TOTAL                                        |                                                                                                                   | $                              | 235,471 |          |         | $ | 184,653 |         
|                                             |                                                                                                                   |                                |         |          |         |   |         |         
|LIABILITIES AND STOCKHOLDERS
    DEFICIENCY
|CURRENT LIABILITIES:                         |                                                                                                                   |                                |         |          |         |   |         |         
|                                             | Accounts payable  trade                                                                                          |                                | $       | 59,535   |         |   | $       | 67,027   |         
|                                             | Advances from affiliated companies                                                                                |                                |         | 2,448    |         |   |         | 4,013    |         
|                                             | Current portion of long-term debt                                                                                 |                                |         | 162,390  |         |   |         | 147,885  |         
|                                             | Accrued and other liabilities                                                                                     |                                |         | 15,422   |         |   |         | 22,986   |         
|                                             |                                                                                                                   |                                |         |          |         |   |         |         
|                                             |                                                                                                                   | Total current liabilities      |         |          | 239,795 |   |         |          | 241,911  |  
|                                             |                                                                                                                   |                                |         |          |         |   |         |         
|LONG-TERM DEBT, Net                          |                                                                                                                   |                                | 3,183   |          |         |   | 196     |         
|                                             |                                                                                                                   |                                |         |          |         |   |         |         
|DEFERRED REVENUES                            |                                                                                                                   |                                | 52,653  |          |         |   | 51,460  |         
|                                             |                                                                                                                   |                                |         |          |         |   |         |         
|COMMITMENTS AND CONTINGENCIES (Note 10)      |                                                                                                                   |                                |         |          |         |   |         |         
|STOCKHOLDERS DEFICIENCY:                    |                                                                                                                   |                                |         |          |         |   |         |         
|                                             | Common Stock, $0.01 par value 73,775 shares
    issued and outstanding at December 31, 2001 and
    June 30, 2002 |                                |         | 4        |         |   |         | 4        |         
|                                             | Paid in capital                                                                                                   |                                |         | 331,179  |         |   |         | 331,179  |         
|                                             | Accumulated deficit                                                                                               |                                |         | (391,024 | )       |   |         | (439,367 | )       
|                                             | Accumulated other comprehensive loss                                                                              |                                |         | (319     | )       |   |         | (730     | )       
|                                             |                                                                                                                   |                                |         |          |         |   |         |         
|                                             |                                                                                                                   | Total stockholders deficiency |         |          | (60,160 | ) |         |          | (108,914 | )
|                                             |                                                                                                                   |                                |         |          |         |   |         |         
|TOTAL                                        |                                                                                                                   | $                              | 235,471 |          |         | $ | 184,653 |         
|                                             |                                                                                                                   |                                |         |          |         |   |         |         

See notes to condensed financial statements.

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IMPSAT S.A.

CONDENSED STATEMENTS OF OPERATIONS

(In thousands of U.S. Dollars)


(Unaudited)


|                           |                                      |                        |                           |                  |       |        |         |         |       |         |         |         |        |         |         |         |        |         |  
|-------------------------- | ------------------------------------ | ---------------------- | ------------------------- | ---------------- | ----- | ------ | ------- | ------- | ----- | ------- | ------- | ------- | ------ | ------- | ------- | ------- | ------ | ------- | -
|                           |                                      |                        |                           |                 
|                           |                                      | Three Months Ended     |                           | Six Months Ended
|                           |                                      | June 30,               |                           | June 30,        
|                           |                                      |                        |                           |                 
|                           |                                      | 2001                   |                           | 2002             |       | 2001   |         | 2002   
|                           |                                      |                        |                           |                  |       |        |         |        
|NET REVENUES:              |                                      |                        |                           |                  |       |        |         |         |       |         |         |         |        |         |         |        
|                           | Data and value added services        |                        | $                         | 22,369           |       |        | $       | 8,900   |       |         | $       | 47,422  |        |         | $       | 19,314  |       
|                           | Internet                             |                        |                           | 4,376            |       |        |         | 1,517   |       |         |         | 8,400   |        |         |         | 3,699   |       
|                           | Telephony                            |                        |                           | 1,674            |       |        |         | 2,925   |       |         |         | 2,379   |        |         |         | 5,422   |       
|                           | Services to carriers                 |                        |                           | 906              |       |        |         | 888     |       |         |         | 1,678   |        |         |         | 1,576   |       
|                           | Sales of equipment                   |                        |                           | 2,034            |       |        |         | 43      |       |         |         | 4,058   |        |         |         | 105     |       
|                           |                                      |                        |                           |                  |       |        |         |         |       |         |         |         |        |         |         |        
|                           |                                      |                        | Total net revenues        |                  |       | 31,359 |         |         |       | 14,273  |         |         |        | 63,937  |         |         |        | 30,116  |  
|                           |                                      |                        |                           |                  |       |        |         |         |       |         |         |         |        |         |         |        
|COSTS AND EXPENSES:        |                                      |                        |                           |                  |       |        |         |         |       |         |         |         |        |         |         |        
|                           | Direct costs:                        |                        |                           |                  |       |        |         |         |       |         |         |         |        |         |         |         |       
|                           |                                      | Contracted services    |                           |                  | 3,251 |        |         |         | 1,502 |         |         |         | 8,540  |         |         |         | 3,317  |        
|                           |                                      | Other direct costs     |                           |                  | 5,052 |        |         |         | 2,694 |         |         |         | 8,212  |         |         |         | 6,131  |        
|                           |                                      | Leased capacity        |                           |                  | 9,300 |        |         |         | 6,908 |         |         |         | 17,950 |         |         |         | 13,678 |        
|                           |                                      | Cost of equipment sold |                           |                  | 1,574 |        |         |         | 50    |         |         |         | 3,414  |         |         |         | 82     |        
|                           |                                      |                        |                           |                  |       |        |         |         |       |         |         |         |        |         |         |        
|                           |                                      |                        | Total direct costs        |                  |       | 19,177 |         |         |       | 11,154  |         |         |        | 38,116  |         |         |        | 23,208  |  
|                           |                                      |                        |                           |                  |       |        |         |         |       |         |         |         |        |         |         |        
|                           | Salaries and wages                   |                        |                           | 9,050            |       |        |         | 1,955   |       |         |         | 18,138  |        |         |         | 4,823   |       
|                           | Selling, general and administrative  |                        |                           | 5,979            |       |        |         | 1,893   |       |         |         | 10,939  |        |         |         | 3,937   |       
|                           | Depreciation and amortization        |                        |                           | 13,409           |       |        |         | 7,888   |       |         |         | 25,800  |        |         |         | 16,134  |       
|                           |                                      |                        |                           |                  |       |        |         |         |       |         |         |         |        |         |         |        
|                           |                                      |                        | Total costs and expenses  |                  |       | 47,615 |         |         |       | 22,890  |         |         |        | 92,993  |         |         |        | 48,102  |  
|                           |                                      |                        |                           |                  |       |        |         |         |       |         |         |         |        |         |         |        
|Operating loss             |                                      |                        | (16,256                   | )                |       |        | (8,617  | )       |       |         | (29,057 | )       |        |         | (17,986 | )      
|                           |                                      |                        |                           |                  |       |        |         |         |       |         |         |         |        |         |         |        
|OTHER INCOME (EXPENSES):   |                                      |                        |                           |                  |       |        |         |         |       |         |         |         |        |         |         |        
|                           | Interest income and investment gains |                        |                           | 473              |       |        |         | 626     |       |         |         | 754     |        |         |         | 626     |       
|                           | Interest expense                     |                        |                           | (6,196           | )     |        |         | (13,050 | )     |         |         | (11,450 | )      |         |         | (18,282 | )     
|                           | Net loss on foreign exchange         |                        |                           | (327             | )     |        |         | (5,683  | )     |         |         | (6      | )      |         |         | (12,769 | )     
|                           | Other income, net                    |                        |                           | 10               |       |        |         | 66      |       |         |         | 9       |        |         |         | 68      |       
|                           |                                      |                        |                           |                  |       |        |         |         |       |         |         |         |        |         |         |        
|                           |                                      |                        | Total other expenses, net |                  |       | (6,040 | )       |         |       | (18,041 | )       |         |        | (10,693 | )       |         |        | (30,357 | )
|                           |                                      |                        |                           |                  |       |        |         |         |       |         |         |         |        |         |         |        
|LOSS BEFORE INCOME TAXES   |                                      |                        | (22,296                   | )                |       |        | (26,658 | )       |       |         | (39,749 | )       |        |         | (48,343 | )      
|PROVISION FOR INCOME TAXES |                                      |                        | (9,046                    | )                |       |        |         |         |       |         | (8,667  | )       |        |         |         |        
|                           |                                      |                        |                           |                  |       |        |         |         |       |         |         |         |        |         |         |        
|NET LOSS                   |                                      | $                      | (31,142                   | )                |       | $      | (26,658 | )       |       | $       | (48,416 | )       |        | $       | (48,343 | )      
|                           |                                      |                        |                           |                  |       |        |         |         |       |         |         |         |        |         |         |        

See notes to condensed financial statements.

F-24



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##### Table of Contents



IMPSAT S.A.

CONDENSED STATEMENTS OF COMPREHENSIVE
LOSS

(In thousands of U.S. Dollars)


(Unaudited)


|                          |                                                                |                    |         |                  |   |      |         |      |   |   |         |      |   |   |         |      |  
|------------------------- | -------------------------------------------------------------- | ------------------ | ------- | ---------------- | - | ---- | ------- | ---- | - | - | ------- | ---- | - | - | ------- | ---- | -
|                          |                                                                |                    |         |                 
|                          |                                                                | Three Months Ended |         | Six Months Ended
|                          |                                                                | June 30,           |         | June 30,        
|                          |                                                                |                    |         |                 
|                          |                                                                | 2001               |         | 2002             |   | 2001 |         | 2002
|                          |                                                                |                    |         |                  |   |      |         |     
|NET LOSS                  |                                                                | $                  | (31,342 | )                |   | $    | (26,658 | )    |   | $ | (48,416 | )    |   | $ | (48,343 | )   
|OTHER COMPREHENSIVE LOSS: |                                                                |                    |         |                  |   |      |         |      |   |   |         |      |   |   |         |     
|                          | Change in unrealized loss on investment available
    for sale |                    |         | (224             | ) |      |         | (218 | ) |   |         | (819 | ) |   |         | (411 | )
|                          |                                                                |                    |         |                  |   |      |         |      |   |   |         |      |   |   |         |     
|                          | TOTAL                                                          |                    |         | (224             | ) |      |         | (218 | ) |   |         | (819 | ) |   |         | (411 | )
|                          |                                                                |                    |         |                  |   |      |         |      |   |   |         |      |   |   |         |     
|COMPREHENSIVE LOSS        |                                                                | $                  | (31,566 | )                |   | $    | (26,876 | )    |   | $ | (49,235 | )    |   | $ | (48,754 | )   
|                          |                                                                |                    |         |                  |   |      |         |      |   |   |         |      |   |   |         |     

See notes to condensed financial statements.

F-25



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##### Table of Contents



IMPSAT S.A.

CONDENSED STATEMENT OF STOCKHOLDERS
DEFICIENCY

(In thousands of U.S. dollars)


(Unaudited)


|                             |                                                                |        |   |         |  |             |         |               |  |       |          |         |   |   |      |      |   |   |          |         |  
|---------------------------- | -------------------------------------------------------------- | ------ | - | ------- |  | ----------- | ------- | ------------- |  | ----- | -------- | ------- | - | - | ---- | ---- | - | - | -------- | ------- | -
|                             |                                                                |        |   |         |  |             |         | Accumulated   |  |      
|                             |                                                                |        |   |         |  |             |         | Other         |  |      
|                             |                                                                | Common |   | Paid in |  | Accumulated |         | Comprehensive |  |      
|                             |                                                                | Stock  |   | Capital |  | Deficit     |         | Loss          |  | Total
|                             |                                                                |        |   |         |  |             |         |               |  |      
|BALANCE AT DECEMBER 31, 2001 |                                                                | $      | 4 |         |  | $           | 331,179 |               |  | $     | (391,024 | )       |   | $ | (319 | )    |   | $ | (60,160  | )      
|                             | Change in unrealized loss on investment available
    for sale |        |   |         |  |             |         |               |  |       |          |         |   |   |      | (411 | ) |   |          | (411    | )
|                             | Net loss for the period                                        |        |   |         |  |             |         |               |  |       |          | (48,343 | ) |   |      |      |   |   |          | (48,343 | )
|                             |                                                                |        |   |         |  |             |         |               |  |       |          |         |   |   |      |      |   |   |          |        
|BALANCE AT JUNE 30, 2002     |                                                                | $      | 4 |         |  | $           | 331,179 |               |  | $     | (439,367 | )       |   | $ | (730 | )    |   | $ | (108,914 | )      
|                             |                                                                |        |   |         |  |             |         |               |  |       |          |         |   |   |      |      |   |   |          |        

See notes to condensed financial statements.

F-26



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##### Table of Contents





IMPSAT S.A.

CONDENSED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)


(Unaudited)


