##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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|x | Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------------



For the quarterly period ended March 31, 2004



OR



| ̈ | Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------------



For the transition period from
 to



Commission File Number: 000-29085



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IMPSAT Fiber Networks, Inc.

(Exact name of registrant as specified in its charter)



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|                                                            |  |                                     
|----------------------------------------------------------- |  | ------------------------------------
|Delaware                                                    |  | 52-1910372                          
|(state or other jurisdiction incorporation or organization) |  | (IRS employer identification number)



Elvira Rawson de
Dellepiane 150

Piso 8, C1107BCA

Buenos Aires, Argentina

(5411) 5170-0000

(Address, including zip code, and telephone number, including area code, of registrants principal executive offices)



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Indicate by check mark whether the registrant (1) has 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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Securities Exchange Act Rule 12b-2).
YES ̈NO  x



APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS



Indicate by check mark whether the registrant 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  x    NO ̈



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 March 31, 2004, the registrant had outstanding 10,100,000 shares of common stock, $0.01 par value.



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##### Table of Contents

IMPSAT FIBER NETWORKS, INC.



|                                                                                              |  |          |  | 
|--------------------------------------------------------------------------------------------- |  | -------- |  | 
|                                                                                              |  | Page No.
|PART I FINANCIAL INFORMATION                                                                  |  |         
|                                                                                              | 
|ITEM 1.
FINANCIAL STATEMENTS                                                                  |  | F-1     
|ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS |  | 1       
|ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            |  | 12      
|ITEM 4.
CONTROLS AND PROCEDURES                                                               |  | 13      
|                                                                                              | 
|PART II OTHER INFORMATION                                                                     |  | 13      
|                                                                                              | 
|ITEM 1.
LEGAL PROCEEDINGS                                                                     |  | 13      
|ITEM 2.
CHANGES IN SECURITIES AND USE OF PROCEEDS                                             |  | 13      
|ITEM 3.
DEFAULTS UPON SENIOR SECURITIES                                                       |  | 13      
|ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS                                   |  | 13      
|ITEM 5.
OTHER INFORMATION                                                                     |  | 13      
|ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K                                                      |  | 14      
|                                                                                              | 
|SIGNATURES                                                                                    |  | 16      
|                                                                                              | 
|CERTIFICATIONS                                                                                |  |         



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##### Table of Contents

PART I

FINANCIAL INFORMATION



Item 1. Financial Statements



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED BALANCE SHEETS (SUCCESSOR COMPANY)

AS OF DECEMBER 31, 2003 AND MARCH 31, 2004

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

(Unaudited)



|                                                                                                                                                                                                                                                       |  |                   |         |   |                |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------- | ------- | - | -------------- | - | ------- | -
|                                                                                                                                                                                                                                                       |  | Successor Company |        
|                                                                                                                                                                                                                                                       |  | December 31, 2003 |         |   | March 31, 2004 |  
|ASSETS                                                                                                                                                                                                                                                 |  |                   |         |   |                |   |         |  
|CURRENT ASSETS:                                                                                                                                                                                                                                        |  |                   |         |   |                |   |         |  
|Cash and cash equivalents                                                                                                                                                                                                                              |  | $                 | 61,498  |   |                | $ | 60,082  |  
|Trading investments                                                                                                                                                                                                                                    |  |                   | 2,474   |   |                |   | 253     |  
|Trade accounts receivable, net                                                                                                                                                                                                                         |  |                   | 31,213  |   |                |   | 32,026  |  
|Other receivables                                                                                                                                                                                                                                      |  |                   | 11,630  |   |                |   | 14,088  |  
|Prepaid expenses                                                                                                                                                                                                                                       |  |                   | 2,249   |   |                |   | 3,830   |  
|                                                                                                                                                                                                                                                       |  |                   |         |   |                |   |         |  
|Total current assets                                                                                                                                                                                                                                   |  |                   | 109,064 |   |                |   | 110,279 |  
|                                                                                                                                                                                                                                                       |  |                   |         |   |                |   |         |  
|PROPERTY, PLANT AND EQUIPMENT, Net                                                                                                                                                                                                                     |  |                   | 315,817 |   |                |   | 308,877 |  
|                                                                                                                                                                                                                                                       |  |                   |         |   |                |   |         |  
|NON-CURRENT ASSETS:                                                                                                                                                                                                                                    |  |                   |         |   |                |   |         |  
|Investments in common stock                                                                                                                                                                                                                            |  |                   | 1,873   |   |                |   | 3,446   |  
|Other non-current assets                                                                                                                                                                                                                               |  |                   | 13,875  |   |                |   | 14,350  |  
|                                                                                                                                                                                                                                                       |  |                   |         |   |                |   |         |  
|Total non-current assets                                                                                                                                                                                                                               |  |                   | 15,748  |   |                |   | 17,796  |  
|                                                                                                                                                                                                                                                       |  |                   |         |   |                |   |         |  
|TOTAL                                                                                                                                                                                                                                                  |  | $                 | 440,629 |   |                | $ | 436,952 |  
|                                                                                                                                                                                                                                                       |  |                   |         |   |                |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                                                                   |  |                   |         |   |                |   |         |  
|CURRENT LIABILITIES:                                                                                                                                                                                                                                   |  |                   |         |   |                |   |         |  
|Accounts payable  trade                                                                                                                                                                                                                               |  | $                 | 37,095  |   |                | $ | 37,829  |  
|Current portion of long-term debt                                                                                                                                                                                                                      |  |                   | 11,851  |   |                |   | 27,553  |  
|Accrued and other liabilities                                                                                                                                                                                                                          |  |                   | 33,140  |   |                |   | 29,951  |  
|                                                                                                                                                                                                                                                       |  |                   |         |   |                |   |         |  
|Total current liabilities                                                                                                                                                                                                                              |  |                   | 82,086  |   |                |   | 95,333  |  
|LONG-TERM DEBT, Net                                                                                                                                                                                                                                    |  |                   | 249,394 |   |                |   | 236,537 |  
|OTHER LONG-TERM LIABILITIES                                                                                                                                                                                                                            |  |                   | 11,904  |   |                |   | 12,125  |  
|                                                                                                                                                                                                                                                       |  |                   |         |   |                |   |         |  
|Total liabilities                                                                                                                                                                                                                                      |  |                   | 343,384 |   |                |   | 343,995 |  
|                                                                                                                                                                                                                                                       |  |                   |         |   |                |   |         |  
|COMMITMENTS AND CONTINGENCIES (NOTE 14)                                                                                                                                                                                                                |  |                   |         |   |                |   |         |  
|STOCKHOLDERS EQUITY:                                                                                                                                                                                                                                  |  |                   |         |   |                |   |         |  
|Preferred stock, $0.01 par value; 5,000,000 shares authorized, no shares outstanding as of December 31, 2003 and March 31,
2004                                                                                                                        |  |                   |         |   |                |   |         |  
|Common stock, $0.01 par value; 50,000,000 shares authorized, 10,100,000 shares issued and outstanding (including 150,000 and 100,000
restricted shares held in the 2003 Stock Incentive Plan as of December 31, 2003 and March 31, 2004, respectively) |  |                   | 101     |   |                |   | 101     |  
|Additional paid in capital                                                                                                                                                                                                                             |  |                   | 90,294  |   |                |   | 90,294  |  
|Retained earnings                                                                                                                                                                                                                                      |  |                   | 9,477   |   |                |   | 3,005   |  
|Deferred stock-based compensation                                                                                                                                                                                                                      |  |                   | (1,320  | ) |                |   | (880    | )
|Accumulated other comprehensive (loss) income                                                                                                                                                                                                          |  |                   | (1,307  | ) |                |   | 437     |  
|                                                                                                                                                                                                                                                       |  |                   |         |   |                |   |         |  
|Total stockholders equity                                                                                                                                                                                                                             |  |                   | 97,245  |   |                |   | 92,957  |  
|                                                                                                                                                                                                                                                       |  |                   |         |   |                |   |         |  
|TOTAL                                                                                                                                                                                                                                                  |  | $                 | 440,629 |   |                | $ | 436,952 |  
|                                                                                                                                                                                                                                                       |  |                   |         |   |                |   |         |  



See notes to condensed
consolidated financial statements.



F-1



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##### Table of Contents

IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2003 (PREDECESSOR COMPANY)

AND FOR THE THREE MONTHS ENDED MARCH 31, 2004 (SUCCESSOR COMPANY)

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

(Unaudited)



|                                                                                                           |  |                                 |         |   |                                 |   |        |  
|---------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ------- | - | ------------------------------- | - | ------ | -
|                                                                                                           |  | PredecessorCompany              |         |   | SuccessorCompany                |  
|                                                                                                           |  | Three MonthsEndedMarch 31, 2003 |         |   | Three MonthsEndedMarch 31, 2004 |  
|NET REVENUES:                                                                                              |  |                                 |         |   |                                 |   |        |  
|Broadband and satellite                                                                                    |  | $                               | 41,382  |   |                                 | $ | 39,573 |  
|Internet                                                                                                   |  |                                 | 5,733   |   |                                 |   | 5,984  |  
|Value added services                                                                                       |  |                                 | 4,781   |   |                                 |   | 4,206  |  
|Telephony                                                                                                  |  |                                 | 4,106   |   |                                 |   | 5,145  |  
|Sales of equipment                                                                                         |  |                                 | 74      |   |                                 |   | 152    |  
|                                                                                                           |  |                                 |         |   |                                 |   |        |  
|Total net revenues                                                                                         |  |                                 | 56,076  |   |                                 |   | 55,060 |  
|                                                                                                           |  |                                 |         |   |                                 |   |        |  
|COSTS AND EXPENSES:                                                                                        |  |                                 |         |   |                                 |   |        |  
|Direct costs:                                                                                              |  |                                 |         |   |                                 |   |        |  
|Contracted services                                                                                        |  |                                 | 4,125   |   |                                 |   | 4,327  |  
|Other direct costs                                                                                         |  |                                 | 4,696   |   |                                 |   | 3,758  |  
|Leased capacity                                                                                            |  |                                 | 17,407  |   |                                 |   | 15,790 |  
|Cost of equipment sold                                                                                     |  |                                 | 48      |   |                                 |   | 97     |  
|                                                                                                           |  |                                 |         |   |                                 |   |        |  
|Total direct costs                                                                                         |  |                                 | 26,276  |   |                                 |   | 23,972 |  
|Salaries and wages                                                                                         |  |                                 | 10,727  |   |                                 |   | 12,207 |  
|Selling, general and administrative                                                                        |  |                                 | 5,553   |   |                                 |   | 5,505  |  
|Depreciation and amortization                                                                              |  |                                 | 19,358  |   |                                 |   | 10,161 |  
|                                                                                                           |  |                                 |         |   |                                 |   |        |  
|Total costs and expenses                                                                                   |  |                                 | 61,914  |   |                                 |   | 51,845 |  
|                                                                                                           |  |                                 |         |   |                                 |   |        |  
|Operating (loss) income                                                                                    |  |                                 | (5,838  | ) |                                 |   | 3,215  |  
|                                                                                                           |  |                                 |         |   |                                 |   |        |  
|OTHER INCOME (EXPENSE):                                                                                    |  |                                 |         |   |                                 |   |        |  
|Interest income                                                                                            |  |                                 | 200     |   |                                 |   | 311    |  
|Interest expense (contractual interest of $21,801 for the three months ended March 31, 2003 (Predecessor)) |  |                                 | (1,909  | ) |                                 |   | (4,934 | )
|Net gain (loss) on foreign exchange                                                                        |  |                                 | 9,969   |   |                                 |   | (4,391 | )
|Reorganization items                                                                                       |  |                                 | 726,127 |   |                                 |   |        |  
|Other income (loss), net                                                                                   |  |                                 | 2,923   |   |                                 |   | (130   | )
|                                                                                                           |  |                                 |         |   |                                 |   |        |  
|Total other income (expense)                                                                               |  |                                 | 737,310 |   |                                 |   | (9,144 | )
|                                                                                                           |  |                                 |         |   |                                 |   |        |  
|INCOME (LOSS) BEFORE INCOME TAXES                                                                          |  |                                 | 731,472 |   |                                 |   | (5,929 | )
|PROVISION FOR FOREIGN INCOME TAXES                                                                         |  |                                 | (406    | ) |                                 |   | (543   | )
|                                                                                                           |  |                                 |         |   |                                 |   |        |  
|NET INCOME (LOSS)                                                                                          |  | $                               | 731,066 |   |                                 | $ | (6,472 | )
|                                                                                                           |  |                                 |         |   |                                 |   |        |  
|NET INCOME (LOSS) PER COMMON SHARE:                                                                        |  |                                 |         |   |                                 |   |        |  
|BASIC AND DILUTED                                                                                          |  | $                               | 8.00    |   |                                 | $ | (0.64  | )
|                                                                                                           |  |                                 |         |   |                                 |   |        |  
|WEIGHTED AVERAGE NUMBER OF COMMON SHARES:                                                                  |  |                                 |         |   |                                 |   |        |  
|BASIC AND DILUTED                                                                                          |  |                                 | 91,429  |   |                                 |   | 10,051 |  
|                                                                                                           |  |                                 |         |   |                                 |   |        |  



See notes to condensed
consolidated financial statements.