|                                                                         |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |         |        |        |        |  
|------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------- | ---------------------------------- | ------------------------------------------------------------------------- | ------------------------------------------------------- | ------ | ------ | ------- | ------- | ------ | ------ | ------ | -
|                                                                         |                                                                                                                   |                                   
|                                                                         |                                                                                                                   | Six Months Ended                  
|                                                                         |                                                                                                                   | June 30,                          
|                                                                         |                                                                                                                   |                                   
|                                                                         |                                                                                                                   | 2001                               |                                                                           | 2002                                                   
|                                                                         |                                                                                                                   |                                    |                                                                           |                                                        
|CASH FLOWS FROM OPERATING ACTIVITIES:                                    |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        
|                                                                         | Net loss                                                                                                          |                                    | $                                                                         | (48,416                                                 | )      |        | $       | (48,343 | )     
|                                                                         | Adjustments to reconcile net loss to net cash
    provided by (used in) operating activities, net of acquisition: |                                    |                                                                           |                                                         |        |        |         |         |       
|                                                                         |                                                                                                                   | Amortization and depreciation      |                                                                           |                                                         | 25,800 |        |         |         | 16,134 |       
|                                                                         |                                                                                                                   | Provision for doubtful accounts    |                                                                           |                                                         | 3,170  |        |         |         | 3,720  |       
|                                                                         |                                                                                                                   | Deferred income tax loss           |                                                                           |                                                         | 8,667  |        |         |         |        |       
|                                                                         |                                                                                                                   | Changes in assets and liabilities: |                                                                           |                                                         |        |        |         |         |        |       
|                                                                         |                                                                                                                   |                                    | (Increase) decrease in trade accounts receivable                          |                                                         |        | (5,625 | )       |         |        | 10,250 |       
|                                                                         |                                                                                                                   |                                    | (Increase) decrease in prepaid expenses                                   |                                                         |        | (81    | )       |         |        | 794    |       
|                                                                         |                                                                                                                   |                                    | (Increase) decrease in other receivables and
    other non-current assets |                                                         |        | (9,237 | )       |         |        | 17,601 |       
|                                                                         |                                                                                                                   |                                    | Increase (decrease) in accounts
    payable  trade                       |                                                         |        | 15,779 |         |         |        | (8,172 | )     
|                                                                         |                                                                                                                   |                                    | Increase (decrease) in deferred revenues                                  |                                                         |        | 15.305 |         |         |        | (1,193 | )     
|                                                                         |                                                                                                                   |                                    | Increase in accrued and other liabilities                                 |                                                         |        | 281    |         |         |        | 7,564  |       
|                                                                         |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        
|                                                                         |                                                                                                                   |                                    |                                                                           | Net cash provided by (used in) operating
    activities |        |        | 5,643   |         |        |        | (1,645 | )
|                                                                         |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        
|CASH FLOWS FROM INVESTING ACTIVITIES:                                    |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        
|                                                                         | Purchases of broadband network, net of disposals                                                                  |                                    |                                                                           | (40,227                                                 | )      |        |         | (4,048  | )     
|                                                                         | Purchases of property, plant and equipment, net
    of disposals                                                  |                                    |                                                                           | (19,430                                                 | )      |        |         | 3,705   |       
|                                                                         | (Increase) decrease in other investment                                                                           |                                    |                                                                           | (306                                                    | )      |        |         | 295     |       
|                                                                         |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        
|                                                                         |                                                                                                                   |                                    |                                                                           | Net cash used in investing activities                   |        |        | (59,963 | )       |        |        | (48    | )
|                                                                         |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        
|CASH FLOWS FROM FINANCING ACTIVITIES:                                    |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        
|                                                                         | Net borrowings from short-term debt                                                                               |                                    |                                                                           | 40                                                      |        |        |         |         |       
|                                                                         | Changes in advances to/from affiliates                                                                            |                                    |                                                                           | (1,447                                                  | )      |        |         | 1,633   |       
|                                                                         | Repayments of long-term debt                                                                                      |                                    |                                                                           | (950                                                    | )      |        |         | (1,828  | )     
|                                                                         | Shareholders contribution                                                                                        |                                    |                                                                           | 58,499                                                  |        |        |         |         |       
|                                                                         |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        
|                                                                         |                                                                                                                   |                                    |                                                                           | Net cash provided by (used in) financing
    activities |        |        | 56,142  |         |        |        | (195   | )
|                                                                         |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        
|NET INCREASE (DECREASE) IN CASH AND CASH
    EQUIVALENTS                 |                                                                                                                   |                                    | 1,822                                                                     |                                                         |        |        | (1,888  | )      
|CASH AND CASH EQUIVALENTS AT BEGINNING OF THE
    PERIOD                 |                                                                                                                   |                                    | 12,051                                                                    |                                                         |        |        | 3,979   |        
|                                                                         |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        
|CASH AND CASH EQUIVALENTS AT END OF THE PERIOD                           |                                                                                                                   |                                    | 13,873                                                                    |                                                         |        |        | 2,091   |        
|                                                                         |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        
|SUPPLEMENTAL CASH FLOW INFORMATION:                                      |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        
|                                                                         | Interest paid                                                                                                     |                                    | $                                                                         | 6,749                                                   |        |        | $       | 1,225   |       
|                                                                         |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        
|                                                                         | Income taxes paid                                                                                                 |                                    |                                                                           |                                                         |        |        | $       | 480     |       
|                                                                         |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        
|SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
    FINANCING ACTIVITIES: |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        
|                                                                         | Change to unrealized loss on investment available
    for sale                                                    |                                    | $                                                                         | (819                                                    | )      |        | $       | (411    | )     
|                                                                         |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        
|                                                                         | Vendor financing                                                                                                  |                                    | $                                                                         | 19,919                                                  |        |        |         |         |       
|                                                                         |                                                                                                                   |                                    |                                                                           |                                                         |        |        |         |        

See notes to condensed financial statements.

F-27



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##### Table of Contents



IMPSAT S.A.

NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS

(Tables in thousands of U.S.
dollars)


1.     GENERAL

IMPSAT S.A. (the Company) is a
leading integrated provider of broadband Internet, data and
voice services in Argentina. The Company offers integrated
telecommunications solutions, with an emphasis on end-to-end
broadband data transmission, for national and multinational
companies, financial institutions, governmental agencies and
other business customers in Argentina. It provides its services
through its advanced telecommunications networks comprised of
owned teleports, earth stations, fiber optic and microwave links
and leased satellite capacity. As of June 30, 2002, the
Company is a 100% owned subsidiary of IMPSAT Fiber Networks,
Inc. (the Parent Company)

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

The Parent Company anticipates it will file a
reorganization plan in accordance with the terms of the
Restructuring Term Sheet (described below under Financial
Restructuring) during the third quarter of 2002 that will
provide for emergence from bankruptcy upon completion of a
financial restructuring described below. There can be no
assurances that any reorganization will be approved by the
Bankruptcy Court. If the Parent Company is unable to obtain
confirmation of a plan of reorganization, the Parent
Companys creditors may seek other alternatives for the
Parent Company, including accepting bids for the Parent Company
or parts thereof through an auction process or forcing the
Parent Company into a liquidation proceeding under the federal
bankruptcy laws.

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



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



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



| |   |                                                                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | holders of the Notes due 2003 would receive
    $67.5 million of new senior convertible notes of the Parent
    Company guaranteed by the Company and initially convertible into
    23% of the Parent Companys new common stock on a
    fully-diluted basis

F-28



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##### Table of Contents



IMPSAT S.A.




NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS  (Continued)


(Tables in thousands of U.S.
dollars)




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

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

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

2.     SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES

Interim Financial
Information The unaudited
condensed financial statements as of June 30, 2002 and for
the three and six months ended June 30, 2001 and 2002 have
been prepared on the same basis as the audited financial
statements. In the opinion of management, such unaudited
financial statements include all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the
results for such period. The operating results for the three and
six months ended June 30, 2001 and 2002 are not necessarily
indicative of the operating results to be expected for the full
fiscal year or for any future period.

Use of
Estimates The preparation
of condensed financial statements in conformity with accounting
principles generally accepted in the United States of America
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the condensed financial statements and the reported amounts of
revenues and expenses during the reporting period. Significant
assumptions and estimates were used in determining the carrying
value of the Companys telecommunications infrastructure
and collectibility of receivables. Actual results could differ
from those estimates.

Market
Risk The Companys
financial performance may be affected by inflation, exchange
rates and controls, price controls, interest rates, changes in
governmental economic policy, taxation and political,

F-29



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##### Table of Contents



IMPSAT S.A.




NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS  (Continued)


(Tables in thousands of U.S.
dollars)


economic or other developments in or affecting
the country in which the Company operates. The Company has not
entered into derivative transactions to hedge against potential
foreign exchange or interest rate risks.

Currency
Risks In early January
2002, as Argentinas ongoing political and financial crisis
deepened, the country defaulted on its massive foreign debt and
the government of President Eduardo Duhalde, who entered office
on January 1, 2002, abandoned the decade-old fixed
peso-dollar exchange rate and permitted the pesoto float freely against the U.S. dollar. The pesofree market opened on January 11, 2002 at 1.65 pesosto the U.S. dollar and has been volatile since. At
June 30, 2002, the Argentine pesotraded at pesos3.90 to the U.S. dollar. The devaluation of the Argentine
pesowill generally affect the Companys condensed
financial statements by generating foreign exchange gains or
losses on peso-denominated monetary liabilities and
assets of the Company and will generally result in a decrease,
in U.S. dollar terms, in the Companys revenues, costs and
expenses in Argentina.

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

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

Numerous uncertainties exist surrounding the
ultimate resolution of Argentinas economic and political
instability and actual results could differ from those estimates
and assumptions utilized. The Argentine economic and political
situation continues to evolve and the Argentine government may
enact future regulations or policies that, when finalized and
adopted, may adversely and materially impact, among other items,
(i) the realized revenues the Company receives for services
offered in Argentina; (ii) the timing of

F-30



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##### Table of Contents



IMPSAT S.A.




NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS  (Continued)


(Tables in thousands of U.S.
dollars)


repatriations of any dividends or other cash
flows from the Company to the Parent Company, in the United
States; (iii) the Companys asset valuations; and
(iv) the Companys peso-denominated monetary
assets and liabilities.

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

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

No single customer accounted for greater than 10%
of total revenues from services for the six months ended
June 30, 2001 and 2002.

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

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

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

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

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

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

Investments
Investments covered under the scope of Statement of Financial
Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity
Securities,are classified by the

F-31



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##### Table of Contents



IMPSAT S.A.




NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS  (Continued)


(Tables in thousands of U.S.
dollars)


Company as available for sale and are
carried at fair value. Unrealized gains or losses, net of tax,
for available for sale investments are included in accumulated
other comprehensive loss within stockholders equity. All
other investments are carried at cost.

Long-Lived
Assets Long-lived assets
are reviewed on an ongoing basis for impairment based on a
comparison of carrying values to the related undiscounted future
cash flows. If the carrying amounts exceed such cash flows,
identifying a possible impairment, the assets carrying
amount is adjusted to fair value. During the three and six month
periods ended June 30, 2001 and 2002, no impairments were
recorded.

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

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

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

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

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

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IMPSAT S.A.




NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS  (Continued)


(Tables in thousands of U.S.
dollars)


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

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

3.     TRADE ACCOUNTS
RECEIVABLE

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

|                                      |  |              |         |          |  |   |         |  
|------------------------------------- |  | ------------ | ------- | -------- |  | - | ------- | -
|                                      |  | December 31, |         | June 30,
|                                      |  | 2001         |         | 2002    
|                                      |  |              |         |         
|Trade accounts receivable             |  | $            | 51,037  |          |  | $ | 30,405  |  
|Less: allowance for doubtful accounts |  |              | (17,113 | )        |  |   | (10,451 | )
|                                      |  |              |         |          |  |   |         |  
|Trade accounts receivable, net        |  | $            | 33,924  |          |  | $ | 19,954  |  
|                                      |  |              |         |          |  |   |         |  

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

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

|                                |  |              |        |          |  |   |         |  
|------------------------------- |  | ------------ | ------ | -------- |  | - | ------- | -
|                                |  | December 31, |        | June 30,
|                                |  | 2001         |        | 2002    
|                                |  |              |        |         
|Beginning balance               |  | $            | 16,436 |          |  | $ | 17,113  |  
|Provision for doubtful accounts |  |              | 15,590 |          |  |   | 3,720   |  
|Write-offs, net of recoveries   |  |              | (7,099 | )        |  |   | (235    | )
|Effect of exchange rate change  |  |              | (7,814 | )        |  |   | (10,147 | )
|                                |  |              |        |          |  |   |         |  
|Ending balance                  |  | $            | 17,113 |          |  | $ | 10,451  |  
|                                |  |              |        |          |  |   |         |  

4.     OTHER
RECEIVABLES

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

F-33



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##### Table of Contents



IMPSAT S.A.




NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS  (Continued)


(Tables in thousands of U.S.
dollars)


5.     BROADBAND
NETWORK AND AGREEMENTS

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

|                               |       |              |         |          |  |   |         |         | 
|------------------------------ | ----- | ------------ | ------- | -------- |  | - | ------- | ------- | 
|                               |       | December 31, |         | June 30,
|                               |       | 2001         |         | 2002    
|                               |       |              |         |         
|Network infrastructure         |       | $            | 76,693  |          |  | $ | 76,943  |        
|Equipment and materials        |       |              | 90,222  |          |  |   | 92,993  |        
|IRU investments                |       |              | 2,616   |          |  |   | 2,616   |        
|                               |       |              |         |          |  |   |         |        
|                               | Total |              |         | 169,531  |  |   |         | 172,552 | 
|Less: accumulated depreciation |       |              | (63,536 | )        |  |   | (71,771 | )      
|                               |       |              |         |          |  |   |         |        
|                               | Total |              | $       | 105,995  |  |   | $       | 100,781 | 
|                               |       |              |         |          |  |   |         |        

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

|                          |  |              |        |          |  |   |        |  
|------------------------- |  | ------------ | ------ | -------- |  | - | ------ | -
|                          |  | December 31, |        | June 30,
|                          |  | 2001         |        | 2002    
|                          |  |              |        |         
|Beginning balance         |  | $            | 42,084 |          |  | $ | 63,536 |  
|Depreciation expense      |  |              | 23,673 |          |  |   | 9,262  |  
|Disposals and retirements |  |              | (2,221 | )        |  |   | (1,027 | )
|                          |  |              |        |          |  |   |        |  
|Ending balance            |  | $            | 63,536 |          |  | $ | 71,771 |  
|                          |  |              |        |          |  |   |        |  

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

On October 25, 1999, the Company signed a
definitive agreement with an affiliate of Nortel Networks to
borrow an aggregate of up to approximately $149.1 million
of long term vendor financing. The financing, which has a final
maturity in 2006, was used to finance Nortels construction
of the segments of the Broadband Network and the purchase of
additional equipment to be used by the Company in connection
with the operation of the Broadband Network. The Parent Company
has agreed to guarantee the obligations of the Company under the
Nortel financing agreement. At June 30, 2002, a total of
$120.3 million was outstanding under the Nortel Financing
Agreement (see Note 8).

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

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

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

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##### Table of Contents



IMPSAT S.A.




NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS  (Continued)


(Tables in thousands of U.S.
dollars)


IRU
Agreements The Company
has entered into several agreements granting IRUs of up to
25 years to the Companys broadband network, including
network maintenance services and telehousing space. The Company
has received advance payments related to these agreements. These
advance payments are recorded as deferred revenue in the
accompanying condensed balance sheet. During the three and six
months period ended June 30, 2002, the Company recognized
approximately $0.6 million and $1.2 million,
respectively, from these agreements, which are reflected as
services to carriers in the accompanying condensed statement of
operations.

6.     PROPERTY,
PLANT AND EQUIPMENT

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

|                                        |       |              |          |          |  |   |          |         | 
|--------------------------------------- | ----- | ------------ | -------- | -------- |  | - | -------- | ------- | 
|                                        |       | December 31, |          | June 30,
|                                        |       | 2001         |          | 2002    
|                                        |       |              |          |         
|Land                                    |       | $            | 3,106    |          |  | $ | 3,106    |        
|Building and improvements               |       |              | 30,909   |          |  |   | 30,420   |        
|Operating communications equipment      |       |              | 142,318  |          |  |   | 135,778  |        
|Furniture, fixtures and other equipment |       |              | 17,629   |          |  |   | 19,801   |        
|                                        |       |              |          |          |  |   |          |        
|                                        | Total |              |          | 193,962  |  |   |          | 189,105 | 
|Less: accumulated depreciation          |       |              | (158,278 | )        |  |   | (161,202 | )      
|                                        |       |              |          |          |  |   |          |        
|                                        | Total |              |          | 35,684   |  |   |          | 27,903  | 
|Equipment in transit                    |       |              | 3,047    |          |  |   | 1,669    |        
|Works in process                        |       |              | 1,418    |          |  |   |          |        
|                                        |       |              |          |          |  |   |          |        
|Property, plant and equipment, net      |       | $            | 40,149   |          |  | $ | 29,572   |        
|                                        |       |              |          |          |  |   |          |        

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

|                          |  |              |         |          |  |   |         |  
|------------------------- |  | ------------ | ------- | -------- |  | - | ------- | -
|                          |  | December 31, |         | June 30,
|                          |  | 2001         |         | 2002    
|                          |  |              |         |         
|Beginning balance         |  | $            | 131,378 |          |  | $ | 158,278 |  
|Depreciation expense      |  |              | 31,717  |          |  |   | 6,872   |  
|Disposals and retirements |  |              | (4,817  | )        |  |   | (3,948  | )
|                          |  |              |         |          |  |   |         |  
|Ending balance            |  | $            | 158,278 |          |  | $ | 161,202 |  
|                          |  |              |         |          |  |   |         |  

7.     INVESTMENTS

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

|                                                                                                                                                 |  |              |       |          |  |   |       | 
|------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------ | ----- | -------- |  | - | ----- | 
|                                                                                                                                                 |  | December 31, |       | June 30,
|                                                                                                                                                 |  | 2001         |       | 2002    
|                                                                                                                                                 |  |              |       |         
|Investment in common stock, at fair
    value  New Skies Satellites N.V. ($2,748 cost at
    December 31, 2001 and 2,455 cost at June 30, 2002) |  | $            | 2,429 |          |  | $ | 1,723 | 
|                                                                                                                                                 |  |              |       |          |  |   |       | 

The Companys investment in common stock is
subject to equity price risk. The Company has not taken any
actions to hedge this market risk exposure.

F-35



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##### Table of Contents



IMPSAT S.A.




NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS  (Continued)


(Tables in thousands of U.S.
dollars)


8.     LONG-TERM
DEBT

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

|                                                                                                                            |                      |              |          |          |  |   |          |         | 
|--------------------------------------------------------------------------------------------------------------------------- | -------------------- | ------------ | -------- | -------- |  | - | -------- | ------- | 
|                                                                                                                            |                      | December 31, |          | June 30,
|                                                                                                                            |                      | 2001         |          | 2002    
|                                                                                                                            |                      |              |          |         
|Term notes payable, maturing from 2001 through
    2004, collateralized by certain assets; denominated in U.S.
    dollars: |                      | $            | 2,590    |          |  | $ | 530      |        
|Eximbank notes payable (6.27% 
    10.09%), maturing semiannually through 200l and 2004                                    |                      |              | 13,513   |          |  |   | 13,513   |        
|Vendor financing (5.21%  24.68%), due
    2006                                                                             |                      |              | 149,470  |          |  |   | 134,038  |        
|                                                                                                                            |                      |              |          |          |  |   |          |        
|                                                                                                                            | Total long-term debt |              |          | 165,573  |  |   |          | 148,081 | 
|Less: current portion, including defaulted
    indebtedness                                                                 |                      |              | (162,390 | )        |  |   | (147,885 | )      
|                                                                                                                            |                      |              |          |          |  |   |          |        
|Long-term debt, net                                                                                                         |                      | $            | 3,183    |          |  | $ | 196      |        
|                                                                                                                            |                      |              |          |          |  |   |          |        

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

The Companys liquidity difficulties have
led to non-compliance with certain covenant requirements and
payment provisions under the Broadband Network Vendor Financing
Agreements. On October 25, 2001, the Company obtained a
waiver of covenant defaults and an extension from these lenders
for scheduled principal and interest payments under the
Broadband Network Vendor Financing Agreements totaling
approximately $18.4 million that were due on that date. The
waiver expired on November 25, 2001 and the Broadbank
Network Vendor Financing Agreements became due and payable. The
Company is in default under the Broadbank Network Vendor
Financing Agreements, and as a result of the default, an
aggregate of $118.0 million and $89.0 million of the
defaulted amounts have been reclassified to current portion of
long-term debt as of December 31, 2001 and June 30,
2002, respectively.

9.     INCOME
TAXES

The composition of the benefit from income taxes,
all of which is for foreign taxes, for the six months ended
June 30, 2001 and 2002 is as follows:

|         |       |                    |        |                  |   |      |   |      |  |   |        |        |   |   |   |   | 
|-------- | ----- | ------------------ | ------ | ---------------- | - | ---- | - | ---- |  | - | ------ | ------ | - | - | - | - | 
|         |       |                    |        |                 
|         |       | Three Months Ended |        | Six Months Ended
|         |       | June 30,           |        | June 30,        
|         |       |                    |        |                 
|         |       | 2001               |        | 2002             |   | 2001 |   | 2002
|         |       |                    |        |                  |   |      |   |     
|Deferred |       | $                  | (9,046 | )                |   | $    |  |      |  | $ | (8,667 | )      |   | $ |  |  
|         |       |                    |        |                  |   |      |   |      |  |   |        |        |   |   |   |  
|         | Total |                    | $      | (9,046           | ) |      | $ |     |  |   | $      | (8,667 | ) |   | $ |  | 
|         |       |                    |        |                  |   |      |   |      |  |   |        |        |   |   |   |  

The statutory tax rate in Argentina is 35%.

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

10.     COMMITMENTS
AND CONTINGENCIES

Commitments
The Company leases satellite capacity with annual rental
commitments of approximately $6.6 million through the year
2006. The Company leases telecommunications links with annual
rental commitments of approximately $1.9 million through
the year 2006. In addition, the Company has commit-

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IMPSAT S.A.




NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS  (Continued)


(Tables in thousands of U.S.
dollars)


ments to purchase communications and data center
equipment amounting to approximately $1.5 million at
June 30, 2002. These commitments are not included in the
balance sheet as of June 30, 2002.

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

IMPSAT Brazil, another wholly-owned subsidiary of
IMPSAT Fiber Networks, Inc., has entered into a
$5.9 million term note with El Camino Resources, which is
guaranteed by the Company and the Parent Company. At
June 30, 2002, the balance outstanding was approximately
$2.4 million.

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

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

During the pendency of the arbitration and
litigation proceedings, the Company will continue to include as
deferred revenues on its balance sheet the amount received from
360networks as down payments under the terminated contracts,
after deducting amounts that were due and payable at the time of
the termination of the contracts. As of June 30, 2002, the
balance of such deferred revenue was $8.0 million.

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

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

* * * * * *

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

New Developments and Critical
Considerations

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

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

In the near future, the Parent Company expects to
file a Disclosure Statement (the Disclosure
Statement) and a Plan of Reorganization (the
Plan) with the Bankruptcy Court. The Disclosure
Statement will summarize the Plan and contain information
concerning, among other matters, the history, business, results
of operations, management, properties, liabilities and the
assets available for distribution under the Plan as well as the
anticipated organization and operation of a reorganized Parent
Company. The Disclosure Statement will also describe certain
effects of Plan confirmation, certain risk factors associated
with the Plan, the manner in which distributions will be made to
our creditors under the Plan for all amounts that were owed to
such parties on the Petition Date and the confirmation process
and voting procedures that holders of claims in impaired classes
must follow for their votes to be counted.

Prior to the Petition Date, holders of a majority
of our indebtedness under our Broadband Network vendor financing
agreements (the Vendor Financing Agreements), our
12 1/8% Senior Guaranteed Notes due 2003 (Senior
Notes due 2003), our 13 3/4% Senior Notes due 2005
(Senior Notes due 2005), and our 12 3/8% Senior
Notes due 2008 (Senior Notes 2008) (collectively,
the Senior Notes) agreed to support the Parent
Companys pre-packaged Plan that, if approved by the
Bankruptcy Court, would provide, among other things, as follows:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Holders of debt under the Vendor Financing
    Agreements will receive a combination of senior secured
    indebtedness totaling $140.7 million, $22.5 million in
    the aggregate of new senior guaranteed convertible notes
    (initially convertible in the aggregate into 5% of the
    reorganized Parent Companys new common stock (New
    Common Stock), and warrants to acquire 15% in the
    aggregate of the New Common Stock.                                                                                                                                             
|
| |  | Holders of the Senior Notes due 2003 will receive
    new senior guaranteed convertible notes in an aggregate amount
    of $67.5 million, initially convertible in the aggregate
    into 23% of the New Common Stock.                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | Holders of the Senior Notes due 2005 and 2008
    will exchange those Notes for initially 98% in the aggregate of
    the New Common Stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | Other creditors of the Parent Companys
    operating subsidiaries holding guarantees by the Parent Company
    of such indebtedness will be entitled to elect to either receive
    the same pro rata treatment with respect to such indebtedness as
    holders of debt under the Vendor Financing Agreements will
    receive above, or to keep their subsidiary debt under its
    existing terms and have their Parent Company guarantee converted
    into shares of New Common Stock based on the allowed amount of
    their guarantee claims as determined by the Bankruptcy Court.
|
| |  | Management would receive 2% of the New Common
    Stock, plus stock options representing 8% of the New Common
    Stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | The Plan contemplates no distribution to existing
    stockholders of the Parent Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

Once the Plan and Disclosure Statement are filed
with the Bankruptcy Court, they will be subject to a vote by the
creditors and certain other interests impaired by the Plan as
well as court review and confirmation. While we expect to file
the Plan and Disclosure Statement substantially as described
herein, we anticipate filing certain amendments to the Plan and/
or Disclosure Statement to, among other things, add and clarify

1



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##### Table of Contents



certain terms of the Plan. We currently expect
that our Chapter 11 restructuring proceeding should be
completed during the fourth quarter of 2002.


Nasdaq Delisting.On
May 17, 2002 we received a notification from the Nasdaq
Listing Qualification Panel that we would no longer be listed on
the Nasdaq National Market effective at market opening on
May 24, 2002. The Nasdaq Listings Qualification
Panels decision was based on our failure to meet the
requirements for continued listing. As of May 24, 2002,
trading of our common stock began on the OTC Bulletin Board, a
regulated quotation service that displays real-time quotes,
last-sale prices and volume information in over-the-counter
(OTC) equity securities. As a consequence of our delisting,
it is expected that our stockholders will find it more difficult
to buy or sell shares of, or obtain accurate quotations as to
the market value of our common stock.

Effect of Argentine Peso Devaluation and
Pesification Decree and Ongoing Economic and
Political Crisis on our Results of
Operations. In the fourth quarter of
1998, the Argentine economy entered into a recession that caused
the gross domestic product to decrease by 3% in 1999, 0.5% in
2000, and 4.5% in 2001. Beginning in the second half of 2001,
Argentinas recession has worsened significantly,
precipitating a severe political and economic crisis. In
December 2001, the Argentine government introduced a partial
freeze on bank deposits, which resulted in widespread political
protests and social disturbances and the resignation of
Argentinas then president, Fernando de la Rua. Such
protests and disturbances have persisted as the Argentine
economy has continued to deteriorate rapidly.

In early January 2002, the government of
Argentine President Eduardo Duhalde abandoned the decade-old
fixed peso-dollar exchange rate and permitted the pesoto float freely against the U.S. dollar. The pesofree market opened on January 11, 2002 and traded at
1.65 pesosto the U.S. dollar and has been volatile
since. As of June 30, 2002, the floating exchange rate was
3.90 pesosto the U.S. dollar. The devaluation of the
Argentine pesoaffects our consolidated financial
statements by generating foreign exchange transaction gains or
losses on peso-denominated monetary liabilities and
assets of IMPSAT Argentina and will generally result in a
decrease, in U.S. dollar terms, in our revenues, costs and
expenses in Argentina.

During December 2001, the Argentine government
instituted a system for the freezing of the deposits in its
financial system. In February 2002, these measures led to, among
other things, the pesification decree.
Generally, this decree mandates that all monetary obligations
arising from agreements subject to Argentine law denominated in
foreign currency and existing as of January 6, 2002 are
mandatorily converted into monetary obligations denominated in
pesosat an exchange rate of one U.S. dollar to one
peso. Such obligations generally may be adjusted pursuant
to an index called the coeficiente de
estabilización de referencia(CER),
to be published by the Argentine central bank, which is based on
the Argentine consumer price index. Contracts denominated in
pesosbefore the decree continue to be denominated in
pesos, unaffected by the decree. The devaluation and the
pesification of agreements of our company
governed by Argentine law may have adverse, unknown and
unforeseeable effects on our company.

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

Argentina is currently trying to negotiate a
multibillion-dollar financial aid package from the International
Monetary Fund to help overcome that countrys debilitating
economic crisis. To date, the IMF and other multilateral and
official sector lenders have indicated an unwillingness to
provide financial aid until a sustainable economic program has
been presented. It is unclear whether Argentinas current
president,

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Eduardo Duhalde, will be able to complete his
term or, even if he is able to remain in power, whether he will
have the necessary support to implement the reforms required to
restore economic growth and public confidence. The rapid and
radical nature of the recent changes in the Argentine social,
political, economic and legal environment, and the absence of a
clear political consensus in favor of the new government or any
particular set of economic policies, have created an atmosphere
of great uncertainty. As a result, virtually all commercial and
financial activities have been paralyzed, further aggravating
the economic recession that precipitated the current crisis. The
Argentine government may enact future regulations or policies
that, when finalized and adopted, may adversely and materially
impact, among other items: (i) the realized revenues we
receives for services offered in Argentina; (ii) the timing
of repatriations of any dividends or other cash flows from
IMPSAT Argentina to IMPSAT Fiber Networks, Inc. in the United
States; (iii) our asset valuations; and (iv) our
peso-denominated monetary assets and liabilities.


Effects of the Global Crossing
Insolvency.We are party to a series
of agreements initially signed in 1999 with several subsidiaries
of Global Crossing Ltd. (collectively, Global
Crossing) for the provision of telecommunications
services. Pursuant to those agreements, among other things, we
have constructed certain terrestrial portions of Global
Crossings South American network, granted Global Crossing
a series of indefeasible rights of use (IRU) capacity on
certain segments of our Broadband Network, and provided Global
Crossing with certain collocation space and related maintenance
and other services. In addition, we acquired IRU and leased
capacity on Global Crossings South American undersea fiber
optic cable system. In January 2002, Global Crossing Ltd., along
with a number of its subsidiaries, filed for protection under
chapter 11 of the U.S. Bankruptcy Code.

During the second quarter of 2002, we recognized
revenues totaling $3.9 million from Global Crossing for the
services provided under our agreements with Global Crossing. Of
this amount, $2.9 million represented services billed
through the second quarter and $1.0 million represented the
revenue recognition effect under the IRUs that we granted to
Global Crossing. During the same period, Global Crossing
invoiced us a total of $0.7 million, principally for
maintenance services on the IRUs that we have acquired from
Global Crossing. In general, invoices under our agreements with
Global Crossing are submitted quarterly in advance and are
payable 30 days after receipt. At June 30, 2002,
Global Crossing was in default for a total of $1.1 million
that we invoiced to them through the second quarter of 2002.

Although none of the Global Crossing subsidiaries
that have amounts outstanding to us are currently included in
Global Crossing Ltd.s chapter 11 filing, we believe that
these payment defaults are related to the significant cash
shortfalls that Global Crossing is currently experiencing. While
Global Crossing has disputed some of the amounts invoiced, we do
not believe that any of the bases of their disputes are valid.
As of In July 2002, we submitted invoices for a total of
$3.8 million for services to be rendered under our
agreements with Global Crossing for the third quarter of 2002.
As of August 10, 2002, the due date of such invoices, and
as of the date of this Quarterly Report, Global Crossing had not
made payment of any of this amount. As of June 30, 2002, we
have created a doubtful debt reserve against $0.1 million
of such amount.

In light of Global Crossings payment
defaults to us, we have declined to pay to Global Crossing a
total of $2.0 million that Global Crossing has invoiced us
for services through the second quarter of 2002. The amounts
that we owe Global Crossing are principally owed to Global
Crossing Bandwidth, Inc., a subsidiary of Global Crossing that
is among the Global Crossing parties that have filed for relief
under chapter 11.