F-2



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##### Table of Contents

IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(LOSS)

FOR THE THREE MONTHS ENDED MARCH 31, 2003 (PREDECESSOR COMPANY)

AND FOR THE THREE MONTHS ENDED MARCH 31, 2004 (SUCCESSOR COMPANY)

(In
thousands of U.S. Dollars)

(Unaudited)



|                                                             |  |                                 |         |   |                                |   |        |  
|------------------------------------------------------------ |  | ------------------------------- | ------- | - | ------------------------------ | - | ------ | -
|                                                             |  | PredecessorCompany              |         |   | SuccessorCompany               |  
|                                                             |  | Three MonthsEndedMarch 31, 2003 |         |   | Three MonthsEndedMarch 31,2004 |  
|NET INCOME (LOSS)                                            |  | $                               | 731,066 |   |                                | $ | (6,472 | )
|                                                             |  |                                 |         |   |                                |   |        |  
|OTHER COMPREHENSIVE (LOSS) INCOME:                           |  |                                 |         |   |                                |   |        |  
|Foreign currency translation adjustment                      |  |                                 | (4,097  | ) |                                |   | 167    |  
|Unrealized gain on investments available for sale            |  |                                 | 55      |   |                                |   | 1,484  |  
|Reclassification adjustment for gains included in net income |  |                                 |         |   |                                |   | 93     |  
|                                                             |  |                                 |         |   |                                |   |        |  
|TOTAL                                                        |  |                                 | (4,042  | ) |                                |   | 1,744  |  
|                                                             |  |                                 |         |   |                                |   |        |  
|COMPREHENSIVE INCOME (LOSS)                                  |  | $                               | 727,024 |   |                                | $ | (4,728 | )
|                                                             |  |                                 |         |   |                                |   |        |  



See notes to condensed
consolidated financial statements.



F-3



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##### Table of Contents

IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2004 (SUCCESSOR COMPANY)

(In thousands of U.S. Dollars)

(Unaudited)



|                                                 |  |              |  |                           |     |                  |   |        |                                  |   |        |                                             |  |   |        |   |  |   |        |   |  |   |        |  
|------------------------------------------------ |  | ------------ |  | ------------------------- | --- | ---------------- | - | ------ | -------------------------------- | - | ------ | ------------------------------------------- |  | - | ------ | - |  | - | ------ | - |  | - | ------ | -
|                                                 |  | Common Stock |  | Additional Paid InCapital |     | RetainedEarnings |   |        | Deferred Stock-BasedCompensation |   |        | AccumulatedOther Comprehensive(Loss) Income |  |   | Total  |  
|                                                 |  | Shares       |  | Amount                    |     |                  |   |        |                                 
|BALANCE AT DECEMBER 31, 2003 (SUCCESSOR COMPANY) |  | 10,100,000   |  | $                         | 101 |                  | $ | 90,294 |                                  | $ | 9,477  |                                             |  | $ | (1,320 | ) |  | $ | (1,307 | ) |  | $ | 97,245 |  
|Recognition of deferred compensation             |  |              |  |                           |     |                  |   |        |                                  |   |        |                                             |  |   | 440    |   |  |   |        |   |  |   | 440    |  
|Unrealized gain on investment available for sale |  |              |  |                           |     |                  |   |        |                                  |   |        |                                             |  |   |        |   |  |   | 1,577  |   |  |   | 1,577  |  
|Foreign currency translation adjustment          |  |              |  |                           |     |                  |   |        |                                  |   |        |                                             |  |   |        |   |  |   | 167    |   |  |   | 167    |  
|Net loss for the period                          |  |              |  |                           |     |                  |   |        |                                  |   | (6,472 | )                                           |  |   |        |   |  |   |        |   |  |   | (6,472 | )
|                                                 |  |              |  |                           |     |                  |   |        |                                  |   |        |                                             |  |   |        |   |  |   |        |   |  |   |        |  
|BALANCE AT MARCH 31, 2004 (SUCCESSOR COMPANY)    |  | 10,100,000   |  | $                         | 101 |                  | $ | 90,294 |                                  | $ | 3,005  |                                             |  | $ | (880   | ) |  | $ | 437    |   |  | $ | 92,957 |  
|                                                 |  |              |  |                           |     |                  |   |        |                                  |   |        |                                             |  |   |        |   |  |   |        |   |  |   |        |  



See notes to condensed
consolidated financial statements.



F-4



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##### Table of Contents

IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2003 (PREDECESSOR COMPANY)

AND FOR THE THREE MONTHS ENDED MARCH 31, 2004 (SUCCESSOR COMPANY)

(In thousands of U.S. Dollars)

(Unaudited)



|                                                                                         |  |                                |          |   |                                |   |        |  
|---------------------------------------------------------------------------------------- |  | ------------------------------ | -------- | - | ------------------------------ | - | ------ | -
|                                                                                         |  | PredecessorCompany             |          |   | SuccessorCompany               |  
|                                                                                         |  | Three MonthsEndedMarch 31,2003 |          |   | Three MonthsEndedMarch 31,2004 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                    |  |                                |          |   |                                |   |        |  
|Net income (loss)                                                                        |  | $                              | 731,066  |   |                                | $ | (6,472 | )
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                                |          |   |                                |   |        |  
|Depreciation and amortization                                                            |  |                                | 19,358   |   |                                |   | 10,161 |  
|Gain on extinguishment of debt                                                           |  |                                | (728,203 | ) |                                |   |        |  
|Stock-based compensation                                                                 |  |                                | 440      |   |                                |   | 440    |  
|Deferred income tax provision                                                            |  |                                | 82       |   |                                |   |        |  
|Provision for (reversal of allowance for) doubtful accounts                              |  |                                | 515      |   |                                |   | (1,855 | )
|Paid-in-kind interest on Senior Notes                                                    |  |                                |          |   |                                |   | 3,345  |  
|Net (gain) loss on foreign exchange                                                      |  |                                | (9,969   | ) |                                |   | 4,391  |  
|Net loss on sale of investments                                                          |  |                                |          |   |                                |   | 46     |  
|Net loss on disposals of property, plant and equipment                                   |  |                                | 772      |   |                                |   | 924    |  
|Changes in assets and liabilities:                                                       |  |                                |          |   |                                |   |        |  
|(Increase) decrease in trade accounts receivable                                         |  |                                | (3,816   | ) |                                |   | 977    |  
|Increase in prepaid expenses                                                             |  |                                | (943     | ) |                                |   | (1,583 | )
|Decrease (increase) in other receivables and other non-current assets                    |  |                                | 1,214    |   |                                |   | (4,462 | )
|(Decrease) increase in accounts payable  trade                                          |  |                                | (2,709   | ) |                                |   | 1,069  |  
|Increase (decrease) in accrued and other liabilities                                     |  |                                | 5,549    |   |                                |   | (3,543 | )
|Decrease in deferred revenues                                                            |  |                                | (1,132   | ) |                                |   |        |  
|(Decrease) increase in other long-term liabilities                                       |  |                                | (721     | ) |                                |   | 240    |  
|                                                                                         |  |                                |          |   |                                |   |        |  
|Net cash provided by operating activities                                                |  |                                | 11,503   |   |                                |   | 3,678  |  
|                                                                                         |  |                                |          |   |                                |   |        |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                    |  |                                |          |   |                                |   |        |  
|Net (increase) decrease in trading investments                                           |  |                                | (3,303   | ) |                                |   | 2,081  |  
|Purchases of property, plant and equipment                                               |  |                                | (3,266   | ) |                                |   | (5,877 | )
|Proceeds from sale of property, plant and equipment                                      |  |                                | 340      |   |                                |   | 38     |  
|Proceeds from the sale of investment                                                     |  |                                |          |   |                                |   | 98     |  
|                                                                                         |  |                                |          |   |                                |   |        |  
|Net cash used in investing activities                                                    |  |                                | (6,229   | ) |                                |   | (3,660 | )
|                                                                                         |  |                                |          |   |                                |   |        |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                    |  |                                |          |   |                                |   |        |  
|Repayments of long-term debt                                                             |  |                                | (1,857   | ) |                                |   | (1,351 | )
|                                                                                         |  |                                |          |   |                                |   |        |  
|Net cash used in financing activities                                                    |  |                                | (1,857   | ) |                                |   | (1,351 | )
|                                                                                         |  |                                |          |   |                                |   |        |  
|EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH EQUIVALENTS                              |  |                                | (415     | ) |                                |   | (83    | )
|                                                                                         |  |                                |          |   |                                |   |        |  
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                     |  |                                | 3,002    |   |                                |   | (1,416 | )
|CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD                                     |  |                                | 32,563   |   |                                |   | 61,498 |  
|                                                                                         |  |                                |          |   |                                |   |        |  
|CASH AND CASH EQUIVALENTS AT END OF THE PERIOD                                           |  | $                              | 35,565   |   |                                | $ | 60,082 |  
|                                                                                         |  |                                |          |   |                                |   |        |  
|SUPPLEMENTAL CASH FLOW INFORMATION:                                                      |  |                                |          |   |                                |   |        |  
|Interest paid                                                                            |  | $                              | 940      |   |                                | $ | 893    |  
|                                                                                         |  |                                |          |   |                                |   |        |  
|Foreign income taxes paid                                                                |  | $                              | 594      |   |                                | $ | 567    |  
|                                                                                         |  |                                |          |   |                                |   |        |  
|CASH PAID DURING THE PERIOD FOR REORGANIZATION ITEMS:                                    |  |                                |          |   |                                |   |        |  
|Professional fees and other reorganization payments                                      |  | $                              | 1,714    |   |                                |   |        |  
|                                                                                         |  |                                |          |   |                                |   |        |  
|SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:                     |  |                                |          |   |                                |   |        |  
|Change in unrealized gain in investment available for sale.                              |  | $                              | 55       |   |                                | $ | 1,484  |  
|                                                                                         |  |                                |          |   |                                |   |        |  



See notes to condensed
consolidated financial statements.



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##### Table of Contents

IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(TABLES IN THOUSANDS OF U.S. DOLLARS, EXCEPT FOR PER SHARE AMOUNTS)

(Unaudited)



1. GENERAL



IMPSAT Fiber Networks, Inc., a Delaware holding company
(the Holding Company), and subsidiaries (collectively the Company or the Successor Company) is a provider of integrated broadband, data, Internet, voice and data center 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.



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



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



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



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



2. FINANCIAL RESTRUCTURING, PETITION FOR RELIEF UNDER CHAPTER 11 AND EMERGENCE



On March 11, 2002, the Holding Company concluded negotiations with an ad hoc committee representing certain creditors under
the Holding Companys Broadband Network Vendor Financing Agreements, and certain holders of its (a) $125.0 million 121/8% Senior Guaranteed Notes due 2003, (b) $300.0 million 133/4% Senior Notes due 2005 and (c)
$225.0 million 123/8% Senior Notes due 2008 (collectively, the Senior Notes) regarding a non-binding
term sheet (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.



In connection with the Restructuring Term Sheet, on June 11, 2002 (the
Petition Date), the Holding Company filed a voluntary petition for relief under Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court for the Southern District of New York (the Bankruptcy Court).
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 were stayed while the Holding Company continued business operations as Debtor-in-Possession.



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##### Table of Contents

On September 4, 2002, the Holding Company filed a Disclosure Statement (the Disclosure
Statement) and a Plan of Reorganization (the Plan) with the Bankruptcy Court. The Plan reflected the terms of the pre-arranged plan of reorganization that a majority of the holders of the indebtedness under the Companys
Vendor Financing Agreements and the holders of the Senior Notes agreed to support. The Disclosure Statement summarized the Plan and contained information concerning among other matters the history, business, results of operations, management,
properties, liabilities and the assets available for distribution under the Plan as well as the anticipated organization and operation of a reorganized Holding Company. The Disclosure Statement also described certain effects of Plan confirmation,
certain risk factors associated with the Plan, the manner in which distributions would be made to the Holding Companys creditors under the Plan for all amounts that were owed to such parties on the Petition Date and the confirmation process
and voting procedures that holders of claims in impaired classes must follow for their votes to be counted.



The Plan received the affirmative vote of the Holding Companys creditors in accordance with the Bankruptcy Code in December 2002 and was confirmed
by order of the Bankruptcy Court on December 16, 2002. In accordance with the Plan, the Holding Company emerged from bankruptcy on March 25, 2003 (the Effective Date). Pursuant to the Plan, on the Effective Date, all of the shares of the
Companys old common stock, options granted under the Companys stock option plans and all other equity interests were cancelled, retired and eliminated with no consideration paid thereon. The Company also adopted a new 2003 Stock
Incentive Plan and terminated all the previous stock options plans.