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

The difficulties being experienced by Global
Crossing Ltd., including Global Crossing Ltd.s
chapter 11 proceeding, could have an adverse effect on our
financial condition and operations. If Global Crossing
Ltd.s bankruptcy proceedings were to expand to include any
of the subsidiaries that are parties to our agreements, we
likely would not receive payment on outstanding amounts due to
us for previously rendered services and sales of equipment,
except to the extent of our claims as unsecured creditors. At a
minimum, such an action

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could cause additional delays in our receipt of
amounts due to us. It is also possible that Global Crossing
could seek, in the applicable bankruptcy proceedings, to reject
some or all of the contracts. In the latter case, any damages
that we might have in respect of the rejected contracts would be
treated as general unsecured claims in the applicable bankruptcy
proceedings. In addition, if Global Crossing is unable to
successfully restructure its balance sheet, it could be forced
to liquidate its assets. If Global Crossing were to sell or
terminate its South American operations as part of its
bankruptcy proceedings, it is unclear what rights we would have
to continue to utilize the IRUs that we have purchased from
Global Crossing. It is possible that our agreements with Global
Crossing would be terminated and we would need to seek
substitute sources of IRU or other capacity from competing
undersea fiber optic systems to link our operations, including
our Broadband Network, to other parts of Latin America and the
world. The occurrence of these circumstances would have a
material adverse effect on our business, results of operations
and financial condition.


Critical Accounting Policies

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



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

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

Outlook

Revenues.In light
of the lingering macroeconomic recession affecting several
countries in Latin America and the consequential devaluation of
certain of their currencies, we believe that the
telecommunications sector in the region will continue a general
static or downward trend during the remainder of 2002. In this
context, some of our competitors have decided or been forced to
terminate their operations in the region. Our company continues
to be a leading provider in the corporate segment of the
regions telecommunications market, and management expects
that, if our proposed financial restructuring is successfully
consummated, our industry position could improve significantly.
Management anticipates that, in absence of additional major
macroeconomic setbacks in the region, total revenues for the
next two quarters will be only slightly below that recorded in
the quarter ended June 30, 2002, which could result in
total revenues for the year 2002 of between $220 million
and $240 million.

For the next six months management expects
revenues from our terrestrial services to remain relatively
stable in U.S. dollar terms. The impact of the prevailing
global decline in telecommunications services is likely to
continue to have a negative effect on our revenues from services
to other carriers. We expect these revenues to decrease in the
second half of 2002 compared to the first half of the same year.
Also during such period, we anticipate revenues from Internet
services to decline slightly as our loss of some Internet
customers and the

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adverse effects of regional currency devaluations
on our U.S. dollar-denominated revenues from such services are
unlikely to be reversed during the remainder of the year.
Meanwhile, our revenues from telephony and data center services
have shown positive growth, a trend management expects will be
sustained during the second half of the year. However, in U.S.
dollar terms, continued devaluations of regional currencies are
likely to offset any growth in these revenues.


The uncertainty regarding the ability of the
Latin American governments to implement the structural reforms
and related policies needed for their countries to regain the
path of economic growth makes it difficult to forecast the
timing for a recovery of the regions telecommunications
sector. However, management remains optimistic about the
longer-term prospects for the region and our companys
ability to capitalize on them.

Costs and EBITDA.The devaluation of the Argentine pesoand other
currencies in the region is expected by management to result in
lower operating costs for our company during the remainder of
2002. In addition, management has implemented and continues to
consider several cost control initiatives, which have controlled
and could be expected to further control our companys
overall operating ratios.

Management anticipates that fixed costs
(including salaries and wages and SG&A) will constitute
approximately 35% of total revenues for the full-year 2002.
Direct costs, including leased capacity, are expected to remain
at current levels throughout the rest of the year. In this
context, we have adjusted our EBITDA expectations for 2002.
Currently, management anticipates that total EBITDA will be in
the range of $25 million$35 million for the year
2002.

Capital
Expenditures.As previously disclosed
by our company in its SEC filings, during 2001 we completed and
put into operation our Broadband Network. Consequently, our
investments in infrastructure during 2002 and for the
foreseeable future will principally involve purchases of
equipment for installation on customers premises, which
purchases are expected by management to be matched by related
revenues generated from such installations. As a result of lower
expected revenues for this year, management currently estimates
that total capital expenditures for 2002 will be below
$20 million.

Forward Looking Statements

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

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

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Results of Operations

The following financial table summarizes our
results of operations:

|                                                 |                                            |                                                             |                                  |                           |        |        |        |      |      |       |         |        |        |        |        |      |      |       |          |        |         |         |        |      |      |       |          |        |        |         |        |      |      |       | 
|------------------------------------------------ | ------------------------------------------ | ----------------------------------------------------------- | -------------------------------- | ------------------------- | ------ | ------ | ------ | ---- | ---- | ----- | ------- | ------ | ------ | ------ | ------ | ---- | ---- | ----- | -------- | ------ | ------- | ------- | ------ | ---- | ---- | ----- | -------- | ------ | ------ | ------- | ------ | ---- | ---- | ----- | 
|                                                 |                                            |                                                             |                                  |                          
|                                                 |                                            | Three Months Ended June 30,                                 |                                  | Six Months Ended June 30,
|                                                 |                                            |                                                             |                                  |                          
|                                                 |                                            |                                                             |                                  |                           |        |        |        |     
|                                                 |                                            | 2001                                                        |                                  | 2002                      |        | 2001   |        | 2002
|                                                 |                                            |                                                             |                                  |                           |        |        |        |     
|                                                 |                                            |                                                             |                                  |                           |        |        |        |      |      |       |         |        |        |       
|                                                 |                                            |                                                            
|                                                 |                                            | (In thousands and as a percentage of consolidated revenues)
|Net revenues:                                    |                                            |                                                             |                                  |                           |        |        |        |      |      |       |         |        |        |        |        |      |      |       |          |        |         |         |        |      |      |       |          |        |        |         |        |     
|                                                 | Net revenues from services:                |                                                             |                                  |                           |        |        |        |      |      |       |         |        |        |        |        |      |      |       |          |        |         |         |        |      |      |       |          |        |        |         |        |      |     
|                                                 |                                            | Data and value added services                               |                                  | $                         | 59,333 |        |        |      | 75.6 | %     |         | $      | 46,021 |        |        |      | 77.6 | %     |          | $      | 119,060 |         |        |      | 71.2 | %     |          | $      | 94,384 |         |        |      | 77.5 | %    
|                                                 |                                            | Internet                                                    |                                  |                           | 11,679 |        |        |      | 14.9 |       |         |        | 7,269  |        |        |      | 12.2 |       |          |        | 22,840  |         |        |      | 13.7 |       |          |        | 15,123 |         |        |      | 12.4 |      
|                                                 |                                            | Telephony                                                   |                                  |                           | 1,881  |        |        |      | 2.4  |       |         |        | 3,971  |        |        |      | 6.7  |       |          |        | 3,154   |         |        |      | 1.9  |       |          |        | 8,317  |         |        |      | 6.8  |      
|                                                 |                                            | Services to carriers                                        |                                  |                           | 2,167  |        |        |      | 2.8  |       |         |        | 1,934  |        |        |      | 3.3  |       |          |        | 4,096   |         |        |      | 2.4  |       |          |        | 3,501  |         |        |      | 2.9  |      
|                                                 |                                            |                                                             |                                  |                           |        |        |        |      |      |       |         |        |        |        |        |      |      |       |          |        |         |         |        |      |      |       |          |        |        |         |        |     
|                                                 |                                            |                                                             | Total net revenues from services |                           |        | 75,060 |        |      |      | 95.6  |         |        |        | 59,195 |        |      |      | 99.8  |          |        |         | 149,150 |        |      |      | 89.2  |          |        |        | 121,325 |        |      |      | 99.6  | 
|                                                 | Sales of equipment                         |                                                             |                                  | 2,842                     |        |        |        | 3.6  |      |       |         | 146    |        |        |        | 0.2  |      |       |          | 10,925 |         |         |        | 6.5  |      |       |          | 429    |        |         |        | 0.4  |     
|                                                 | Broadband network development
    revenues |                                                             |                                  | 625                       |        |        |        | 0.8  |      |       |         |       |        |        |        |     |      |       |          | 7,197  |         |         |        | 4.3  |      |       |          |       |        |         |        |     |     
|                                                 |                                            |                                                             |                                  |                           |        |        |        |      |      |       |         |        |        |        |        |      |      |       |          |        |         |         |        |      |      |       |          |        |        |         |        |     
|                                                 |                                            |                                                             | Total net revenues               |                           |        | 78,527 |        |      |      | 100.0 |         |        |        | 59,341 |        |      |      | 100.0 |          |        |         | 167,272 |        |      |      | 100.0 |          |        |        | 121,754 |        |      |      | 100.0 | 
|Direct costs:                                    |                                            |                                                             |                                  |                           |        |        |        |      |      |       |         |        |        |        |        |      |      |       |          |        |         |         |        |      |      |       |          |        |        |         |        |     
|                                                 | Contracted services                        |                                                             |                                  | 8,859                     |        |        |        | 11.3 |      |       |         | 5,104  |        |        |        | 8.6  |      |       |          | 19,945 |         |         |        | 11.9 |      |       |          | 11,337 |        |         |        | 9.3  |     
|                                                 | Other direct costs                         |                                                             |                                  | 7,371                     |        |        |        | 9.4  |      |       |         | 5,025  |        |        |        | 8.5  |      |       |          | 13,163 |         |         |        | 7.9  |      |       |          | 11,560 |        |         |        | 9.5  |     
|                                                 | Leased capacity                            |                                                             |                                  | 23,452                    |        |        |        | 29.9 |      |       |         | 19,514 |        |        |        | 32.9 |      |       |          | 45,385 |         |         |        | 27.1 |      |       |          | 39,899 |        |         |        | 32.8 |     
|                                                 | Broadband network
    cost                 |                                                             |                                  |                          |        |        |        |     |      |       |         |       |        |        |        |     |      |       |          | 3,335  |         |         |        | 2.0  |      |       |          |       |        |         |        |     |     
|                                                 | Cost of equipment
    sold                 |                                                             |                                  | 2,105                     |        |        |        | 2.7  |      |       |         | 123    |        |        |        | 0.2  |      |       |          | 7,497  |         |         |        | 4.5  |      |       |          | 241    |        |         |        | 0.2  |     
|                                                 |                                            |                                                             |                                  |                           |        |        |        |      |      |       |         |        |        |        |        |      |      |       |          |        |         |         |        |      |      |       |          |        |        |         |        |     
|Total direct costs                               |                                            |                                                             | 41,787                           |                           |        |        | 53.2   |      |      |       | 29,766  |        |        |        | 50.2   |      |      |       | 89,325   |        |         |         | 53.4   |      |      |       | 63,037   |        |        |         | 51.8   |     
|Salaries and wages                               |                                            |                                                             | 21,900                           |                           |        |        | 27.9   |      |      |       | 12,593  |        |        |        | 21.2   |      |      |       | 44,097   |        |         |         | 26.4   |      |      |       | 25,635   |        |        |         | 21.1   |     
|Selling, general and administrative
    expenses |                                            |                                                             | 14,782                           |                           |        |        | 18.8   |      |      |       | 6,809   |        |        |        | 11.5   |      |      |       | 29,470   |        |         |         | 17.6   |      |      |       | 14,160   |        |        |         | 11.6   |     
|Depreciation and amortization                    |                                            |                                                             | 30,245                           |                           |        |        | 38.5   |      |      |       | 23,359  |        |        |        | 39.4   |      |      |       | 59,677   |        |         |         | 35.7   |      |      |       | 47,268   |        |        |         | 38.8   |     
|Interest expense, net                            |                                            |                                                             | 33,132                           |                           |        |        | 42.2   |      |      |       | 37,707  |        |        |        | 63.5   |      |      |       | 62,131   |        |         |         | 37.1   |      |      |       | 71,152   |        |        |         | 58.4   |     
|Net loss on foreign exchange                     |                                            |                                                             | 10,369                           |                           |        |        | 13.2   |      |      |       | 45,065  |        |        |        | 75.9   |      |      |       | 24,150   |        |         |         | 14.4   |      |      |       | 52,431   |        |        |         | 43.1   |     
|Reorganization items                             |                                            |                                                             |                                 |                           |        |        |       |      |      |       | (5,574  | )      |        |        | (9.4   | )    |      |       |         |        |         |         |       |      |      |       | (5,692   | )      |        |         | (4.7   | )   
|Other income (loss), net                         |                                            |                                                             | 138                              |                           |        |        | 0.2    |      |      |       | 246     |        |        |        | 0.4    |      |      |       | 145      |        |         |         | 0.1    |      |      |       | (1,704   | )      |        |         | (1.4   | )   
|Provision for foreign income taxes               |                                            |                                                             | (26,122                          | )                         |        |        | (33.3  | )    |      |       | (711    | )      |        |        | (1.2   | )    |      |       | (26,488  | )      |         |         | (15.8  | )    |      |       | (1,149   | )      |        |         | (0.9   | )   
|Extraordinary item                               |                                            |                                                             |                                 |                           |        |        |       |      |      |       | 16,367  |        |        |        | 27.6   |      |      |       |         |        |         |         |       |      |      |       | 16,367   |        |        |         | 13.4   |     
|                                                 |                                            |                                                             |                                  |                           |        |        |        |      |      |       |         |        |        |        |        |      |      |       |          |        |         |         |        |      |      |       |          |        |        |         |        |     
|Net loss                                         |                                            | $                                                           | (99,672                          | )                         |        |        | (126.9 | )%   |      | $     | (90,437 | )      |        |        | (152.4 | )%   |      | $     | (167,921 | )      |         |         | (100.4 | )%   |      | $     | (148,914 | )      |        |         | (122.3 | )%  
|                                                 |                                            |                                                             |                                  |                           |        |        |        |      |      |       |         |        |        |        |        |      |      |       |          |        |         |         |        |      |      |       |          |        |        |         |        |     

Six Months Ended June 30, 2002
Compared to Six Months Ended June 30, 2001

Revenues.Our total
net revenues for the three and six months ended June 30, 2002
totaled $59.3 million and $121.8 million, a decrease
of $19.2 million (or 24.4%) and $45.5 million (or
27.2%) from total net revenues for the same periods in 2001. Our
total net revenues in the second quarter of 2002 decreased by
$3.1 million (or 4.9%) compared to our total net revenues
for the first quarter of 2002.

Our net revenues from services for the three and
six months ended June 30, 2002, totaled $59.2 million
and $121.3 million, an decrease of $15.9 million (or
21.1%) and $27.8 million (or 18.7%) from net revenues from
services for the same periods in 2001. Compared to our net
revenues from services for the first quarter of 2002, our net
revenues from services in the second quarter of 2002 decreased
by $2.9 million (or 4.7%). The decrease in our net revenues
was principally due to significant devaluations of the Argentine
pesoand the Brazilian realagainst the U.S.
dollar that occurred during the first half of 2002. Excluding
our operations in Argentina, our revenues from services for the
three and six months ended June 30, 2002 totaled
$46.5 million and $94.5 million, compared to
$46.7 million and $91.1 million for the three and six
months ended June 30, 2001.

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##### Table of Contents



Our net revenues from services include net
revenues from:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | data and value added services, which include
    satellite and broadband data transmission services, data center
    services, and other value-added services                                                                                                                                                                                                                                   
|
| |  | Internet, which is composed of our Internet
    backbone access and managed modem services                                                                                                                                                                                                                                                                                                      
|
| |  | telephony, including local, national and
    international long-distance services, and                                                                                                                                                                                                                                                                                                          
|
| |  | services to carriers, which consist of our
    wholesale long-haul services to other telecommunications
    carriers (including revenue recognition from the sale of IRU
    capacity on our Broadband Network to, and our provision of
    switching and transportation of telecommunications traffic
    services for, such carriers), and related maintenance services
    to those carriers.

The following table shows our revenues from
services by business lines (after elimination of intercompany
transactions) for the periods indicated:

|                               |                                   |                                  |        |                           |        |             |       |        |        |      |       |             |       |    |        |        |         |  |        |        |         |  |       |       |       |   
|------------------------------ | --------------------------------- | -------------------------------- | ------ | ------------------------- | ------ | ----------- | ----- | ------ | ------ | ---- | ----- | ----------- | ----- | -- | ------ | ------ | ------- |  | ------ | ------ | ------- |  | ----- | ----- | ----- | --
|                               |                                   |                                  |        |                          
|                               |                                   | Three Months Ended June 30,      |        | Six Months Ended June 30,
|                               |                                   |                                  |        |                          
|                               |                                   | 2001                             |        | 2002                      |        | % change(1) |       | 2001   |        | 2002 |       | % change(1)
|                               |                                   |                                  |        |                           |        |             |       |        |        |      |       |            
|                               |                                   |                                 
|                               |                                   | (dollar amounts in thousands)   
|Data and value added services: |                                   |                                  |        |                           |        |             |       |        |        |      |       |             |       |    |        |        |         |  |        |        |         |  |       |      
|                               | Broadband                         |                                  | $      | 20,287                    |        |             | $     | 19,920 |        |      |       | (1.8        | )%    |    | $      | 38,720 |         |  | $      | 39,804 |         |  |       | 2.8   | %    
|                               | Satellite                         |                                  |        | 34,382                    |        |             |       | 22,597 |        |      |       | (34.3       | )     |    |        | 72,163 |         |  |        | 47,459 |         |  |       | (34.2 | )    
|                               | Other value added
    services(2) |                                  |        | 4,664                     |        |             |       | 3,504  |        |      |       | (24.9       | )     |    |        | 8,177  |         |  |        | 7,121  |         |  |       | (12.9 | )    
|                               |                                   |                                  |        |                           |        |             |       |        |        |      |       |             |       |    |        |        |         |  |        |        |         |  |       |      
|                               |                                   | Total                            |        | $                         | 59,333 |             |       | $      | 46,021 |      |       |             | (22.4 | )% |        | $      | 119,060 |  |        | $      | 94,384  |  |       |       | (20.7 | )%
|Internet                       |                                   |                                  | 11,679 |                           |        |             | 7,269 |        |        |      | (37.8 | )           |       |    | 22,840 |        |         |  | 15,123 |        |         |  | (33.8 | )    
|Telephony                      |                                   |                                  | 1,881  |                           |        |             | 3,971 |        |        |      | 111.1 |             |       |    | 3,154  |        |         |  | 8,317  |        |         |  | 163.7 |      
|Services to carriers           |                                   |                                  | 2,167  |                           |        |             | 1,934 |        |        |      | (10.8 | )           |       |    | 4,096  |        |         |  | 3,501  |        |         |  | (14.5 | )    
|                               |                                   |                                  |        |                           |        |             |       |        |        |      |       |             |       |    |        |        |         |  |        |        |         |  |       |      
|                               |                                   | Total net revenues from services |        | $                         | 75,060 |             |       | $      | 59,195 |      |       |             | (21.1 | )% |        | $      | 149,150 |  |        | $      | 121,325 |  |       |       | (18.7 | )%
|                               |                                   |                                  |        |                           |        |             |       |        |        |      |       |             |       |    |        |        |         |  |        |        |         |  |       |      






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

The decrease in our net revenues from services
during the three and six months ended June 30, 2002 as
compared to the corresponding periods in 2001 resulted from
lower revenues from data and value added services, Internet and
services to carriers, offset in part by an increase in our
revenues from telephony services.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our revenues from broadband services increased
    during the first half of 2002 as compared to the first half of
    2001 notwithstanding the negative effect on these revenues (in
    U.S. dollar terms) primarily attributable to the devaluation of
    the Argentine pesoand the Brazilian real.
    Increases in our revenues from broadband services were more than
    offset by reduced revenues from our satellite services and other
    value added services. Our revenues from satellite services
    during the three and six months ended June 30, 2002
    declined in comparison to the same periods in 2001 due to:
    (i) the negative effect on such revenues, in U.S. dollar
    terms, of the devaluation of the Argentina pesoand the
    Brazilian realduring the first half of 2002,
    (ii) lower satellite-based services volume (as we
    transferred telecommunications services to our Broadband
    Network), (iii) downward pressure on our prices (because of
    competition and adverse economic conditions), and (iv) a
    number of customer cancellations or non-renewals.
|
| |  | We experienced lower Internet revenues
    principally because of (i) the adverse impact on such
    revenues of the devaluation of the Argentina pesoand the
    Brazilian realduring the first half of 2002, and
    (ii) a number of customer cancellations or non-renewals,
    particularly in Brazil.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | Our telephony services revenues grew during the
    three and six months ended June 30, 2002 as compared to the
    same periods in 2001. This increase in our telephony services
    revenues, which were partially offset by the effect of the
    devaluation of the Argentine peso, was generated in
    connection with                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | our increased delivery during that period of
    switched voice services to corporate customers in Argentina and
    international call terminations to end-user customers in Peru
    and the United States. Included in our telephony revenues for
    the three months ended June 30, 2002 are approximately $1.1
    million of such revenues that were recorded during the second
    quarter of 2002 have been deemed uncollectible because of
    customer defaults, and have been reserved against in full.
|
| |  | Our revenues from services to carriers decreased
    compared to the first half of 2001 as a result of the
    cancellation of our contracts with 360networks in June 2001 and
    a general decline in demand by telecommunications companies for
    dark and lit fiber capacity.                                                                                                                                                                                                                            

Global Crossing and 360networks were the
principal customers for our data center services and services to
carriers during 2001. Due to Global Crossings insolvency
and our dispute with 360networks (which is also engaged in
ongoing insolvency proceedings), we anticipate that we will
generate lower data center services and services to carriers
revenues during the remainder of 2002. In June 2001, we
terminated a series of contracts that we had signed with
360networks due to the latters payment default of its
obligations under those contracts to us. (For a description of
this matter, you may refer to see the section captioned
Legal Proceedings in our Quarterly Report on
Form 10-Q for the first quarter of 2002.)

At June 30, 2002, we experienced a net
decrease in the number of our customers, as compared to the same
date in 2001. We had 2,854 customers as of June 30, 2002,
compared to 2,877 customers at December 31, 2001 and 3,079
customers at June 30, 2001. The following table shows the
evolution of our customer base as of the dates indicated:

|                 |       |                            |       |              |  |          |       |             |  |             |       |       |  |  |       |      |   |  |      |      |  
|---------------- | ----- | -------------------------- | ----- | ------------ |  | -------- | ----- | ----------- |  | ----------- | ----- | ----- |  |  | ----- | ---- | - |  | ---- | ---- | -
|                 |       |                            |       |              |  |         
|                 |       | Number of Customers as of: |       |              |  |         
|                 |       |                            |       |              |  |         
|                 |       | June 30,                   |       | December 31, |  | June 30, |       |             |  |            
|                 |       | 2001                       |       | 2001         |  | 2002     |       | % Change(1) |  | % Change(2)
|                 |       |                            |       |              |  |          |       |             |  |            
|IMPSAT Argentina |       |                            | 1,202 |              |  |          | 1,100 |             |  |             | 1,097 |       |  |  | (8.7  | )%   |   |  | (0.3 | )%  
|IMPSAT Colombia  |       |                            | 782   |              |  |          | 699   |             |  |             | 697   |       |  |  | (10.9 | )    |   |  | (0.3 | )   
|IMPSAT Brazil    |       |                            | 360   |              |  |          | 387   |             |  |             | 371   |       |  |  | 3.1   |      |   |  | (4.1 | )   
|IMPSAT Venezuela |       |                            | 288   |              |  |          | 245   |             |  |             | 239   |       |  |  | (17.0 | )    |   |  | (2.4 | )   
|IMPSAT Ecuador   |       |                            | 253   |              |  |          | 236   |             |  |             | 226   |       |  |  | (10.7 | )    |   |  | (4.2 | )   
|IMPSAT Mexico    |       |                            | 53    |              |  |          | 47    |             |  |             | 47    |       |  |  | (11.3 | )    |   |  |     |     
|IMPSAT Chile     |       |                            | 33    |              |  |          | 57    |             |  |             | 53    |       |  |  | 60.6  |      |   |  | (7.0 | )   
|IMPSAT Peru      |       |                            | 35    |              |  |          | 33    |             |  |             | 55    |       |  |  | 57.1  |      |   |  | 66.7 |     
|IMPSAT USA       |       |                            | 73    |              |  |          | 73    |             |  |             | 69    |       |  |  | (5.5  | )    |   |  | (5.5 | )   
|                 |       |                            |       |              |  |          |       |             |  |             |       |       |  |  |       |      |   |  |      |     
|                 | Total |                            |       | 3,079        |  |          |       | 2,877       |  |             |       | 2,854 |  |  |       | (7.3 | ) |  |      | (0.8 | )
|                 |       |                            |       |              |  |          |       |             |  |             |       |       |  |  |       |      |   |  |      |     





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

Adverse economic conditions experienced in
Argentina resulted in a net decrease in the number of customers
(primarily small and medium-sized corporations) and the volume
of services provided in that country as of June 30, 2002
compared to as of June 30, 2001. In addition to poor
economic conditions in Argentina and Brazil, negative or
sluggish economic growth persisted throughout most of the Latin
American region during the second quarter 2002. This general
downturn has caused a reduction in our customer base during the
first half of 2002. During 2002, we have not, however,
experienced any significant customer losses to our competitors.

In addition to net revenues from services, our
total net revenues for the three and six months ended
June 30, 2002 included $0.1 million and
$0.4 million in equipment sales, which represent decreases
of $2.7 million (or 94.9%) and $10.5 million (or
96.1%) from the same periods in 2001. We did not record any
Broadband network development revenues during the first half of
2002. Our Broadband Network development revenues totaled
$0.6 million and $7.2 million for the three and six
months ended June 30, 2001. We currently anticipate only
minimal sales of equipment during the remainder of 2002, and we
do not anticipate any Broadband Network development revenues
during 2002.

8



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

|                 |               |                               |   |                           |  |             |   |        |  |      |  |             |    |  |   |        |  |  |   |        |  |  |  |       |   
|---------------- | ------------- | ----------------------------- | - | ------------------------- |  | ----------- | - | ------ |  | ---- |  | ----------- | -- |  | - | ------ |  |  | - | ------ |  |  |  | ----- | --
|                 |               |                               |   |                          
|                 |               | Three Months Ended June 30,   |   | Six Months Ended June 30,
|                 |               |                               |   |                          
|                 |               | 2001                          |   | 2002                      |  | % change(1) |   | 2001   |  | 2002 |  | % change(1)
|                 |               |                               |   |                           |  |             |   |        |  |      |  |            
|                 |               |                              
|                 |               | (dollar amounts in thousands)
|IMPSAT Argentina |               |                               |   |                           |  |             |   |        |  |      |  |             |    |  |   |        |  |  |   |        |  |  |  |      
|                 | From services |                               | $ | 29,325                    |  |             | $ | 14,230 |  |      |  | (51.5       | )% |  | $ | 59,879 |  |  | $ | 30,011 |  |  |  | (49.9 | )%
|                 | Total         |                               | $ | 31,359                    |  |             | $ | 14,273 |  |      |  | (54.5       | )  |  | $ | 63,937 |  |  | $ | 30,116 |  |  |  | (52.9 | ) 
|IMPSAT Colombia  |               |                               |   |                           |  |             |   |        |  |      |  |             |    |  |   |        |  |  |   |        |  |  |  |      
|                 | From services |                               |   | 15,168                    |  |             |   | 14,951 |  |      |  | (1.4        | )  |  |   | 30,758 |  |  |   | 30,011 |  |  |  | (2.4  | ) 
|                 | Total         |                               |   | 15,646                    |  |             |   | 14,951 |  |      |  | (4.4        | )  |  |   | 31,236 |  |  |   | 30,021 |  |  |  | (3.9  | ) 
|IMPSAT Brazil    |               |                               |   |                           |  |             |   |        |  |      |  |             |    |  |   |        |  |  |   |        |  |  |  |      
|                 | From services |                               |   | 10,913                    |  |             |   | 10,086 |  |      |  | (7.6        | )  |  |   | 21,077 |  |  |   | 20,819 |  |  |  | (1.2  | ) 
|                 | Total         |                               |   | 11,538                    |  |             |   | 10,086 |  |      |  | (12.6       | )  |  |   | 26,353 |  |  |   | 20,819 |  |  |  | (21.0 | ) 
|IMPSAT Venezuela |               |                               |   |                           |  |             |   |        |  |      |  |             |    |  |   |        |  |  |   |        |  |  |  |      
|                 | From services |                               |   | 7,779                     |  |             |   | 7,633  |  |      |  | (1.9        | )  |  |   | 15,132 |  |  |   | 15,434 |  |  |  | 2.0   |   
|                 | Total         |                               |   | 7,820                     |  |             |   | 7,704  |  |      |  | (1.5        | )  |  |   | 16,302 |  |  |   | 15,559 |  |  |  | (4.6  | ) 
|IMPSAT Ecuador   |               |                               |   |                           |  |             |   |        |  |      |  |             |    |  |   |        |  |  |   |        |  |  |  |      
|                 | From services |                               |   | 4,018                     |  |             |   | 4,529  |  |      |  | 12.7        |    |  |   | 7,710  |  |  |   | 8,743  |  |  |  | 13.4  |   
|                 | Total         |                               |   | 4,045                     |  |             |   | 4,529  |  |      |  | 12.0        |    |  |   | 7,690  |  |  |   | 8,848  |  |  |  | 15.1  |   
|IMPSAT Chile     |               |                               |   |                           |  |             |   |        |  |      |  |             |    |  |   |        |  |  |   |        |  |  |  |      
|                 | From services |                               |   | 2,153                     |  |             |   | 2,525  |  |      |  | 17.3        |    |  |   | 3,538  |  |  |   | 4,739  |  |  |  | 33.9  |   
|                 | Total         |                               |   | 2,216                     |  |             |   | 2,525  |  |      |  | 13.9        |    |  |   | 9,598  |  |  |   | 4,739  |  |  |  | (50.6 | ) 
|IMPSAT Peru      |               |                               |   |                           |  |             |   |        |  |      |  |             |    |  |   |        |  |  |   |        |  |  |  |      
|                 | From services |                               |   | 1,213                     |  |             |   | 2,612  |  |      |  | 115.3       |    |  |   | 1,993  |  |  |   | 5,644  |  |  |  | 183.2 |   
|                 | Total         |                               |   | 1,236                     |  |             |   | 2,642  |  |      |  | 113.8       |    |  |   | 2,994  |  |  |   | 5,725  |  |  |  | 91.2  |   
|IMPSAT USA       |               |                               |   |                           |  |             |   |        |  |      |  |             |    |  |   |        |  |  |   |        |  |  |  |      
|                 | From services |                               |   | 9,371                     |  |             |   | 9,240  |  |      |  | (1.4        | )  |  |   | 18,650 |  |  |   | 18,857 |  |  |  | 1.1   |   
|                 | Total         |                               |   | 9,470                     |  |             |   | 9,240  |  |      |  | (2.4        | )  |  |   | 18,750 |  |  |   | 18,857 |  |  |  | 0.6   |   
|Other            |               |                               |   |                           |  |             |   |        |  |      |  |             |    |  |   |        |  |  |   |        |  |  |  |      
|                 | From services |                               |   | 1,104                     |  |             |   | 890    |  |      |  | (19.4       | )  |  |   | 2,250  |  |  |   | 1,885  |  |  |  | (16.2 | ) 
|                 | Total         |                               |   | 1,107                     |  |             |   | 893    |  |      |  | (19.3       | )  |  |   | 2,250  |  |  |   | 1,888  |  |  |  | (16.1 | ) 





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



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

During the first half of 2002, IMPSAT
Argentinas financial condition and results of operations
continued to be severely and negatively affected by currency
fluctuations, inflation, interest rates, and other unfavorable
political, social and economic developments. Our net revenues
from services at IMPSAT Argentina for the

9



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three and six months ended June 30, 2002
totaled $14.2 million and $30.0 million, a decrease of
$15.1 million (or 51.5%) and $29.9 million (or 49.9%)
compared to the same periods in 2001. This decrease was
primarily caused by the devaluation of the Argentine pesofollowing the implementation of the February 2002
pesification decree and general recessionary
conditions in that country. In Argentine pesos, IMPSAT
Argentinas revenues from services for the three and six
months ended June 30, 2002, increased by 66.6% and 37.4% as
compared to the same periods in 2001.