Although the Holding Company has emerged from bankruptcy, the Company remains in default under indebtedness owed to a creditor who voted against the Plan. Under the Plan, the claims of this creditor were a contingent obligation arising
under a guarantee by the Holding Company of certain primary indebtedness of IMPSAT Argentina. Notwithstanding the Companys emergence from bankruptcy and the extinguishment of Companys guarantee as a result, an event of default has
occurred and is continuing with respect to the related primary underlying indebtedness of IMPSAT Argentina. This default, which relates to indebtedness totaling approximately $7.6 million in outstanding principal amount as of March 31, 2004, gives
the creditor the right to accelerate such indebtedness and seek immediate repayment of all outstanding amounts and accrued interest thereon. The Company is currently conducting negotiations at the level of IMPSAT Argentina with this creditor with a
view to rescheduling or otherwise restructuring the defaulted debt obligation. There is no assurance, however, that the Company will be successful in these negotiations or that the Company will reach a definitive agreement with this creditor to
reschedule or restructure such obligations.



Following is a
summary of the significant transactions consummated on March 25, 2003 under the Plan:



| |  | issued shares of the Holding Companys new common stock (the New Common Stock) to holders of the Companys 133/4% Senior Notes due 2005 and 123/8% Senior Notes due 2008 (the 2005/2008 Holders) in full satisfaction of their claims thereunder, including the outstanding principal and all accrued and unpaid interest. The 2005/2008 Holders received their ratable
portion of 9.8 million shares of New Common Stock, less an allocation of a ratable number of such shares of New Common Stock to the holders of certain other claims of unsecured creditors of the Holding Company. Under the Plan, the dollar value of
such other unsecured claims was determined after the Effective Date based on factors at the level of the Holding Companys operating subsidiaries. Accordingly, the Plan required the Company to establish on the Effective Date a reserve (the
Common Stock Reserve Pool) consisting of an estimated portion of such 9.8 million shares of New Common Stock sufficient to enable the Company to make any distributions after the Effective Date on account of such other unsecured claims.
To this end, based on the estimated maximum value of the post-Effective Date contingencies and other unsecured claims, the Company and the creditors committee under the Plan determined that the Common Stock Reserve Pool should be comprised of
686,000 shares of New Common Stock. The 2005/2008 Holders initially received on the Effective Date 9.1 million shares of New Common Stock, net of the Common Stock Reserve Pool. Pursuant to the Plan, any settlements or distributions from the Common
Stock Reserve Pool with the holders of other unsecured claims were to be made in accordance with the disputed claims resolution process contained therein. Following the resolution of these claims, the Plan provided that the Company would distribute
any shares of New Common Stock remaining in the Common Stock Reserve Pool ratably among the 2005/2008 Holders in accordance with the terms of the Plan. In accordance with such disputed claims resolution procedure, in December 2003, the Holding
Company issued 11,564 shares of New Common Stock to holders of allowed unsecured claims and the remainder of the Common Stock Reserve Pool to the 2005/2008 Holders. Holders of the Companys pre-Chapter 11 common stock (the Old Common
Stock) and holders of any other equity interest received no distribution under the Plan. All Old Common Stock and all other equity interests were cancelled on the Effective Date;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | filed with the Delaware Secretary of State a Restated Certificate of Incorporation (Certificate of Incorporation);
| | - | --------------------------------------------------------------------------------------------------------------------



| |  | amended and restated the Companys Bylaws (Bylaws);
| | - | -----------------------------------------------------



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##### Table of Contents

| |  | cancelled all Old Common Stock, and all other existing securities and agreements to issue or purchase any equity interest;
| | - | --------------------------------------------------------------------------------------------------------------------------



| |  | issued $67.5 million in aggregate principal amount of Series A 6% Senior Guaranteed Notes due 2011 (the Series A Notes) (initially convertible, in the aggregate, into
22.8% of the New Common Stock on a fully diluted basis) to holders of the Holding Companys former 121/8%
Senior Guaranteed Notes due 2003 (the 2003 Noteholders), in full satisfaction of the claims of the 2003 Noteholders, including the outstanding principal and all accrued and unpaid interest thereon;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | issued to (i) holders of debt under the Companys pre-Effective Date Broadband Network vendor financing agreements (the Original Vendor Financing Agreements) and
(ii) other creditors of the Companys operating subsidiaries holding guarantees by the Holding Company of such indebtedness who voted to accept the Plan, a combination of new senior indebtedness totaling $144.0 million, $23.9 million in the
aggregate of new Series B 6% Senior Guaranteed Notes due 2011 (the Series B Notes) (initially convertible in the aggregate into 5.3% of the New Common Stock on a fully diluted basis), and eight-year warrants to acquire 15.3% in the
aggregate of the New Common Stock (on a fully diluted basis);
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | issued 200,000 shares of restricted New Common Stock to certain officers of the Company in accordance with the Companys 2003 Stock Incentive Plan; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | approved stock options for 1,646,332 shares of New Common Stock to senior officers.
| | - | -----------------------------------------------------------------------------------



Under the Holding Companys Certificate of Incorporation, the authorized capital stock as of the Effective Date
consists of (i) 50,000,000 shares of the New Common Stock, with a par value of $0.01 per share and (ii) 5,000,000 shares of Preferred Stock, with a par value of $0.01 per share (the Preferred Stock). No Preferred Stock has been issued.
Pursuant to the Certificate of Incorporation, Preferred Stock may be issued in one or more series as determined from time to time by the Companys Board of Directors (the Board) without further approval of the Holding Companys
stockholders. Upon issuance of any series of Preferred Stock, the Board will fix the voting powers, designations, preferences, and relative, participating, optional, redemption, conversion, exchange or other special rights, qualifications,
limitations or restrictions of such Preferred Stock, to the extent permitted by law. Pursuant to the Certificate of Incorporation, the Holding Company may not create, designate, authorize or cause to be issued any class or series of nonvoting stock
to the extent prohibited by Section 1123 of the United States Bankruptcy Code.



As a result of these transactions, as of March 31, 2003, the Company had 10,000,000 shares of New Common Stock issued and outstanding (including 686,000 shares held in the Common Stock Reserve Pool pending the
resolution of disputed claims and 150,000 shares of unvested restricted stock issued under the 2003 Stock Incentive Plan).



Because the Company emerged from bankruptcy on March 25, 2003 referred to as the Successor Company (as of and subsequent to March 31, 2003),
for financial reporting purposes the Company used an effective date of March 31, 2003 and applied fresh-start accounting to the condensed consolidated balance sheet as of that date in accordance with the American Institute of Certified Public
Accountants Statement of Position (SOP) 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code. In accordance with SOP 90-7, the Company adopted fresh-start accounting because (i) the holders of
the existing voting shares immediately before filing and confirmation of the Plan received less than 50% of the voting shares of the emerging company and (ii) the Companys reorganization value, which served as the basis for the Plan approved
by the Bankruptcy Court, was less than the Companys post-petition liabilities and allowed claims, as shown below:



|                                                      |  |   |          |  
|----------------------------------------------------- |  | - | -------- | -
|Post-petition current liabilities                     |  | $ | 8,070    |  
|Liabilities deferred under the Chapter 11 proceedings |  |   | 727,522  |  
|                                                      |  |   |          |  
|Total post-petition liabilities and allowed claims    |  |   | 735,592  |  
|Reorganization value                                  |  |   | (557,000 | )
|                                                      |  |   |          |  
|Excess of liabilities over reorganization value       |  | $ | 178,592  |  
|                                                      |  |   |          |  



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##### Table of Contents

Under fresh-start accounting, a new reporting entity is considered to be created and the Company adjusts
the recorded amounts of assets and liabilities to reflect their estimated fair values at the date fresh-start accounting is applied. Accordingly, the estimated reorganization value of the Company of $557.0 million represents the total fair value
that the Company allocated to the assets of the Company. In conformity with Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations, the Holding Company has used purchase accounting (pushed
down to its operating subsidiaries) to account for the assets and liabilities as of the fresh-start date.



The Companys financial advisors assisted the Company in determining its estimated reorganization value of $557 million and its reorganization equity
value of the Company of approximately $88.0 million. The financial advisors used two methodologies to derive the total estimated reorganization value: (a) the application of comparable company multiples to the Companys historical and projected
financial results; and (b) a calculation of the present value of the Companys free cash flows under the Companys revised business plan using financial projections through 2010, including an assumption for a terminal value, discounted at
the Companys estimated post-restructuring weighted-average cost of capital. In estimating the total reorganization value, the Companys advisors considered the Companys market share and position, competition and general economic
considerations, projected revenue growth, potential profitability, working capital requirements and other relevant factors.



As a result of the Companys reorganization and application of fresh-start accounting, during the three months ended March 31, 2003, the Predecessor
Company recognized a gain of approximately $728.2 million on the extinguishment of the Predecessor Companys Senior Notes, Broadband Vendor Financing agreements and other trade accounts payable.



The effect of the Plan and the resulting fresh-start accounting adjustments
on the Companys condensed consolidated balance sheet as of March 31, 2003, is as follows:



|                                   |  |                                              |         |                                      |   |                         |  |                                  |   |                                                  |   |   |                                                |   |   |  |   |         |   |  |   |        
|---------------------------------- |  | -------------------------------------------- | ------- | ------------------------------------ | - | ----------------------- |  | -------------------------------- | - | ------------------------------------------------ | - | - | ---------------------------------------------- | - | - |  | - | ------- | - |  | - | -------
|                                   |  | PreReorganization BalanceSheetMarch 31, 2003 |         | Debt ExtinguishmentAndReorganization |   | Common StockReservePool |  | 2003 StockIncentivePlan          |   | Elimination of Equity andFresh Start Adjustments |   |   | PostReorganization Balance SheetMarch 31, 2003
|                                   |  |                                              |         |                                      |   | EquityElimination       |  | Allocation ofReorganizationValue |   |                                                 
|ASSETS                             |  |                                              |         |                                      |   |                         |  |                                  |   |                                                  |   |   |                                                |   |   |  |   |         |   |  |   |        
|CURRENT ASSETS:                    |  |                                              |         |                                      |   |                         |  |                                  |   |                                                  |   |   |                                                |   |   |  |   |         |   |  |   |        
|Cash and cash equivalents          |  | $                                            | 35,565  |                                      |   |                         |  |                                  |   |                                                  |   |   |                                                |   |   |  |   |         |   |  | $ | 35,565 
|Trading investments                |  |                                              | 26,324  |                                      |   |                         |  |                                  |   |                                                  |   |   |                                                |   |   |  |   |         |   |  |   | 26,324 
|Trade accounts receivable, net     |  |                                              | 34,493  |                                      |   |                         |  |                                  |   |                                                  |   |   |                                                |   |   |  |   |         |   |  |   | 34,493 
|Other receivables                  |  |                                              | 13,235  |                                      |   |                         |  |                                  |   |                                                  |   |   |                                                |   |   |  |   |         |   |  |   | 13,235 
|Prepaid expenses                   |  |                                              | 3,696   |                                      |   |                         |  |                                  |   |                                                  |   |   |                                                |   |   |  |   |         |   |  |   | 3,696  
|Assets held for disposal           |  |                                              | 5,222   |                                      |   |                         |  |                                  |   |                                                  |   |   |                                                |   |   |  | $ | 263     |   |  |   | 5,485  
|                                   |  |                                              |         |                                      |   |                         |  |                                  |   |                                                  |   |   |                                                |   |   |  |   |         |   |  |   |        
|Total current assets               |  |                                              | 118,535 |                                      |   |                        |  |                                  |   |                                                  |   |  |                                                |   |  |  |   | 263     |   |  |   | 118,798
|                                   |  |                                              |         |                                      |   |                         |  |                                  |   |                                                  |   |   |                                                |   |   |  |   |         |   |  |   |        
|PROPERTY, PLANT AND EQUIPMENT, Net |  |                                              | 390,674 |                                      |   |                         |  |                                  |   |                                                  |   |   |                                                |   |   |  |   | (72,871 | ) |  |   | 317,803
|                                   |  |                                              |         |                                      |   |                         |  |                                  |   |                                                  |   |   |                                                |   |   |  |   |         |   |  |   |        
|NON-CURRENT ASSETS:                |  |                                              |         |                                      |   |                         |  |                                  |   |                                                  |   |   |                                                |   |   |  |   |         |   |  |   |        
|Investments in common stock        |  |                                              | 141     |                                      |   |                         |  |                                  |   |                                                  |   |   |                                                |   |   |  |   |         |   |  |   | 141    
|Other non-current assets           |  |                                              | 10,987  |                                      |   |                         |  |                                  |   |                                                  |   |   |                                                |   |   |  |   |         |   |  |   | 10,987 
|                                   |  |                                              |         |                                      |   |                         |  |                                  |   |                                                  |   |   |                                                |   |   |  |   |         |   |  |   |        
|Total non-current assets           |  |                                              | 11,128  |                                      |   |                        |  |                                  |   |                                                  |   |  |                                                |   |  |  |   |        |   |  |   | 11,128 
|                                   |  |                                              |         |                                      |   |                         |  |                                  |   |                                                  |   |   |                                                |   |   |  |   |         |   |  |   |        
|TOTAL                              |  | $                                            | 520,337 |                                      | $ |                        |  | $                                |  |                                                  | $ |  |                                                | $ |  |  | $ | (72,608 | ) |  | $ | 447,729
|                                   |  |                                              |         |                                      |   |                         |  |                                  |   |                                                  |   |   |                                                |   |   |  |   |         |   |  |   |        