Our results in Brazil also were adversely
affected during the first half of 2002 as compared to the
corresponding period in 2001 by the devaluation of the Brazilian
realagainst the U.S. dollar. At June 30, 2001, the
realtraded at a rate of R$2.31 = $1.00, and at
June 30, 2002 it had depreciated to
R$2.83 = $1.00. As of August 9, 2002, the realtraded at a rate of R$2.94 = $1.00. These and
prior devaluations have had a negative effect on our
real-denominated revenues. The devaluation of the realand the decline in growth in the Brazilian economy have been
caused in part by the continued recession in the region, a
general aversion to emerging markets by foreign direct and
financial investors and the overall decline in worldwide
economic production. Recently, fears have mounted in the
international investor community that left-wing candidate, Luiz
Inacio Lula da Silva, could win Brazils upcoming
presidential elections and cause Brazil to alter its policies in
a manner that would adversely affect its economy. These
conditions have had, and can be expected to continue to have, an
adverse effect on IMPSAT Brazils and our companys
overall financial condition and results of operations.

IMPSAT Brazils revenues from services for
the three and six months ended June 30, 2002 totaled
$10.1 million and $20.8 million, a decrease of
$0.8 million (or 7.6%) and $0.3 million (or 1.2%)
compared to the same periods in 2001. This decrease in revenues
relates primarily to the effect of the devaluation of the
real. In local currency terms, IMPSAT Brazils
revenues for the three and six months ended June 30, 2002
increased by 21.9% and 12.0% as compared to the same periods in
2001.

IMPSAT Colombia recorded revenues from services
of $15.0 million and $30.0 million during the three
and six months ended June 30, 2002, compared to
$15.2 million and $30.8 million for the same periods
in 2001. Our net revenues from services in Colombia have been
negatively impacted by sustained adverse economic conditions in
that country. Colombias economy continues to suffer as a
result of devaluations of the Colombian peso, an enduring
civil war, as well as general recessionary conditions.
Nevertheless, we expect that our revenues in Colombia will
stabilize at current levels throughout the remainder of 2002.

Revenues from services at IMPSAT Venezuela
equaled $7.6 million and $15.4 million for the three
and six months ended June 30, 2002, compared to
$7.8 million and $15.1 million for the corresponding
periods in 2001. On February 12, 2002, Venezuelas
government floated its currency, ending a five-year-old regime
that permitted the bolivarto trade only within a
fixed-band against the U.S. dollar. As a result, devaluation of
he bolivaroccurred. Venezuela is currently experiencing
political and economic uncertainty following the attempted
military coup staged against that countrys President
Chavez during the first weeks of April 2002. Any resurgence of
the recent crisis in Venezuela could have a material adverse
effect on IMPSAT Venezuelas results of operations and
financial condition.

Direct Costs.Our
direct costs for the three and six months ended June 30,
2002 totaled $29.8 million and $63.0 million, a
decrease of $12.0 million (or 28.8%) and $26.3 million
(or 29.4%), compared to the same periods in 2001. Of our total
direct costs for the three and six months ended June 30,
2002, $11.2 million and $23.2 million related to the
operations of IMPSAT Argentina. This compares to
$19.2 million and $38.1 million at IMPSAT Argentina
for the same periods in 2001. As compared to the corresponding
periods in 2001, this reduction during the first half of 2002
was caused principally by (i) the devaluation of local
currencies in Argentina, Brazil, Colombia and Venezuela during
the first half of 2002, which had the effect of decreasing our
direct costs in those countries in U.S. dollar terms and
(ii) our incurring significantly lower total costs of
equipment sold and no Broadband Network development costs during
the first half of 2002. Direct costs for IMPSAT Brazil totaled
$5.8 million and $12.8 million for the second quarter
and first half of 2002, compared to $8.3 million and
$18.8 million for the corresponding periods in 2001. Direct
costs of our subsidiaries are described prior to the elimination
of intercompany transactions.

10



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##### Table of Contents



(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, 2002, our
contracted services costs totaled $5.1 million and
$11.3 million, a decrease of $3.8 million (or 42.4%)
and $8.6 million (or 43.2%) from the same periods in 2001.
Of this amount, maintenance costs for our telecommunications
network infrastructure, including the Broadband Network, totaled
$3.9 million and $8.8 million for the three and six
months ended June 30, 2002, compared to $6.6 million
and $12.7 million during the same periods in 2001.
Installation costs totaled $1.2 million and
$2.5 million for the three and six months ended
June 30, 2002, compared to $2.3 million and
$7.2 million for the same periods in 2001. The decrease in
our maintenance costs and installation costs is partially
attributable to the effect of the devaluation of the pesoon such costs in Argentina and the favorable renegotiation
of certain of our agreements for maintenance services with
third-party contractors in that country. Also, our installation
costs decreased because we had fewer new customers in the first
half of 2002 compared to the same period in 2001. Of our total
contracted services costs for the second quarter and first half
of 2002, $1.5 million and $3.3 million related to the
operations of IMPSAT Argentina, compared to $3.3 million
and $8.5 million at IMPSAT Argentina for the same periods
in 2001. In local currency terms, IMPSAT Argentinas
contracted services costs increased by 1.7 million pesos(or 51.9%) and 0.2 million pesos(or 2.1%)
during the second quarter and first half of 2002 as compared to
the corresponding periods in 2001.

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

Sales commissions paid to third-party sales
representatives for the three and six months ended June 30,
2002 totaled $1.2 million and $2.6 million, compared
to $1.8 million and $3.9 million for the corresponding
periods in 2001. The majority of these commissions related to
customers of IMPSAT Argentina.

We recorded a net provision for doubtful accounts
of $2.0 million and $5.0 million for the three and six
months ended June 30, 2002, compared to $3.0 million
and $4.2 million for the same periods in 2001. At
June 30, 2002 approximately 32.3% of our gross trade
accounts receivable were past due more than six months compared
to 28.9% for the same period in 2001. At the same date, our
allowance for doubtful accounts covered approximately 90.5% of
our gross trade accounts receivable past due more than six
months. The average days in quarterly gross trade accounts
receivable decreased from 94 at March 31, 2002 to 84 at
June 30, 2002. At June 30, 2001, average days of gross
trade accounts receivable equaled 108. The recession in
Argentina has adversely affected the quality of our accounts
receivable from our customers in that country. IMPSAT
Argentinas allowance for doubtful accounts at
June 30, 2002 covered approximately 88.8% of its gross
trade accounts receivable past due more than six months.

(3) Leased Capacity.Our leased
capacity costs for the three and six months ended June 30,
2002 totaled $19.5 million and $39.9 million, which
represented a decrease of $3.9 million (or 16.8%) and
$5.5 million (or 12.1%) from the corresponding periods in
2001. This decrease occurred notwithstanding an increase in
costs for interconnection and telephony termination costs (which
are components of our leased capacity costs), as described
below. The decrease in our leased capacity costs is attributable
to a combination of the effects of currency devaluations in our
countries of operation during the second half of 2002, as well
as our favorable renegotiations of the terms of certain of the
underlying capacity leases. As a percentage of our total
revenues, our leased capacity costs increased, principally
because such costs are incurred in US. dollars, while our
revenues in Argentina and Brazil are principally denominated and
generated in local currency.

Our leased capacity costs for satellite capacity
for the three and six months ended June 30, 2002 totaled
$8.4 million and $17.2 million, a decrease of
$2.1 million (or 19.8%) and $3.6 million (or 17.1%),
from the corresponding periods in 2001. In Argentina, our leased
satellite capacity costs totaled $2.1 million and
$4.5 million for the three and six months ended
June 30, 2002, as compared to $2.2 million and
$4.5 million for the same periods in 2001. Our leased
satellite capacity costs for IMPSAT Brazil totaled
$1.2 million and $2.3 million for the three and six
months ended July 30, 2002, as compared to
$1.9 million and $3.7 million for the same periods in
2001. Our satellite capacity costs decreased in Brazil, in part
because of (i) our favorable renegotiation of certain of
our agreements satellite capacity providers, (ii) our
transitioning customers from satellite-based solutions onto the
Broadband Network, and (iii) the effect on such costs of
the devaluation of

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the real. We had approximately
907 MHz of leased satellite capacity at June 30, 2002
and 998 MHz at June 30, 2001.


Our costs for dedicated leased capacity on
third-party fiber optic networks totaled $6.8 million and
$14.9 million for the second quarter and first half of
2002, a decrease of $3.3 million (or 32.8%) and
$4.0 million (or 21.4%) compared to the corresponding
periods in 2001. These costs were incurred principally in
Argentina, Brazil, Colombia and the United States. Prior to the
implementation of our Broadband Network, we had incurred these
higher costs of leased fiber optic capacity in Argentina and
Brazil due to the continued demand by our customers in those
countries for greater bandwidth and, in the United States, due
to the expansion of our Internet service offerings where we
provide a link between Latin America and the U.S. Internet
backbone. Although we have transferred increasing amounts of our
telecommunications traffic to the Broadband Network as we
migrated our customers to our Broadband Network, we will
continue to require leased capacity to provide
telecommunications services to clients with facilities outside
of the footprint of our Broadband Network in order to provide
end-to-end telecommunications services. The decrease in these
costs were also due, in part, to the effect on such costs of the
currency devaluations experienced during the period in certain
of our countries of operation.

In connection with certain new services that we
are offering as a result of the implementation of our Broadband
Network and the effectiveness of our license in Argentina to
provide domestic and international long distance services, we
also are incurring costs for interconnection and telephony
termination (I&T) and frequency rights. Our
I&T and frequency rights costs totaled $4.4 million and
$7.8 million during the second quarter and first half of
2002. These totals are composed of $3.4 million and
$6.2 million of I&T costs. This compares to
$3.0 million and $5.7 million of I&T and frequency
rights costs during the second quarter and first half of 2001
(composed of $1.5 million and $3.0 million of I&T
costs). Our interconnection and telephony termination costs have
increased in connection with the growth of our telephony
revenues (as discussed under  Revenues).

Our I&T and frequency rights costs in
Argentina totaled $2.6 million and $4.3 million during
the three and six months ended June 30, 2002. These totals
are composed of $2.4 million and $4.0 million of
I&T costs. This compares to $1.3 million and
$2.7 million of I&T and frequency rights costs for the
three and six months ended June 30, 2001 (composed of
$0.5 million and $1.1 million of I&T costs).

(4) Costs of Equipment Sold and Broadband
Network Development.In the three and six months ended
June 30, 2002, we incurred costs of equipment sold of
$0.1 million and $0.2 million, compared to
$2.1 million and $7.5 million for the same periods in
2001. During the three and six months ended June 30, 2002,
we incurred no Broadband Network development costs as compared
to zero and $3.3 million of such costs during the same
periods of 2001.

Salaries and Wages.Salaries and wages for the three and
six months ended June 30, 2002 totaled $12.6 million
and $25.6 million, a decrease of $9.3 million (or
42.5%) and $18.5 million (or 41.9%), from the same periods
in 2001. As a result of the adverse economic conditions
experienced in Argentina, Brazil and elsewhere in Latin America
and as part of cost-control measures implemented by management
commencing at the end of the first quarter of 2001, our
aggregate number of employees has fallen from 1,590 at
June 30, 2001 to 1,324 at June 30, 2002. Management
expects to continue to monitor the size of its total workforce
and to make appropriate adjustments if required by financial and
competitive circumstances. The decrease in these costs were also
due, in part, to the effect on such costs of the currency
devaluations experienced during the period in certain of our
countries of operation.

IMPSAT Argentina incurred salaries and wages for
the three and six months ended June 30, 2002, of
$2.0 million and $4.8 million, a decrease of
$7.1 million (or 78.4%) and $13.3 million (or 73.4%)
compared to the same periods in 2001. This decrease was due to
(i) the devaluation of the peso, which decreased the
dollar value of our salaries and wages expenses incurred in
Argentina during the first half of 2002; and (ii) a
reduction in the number of employees at IMPSAT Argentina. In
pesos, IMPSAT Argentinas first half 2002 salaries
and wages expenses decreased by 31.2% as compared to the same
period in 2001. IMPSAT Argentina had 444 employees as of
June 30, 2002 as compared to 543 employees as of
June 30, 2001.

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IMPSAT Brazil incurred salaries and wages for the
three and six months ended June 30, 2002 of
$3.3 million and $6.5 million, a decrease of
$0.8 million (or 20.4%) and $2.8 million (or 30.4%)
over the same periods in 2001. IMPSAT Brazil decreased its
number of employees to 290 persons at June 30, 2002,
compared to 387 persons at June 30, 2001. In addition to
our reduced employee headcount in that country, the decrease in
salaries and wages at IMPSAT Brazil during the first half of
2002 is in part related to the devaluation of the realagainst the U.S. dollar, which resulted in a decrease in
U.S. dollar terms of our salaries and wages expense in Brazil.

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

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



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

We incurred SG&A expenses of
$6.8 million and $14.2 million for the three and six
months ended June 30, 2002. These SG&A expenses
represented a decrease of $8.0 million (or 53.9%) and
$15.3 million (or 52.0%), from the three and six months
ended June 30, 2001. This decline in our SG&A expenses
is due principally to a decrease in our publicity and promotion
costs, the effect of the devaluation of Argentinas pesoand Brazils realagainst the U.S. dollar, which
decreased the dollar value of our SG&A expenses incurred in
those countries, and overall cost control measures undertaken by
management.

SG&A expenses at IMPSAT Argentina for the
three and six months ended June 30, 2002 totaled
$1.9 million and $3.9 million, which represented
decreases of $4.1 million (or 68.3%) and $7.0 million
(or 64.0%), from SG&A expenses incurred by IMPSAT Argentina
for the three and six months ended June 30, 2001.
Management intends to take efforts throughout the remainder of
2002 to control or reduce SG&A expenses. Such efforts, along
with the effects of the devaluations of the Argentine
peso, are anticipated to result in a further decline in
SG&A expenses in future periods during 2002.