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##### Table of Contents

|                                                  |  |                                              |            |   |                                      |                   |          |                         |                                  |   |                         |   |  |                                                  |        |   |                                                |   |          |   |  |   |         |   |  |   |         |  
|------------------------------------------------- |  | -------------------------------------------- | ---------- | - | ------------------------------------ | ----------------- | -------- | ----------------------- | -------------------------------- | - | ----------------------- | - |  | ------------------------------------------------ | ------ | - | ---------------------------------------------- | - | -------- | - |  | - | ------- | - |  | - | ------- | -
|                                                  |  | PreReorganization BalanceSheetMarch 31, 2003 |            |   | Debt ExtinguishmentAndReorganization |                   |          | Common StockReservePool |                                  |   | 2003 StockIncentivePlan |   |  | Elimination of Equity andFresh Start Adjustments |        |   | PostReorganization Balance SheetMarch 31, 2003 |  
|                                                  |  |                                              |            |   |                                      | EquityElimination |          |                         | Allocation ofReorganizationValue |   |                        
|LIABILITIES AND STOCKHOLDERS (DEFICIENCY) EQUITY |  |                                              |            |   |                                      |                   |          |                         |                                  |   |                         |   |  |                                                  |        |   |                                                |   |          |   | 
|LIABILITIES NOT SUBJECT TO COMPROMISE:            |  |                                              |            |   |                                      |                   |          |                         |                                  |   |                         |   |  |                                                  |        |   |                                                |   |          |   |  |   |         |   | 
|CURRENT LIABILITIES:                              |  |                                              |            |   |                                      |                   |          |                         |                                  |   |                         |   |  |                                                  |        |   |                                                |   |          |   |  |   |         |   |  |   |         |  
|Accounts payable  trade                          |  | $                                            | 74,444     |   |                                      | $                 | (22,442  | )                       |                                  |   |                         |   |  |                                                  |        |   |                                                |   |          |   |  |   |         |   |  | $ | 52,002  |  
|Current portion of long-term debt                 |  |                                              | 282,474    |   |                                      |                   | (258,832 | )                       |                                  |   |                         |   |  |                                                  |        |   |                                                |   |          |   |  |   |         |   |  |   | 23,642  |  
|Accrued and other liabilities                     |  |                                              | 51,633     |   |                                      |                   | (25,137  | )                       |                                  |   |                         |   |  |                                                  |        |   |                                                |   |          |   |  |   |         |   |  |   | 26,496  |  
|                                                  |  |                                              |            |   |                                      |                   |          |                         |                                  |   |                         |   |  |                                                  |        |   |                                                |   |          |   |  |   |         |   |  |   |         |  
|Total current liabilities                         |  |                                              | 408,551    |   |                                      |                   | (306,411 | )                       |                                  |   |                         |   |  |                                                  |       |   |                                                |   |         |   |  |   |        |   |  |   | 102,140 |  
|                                                  |  |                                              |            |   |                                      |                   |          |                         |                                  |   |                         |   |  |                                                  |        |   |                                                |   |          |   |  |   |         |   |  |   |         |  
|LONG-TERM DEBT, Net                               |  |                                              | 24,334     |   |                                      |                   | 219,490  |                         |                                  |   |                         |   |  |                                                  |        |   |                                                |   |          |   |  |   |         |   |  |   | 243,824 |  
|                                                  |  |                                              |            |   |                                      |                   |          |                         |                                  |   |                         |   |  |                                                  |        |   |                                                |   |          |   |  |   |         |   |  |   |         |  
|OTHER LONG-TERM LIABILITIES                       |  |                                              | 13,765     |   |                                      |                   |          |                         |                                  |   |                         |   |  |                                                  |        |   |                                                |   |          |   |  |   |         |   |  |   | 13,765  |  
|                                                  |  |                                              |            |   |                                      |                   |          |                         |                                  |   |                         |   |  |                                                  |        |   |                                                |   |          |   |  |   |         |   |  |   |         |  
|DEFERRED REVENUES                                 |  |                                              | 69,377     |   |                                      |                   |          |                         |                                  |   |                         |   |  |                                                  |        |   |                                                |   |          |   |  | $ | (69,377 | ) |  |   |        |  
|                                                  |  |                                              |            |   |                                      |                   |          |                         |                                  |   |                         |   |  |                                                  |        |   |                                                |   |          |   |  |   |         |   |  |   |         |  
|LIABILITIES SUBJECT TO COMPROMISE                 |  |                                              | 727,522    |   |                                      |                   | (727,522 | )                       |                                  |   |                         |   |  |                                                  |        |   |                                                |   |          |   |  |   |         |   |  |   |        |  
|                                                  |  |                                              |            |   |                                      |                   |          |                         |                                  |   |                         |   |  |                                                  |        |   |                                                |   |          |   |  |   |         |   |  |   |         |  
|Total liabilities                                 |  |                                              | 1,243,549  |   |                                      |                   | (814,443 | )                       |                                  |   |                         |   |  |                                                  |        |   |                                                |   |         |   |  |   | (69,377 | ) |  |   | 359,729 |  
|                                                  |  |                                              |            |   |                                      |                   |          |                         |                                  |   |                         |   |  |                                                  |        |   |                                                |   |          |   |  |   |         |   |  |   |         |  
|STOCKHOLDERS (DEFICIENCY) EQUITY:                |  |                                              |            |   |                                      |                   |          |                         |                                  |   |                         |   |  |                                                  |        |   |                                                |   |          |   |  |   |         |   |  |   |         |  
|Common Stock  old                                |  |                                              | 914        |   |                                      |                   |          |                         |                                  |   |                         |   |  |                                                  |        |   |                                                | $ | (914     | ) |  |   |         |   |  |   |        |  
|Common Stock  new                                |  |                                              |            |   |                                      |                   | 98       |                         |                                  |   |                         |   |  | $                                                | 2      |   |                                                |   |          |   |  |   |         |   |  |   | 100     |  
|Additional paid in capital  old                  |  |                                              | 537,725    |   |                                      |                   |          |                         |                                  |   |                         |   |  |                                                  |        |   |                                                |   | (537,725 | ) |  |   |         |   |  |   |        |  
|Additional paid in capital  new                  |  |                                              |            |   |                                      |                   | 86,142   |                         |                                  | $ | 6,037                   |   |  |                                                  | 1,758  |   |                                                |   |          |   |  |   | 1,320   |   |  |   | 95,257  |  
|Accumulated deficit                               |  |                                              | (1,273,542 | ) |                                      |                   | 728,203  |                         |                                  |   |                         |   |  |                                                  | (440   | ) |                                                |   | 550,330  |   |  |   | (4,551  | ) |  |   |        |  
|Common stock reserve pool                         |  |                                              |            |   |                                      |                   |          |                         |                                  |   | (6,037                  | ) |  |                                                  |        |   |                                                |   |          |   |  |   |         |   |  |   | (6,037  | )
|Deferred stock-based compensation                 |  |                                              | (4,530     | ) |                                      |                   |          |                         |                                  |   |                         |   |  |                                                  | (1,320 | ) |                                                |   | 4,530    |   |  |   |         |   |  |   | (1,320  | )
|Accumulated other comprehensive income            |  |                                              | 16,221     |   |                                      |                   |          |                         |                                  |   |                         |   |  |                                                  |        |   |                                                |   | (16,221  | ) |  |   |         |   |  |   |        |  
|                                                  |  |                                              |            |   |                                      |                   |          |                         |                                  |   |                         |   |  |                                                  |        |   |                                                |   |          |   |  |   |         |   |  |   |         |  
|Total stockholders (deficiency) equity           |  |                                              | (723,212   | ) |                                      |                   | 814,443  |                         |                                  |   |                        |   |  |                                                  |       |   |                                                |   |         |   |  |   | (3,231  | ) |  |   | 88,000  |  
|                                                  |  |                                              |            |   |                                      |                   |          |                         |                                  |   |                         |   |  |                                                  |        |   |                                                |   |          |   |  |   |         |   |  |   |         |  
|TOTAL                                             |  | $                                            | 520,337    |   |                                      | $                 |         |                         |                                  | $ |                        |   |  | $                                                |       |   |                                                | $ |         |   |  | $ | (72,608 | ) |  | $ | 447,729 |  
|                                                  |  |                                              |            |   |                                      |                   |          |                         |                                  |   |                         |   |  |                                                  |        |   |                                                |   |          |   |  |   |         |   |  |   |         |  



These adjustments primarily include
the following:



Debt Extinguishment and Reorganization



| |  | The extinguishment of the Companys 2005/2008 Senior Notes plus accrued interest in exchange for the issuance of 9.8 million shares of the Companys New Common Stock
(including 686,000 shares held in the Common Stock Reserve Pool pending the resolution of the Post-Effective Date Contingencies);
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The extinguishment of the Companys 2003 Senior Notes plus accrued interest in exchange for the issuance of $67.5 million in aggregate principal amount of Series A Notes ($60.0
million as of March 31, 2003);
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The extinguishment of the Companys Broadband Vendor Financing agreements that voted in favor of the plan plus accrued interest in exchange for the issuance of a combination of
$144.0 million in senior indebtedness issued by IMPSAT Argentina and IMPSAT Brazil ($128.0 million as of March 31, 2003), $23.9 million in aggregate principal amount of Series B Notes ($21.2 million as of March 31, 2003) and eight-year warrants to
acquire 15.3% in the aggregate of the Companys New Common Stock;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Common Stock Reserve Pool



| |  | The establishment of the Common Stock Reserve Pool of 686,000 shares.
| | - | ---------------------------------------------------------------------



2003 Stock Incentive Plan



| |  | The issuance of 200,000 shares of the New Common Stock to certain officers of the Company in accordance with the 2003 Stock Incentive Plan, of which 50,000 shares vested immediately
upon issuance;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Equity Eliminations



| |  | The cancellation of all outstanding Old Common Stock and other equity interests and the elimination of all components of stockholders deficiency, including paid-in-capital,
accumulated deficit, deferred compensation and accumulated other comprehensive income; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Allocation of Reorganization Value



| |  | The adjustments to the carrying values of the Companys property, plant and equipment, based on the Companys estimates of their relative fair values, which the Company
determined in consultation with an external valuation specialist that the Company hired, as follows:
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                     |  |   |          |  
|------------------------------------------------------------------------------------ |  | - | -------- | -
|Adjustment to record at fair value                                                   |  | $ | 36,901   |  
|Allocation of the excess of fair value assigned to the net assets acquired over cost |  |   | (109,772 | )
|                                                                                     |  |   |          |  
|Net adjustment                                                                       |  | $ | (72,871  | )
|                                                                                     |  |   |          |  



In accordance with
SFAS No. 141, the excess of fair value assigned to net assets acquired over cost was applied to reduce the carrying value of property, plant and equipment.



| |  | The adjustment to the Predecessor Companys deferred revenue in accordance with Emerging Issues Task Force (EITF) 01-3, Accounting in a Business Combination for
Deferred Revenue of an Acquiree, which requires the acquiring entity to recognize a liability (based on its fair value at the date of acquisition) related to a deferred revenue of an acquired entity only if that deferred revenue represents a
legal obligation assumed by the acquiring entity (a legal performance obligation). The Successor Company determined that the deferred revenue represented a legal performance obligation under EITF 01-3; however, the fair value (based on incremental
costs incurred to honor the legal performance obligation) was determined during the period ended June 30, 2003, to not be material to the Successor Companys condensed consolidated balance sheet.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



3. LIQUIDITY



As discussed in Note 2, the Company successfully emerged from bankruptcy on March 25, 2003 with an approved reorganization plan. Prior to
June 11, 2002 (the Petition Date), the Company had incurred substantial net losses and had both working capital and stockholders deficiencies. Emerging from bankruptcy gives the Company a chance to become successful in its future operations.
The primary benefit of the bankruptcy was to relieve the Company of the obligations of the Senior Notes and Broadband Network Vendor Financing Agreements along with the related interest expense. As a result, the Company has generated positive
operating income and cash flows from operations of $3.2 million and $3.7 million, respectively, for the three months ended March 31, 2004. As of March 31, 2004, the Company has cash and cash equivalents and trading investments of over $60 million,
which includes approximately $6.7 million in Venezuela (see Note 4). Based on its current business plan, the Company believes that the cash balances as of March 31, 2004 and the expected cash flows to be generated by the Companys operations
will be sufficient for the foreseeable future to pay its obligations when due, including any acceleration of the approximately $7.6 million owed to the creditor mentioned in Note 2. However, management can give no assurances that the Company will be
successful in executing its business plan nor that the Company will be able to achieve profitability in the long-term.



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##### Table of Contents

4. 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. The provisions of SOP 90-7 (see Note 2) were used in the preparation of these condensed consolidated financial statements.



Interim Financial Information  The unaudited condensed
consolidated financial statements as of March 31, 2004 and for the three months then ended have been prepared on the same basis as the Companys audited consolidated financial statements as of and for the nine months ended December 31, 2003. 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 months ended March 31, 2004 are not necessarily indicative of the operating results to be expected for the remainder of calendar year 2004 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 policies, 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  The Argentine peso has been volatile since January 2002, when it traded at 1.65 pesos to the U.S. dollar. At December 31, 2003 and March 31, 2004, the Argentine peso traded at 2.95 and 2.88 pesos to the
U.S. dollar, respectively. The devaluation of the Argentine peso will 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.



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 are adversely affected by devaluations of the Brazilian realagainst the U.S. dollar. At December 31,
2003 and March 31, 2004, the realtraded at R$2.89 and R$2.94 to the U.S. dollar, respectively. Devaluations of the realagainst the U.S. dollar have had a negative effect on the Companys realdenominated revenues.
Economic difficulties in Brazil, including further currency devaluations, could have a material adverse effect on IMPSAT Brazils and the Companys overall financial condition and results of operations.



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##### Table of Contents

In 2002, the Venezuelan government removed controls over the trading range of the bolivar,
allowing the exchange rate to be determined by market conditions. As a result, during 2002, the bolivar decreased in value in relation to the U.S. dollar by approximately 85%. During February 2003, the Venezuelan government imposed exchange rate
controls, fixing the bolivars value to the U.S. dollar at 1,600 bolivars to the U.S. dollar. These exchange rate controls make it difficult for the Companys customers in Venezuela to obtain the U.S. dollars needed to make payments
due to the Company in U.S. dollars on a timely basis. These exchange controls also limit the Companys ability to convert local currency into U.S. dollars and transfer funds out of Venezuela. During February 2004, the Venezuelan government
further devalued the bolivar and fixed the bolivars value to the U.S. dollar at 1,920. As of March 31, 2004, approximately $6.7 million of the Companys cash and cash equivalents were held in Venezuela bolivars by IMPSAT
Venezuela (translated into U.S. dollars at the fixed exchange rate imposed by the Venezuelan government). Pursuant to the discussions by the AICPA International Practices Task Force during their March 2003 meeting, the Company has used the official
government exchange rate of 1,920 bolivars to the U.S. dollar to remeasure the financial statements of IMPSAT Venezuela.



Cash and Cash Equivalents  Cash and cash equivalents are time deposits or money market funds 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. Included in cash and cash equivalents is approximately $0.5 million of restricted cash in IMPSAT Peru related to certain of its borrowings and
other obligations.



Revenue Recognition  Revenues from data,
value-added telephony, IT solutions and Internet services are recognized monthly as the services are provided. Equipment sales are recorded upon delivery to and acceptance by the customer. In addition, the Company has entered into, and may enter
into in the future, agreements with carriers granting indefeasible rights of use (IRUs) and access to portions of the Companys broadband network capacity and infrastructure. Pursuant to these agreements, the Company may receive
fixed advance payments for the IRUs, which would be recognized as revenue ratably over the life of the IRU. Amounts received in advance would be recorded as deferred revenue. 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 for the three months ended March 31, 2003 and 2004.



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.



Assets Held for Disposal During the first quarter of 2003, the Company decided to close its operations in Mexico, and as such reclassified the amounts of assets associated with the operations in Mexico
to assets held for disposal as of March 31, 2003. During 2003, the Company sold the real estate property in Mexico for $2.4 million and its other real and personal property including its telecommunications licenses, to unrelated third parties for
$3.7 million. As of March 31, 2004, there were no other assets held for disposal.



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 
|Network infrastructure (including rights of way) |  | 10-20 years
|IRU investments                                  |  | 15 years   
|Furniture, fixtures and other equipment          |  | 2-10 years 



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##### Table of Contents

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.



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.



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 asset carrying amounts are adjusted to fair value.



Investments Investments covered under the scope of 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 for investments available for sale are included in accumulated other comprehensive (loss) income within stockholders equity. All other investments are carried at cost.



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 asset and liability method of computing deferred income taxes. Under the
asset and 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 are included in accumulated other comprehensive (loss) income 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
is 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.



The Company has adopted the disclosure-only provisions of SFAS No. 123. Had
compensation costs been recognized based on the fair value at the date of grant for options awarded under the previous stock option plans and the 2003 Plan, the pro forma amounts of the Companys net income (loss) and net income (loss) per
common share for the three months ended March 31, 2003 and 2004 would have been as follows:



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##### Table of Contents

|                                                                                                                |  |                                 |         |   |                                  |   |        |  
|--------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ------- | - | -------------------------------- | - | ------ | -
|                                                                                                                |  | PredecessorCompany              |         |   | SuccessorCompany                 |  
|                                                                                                                |  | Three MonthsEndedMarch 31, 2003 |         |   | Three MonthsEnded March 31, 2004 |  
|Net income (loss):                                                                                              |  |                                 |         |   |                                  |   |        |  
|As reported                                                                                                     |  | $                               | 731,066 |   |                                  | $ | (6,472 | )
|                                                                                                                |  |                                 |         |   |                                  |   |        |  
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards |  |                                 | (175    | ) |                                  |   | (171   | )
|                                                                                                                |  |                                 |         |   |                                  |   |        |  
|Pro forma                                                                                                       |  | $                               | 730,891 |   |                                  | $ | (6,643 | )
|                                                                                                                |  |                                 |         |   |                                  |   |        |  
|                                                                                                                |  |                                
|Net income per common share (loss):                                                                             |  |                                 |         |   |                                  |   |        |  
|Basic:                                                                                                          |  |                                 |         |   |                                  |   |        |  
|As reported                                                                                                     |  | $                               | 8.00    |   |                                  | $ | (0.64  | )
|Pro forma                                                                                                       |  | $                               | 7.00    |   |                                  | $ | (0.66  | )
|Diluted:                                                                                                        |  |                                 |         |   |                                  |   |        |  
|As reported                                                                                                     |  | $                               | 8.00    |   |                                  | $ | (0.64  | )
|Pro forma                                                                                                       |  | $                               | 7.00    |   |                                  | $ | (0.66  | )



For purposes of the pro forma
disclosures, the fair value of the options granted in 2003 (see Note 13) was estimated using the minimum value method prescribed by SFAS No. 123, as the Companys new common stock had not traded between the date of emergence and the date of the
granting of the options. The assumptions used by the Company were as follows: no dividend yield; no volatility; risk-free interest rate of 3%; and an expected term of seven years. No stock options were granted during the three months ended March 31,
2004. No stock-based compensation cost from stock options is reflected in the accompanying condensed consolidated statements of operations because all the options granted had an exercise price greater than the market value of the underlying common
stock on the date of grant.



Fair Value of Financial Instruments 
The Companys financial instruments include trading investments, receivables, investments in common stock, payables and long-term debt. The Companys trading investments and common stock investments were valued at market closing prices at
March 31, 2004. The fair value of these investments is presented in Note 5. The fair values of all other financial instruments, which approximate their carrying values, have been estimated by management using available market information and
interest rates as of March 31, 2004.



Net Income (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 using the
treasury stock method. The calculation of diluted income (loss) per share was the same as the calculation of basic income per share for the three months ended March 31, 2003 and 2004 since the inclusion of potential common stock in the computation
would be antidilutive. The computation of net loss per share for the three months ended March 31, 2004 is as follows:



|                                                                                         |  |    |                |  
|---------------------------------------------------------------------------------------- |  | -- | -------------- | -
|Net loss                                                                                 |  | $  | (6,472         | )
|                                                                                         |  |    |                |  
|Weighted average number of common shares outstanding used in basic per share calculation |  |    | 10,051         |  
|                                                                                         |  |    |                |  
|Basic net loss per common share                                                          |  | $  | (0.64          | )
|                                                                                         |  |    |                |  
|Antidilutive securities not included in diluted earnings per common share computation:   |  |    |                |  
|Stock Options                                                                            |  |    | 1,676,332      |  
|                                                                                         |  |    |                |  
|Exercise Price                                                                           |  | $  | 15.00          |  
|                                                                                         |  |    |                |  
|Warrants                                                                                 |  |    | 3,257,178      |  
|                                                                                         |  |    |                |  
|Exercise Price                                                                           |  | $  | 15.00          |  
|                                                                                         |  |    |                |  
|Series A and B Notes                                                                     |  |    | 6,033,000      |  
|                                                                                         |  |    |                |  
|Conversion Price                                                                         |  | $$ | 13.56 and20.78 |  
|                                                                                         |  |    |                |  
|Restricted Stock                                                                         |  |    | 100,000        |  
|                                                                                         |  |    |                |  



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##### Table of Contents

Accumulated Other Comprehensive Income (Loss)  Accumulated other comprehensive income (loss) is comprised as
follows:



|                                                 |  |                              |        |   |                                                |   |       |  |   |        |  
|------------------------------------------------ |  | ---------------------------- | ------ | - | ---------------------------------------------- | - | ----- |  | - | ------ | -
|                                                 |  | FOREIGN CURRENCY TRANSLATION |        |   | UNREALIZED GAINON INVESTMENTSAVAILABLE FORSALE |   | TOTAL | 
|Balance at December 31, 2003 (Successor Company) |  | $                            | (3,039 | ) |                                                | $ | 1,732 |  | $ | (1,307 | )
|Change during the period                         |  |                              | 167    |   |                                                |   | 1,577 |  |   | 1,744  |  
|                                                 |  |                              |        |   |                                                |   |       |  |   |        |  
|Balance at March 31, 2004(Successor Company)     |  | $                            | (2,872 | ) |                                                | $ | 3,309 |  | $ | 437    |  
|                                                 |  |                              |        |   |                                                |   |       |  |   |        |  



New Accounting Pronouncement
 In January 2003, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities, an Interpretation of APB No. 51. FIN 46 requires certain
variable interest entities to be condensed consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for
the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is effective for all new variable interest entities created or acquired after January 31, 2003. During October 2003, the FASB deferred
the effective date of FIN 46 until the end of the first interim or annual period ending after December 15, 2003. In addition the FASB issued a revised interpretation of FIN 46 (FIN 46-R) in December 2003. The adoption of FIN 46-R during
the three months ended March 31, 2004 did not have a material effect on the Companys financial condition or results of operations.



Reclassifications  Certain amounts in the 2003 condensed consolidated financial statements have been reclassified to conform with the 2004 presentation.



5. INVESTMENTS



The Companys investments consist of the following at December 31, 2003
and March 31, 2004:



|                                   |  |                   |       |                |   |      
|---------------------------------- |  | ----------------- | ----- | -------------- | - | -----
|                                   |  | Successor Company
|                                   |  | December 31, 2003 |       | March 31, 2004
|Trading investments, at fair value |  | $                 | 2,474 |                | $ | 253  
|Investments in common stock        |  | $                 | 1,873 |                | $ | 3,446



Trading investments as
of December 31, 2003 and March 31, 2004 consist of approximately $2.5 million and $0.3 million, respectively, in short term bonds issued by the Venezuelan government.



The Companys investments in common stock at December 31, 2003 and March 31, 2004 included a less than 5% ownership
interest in the outstanding common stock of Claxson Interactive Group Inc. (Claxson), an integrated media company with operations in Latin America. The Companys investments in common stock are classified as available for sale.



6. TRADE ACCOUNTS RECEIVABLE



Trade accounts receivable, by operating subsidiaries, at December 31, 2003
and March 31, 2004, are summarized as follows:



|                                      |  |                   |         |   |                |   |         |  
|------------------------------------- |  | ----------------- | ------- | - | -------------- | - | ------- | -
|                                      |  | Successor Company |        
|                                      |  | December 31, 2003 |         |   | March 31, 2004 |  
|IMPSAT Argentina                      |  | $                 | 25,465  |   |                | $ | 24,057  |  
|IMPSAT Brazil                         |  |                   | 5,804   |   |                |   | 4,652   |  
|IMPSAT Colombia                       |  |                   | 3,680   |   |                |   | 4,895   |  
|IMPSAT Venezuela                      |  |                   | 6,692   |   |                |   | 6,996   |  
|All other countries                   |  |                   | 10,214  |   |                |   | 10,214  |  
|                                      |  |                   |         |   |                |   |         |  
|Total                                 |  |                   | 51,855  |   |                |   | 50,814  |  
|Less: allowance for doubtful accounts |  |                   | (20,642 | ) |                |   | (18,788 | )
|                                      |  |                   |         |   |                |   |         |  
|Trade accounts receivable, net        |  | $                 | 31,213  |   |                | $ | 32,026  |  
|                                      |  |                   |         |   |                |   |         |  



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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 is susceptible to changes in the Latin American economies and political climates. Prior to extending credit, the customers financial history is analyzed.