Depreciation and Amortization.Our depreciation and amortization
expenses for the three and six months ended June 30, 2002
totaled $23.4 million and $47.3 million. This
represents a decrease of $6.9 million (or 22.8%) and $12.4
million (or 20.8%), compared to our depreciation and
amortization for the three and six months ended June 30,
2001. Depreciation and amortization for IMPSAT Argentina for the
three and six months ended June 30, 2002, totaled $7.9
million and $16.1 million. This represents a decrease of
$5.5 million (or 41.2%) and $9.7 million (or 37.5%),
compared to IMPSAT Argentinas depreciation and
amortization for the three and six months ended June 30,
2001. The decrease in depreciation and amortization primarily is
the result of the asset impairment charge of $381.9 million
recorded in the second half of 2001, which reduced the dollar
value of our depreciable fixed asset base.

Interest Expense, Net.Our net interest expense for the three
months ended June 30, 2002 totaled $37.7 million,
consisting of interest expense of $39.0 million and
interest income of $1.2 million. Our net interest expense
for the six months ended June 30, 2002 totaled
$71.2 million, consisting of interest expense of
$72.7 million and interest income of $1.5 million. Our
net interest expense increased $4.8 million (or 14.5%) and
$9.1 million (or 14.7%) for the three and six months ended
June 30, 2002 from net interest expense for the same
periods in 2001.

As previously disclosed (see the section
captioned Certain Considerations  We have
defaulted on our indebtedness and could face liquidation
in our 2001 Annual Report on Form 10-K), we are in default
on accrued and unpaid amounts under our Senior Notes, our Vendor
Financing Agreements, and certain other

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indebtedness. The interest components of such
defaulted amounts during the second quarter and first half of
2002, which aggregated $26.8 million and $56.8 million at the
end of such periods, are included in our net interest expense
for such periods as discussed in the preceding paragraph.
Pursuant to the provisions of the Bankruptcy Code, as of
June 11, 2002, the date of our Chapter 11 filing,
contractually accrued interest on our unsecured, pre-petition
obligations, which are entirely constituted by the Senior Notes,
ceased to accrue at and after such date. Such post-petition
contractual interest, which is excluded in our reported interest
expense for the first half of 2002, totaled $4.8 million.


In accordance with U.S. generally accepted
accounting principles (GAAP), because of our
Chapter 11 filing, as of the Petition Date, our primary
obligations under the Senior Notes and certain other accounts
payables, which, including accrued interest, totaled $727.5
million as of such date, have been classified on our
consolidated balance sheet as liabilities subject to
compromise. (See Notes 1 and 11 to our consolidated
financial statements, included in Part 1, Item 1 of this
Quarterly Report.) Also in accordance with GAAP, our contingent
liabilities as guarantor under the Vendor Financing Agreements
and certain other indebtedness of our subsidiaries, which
aggregated $289.9 million as of June 30, 2002, have
been classified as current portion of long-term indebtedness.

For the three and six months ended June 30,
2002, IMPSAT Argentinas net interest expense totaled
$12.4 million (before and after eliminating intercompany
items) and $17.7 million ($17.6 million after
eliminating intercompany items). This compared to
$5.7 million (before and after eliminating intercompany
items) and $10.7 million (before and after eliminating
intercompany items) for the corresponding periods in 2001.

Net (Loss) Gain on Foreign Exchange.We recorded net losses on foreign
exchange for the three and six months ended June 30, 2002
of $45.1 million and $52.4 million, compared to net
losses of $10.4 million and $24.2 million for the same
periods in 2001.

The increase in our losses on foreign exchange
was primarily due to the devaluation of the Argentine pesoand the Brazilian realagainst the U.S. dollar during
the first half of 2002. Decreases in U.S. dollar terms of IMPSAT
Argentinas peso-denominated assets during the first
half of 2002 caused by the devaluation were partially offset by
the effects of decreases in U.S. dollar terms of
peso-denominated liabilities during the same period.
IMPSAT Argentina recorded net losses on foreign exchange for the
second quarter and first half of 2002 totaling $5.7 million
and $12.8 million, compared to net losses of
$0.3 million and $0.1 million for the same periods
during 2001.

IMPSAT Brazil recorded net losses on foreign
exchange for the second quarter and first half of 2002 totaling
$39.0 million and $39.1 million, compared to net
losses of $9.5 million and $25.4 million for the same
periods during 2001. This net loss on foreign exchange reflects
the effect of the devaluation of the realagainst the
U.S. dollar in the first half of 2002 on the book value of the
dollar-denominated debt of IMPSAT Brazil under the Vendor
Financing Agreements. At June 30, 2002, the realtraded at a rate of R$2.83 = $1.00. At
June 30, 2001, the realtraded at a rate of
R$2.31 = $1.00.

Reorganization
Items.We recorded reorganization
items or the three and six months ended June 30, 2002 of
$5.6 million and $5.7 million. These costs were
incurred in connection with the negotiation and formation of our
Plan and Chapter 11 filing.

Other Income, Net.We recorded other income, net, for the
three and six months ended June 30, 2002 of
$0.2 million and $1.7 million, as compared to
$0.1 million and $0.2 million for the corresponding
periods in 2001.

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

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Provisions for Foreign Income Taxes.We recorded a provision for foreign
income taxes of $0.7 million and $1.2 million, for the
three and six months ended June 30, 2002, compared to a
provision for income taxes of $26.1 million and
$26.5 million for the corresponding periods in 2001.

Net Loss.For the
three and six months ended June 30, 2002, we incurred a net
loss of $85.6 million and $144.1 million, a decrease
of $14.0 million (or 14.1%) and $23.8 million (or
14.2%) for same periods in 2001. IMPSAT Argentina recorded net
losses of $26.7 million and $48.3 million or the three
and six months ended June 30, 2002, compared to net losses
of $31.1 million and $48.4 million for the same periods in
2001.

Liquidity and Capital Resources

At June 30, 2002, we had total cash, cash
equivalents and trading investments of $55.9 million, as
compared to $64.9 million as of December 31, 2001 and
$61.0 million as of March 31, 2002. At June 30,
2002, our total indebtedness was $0.99 billion (as compared
to $0.97 billion as of June 30, 2001), of which
$7.7 million represented short-term debt,
$296.9 million represented the current portion of our
long-term debt, $15.1 million represented our long-term
debt, and $727.5 million represented principal and accrued
interest of indebtedness subject to compromise. As discussed
above (see discussion under  Interest Expense,
Net), as a result of our default under our Senior Notes
and the Vendor Financing Agreements and the Chapter 11
filing, the Parent Companys primary obligations under the
Senior Notes and certain other accounts payables have been
classified as liabilities subject to compromise, and
the Parent Companys contingent liability as guarantor
under the Vendor Financing Agreements has been classified as
current portion of long-term indebtedness. As of August 12,
2002, our indebtedness under the Senior Notes and the Broadband
Network Vendor Financing Agreements had an aggregate outstanding
principal balance of $650.0 million and
$254.4 million, respectively.

As evidenced by our Chapter 11 filing, we
face significant cash flow and liquidity problems and, as
discussed further below, our cash flows and liquidity are
insufficient to satisfy all of our obligations. Our company has
no material working capital or other debtor-in-possession
financing or credit facility under which it may borrow for
working capital or other general corporate purposes. We believe
that, without a successful restructuring of our financial
obligations under the Plan, we are unlikely to be able to obtain
future debt or equity financing on acceptable terms, or at all.
The securities markets are currently not available to us. There
can be no assurances that the Plan will be approved by the
Bankruptcy Court. If we are unable to secure confirmation of the
Plan, our creditors may seek other alternatives for our company,
including accepting bids for our company or parts thereof
through an auction process or forcing us into a liquidation
proceeding under the federal bankruptcy laws.

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

As set forth in our consolidated statement of
cash flows, our operating activities used $4.3 million in
net cash flow for the six months ended June 30, 2002,
compared to $52.0 million used by operating activities
during the same period in 2001. In addition to the decrease in
our operating losses discussed above, the increase in cash flow
from operating activities in the first half of 2002 was
primarily due to an increase in accrued and other liabilities of
$54.7 million (as compared to a decrease of
$0.4 million in the first half of 2001); a significantly
smaller increase in deferred revenue of $2.0 million (as
compared to an increase of $39.6 million in the first half
of 2001). Also, during the first half of 2002, a decrease in our
trade accounts payable of $15.7 million (as compared to an
increase of $6.2 million for the first half of 2001) offset
a decrease in our trade accounts receivable of
$10.6 million (compared to an increase of $8.2 million
for the first half of 2001), and thereby contributed to the
increase in net cash flow from operating activities during the
period. These changes to our accounts receivable and payable
during the first half of 2002 reflect actual operating cash
flows, as well as changes in the value of those accounts (in
U.S. dollar terms) caused by the devaluation of the Argentine
pesoduring that period.

For the first half of 2002, we used
$4.4 million in net cash flow from investing activities,
compared to $50.3 million of net cash flow provided by
investing activities during the corresponding period in 2001. The

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decreased net cash flow from investing activities
was principally due to an decrease in our trading investments of
$0.3 million during the first half of 2002, compared to
decrease in our trading investments of $163.4 million
during the same period in 2001. During the first half of 2002,
we used $4.6 million in net cash flows from financing
activities. This compares to $5.8 million in net cash flows
generated by financing activities during the first half of 2001,
principally as a result of disbursements during that period
under the Vendor Financing Agreements with Nortel Networks
Limited.


At June 30, 2002, we had leased satellite
capacity with annual rental commitments of approximately
$25.7 million through the year 2006. In addition, at
June 30, 2002, we had commitments to purchase
telecommunications equipment amounting to approximately
$2.3 million. We also have commitments of approximately
$63.9 million with respect to purchases of IRUs for
undersea submarine fiber optic capacity with which we intend to
link our telecommunications networks in our countries of
operation with and among each other and other parts of the
World. Commitments under contracts with 360networks and Global
Crossing totaling $41.4 million and $22.5 million,
respectively, are included in this $63.9 million total.
Depending on the outcome of our dispute with 360networks (see
the section captioned Legal Proceedings in our
Quarterly Report on Form 10-Q for the first quarter of
2002, accessible on the SECs website at www.sec.gov) and
Global Crossings ongoing insolvency proceedings, some or
all of our liability under these commitments may be canceled or
fail to materialize. Furthermore, we had leased from third
parties a series of terrestrial links for the provision of data,
Internet and telephony services to our clients in the different
countries in which we operate. We have committed to long term
contracts for the purchase of terrestrial links from third
parties in Argentina, Colombia, and the United States for
approximately $3.1 million per year through 2006. The
remainder of the leases are typically under one-year contracts,
the early cancellation of which is subject to a fee.

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

|                                     |  |                |           |      |  |      |       |      |  |      |       |            |  |       |       |  |  |   |       |  |  |   |       |  |  |   |           | 
|------------------------------------ |  | -------------- | --------- | ---- |  | ---- | ----- | ---- |  | ---- | ----- | ---------- |  | ----- | ----- |  |  | - | ----- |  |  | - | ----- |  |  | - | --------- | 
|Type of Obligations                  |  | 2002           |           | 2003 |  | 2004 |       | 2005 |  | 2006 |       | Thereafter |  | Total
|                                     |  |                |           |      |  |      |       |      |  |      |       |            |  |      
|                                     |  |               
|                                     |  | (in thousands)
|Long-term debt(1)                    |  | $              | 283,857   |      |  | $    | 3,598 |      |  | $    | 3,325 |            |  | $     | 2,212 |  |  | $ | 926   |  |  | $ | 926   |  |  | $ | 294,844   | 
|Liabilities subject to compromise(2) |  |                | 727,522   |      |  |      |      |      |  |      |      |            |  |       |      |  |  |   |      |  |  |   |      |  |  |   | 727,522   | 
|Capital lease obligations            |  |                | 7,313     |      |  |      | 3,586 |      |  |      | 3,765 |            |  |       | 1,999 |  |  |   | 466   |  |  |   |      |  |  |   | 17,129    | 
|Operating leases                     |  |                | 385       |      |  |      | 454   |      |  |      | 150   |            |  |       |      |  |  |   |      |  |  |   |      |  |  |   | 989       | 
|Other long-term obligations          |  |                | 1,329     |      |  |      | 2,179 |      |  |      | 1,681 |            |  |       | 734   |  |  |   | 361   |  |  |   | 6,315 |  |  |   | 12,599    | 
|                                     |  |                |           |      |  |      |       |      |  |      |       |            |  |       |       |  |  |   |       |  |  |   |       |  |  |   |           | 
|Total contractual cash obligations   |  | $              | 1,020,406 |      |  | $    | 9,817 |      |  | $    | 8,921 |            |  | $     | 4,945 |  |  | $ | 1,753 |  |  | $ | 7,241 |  |  | $ | 1,053,083 | 
|                                     |  |                |           |      |  |      |       |      |  |      |       |            |  |       |       |  |  |   |       |  |  |   |       |  |  |   |           | 




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

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

|                                |  |                |        |      |  |      |        |      |  |      |        |            |  |       |        |  |  |   |        |  |  |   |        |  |  |   |         | 
|------------------------------- |  | -------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ | ---------- |  | ----- | ------ |  |  | - | ------ |  |  | - | ------ |  |  | - | ------- | 
|Type of Commitments(1)          |  | 2002           |        | 2003 |  | 2004 |        | 2005 |  | 2006 |        | Thereafter |  | Total
|                                |  |                |        |      |  |      |        |      |  |      |        |            |  |      
|                                |  |               
|                                |  | (in thousands)
|Lines of credit                 |  |                |       |      |  |      |       |      |  |      |       |            |  |       |       |  |  |   |       |  |  |   |       |  |  |   |        | 
|Standby letters of credit       |  |                |       |      |  |      |       |      |  |      |       |            |  |       |       |  |  |   |       |  |  |   |       |  |  |   |        | 
|Guarantees                      |  |                |       |      |  |      |       |      |  |      |       |            |  |       |       |  |  |   |       |  |  |   |       |  |  |   |        | 
|Standby repurchase obligations  |  |                |       |      |  |      |       |      |  |      |       |            |  |       |       |  |  |   |       |  |  |   |       |  |  |   |        | 
|Other commercial commitments(2) |  | $              | 20,280 |      |  | $    | 32,865 |      |  | $    | 30,055 |            |  | $     | 25,394 |  |  | $ | 21,737 |  |  | $ | 36,286 |  |  | $ | 166,617 | 
|                                |  |                |        |      |  |      |        |      |  |      |        |            |  |       |        |  |  |   |        |  |  |   |        |  |  |   |         | 
|Total commercial commitments    |  | $              | 20,280 |      |  | $    | 32,865 |      |  | $    | 30,055 |            |  | $     | 25,394 |  |  | $ | 21,737 |  |  | $ | 36,286 |  |  | $ | 166,617 | 
|                                |  |                |        |      |  |      |        |      |  |      |        |            |  |       |        |  |  |   |        |  |  |   |        |  |  |   |         | 




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

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

The sections below highlight our exposure to
interest rate and foreign exchange rate risks and changes in the
market values of our investment in equity securities. The
analyses presented below are illustrative and should not be
viewed as predictive of our future financial performance.
Additionally, we cannot assure you that our actual results in
any particular year will not differ from the amounts indicated
below. However, we believe that these results are reasonable
based on our financial instrument portfolio at June 30,
2002 and assuming that the hypothetical interest rate and
foreign exchange rate changes used in the analyses occurred
during 2002. We do not hold or issue any market risk sensitive
instruments for trading purposes.