The activity for the allowance for doubtful accounts for the three months
ended March 31, 2003, for the nine months ended December 31, 2003 and for the three months ended March 31, 2004 is as follows:



|                                                            |  |                                   |        |   |                                    |   |        |                                 |  |   |        |  
|----------------------------------------------------------- |  | --------------------------------- | ------ | - | ---------------------------------- | - | ------ | ------------------------------- |  | - | ------ | -
|                                                            |  | PredecessorCompany March 31, 2003 |        |   | SuccessorCompany December 31, 2003 |   |        | SuccessorCompany March 31, 2004 | 
|Beginning balance                                           |  | $                                 | 23,384 |   |                                    | $ | 21,358 |                                 |  | $ | 20,642 |  
|Provision for (reversal of allowance for) doubtful accounts |  |                                   | 515    |   |                                    |   | 2,365  |                                 |  |   | (1,855 | )
|Write-offs                                                  |  |                                   | (1,553 | ) |                                    |   | (3,238 | )                               |  |   | (173   | )
|Effect of exchange rate change                              |  |                                   | (988   | ) |                                    |   | 157    |                                 |  |   | 174    |  
|                                                            |  |                                   |        |   |                                    |   |        |                                 |  |   |        |  
|Ending balance                                              |  | $                                 | 21,358 |   |                                    | $ | 20,642 |                                 |  | $ | 18,788 |  
|                                                            |  |                                   |        |   |                                    |   |        |                                 |  |   |        |  



7. 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, including its operating subsidiaries and are as follows at December 31, 2003 and March 31, 2004:



|                    |  |                   |        |               |   |       
|------------------- |  | ----------------- | ------ | ------------- | - | ------
|                    |  | Successor Company
|                    |  | December 31,2003  |        | March 31,2004
|IMPSAT Argentina    |  | $                 | 577    |               | $ | 517   
|IMPSAT Brazil       |  |                   | 2,633  |               |   | 2,492 
|IMPSAT Colombia     |  |                   | 3,522  |               |   | 4,293 
|IMPSAT Venezuela    |  |                   | 2,794  |               |   | 2,069 
|All other countries |  |                   | 2,104  |               |   | 4,717 
|                    |  |                   |        |               |   |       
|Total               |  | $                 | 11,630 |               | $ | 14,088
|                    |  |                   |        |               |   |       



8. PROPERTY, PLANT AND EQUIPMENT



Property, plant and equipment at December 31, 2003 and
March 31, 2004 consists of:



|                                                 |  |                   |         |   |                |   |         |  
|------------------------------------------------ |  | ----------------- | ------- | - | -------------- | - | ------- | -
|                                                 |  | Successor Company |        
|                                                 |  | December 31, 2003 |         |   | March 31, 2004 |  
|Land                                             |  | $                 | 10,109  |   |                | $ | 10,109  |  
|Building and improvements                        |  |                   | 33,921  |   |                |   | 33,831  |  
|Operating communications equipment               |  |                   | 160,804 |   |                |   | 164,425 |  
|Network infrastructure (including rights of way) |  |                   | 103,828 |   |                |   | 103,131 |  
|IRU investments                                  |  |                   | 19,381  |   |                |   | 19,177  |  
|Furniture, fixtures and other equipment          |  |                   | 13,765  |   |                |   | 13,986  |  
|                                                 |  |                   |         |   |                |   |         |  
|Total                                            |  |                   | 341,808 |   |                |   | 344,659 |  
|Less: accumulated depreciation                   |  |                   | (29,389 | ) |                |   | (38,998 | )
|                                                 |  |                   |         |   |                |   |         |  
|Total                                            |  |                   | 312,419 |   |                |   | 305,661 |  
|Equipment in transit                             |  |                   | 2,484   |   |                |   | 1,911   |  
|Construction in process                          |  |                   | 914     |   |                |   | 1,305   |  
|                                                 |  |                   |         |   |                |   |         |  
|Property, plant and equipment, net               |  | $                 | 315,817 |   |                | $ | 308,877 |  
|                                                 |  |                   |         |   |                |   |         |  



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##### Table of Contents

The recap of accumulated depreciation for the three months ended March 31, 2003, for the nine months
ended December 31, 2003 and for the three months ended March 31, 2004 is as follows:



|                                     |  |                                  |          |   |                                   |   |        |                                |  |   |        |  
|------------------------------------ |  | -------------------------------- | -------- | - | --------------------------------- | - | ------ | ------------------------------ |  | - | ------ | -
|                                     |  | PredecessorCompany March 31,2003 |          |   | SuccessorCompany December 31,2003 |   |        | SuccessorCompany March 31,2004 | 
|Beginning balance                    |  | $                                | 465,142  |   |                                   | $ |       |                                |  | $ | 29,389 |  
|Depreciation expense                 |  |                                  | 19,216   |   |                                   |   | 29,535 |                                |  |   | 10,161 |  
|Exchange rate effects                |  |                                  | 1,889    |   |                                   |   | 226    |                                |  |   | (143   | )
|Disposals and retirements            |  |                                  | (4,845   | ) |                                   |   | (372   | )                              |  |   | (409   | )
|Application of fresh-start reporting |  |                                  | (481,402 | ) |                                   |   |        |                                |  |   |        |  
|                                     |  |                                  |          |   |                                   |   |        |                                |  |   |        |  
|Ending balance                       |  | $                                |         |   |                                   | $ | 29,389 |                                |  | $ | 38,998 |  
|                                     |  |                                  |          |   |                                   |   |        |                                |  |   |        |  



IRU Agreements
The Company has entered into several 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. As described in Note 2, these advance payments were initially recorded as deferred revenues and adjusted in the application of fresh-start accounting in accordance with EITF 01-3.



9. LONG TERM DEBT



The Companys long-term debt at December 31, 2003 and March 31, 2004 is detailed as follows:



|                                                                                                                                                  |  |                   |         |   |                |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | -------------- | - | ------- | -
|                                                                                                                                                  |  | Successor Company |        
|                                                                                                                                                  |  | December 31, 2003 |         |   | March 31, 2004 |  
|Series A 6% Senior Guaranteed Notes due 2011                                                                                                      |  | $                 | 62,773  |   |                | $ | 63,707  |  
|Series B 6% Senior Guaranteed Notes due 2011                                                                                                      |  |                   | 23,792  |   |                |   | 24,147  |  
|Senior Secured Notes 10%, maturing 2009                                                                                                           |  |                   | 138,447 |   |                |   | 140,493 |  
|Senior Notes issued by IMPSAT Colombia due 2008 and 2010 (interest rate 13.88%), collateralized by the assignment of customers
contracts          |  |                   | 16,197  |   |                |   | 16,795  |  
|Term notes, maturing through 2007 collateralized by buildings and equipment, the assignment of customer contracts and investment; denominated
in: |  |                   |         |   |                |   |         |  
|U.S. dollars (interest rates 7% to 11.68%)                                                                                                        |  |                   | 1,278   |   |                |   | 910     |  
|Local currency (interest rate 12.97%)                                                                                                             |  |                   | 6,839   |   |                |   | 6,648   |  
|Eximbank notes (interest rates 3.19% to 3.35%), maturing semiannually through 2007                                                                |  |                   | 3,770   |   |                |   | 3,274   |  
|Vendor financing (3.47% to 11%), in default                                                                                                       |  |                   | 8,149   |   |                |   | 8,116   |  
|                                                                                                                                                  |  |                   |         |   |                |   |         |  
|Total long-term debt                                                                                                                              |  |                   | 261,245 |   |                |   | 264,090 |  
|Less: current portion, including defaulted indebtedness                                                                                           |  |                   | (11,851 | ) |                |   | (27,553 | )
|                                                                                                                                                  |  |                   |         |   |                |   |         |  
|Long-term debt, net                                                                                                                               |  | $                 | 249,394 |   |                | $ | 236,537 |  
|                                                                                                                                                  |  |                   |         |   |                |   |         |  



The Companys
Series A, Series B and Senior Secured Notes shown above were originally issued in conjunction with effecting the Plan described in Note 2. The Series A, Series B and Senior Secured Notes 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 Series A and Series B Notes were initially convertible into the
Companys stock at a conversion price of $14.39 and $22.06, respectively. The conversion price is reduced with the passage of time. As of March 31, 2004, the Series A and Series B Notes were convertible into approximately 4,837,000 and
1,195,000 shares of common stock, respectively.



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##### Table of Contents

10. INCOME TAXES



The composition of the provision for income taxes, all of which is for foreign taxes, for the three months ended March 31, 2003 and 2004 is as follows:



|         |  |                                 |      |   |                                 |   |      |  
|-------- |  | ------------------------------- | ---- | - | ------------------------------- | - | ---- | -
|         |  | PredecessorCompany              |      |   | SuccessorCompany                |  
|         |  | Three MonthsEndedMarch 31, 2003 |      |   | Three MonthsEndedMarch 31, 2004 |  
|Current  |  | $                               | (324 | ) |                                 | $ | (543 | )
|Deferred |  |                                 | (82  | ) |                                 |   |      |  
|         |  |                                 |      |   |                                 |   |      |  
|Total    |  | $                               | (406 | ) |                                 | $ | (543 | )
|         |  |                                 |      |   |                                 |   |      |  



The foreign statutory
tax rates range from 15% to 35% depending on the particular country. Deferred taxes result from temporary differences in revenue recognition, depreciation methods and net operating loss carryforwards.



Net Operating Losses Carryforward (NOLs)  For U.S. income tax
purposes, the income recognized upon the cancellation of debt upon emergence from bankruptcy were excluded from the Companys taxable income. The Company is required to reduce its tax attributes to compensate for the exclusion of debt
cancellation income. The attribute reduction will occur as of the first day of the tax year following the year of emergence from bankruptcy. In general, the amount of the reduction is one dollar for each dollar excluded from gross income (the
reduction to credits is 331/3cents for each dollar excluded). Attribute reduction is generally applied in the
following order:



| |  | Net operating losses and net operating loss carryovers
| | - | ------------------------------------------------------



| |  | General business credits
| | - | ------------------------



| |  | Minimum tax credits
| | - | -------------------



| |  | Capital losses and capital loss carryovers
| | - | ------------------------------------------



| |  | Basis of property (depreciable and non-depreciable)
| | - | ---------------------------------------------------



| |  | Passive activity loss carryovers
| | - | --------------------------------



| |  | Foreign tax credit carryovers
| | - | -----------------------------



In addition, the Companys ability to utilize its remaining NOLs will be limited as a result of the change in ownership resulting from the bankruptcy restructuring.



The Company recorded a valuation allowance to offset its deferred income tax
asset because management cannot conclude that utilization of the tax benefits resulting from operating losses and the other temporary differences are more likely than not to be realized, as required by SFAS 109.



11. LIABILITIES SUBJECT TO COMPROMISE AND REORGANIZATION ITEMS



Liabilities subject to compromise  This term refers to
the liabilities incurred prior to the commencement of the Chapter 11 case. These liabilities consisted primarily of amounts outstanding under the Companys Old Senior Notes and also included accounts payable, accrued interest and other accrued
expenses. These amounts represented the Companys estimate of known or potential claims to be resolved in connection with the Chapter 11 case. These liabilities were restructured in accordance with the Plan, see Note 2.



Liabilities subject to compromise as of March 25, 2003 were as follows:



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



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##### Table of Contents

Contractual interest expense not accrued on prepetition debt totaled $52.2 million and $72.1 million for
the period that began as of June 11, 2002, the date of the Companys petition for relief under chapter 11 of the Bankruptcy Code, and ended December 31, 2002, and March 25, 2003, the date of the Companys emergence from bankruptcy,
respectively.



Reorganization items  Reorganization items
during the three-month period ended March 31, 2003 are comprised of the following:



|                                |  |   |         |  
|------------------------------- |  | - | ------- | -
|Professional fees               |  | $ | (1,636  | )
|Gain on extinguishments of debt |  |   | 728,203 |  
|Stock-based compensation        |  |   | (440    | )
|                                |  |   |         |  
|Total                           |  | $ | 726,127 |  
|                                |  |   |         |  



12. OPERATING SEGMENT INFORMATION



The Companys operating segment information, by
subsidiary, is as follows for three months ended March 31, 2003 and 2004:



|                                                       |  |           |         |   |        |   |         |          |  |   |           |   |                    |   |        |              |   |        |       |  |   |         |   |  |   |         |  
|------------------------------------------------------ |  | --------- | ------- | - | ------ | - | ------- | -------- |  | - | --------- | - | ------------------ | - | ------ | ------------ | - | ------ | ----- |  | - | ------- | - |  | - | ------- | -
|Three months ended March 31, 2003(Predecessor Company) |  | Argentina |         |   | Brazil |   |         | Colombia |  |   | Venezuela |   | All othercountries |   |        | Eliminations |   |        | Total | 
|Net Revenues                                           |  |           |         |   |        |   |         |          |  |   |           |   |                    |   |        |              |   |        |       |  |   |         |   |  |   |         |  
|Satellite and Broadband                                |  | $         | 9,196   |   |        | $ | 5,504   |          |  | $ | 12,068    |   |                    | $ | 7,510  |              | $ | 14,432 |       |  | $ | (7,328  | ) |  | $ | 41,382  |  
|Internet                                               |  |           | 1,585   |   |        |   | 838     |          |  |   | 1,147     |   |                    |   | 910    |              |   | 2,810  |       |  |   | (1,557  | ) |  |   | 5,733   |  
|Value added services                                   |  |           | 1,157   |   |        |   | 956     |          |  |   | 225       |   |                    |   | 518    |              |   | 2,541  |       |  |   | (616    | ) |  |   | 4,781   |  
|Telephony                                              |  |           | 2,701   |   |        |   |         |          |  |   | 117       |   |                    |   |        |              |   | 2,439  |       |  |   | (1,151  | ) |  |   | 4,106   |  
|Sales of equipment                                     |  |           | 41      |   |        |   |         |          |  |   |           |   |                    |   | 29     |              |   | 4      |       |  |   |         |   |  |   | 74      |  
|                                                       |  |           |         |   |        |   |         |          |  |   |           |   |                    |   |        |              |   |        |       |  |   |         |   |  |   |         |  
|Total net revenues                                     |  | $         | 14,680  |   |        | $ | 7,298   |          |  | $ | 13,557    |   |                    | $ | 8,967  |              | $ | 22,226 |       |  | $ | (10,652 | ) |  | $ | 56,076  |  
|                                                       |  |           |         |   |        |   |         |          |  |   |           |   |                    |   |        |              |   |        |       |  |   |         |   |  |   |         |  
|Operating income (loss)                                |  | $         | (3,004  | ) |        | $ | (2,761  | )        |  | $ | (2,729    | ) |                    | $ | 2,459  |              | $ | 197    |       |  |   |         |   |  | $ | (5,838  | )
|                                                       |  |           |         |   |        |   |         |          |  |   |           |   |                    |   |        |              |   |        |       |  |   |         |   |  |   |         |  
|Total assets                                           |  | $         | 124,570 |   |        | $ | 100,023 |          |  | $ | 79,925    |   |                    | $ | 45,524 |              | $ | 97,687 |       |  |   |         |   |  | $ | 447,729 |  
|                                                       |  |           |         |   |        |   |         |          |  |   |           |   |                    |   |        |              |   |        |       |  |   |         |   |  |   |         |  
|                                                       |  |           |         |   |        |   |        
|Three months ended March 31, 2004(Successor Company)   |  | Argentina |         |   | Brazil |   |         | Colombia |  |   | Venezuela |   | All othercountries |   |        | Eliminations |   |        | Total | 
|Net Revenues                                           |  |           |         |   |        |   |         |          |  |   |           |   |                    |   |        |              |   |        |       |  |   |         |   |  |   |         |  
|Satellite and Broadband                                |  | $         | 8,062   |   |        | $ | 5,369   |          |  | $ | 11,823    |   |                    | $ | 7,174  |              | $ | 12,847 |       |  | $ | (5,702  | ) |  | $ | 39,573  |  
|Internet                                               |  |           | 1,536   |   |        |   | 865     |          |  |   | 1,234     |   |                    |   | 597    |              |   | 3,161  |       |  |   | (1,409  | ) |  |   | 5,984   |  
|Value added services                                   |  |           | 1,651   |   |        |   | 1,099   |          |  |   | 467       |   |                    |   | 315    |              |   | 836    |       |  |   | (162    | ) |  |   | 4,206   |  
|Telephony                                              |  |           | 3,422   |   |        |   | 13      |          |  |   | 49        |   |                    |   |       |              |   | 3,164  |       |  |   | (1,503  | ) |  |   | 5,145   |  
|Sales of equipment                                     |  |           | 97      |   |        |   |        |          |  |   | 34        |   |                    |   | 20     |              |   | 1      |       |  |   |        |   |  |   | 152     |  
|                                                       |  |           |         |   |        |   |         |          |  |   |           |   |                    |   |        |              |   |        |       |  |   |         |   |  |   |         |  
|Total net revenues                                     |  | $         | 14,768  |   |        | $ | 7,346   |          |  | $ | 13,607    |   |                    | $ | 8,106  |              | $ | 20,009 |       |  | $ | (8,776  | ) |  | $ | 55,060  |  
|                                                       |  |           |         |   |        |   |         |          |  |   |           |   |                    |   |        |              |   |        |       |  |   |         |   |  |   |         |  
|Operating income (loss)                                |  | $         | 789     |   |        | $ | (1,677  | )        |  | $ | 1,754     |   |                    | $ | 2,505  |              | $ | (156   | )     |  |   |         |   |  | $ | 3,215   |  
|                                                       |  |           |         |   |        |   |         |          |  |   |           |   |                    |   |        |              |   |        |       |  |   |         |   |  |   |         |  
|Total assets                                           |  | $         | 113,634 |   |        | $ | 104,182 |          |  | $ | 79,042    |   |                    | $ | 56,809 |              | $ | 83,285 |       |  |   |         |   |  | $ | 436,952 |  
|                                                       |  |           |         |   |        |   |         |          |  |   |           |   |                    |   |        |              |   |        |       |  |   |         |   |  |   |         |  



13. STOCKHOLDERS EQUITY



2003 Stock Incentive Plan On the Effective
Date, in accordance with the Plan, the Company adopted the 2003 Stock Incentive Plan (the 2003 Plan), which provides for the grant to the Companys officers, key employees, consultants, advisors, directors or affiliates of (i)
incentive stock options within the meaning of Section 422 of the U.S. Internal Revenue Code of 1986, as amended, (ii) stock options that are non-qualified for U.S. federal income tax purposes, (iii) restricted stock grants and (iv) stock
appreciation rights (collectively the Awards). The total number of shares of common stock for which Awards may be granted pursuant to the 2003 Plan is 3,087,044, subject to certain adjustments reflecting changes in the Companys
capitalization (provided that no more than 200,000 shares of common stock may be issued pursuant to Awards that are not stock options or stock appreciation rights). The 2003 Plan is administered by the Companys compensation committee. The
compensation committee determines, among other things, which of the Companys officers, employees, consultants, advisors, affiliates and directors will receive Awards under the Plan, the time when Awards will be granted, and the type of Awards
to be granted. Awards granted under the 2003 Plan are on such terms, including the number of shares subject to each Award, the time or times when the Awards will become exercisable, and the price and duration of the Award, as determined by the
compensation committee. The expiration date of the 2003 Plan is March 25, 2013.



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##### Table of Contents

The exercise price of incentive and non-qualified stock options is determined by the compensation
committee. In the case of incentive stock options and other options intended to qualify as performance-based compensation under Section 162(m) of the U.S. Internal Revenue Code (Section 162(m)), the excercise price may not be
less than the fair market value of the common stock on the date of grant. The term of any option may not exceed ten years from the date of grant (or five years in the case of an incentive stock option granted to an employee owning 10% or more of the
companys voting stock).



Payment of the exercise price of
a stock option or stock appreciation right must be made by cash or, in the sole discretion of the compensation committee, by promissory note, tender of shares of the Companys common stock then owned by the optionee or, subject to certain
conditions, the surrender to the Company of an exercisable option to purchase shares of the Companys common stock under the 2003 Plan. Stock options and stock appreciation rights granted pursuant to the 2003 Plan are generally not
transferable, other than by will or the laws of descent and distribution in the event of death.



The Companys compensation committee has the right at any time and from time to time to amend or modify the 2003 Plan, without the consent of the
Companys stockholders (unless otherwise required by law or regulations, including to prevent awards from failing to qualify as performance-based compensation under Section 162(m)) or grantees of Awards. However, no such action may adversely
affect Awards previously granted without the grantees consent.



Restricted Stock  On the Effective Date, in accordance with the Plan, the Company granted certain officers 200,000 shares of the Companys New Common Stock. These shares vest in one-quarter increments on the date of
grant and on each of the successive first three anniversaries of the date of grant (but, in each case, only if the executive is still employed with the company on such respective date).



In connection with the restricted stock grant above, the Company recorded approximately $1.3 million in stockholders
equity as deferred compensation and recognized approximately $0.4 million as compensation expense on the date of grant and during the three months ended March 31, 2004. The deferred compensation will be amortized to expense over the vesting period.



Stock Options On May 19, 2003, the
Company granted stock options for 1,646,332 shares of the Companys New Common Stock, at an exercise price of $15 per share to certain key employees. These stock options vest in one-quarter increments on the date of grant and on each of the
successive first three anniversaries of the date of grant. In addition, on such date, the Company also granted stock options for 30,000 shares to certain directors of the Company at an exercise price of $15 per share. These stock options vested
immediately. Any unexercised stock options will expire on May 19, 2011. No options were granted during the three months ended March 31, 2004.



Warrants  On the Effective Date, in accordance with the Plan, the Company issued 3,257,178 eight-year warrants to acquire the
Companys stock at $ 15.00 per share. As of March 31, 2004, all the warrants remain outstanding.



14. COMMITMENTS AND CONTINGENCIES



Commitments  The Company leases satellite capacity with average annual rental commitments of approximately $15.4 million through the year 2008 under non cancelable agreements. In addition, the
Company has committed to long-term contracts for the purchase of satellite and terrestrial links from third parties for approximately $15.0 million and $16.3 million through 2015 and 2008, respectively. The Company has commitments to purchase
communications and data center equipment amounting to approximately $5.3 million at March 31, 2004.



The Company is a guarantor of the Senior Secured Notes issued by its subsidiaries under the Plan and other financing agreements entered into by certain of
its subsidiaries. At March 31, 2004, the balances outstanding were approximately $140.5 million and $0.5 million respectively (see Note 9).



Employment Agreements  Upon emergence, the Company entered into employment agreements with certain of its senior executives with
provide for a three year term (subject to recurrent automatic one year renewals). Under such agreements, the base salary of these executives amounts to approximately $0.8 million per year.



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IPO Allocations Class Action  On November 1, 2001, a lawsuit (the IPO Class
Action) was filed in the United States District Court for the Southern District of New York against the Holding Company, certain individuals who were then officers and directors of the Company, and the underwriters to the Holding
Companys initial public offering (IPO). This lawsuit alleges on behalf of a proposed class of all shareholders that the Holding Company and its underwriters violated various provisions of the securities laws in connection with the IPO in
February 2000. Pursuant to the Plan, the plaintiffs in the IPO Class Action received in connection with their claims the assignment of any insurance proceeds that the Holding Company receives in connection with the litigation, but otherwise the
claims of the plaintiffs against the Holding Company or any of its other assets, have been discharged as part of the Chapter 11 proceedings.



Employee Severance Litigation  On December 26, 2003, a lawsuit was filed in an Argentine court against IMPSAT Argentina by the former
chairman of the Companys board of directors, Mr. Enrique M. Pescarmona. This lawsuit alleged that IMPSAT Argentina failed to pay Mr. Pescarmona severance compensation in the amount of $2.9 million which the plaintiff believes is required by
Argentine labor law in connection with his termination from the Company upon the effectiveness of the Plan. The Company believes that it has meritorious defenses to the allegations in the complaints and intends to defend the litigation vigorously.



US Municipal Taxes  Pursuant to a certain
state provision in the US, charges for telecommunications services that originate or terminate in and are charged to a service address in such state are subject to a discretionary municipal tax. Charges for long distance service ending or
originating out of such state are exempt. The Company believes that substantially all the transactions of IMPSAT USA are excluded from the scope of the tax. To date, the state has not notified IMPSAT USA of any tax due under any municipalitys
discretionary municipal tax or any state tax on telecommunications services. Accordingly, the Company is unable to determine if they are liable for any municipal taxes under such state provisions.



Other Litigation  The Company is involved in or subject
to various litigation and legal proceedings incidental to the normal conduct of its business, including with respect to regulatory and foreign tax assessment matters. 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.