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

We are exposed to interest rate risk on our
floating rate indebtedness, which affects our cost of financing.
Our floating rate indebtedness has increased as we have drawn
down commitments under our vendor financing agreements to cover
capital expenditures, including the Broadband Network. Our
actual interest rate is not quantifiable or predictable because
of the variability of future interest rates and business
requirements. We do not believe such risk is material and we do
not customarily use derivative instruments to adjust interest
rate risk. As of June 30, 2002, a hypothetical 100 basis
point increase in the London Interbank Offered Rate
(LIBOR) would adversely affect our annual interest cost
related to our floating rate indebtedness by approximately
$2.6 million annually.

|                                    |  |                        |         |      |  |      |         |      |  |      |        |            |  |       |         |       |  |   |        |   |  |   |         |   |  |   |         |  |  |   |         |  
|----------------------------------- |  | ---------------------- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------ | ---------- |  | ----- | ------- | ----- |  | - | ------ | - |  | - | ------- | - |  | - | ------- |  |  | - | ------- | -
|                                    |  |                        |         |     
|                                    |  | Expected Maturity Date |         |     
|                                    |  |                        |         | Fair
|June 30,                            |  | 2002                   |         | 2003 |  | 2004 |         | 2005 |  | 2006 |        | Thereafter |  | Total |         | Value
|                                    |  |                        |         |      |  |      |         |      |  |      |        |            |  |       |         |      
|Senior Notes (fixed rate)(1)        |  |                        |        |      |  | $    | 125,000 |      |  |      |       |            |  | $     | 300,000 |       |  |   |        |   |  | $ | 225,000 |   |  | $ | 650,000 |  |  |   | (2     | )
|                                    |  |                        |         |      |  |      |         |      |  |      |        |            |  |       |         |       |  |   |        |   |  |   |         |   |  |   |         |  |  |   |         |  
|Avg. interest rate                  |  |                        |         |      |  |      | 12.13   | %    |  |      |        |            |  |       | 13.75   | %     |  |   |        |   |  |   | 12.38   | % |  |   | 12.96%  |  |  |   |         |  
|                                    |  |                        |         |      |  |      |         |      |  |      |        |            |  |       |         |       |  |   |        |   |  |   |         |   |  |   |         |  |  |   |         |  
|Term Notes (fixed rate)             |  | $                      | 31,556  |      |  | $    | 5,649   |      |  | $    | 8,201  |            |  | $     | 4,230   |       |  | $ | 1,392  |   |  | $ | 926     |   |  | $ | 51,954  |  |  | $ | 51,954  |  
|                                    |  |                        |         |      |  |      |         |      |  |      |        |            |  |       |         |       |  |   |        |   |  |   |         |   |  |   |         |  |  |   |         |  
|Avg. interest rate                  |  |                        | 14.17   | %    |  |      | 14.17   | %    |  |      | 14.17  | %          |  |       | 14.17   | %     |  |   | 14.17  | % |  |   |         |   |  |   | 14.17%  |  |  |   |         |  
|Vendor Financing (variable rate)(1) |  | $                      | 179,816 |      |  | $    | 11,408  |      |  | $    | 22,994 |            |  | $     | 22,961  |       |  | $ | 22,840 |   |  |   |         |   |  | $ | 260,019 |  |  | $ | 260,019 |  
|                                    |  |                        |         |      |  |      |         |      |  |      |        |            |  |       |         |       |  |   |        |   |  |   |         |   |  |   |         |  |  |   |         |  
|Avg. interest rate                  |  |                        | 14.14   | %    |  |      | 14.14   | %    |  |      | 14.14  | %          |  |       | 14.14   | %     |  |   | 14.14  | % |  |   |         |   |  |   | 14.14%  |  |  |   |         |  
|                                    |  |                        |         |      |  |      |         |      |  |      |        |            |  |       |         |       |  |   |        |   |  |   |         |   |  |   |         |  |  |   |         |  



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | As discussed elsewhere in this quarterly report,
    we are in default under our Senior Notes and the Vendor
    Financing Agreements. Accordingly, an aggregate of
    $824.5 million of our long-term indebtedness has been
    reclassified as short-term indebtedness and liabilities subject
    to compromise. None of these reclassified amounts are included
    in this line item as being due in 2002, but instead are set
    forth based on their originally scheduled contractual due dates.
|   
|(2) | Quoted market prices for the Senior Notes are
    unavailable. Furthermore, in light of our default on the
    principal and interest on the Senior Notes and Chapter 11
    bankruptcy filing, it is not practicable to determine a quoted
    rate for the same or similar obligations or for management to
    estimate the fair value of the Senior Notes.                                                                                                                                           

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

As previously discussed in this Quarterly Report,
during January 2002, Argentina abandoned the fixed
dollar-to-pesoexchange rate and devalued the Argentine
pesoand, on February 3, 2002, pursuant to the

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pesification decree, the Argentine government announced the mandatory
conversion of all foreign currency denominated contractual
obligations governed by Argentine law into Argentine pesosat a rate of one Argentine pesoto one
U.S. dollar. The floating exchange rate at August 9,
2002 was pesos3.64 = $1.00. These and any
further devaluations of the pesohave and will adversely
affect IMPSAT Argentinas results of operations and, in
turn, our companys consolidated results of operations and
financial condition. Management is currently unable to predict
the most likely average or end-of-period peso/dollar
exchange rates for 2002 or provide estimates of the impacts that
the changes in Argentine laws, the potential impacts of the
currency devaluation and other recent events in Argentina could
have on our companys consolidated results of operation and
financial condition. There is likely to occur during the
remainder of 2002 increases to our consolidated net losses that
would result from transaction gains or losses on our
peso-denominated monetary assets and liabilities. Also,
operating income reductions are likely to result from the
potential impacts on our consolidated revenues from services of
the conversion to pesosof contract obligations that were
previously tied to the dollar. Balance sheet exposures include
the reduction to our consolidated stockholders equity due
to the effects of lower net income on retained earnings. Our
management is continuing to assess the impacts that the events
in Argentina could have on our consolidated results of
operations and financial condition.


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

Revenues from services from our Argentine
operations for the three months ended June 30, 2002 and
2001 represented approximately 24.0% and 39.1% of our total net
revenues from services for such periods. Revenues from services
from our Brazilian operations for the three months ended
June 30, 2002 and 2001 represented approximately 17.0% and
14.5% of our total net revenues from services for such periods.
At August 9, 2002, the pesotraded at a rate of
pesos3.64 = $1.00. At June 30, 2002 and
August 9, 2002, the realtraded at a rate of
R$2.83 = $1.00 and R$2.94 = $1.00.

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##### Table of Contents






PART II

OTHER INFORMATION





Item 1.     Legal
Proceedings

On June 11, 2002, IMPSAT Fiber Networks,
Inc. filed voluntary petitions in the Bankruptcy Court for
protection under Chapter 11 of the Bankruptcy Code (See
Part I, Item 2  Managements
Discussion and Analysis of Financial Condition and Results of
Operations  New Developments and Critical
Considerations). All civil litigation commenced against IMPSAT
Fiber Networks, Inc. prior to that date has been stayed by
operation of law.




Item 2.     Changes
in Securities

Not applicable.




Item 3.     Defaults
Upon Senior Securities

Not applicable.




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

Not applicable.




Item 5.     Other
Information

Not applicable.




Item 6.     Exhibits
and Reports on Form 8-K

(a)(1)

Exhibit Index:

|        |  |                                                                                                                                                                                                                                                                                                                                       
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                       
|No.     |  | Description                                                                                                                                                                                                                                                                                                                           
|        |  |                                                                                                                                                                                                                                                                                                                                       
|3.1     |  | Amended and Restated Certificate of Incorporation
    of the Company (filed on January 14, 2000 as
    Exhibit No. 3.1 to the Companys Registration
    Statement on Form S-1 (No. 333-88389) and incorporated
    herein by reference).                                                                                             
|3.2     |  | Amended and Restated Bylaws of the Company (filed
    on January 14, 2000 as Exhibit No. 3.2 to the
    Companys Registration Statement on Form S-1
    (No. 333-88389) and incorporated herein by reference).                                                                                                                       
|4.1     |  | Indenture for the Notes Due 2005, dated as of
    February 16, 2000, among the Company, The Bank of New York,
    as Trustee and Banque Internationale a Luxembourg (including
    form of Note) (filed on March 10, 2000 as an exhibit to the
    Companys 1999 Annual Report on Form 10K and
    incorporated herein by reference).
|4.2     |  | Indenture for the Notes due 2008, dated as of
    June 17, 1998, between the Company and The Bank of New
    York, as Trustee (including form of Note) (filed on
    July 21, 1998 as an exhibit to the Companys
    Registration Statement on Form S-4 (No. 333-59469) and
    incorporated herein by reference).                   
|4.3     |  | Securityholders Agreement dated as of
    March 19, 1998, among Nevasa Holdings, the Morgan Stanley
    investors and certain other parties (filed on April 15,
    1998, as an exhibit to the Companys Annual Report on
    Form 10-K for 1997 and incorporated herein by reference).                                               
|4.4     |  | Supplemental Indenture for the Notes Due 2003
    dated as of May 13, 1997 among IMPSAT Corporation,
    IMPSAT S.A. and The Bank of New York (filed on
    April 15, 1998 as an exhibit to the Companys Annual
    Report on Form 10-K for 1997 and incorporated herein by
    reference).                                          

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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|No.     |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|4.5     |  | Indenture for the Notes Due 2003 dated as of
    July 31, 1996, among the Company, IMPSAT Argentina as
    Guarantor and the Bank of New York as Trustee (including form of
    Note) (filed on November 20, 1996 as an exhibit to the
    Companys Registration Statement on Form S-4
    (No. 333-12977) and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                           
|4.6     |  | Shareholders Agreement dated as of March 10,
    1999 (filed on January 14, 2000 as an exhibit to the
    Companys Registration Statement on Form S-1
    (No. 333-88389) and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4.7     |  | Specimen Stock Certificate (filed on
    January 14, 2000 as an exhibit to the Companys
    Registration Statement on Form S-1 (No. 333-88389) and
    incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|4.8     |  | Form of Stockholder Rights Plan Agreement between
    the Company and The Bank of New York, as Rights Agent (filed on
    June 21, 2000 as an exhibit to the Companys
    Registration Statement on Form S-4 (No. 333-34954) and
    incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                     
|4.9     |  | Certificate of Designations dated as of
    June 7, 2000 (filed on June 21, 2000 as an exhibit to
    the Companys Registration Statement on Form S-4
    (No. 333-34954) and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|9.1     |  | 1998 Stock Option Plan (filed on March 31,
    1999 as an exhibit to the Companys 1998 Annual Report on
    Form 10-K and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|9.2     |  | 1999 Stock Option Plan (filed on January 14,
    2000 as an exhibit to the Companys Registration Statement
    on Form S-1 (No. 333-88389) and incorporated herein by
    reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.1   |  | Global Crossing Framework Agreement (filed on
    October 4, 1999 as an exhibit to the Companys
    Registration Statement on Form S-1 (No. 333-88389) and
    incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.2   |  | Turnkey Backhaul Construction and IRU Agreement
    between IMPSAT Brazil and South American Crossing, Ltd. (Rio de
    Janeiro), dated as of February 17, 2000 (filed on
    April 17, 2000 as an exhibit to the Companys
    Registration Statement on Form S-4 (No. 333-34954) and
    incorporated herein by reference). In accordance with
    Instruction 2 to Item 601 of Regulation S-K, the
    following agreement was not filed as an exhibit because it is
    substantially identical in all material respects to
    Exhibit 10.2: Turnkey Backhaul Construction and IRU
    Agreement between IMPSAT Brazil and South American Crossing,
    Ltd. (São Paolo), dated as of February 17, 2000.
|10.3   |  | Turnkey Project Agreement between IMPSAT
    Argentina and Nortel Networks (filed on October 4, 1999 as
    an exhibit to the Companys Registration Statement on
    Form S-1 (No. 333-88389) and incorporated herein by
    reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|10.4   |  | TAC Turnkey Construction and IRU Agreement among
    IMPSAT Argentina, IMPSAT Chile and South American Crossing Ltd.
    (filed on October 4, 1999 as an exhibit to the
    Companys Registration Statement on Form S-1
    (No. 333-88389) and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.5   |  | Capacity Commitment Agreement dated as of
    November 10, 2000, between South American Crossing Ltd. and
    IMPSAT Fiber Networks, Inc. (filed on March 30, 2001, as an
    exhibit to the Companys Annual Report on Form 10-K
    for 2000 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.6   |  | Capacity Purchase Agreement dated as of
    November 10, 2000, between Global Crossing Bandwidth, Inc.
    and International Satellite Communication Holding Ltd. (filed on
    March 30, 2001, as an exhibit to the Companys Annual
    Report on Form 10-K for 2000 and incorporated herein by
    reference).                                                                                                                                                                                                                                                                                                                                                                                            
|10.7   |  | Capacity IRU Agreement dated as of
    February 15, 2001, by and between 360americas network
    (Bermuda) Ltd. and IMPSAT Fiber Networks, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|No.     |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|10.8   |  | IRU Fiber Agreement (Argentina) dated as of
    February 15, 2001, by and between IMPSAT S.A. (Argentina)
    and 360networks de Argentina S.R.L. (filed on 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 (filed on August 16, 2001 as an exhibit to
    the Companys Quarterly Report on Form 10-Q for the
    quarterly period ended June 30, 2001 and incorporated
    herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                               
|10.11   |  | Amended and Restated Financing Agreement between
    IMPSAT Argentina and Nortel Networks (filed on August 16,
    2001 as an exhibit to the Companys Quarterly Report on
    Form 10-Q for the quarterly period ended June 30, 2001
    and incorporated herein by reference). In accordance with
    Instruction 2 to Item 601 of Regulation S-K, the
    following agreement was not filed as an exhibit because it is
    substantially identical in all material respects to
    Exhibit 10.11: Amended and Restated Financing Agreement
    between IMPSAT Brazil and Nortel Networks.                                                                                                                                                                                                     
|21.1    |  | List of subsidiaries of the registrants
    (incorporated by reference to the Business 
    General section of the Companys Annual Report on
    Form 10-K for 2001 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|99.1    |  | Certification by the Companys Chief
    Executive Officer pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002. Filed herewith.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|99.2    |  | Certification by the Companys Chief
    Financial Officer pursuant to 18 U.S.C. Section 1350,
    as adopted pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002. Filed herewith.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|99.3    |  | Certification by IMPSAT Argentinas
    principal executive officer pursuant to 18 U.S.C.
    Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002. Filed herewith.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|99.4    |  | Certification by IMPSAT Argentinas
    principal financial officer pursuant to 18 U.S.C.
    Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002. Filed herewith.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             



---

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

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

(b) Reports on Form 8-K.On
June 11, 2002 we filed a Current Report on Form 8-K
disclosing that IMPSAT Fiber Networks, Inc. had filed a
voluntary petition for reorganization under Chapter 11 of
the Bankruptcy Code.

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SIGNATURES

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



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



| |     |                  
| | --- | -----------------
| | By: | /s/ HÉCTOR ALONSO

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



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

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

22