15. GUARANTOR FINANCIAL INFORMATION



The financial information of IMPSAT Argentina, a guarantor subsidiary of the Holding Companys Series A 6% Senior Guaranteed Notes due 2011 and
Series B 6% Senior Guaranteed Notes due 2011, as of December 31, 2003 and as of and for the three months ended March 31, 2004 is shown in a separate column in the accompanying consolidating financial information, as follows:



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##### Table of Contents

CONSOLIDATING BALANCE SHEET (SUCCESSOR COMPANY)

AS OF DECEMBER 31, 2003

(In
thousands of U.S. Dollars)



|                                     |  |                |         |                 |   |                           |  |                          |         |  |              |          |   |  |   |        
|------------------------------------ |  | -------------- | ------- | --------------- | - | ------------------------- |  | ------------------------ | ------- |  | ------------ | -------- | - |  | - | -------
|                                     |  | HoldingCompany |         | IMPSATArgentina |   | Non-GuarantorSubsidiaries |  | IntercompanyEliminations |         |  | Consolidated
|                                     |  |                |         | (Guarantor)     |   |                           |  |                          |         |  |             
|ASSETS                               |  |                |         |                 |   |                           |  |                          |         |  |              |          |   |  |   |        
|CURRENT ASSETS:                      |  |                |         |                 |   |                           |  |                          |         |  |              |          |   |  |   |        
|Cash and cash equivalents            |  | $              | 43,883  |                 | $ | 1,432                     |  | $                        | 16,183  |  | $            |          |   |  | $ | 61,498 
|Trading investments                  |  |                |         |                 |   |                           |  |                          | 2,474   |  |              |          |   |  |   | 2,474  
|Trade accounts receivable, net       |  |                |         |                 |   | 14,087                    |  |                          | 17,126  |  |              |          |   |  |   | 31,213 
|Other receivables                    |  |                | 96,610  |                 |   | 17,654                    |  |                          | 48,414  |  |              | (151,048 | ) |  |   | 11,630 
|Prepaid expenses                     |  |                | 193     |                 |   | 432                       |  |                          | 1,935   |  |              | (311     | ) |  |   | 2,249  
|                                     |  |                |         |                 |   |                           |  |                          |         |  |              |          |   |  |   |        
|Total current assets                 |  |                | 140,686 |                 |   | 33,605                    |  |                          | 86,132  |  |              | (151,359 | ) |  |   | 109,064
|                                     |  |                |         |                 |   |                           |  |                          |         |  |              |          |   |  |   |        
|PROPERTY, PLANT AND EQUIPMENT, Net   |  |                |         |                 |   | 74,848                    |  |                          | 240,969 |  |              |          |   |  |   | 315,817
|                                     |  |                |         |                 |   |                           |  |                          |         |  |              |          |   |  |   |        
|NON-CURRENT ASSETS:                  |  |                |         |                 |   |                           |  |                          |         |  |              |          |   |  |   |        
|Investments in common stock          |  |                | 47,225  |                 |   |                           |  |                          |         |  |              | (45,352  | ) |  |   | 1,873  
|Other non-current assets             |  |                |         |                 |   | 5,578                     |  |                          | 8,297   |  |              |          |   |  |   | 13,875 
|                                     |  |                |         |                 |   |                           |  |                          |         |  |              |          |   |  |   |        
|Total non-current assets             |  |                | 47,225  |                 |   | 5,578                     |  |                          | 8,297   |  |              | (45,352  | ) |  |   | 15,748 
|                                     |  |                |         |                 |   |                           |  |                          |         |  |              |          |   |  |   |        
|TOTAL                                |  | $              | 187,911 |                 | $ | 114,031                   |  | $                        | 335,398 |  | $            | (196,711 | ) |  | $ | 440,629
|                                     |  |                |         |                 |   |                           |  |                          |         |  |              |          |   |  |   |        
|LIABILITIES AND STOCKHOLDERS EQUITY |  |                |         |                 |   |                           |  |                          |         |  |              |          |   |  |   |        
|CURRENT LIABILITIES:                 |  |                |         |                 |   |                           |  |                          |         |  |              |          |   |  |   |        
|Accounts payable  trade             |  | $              | 4,048   |                 | $ | 22,344                    |  | $                        | 63,343  |  | $            | (52,640  | ) |  | $ | 37,095 
|Current portion of long-term debt    |  |                |         |                 |   | 7,712                     |  |                          | 4,139   |  |              |          |   |  |   | 11,851 
|Accrued and other liabilities        |  |                | 53      |                 |   | 11,151                    |  |                          | 33,185  |  |              | (11,249  | ) |  |   | 33,140 
|                                     |  |                |         |                 |   |                           |  |                          |         |  |              |          |   |  |   |        
|Total current liabilities            |  |                | 4,101   |                 |   | 41,207                    |  |                          | 100,667 |  |              | (63,889  | ) |  |   | 82,086 
|LONG-TERM DEBT, Net                  |  |                | 86,565  |                 |   | 52,896                    |  |                          | 109,933 |  |              |          |   |  |   | 249,394
|OTHER LONG-TERM LIABILITIES          |  |                |         |                 |   | 7,480                     |  |                          | 92,438  |  |              | (88,014  | ) |  |   | 11,904 
|                                     |  |                |         |                 |   |                           |  |                          |         |  |              |          |   |  |   |        
|Total liabilities                    |  |                | 90,666  |                 |   | 101,583                   |  |                          | 303,038 |  |              | (151,903 | ) |  |   | 343,384
|STOCKHOLDERS EQUITY                 |  |                | 97,245  |                 |   | 12,448                    |  |                          | 32,360  |  |              | (44,808  | ) |  |   | 97,245 
|                                     |  |                |         |                 |   |                           |  |                          |         |  |              |          |   |  |   |        
|TOTAL                                |  | $              | 187,911 |                 | $ | 114,031                   |  | $                        | 335,398 |  | $            | (196,711 | ) |  | $ | 440,629
|                                     |  |                |         |                 |   |                           |  |                          |         |  |              |          |   |  |   |        



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##### Table of Contents

CONSOLIDATING BALANCE SHEET (SUCCESSOR COMPANY)

AS OF MARCH 31, 2004

(In thousands
of U.S. Dollars)



|                                     |  |                |         |                 |   |                           |  |                          |         |  |                       |          |   |  |   |        
|------------------------------------ |  | -------------- | ------- | --------------- | - | ------------------------- |  | ------------------------ | ------- |  | --------------------- | -------- | - |  | - | -------
|                                     |  | HoldingCompany |         | IMPSATArgentina |   | Non-GuarantorSubsidiaries |  | IntercompanyEliminations |         |  | CondensedConsolidated
|                                     |  |                |         | (Guarantor)     |   |                           |  |                          |         |  |                      
|ASSETS                               |  |                |         |                 |   |                           |  |                          |         |  |                       |          |   |  |   |        
|CURRENT ASSETS:                      |  |                |         |                 |   |                           |  |                          |         |  |                       |          |   |  |   |        
|Cash and cash equivalents            |  | $              | 40,614  |                 | $ | 2,106                     |  | $                        | 17,362  |  | $                     |          |   |  | $ | 60,082 
|Trading investments                  |  |                |         |                 |   |                           |  |                          | 253     |  |                       |          |   |  |   | 253    
|Trade accounts receivable, net       |  |                |         |                 |   | 13,978                    |  |                          | 18,048  |  |                       |          |   |  |   | 32,026 
|Other receivables                    |  |                | 93,576  |                 |   | 17,770                    |  |                          | 55,580  |  |                       | (152,838 | ) |  |   | 14,088 
|Prepaid expenses                     |  |                |         |                 |   | 723                       |  |                          | 3,307   |  |                       | (200     | ) |  |   | 3,830  
|                                     |  |                |         |                 |   |                           |  |                          |         |  |                       |          |   |  |   |        
|Total current assets                 |  |                | 134,190 |                 |   | 34,577                    |  |                          | 94,550  |  |                       | (153,038 | ) |  |   | 110,279
|                                     |  |                |         |                 |   |                           |  |                          |         |  |                       |          |   |  |   |        
|PROPERTY, PLANT AND EQUIPMENT, Net   |  |                |         |                 |   | 73,424                    |  |                          | 235,453 |  |                       |          |   |  |   | 308,877
|                                     |  |                |         |                 |   |                           |  |                          |         |  |                       |          |   |  |   |        
|NON-CURRENT ASSETS:                  |  |                |         |                 |   |                           |  |                          |         |  |                       |          |   |  |   |        
|Investments                          |  |                | 52,169  |                 |   |                           |  |                          |         |  |                       | (48,723  | ) |  |   | 3,446  
|Other non-current assets             |  |                |         |                 |   | 5,633                     |  |                          | 8,717   |  |                       |          |   |  |   | 14,350 
|                                     |  |                |         |                 |   |                           |  |                          |         |  |                       |          |   |  |   |        
|Total non-current assets             |  |                | 52,169  |                 |   | 5,633                     |  |                          | 8,717   |  |                       | (48,723  | ) |  |   | 17,796 
|                                     |  |                |         |                 |   |                           |  |                          |         |  |                       |          |   |  |   |        
|TOTAL                                |  | $              | 186,359 |                 | $ | 113,634                   |  | $                        | 338,720 |  | $                     | (201,761 | ) |  | $ | 436,952
|                                     |  |                |         |                 |   |                           |  |                          |         |  |                       |          |   |  |   |        
|LIABILITIES AND STOCKHOLDERS EQUITY |  |                |         |                 |   |                           |  |                          |         |  |                       |          |   |  |   |        
|CURRENT LIABILITIES:                 |  |                |         |                 |   |                           |  |                          |         |  |                       |          |   |  |   |        
|Accounts payable  trade             |  | $              | 3,547   |                 | $ | 22,118                    |  | $                        | 68,925  |  | $                     | (56,761  | ) |  | $ | 37,829 
|Current portion of long-term debt    |  |                |         |                 |   | 13,608                    |  |                          | 13,945  |  |                       |          |   |  |   | 27,553 
|Accrued and other liabilities        |  |                | 2,002   |                 |   | 9,918                     |  |                          | 37,008  |  |                       | (18,977  | ) |  |   | 29,951 
|                                     |  |                |         |                 |   |                           |  |                          |         |  |                       |          |   |  |   |        
|Total current liabilities            |  |                | 5,549   |                 |   | 45,644                    |  |                          | 119,878 |  |                       | (75,738  | ) |  |   | 95,333 
|LONG-TERM DEBT, Net                  |  |                | 87,853  |                 |   | 47,719                    |  |                          | 100,965 |  |                       |          |   |  |   | 236,537
|OTHER LONG-TERM LIABILITIES          |  |                |         |                 |   | 4,010                     |  |                          | 85,984  |  |                       | (77,869  | ) |  |   | 12,125 
|                                     |  |                |         |                 |   |                           |  |                          |         |  |                       |          |   |  |   |        
|Total liabilities                    |  |                | 93,402  |                 |   | 97,373                    |  |                          | 306,827 |  |                       | (153,607 | ) |  |   | 343,995
|STOCKHOLDERS EQUITY                 |  |                | 92,957  |                 |   | 16,261                    |  |                          | 31,893  |  |                       | (48,154  | ) |  |   | 92,957 
|                                     |  |                |         |                 |   |                           |  |                          |         |  |                       |          |   |  |   |        
|TOTAL                                |  | $              | 186,359 |                 | $ | 113,634                   |  | $                        | 338,720 |  | $                     | (201,761 | ) |  | $ | 436,952
|                                     |  |                |         |                 |   |                           |  |                          |         |  |                       |          |   |  |   |        



F-24



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##### Table of Contents

CONSOLIDATING STATEMENT OF OPERATIONS (SUCCESSOR COMPANY)

FOR THE THREE MONTHS ENDED MARCH 31, 2004

(In thousands of U.S. Dollars)



|                                    |  |                |        |   |                 |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |        |  
|----------------------------------- |  | -------------- | ------ | - | --------------- | - | ------ | ------------------------- |  | - | ------------------------ | - |  | --------------------- | ------ | - |  | - | ------ | -
|                                    |  | HoldingCompany |        |   | IMPSATArgentina |   |        | Non-GuarantorSubsidiaries |  |   | IntercompanyEliminations |   |  | CondensedConsolidated |       
|                                    |  |                |        |   | (Guarantor)     |   |        |                           |  |   |                          |   |  |                       |       
|NET REVENUES:                       |  |                |        |   |                 |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |        |  
|Broadband and satellite             |  | $              |        |   |                 | $ | 8,062  |                           |  | $ | 37,213                   |   |  | $                     | (5,702 | ) |  | $ | 39,573 |  
|Internet                            |  |                |        |   |                 |   | 1,536  |                           |  |   | 5,857                    |   |  |                       | (1,409 | ) |  |   | 5,984  |  
|Value added services                |  |                |        |   |                 |   | 1,651  |                           |  |   | 2,717                    |   |  |                       | (162   | ) |  |   | 4,206  |  
|Telephony                           |  |                |        |   |                 |   | 3,422  |                           |  |   | 3,226                    |   |  |                       | (1,503 | ) |  |   | 5,145  |  
|Sales of equipment                  |  |                |        |   |                 |   | 97     |                           |  |   | 55                       |   |  |                       |        |   |  |   | 152    |  
|                                    |  |                |        |   |                 |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |        |  
|Total net revenues                  |  |                |        |   |                 |   | 14,768 |                           |  |   | 49,068                   |   |  |                       | (8,776 | ) |  |   | 55,060 |  
|                                    |  |                |        |   |                 |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |        |  
|COSTS AND EXPENSES:                 |  |                |        |   |                 |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |        |  
|Direct costs:                       |  |                |        |   |                 |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |        |  
|Contracted services                 |  |                |        |   |                 |   | 1,594  |                           |  |   | 2,767                    |   |  |                       | (34    | ) |  |   | 4,327  |  
|Other direct costs                  |  |                |        |   |                 |   | 612    |                           |  |   | 3,146                    |   |  |                       |        |   |  |   | 3,758  |  
|Leased capacity                     |  |                |        |   |                 |   | 4,944  |                           |  |   | 19,575                   |   |  |                       | (8,729 | ) |  |   | 15,790 |  
|Cost of equipment sold              |  |                |        |   |                 |   | 67     |                           |  |   | 30                       |   |  |                       |        |   |  |   | 97     |  
|                                    |  |                |        |   |                 |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |        |  
|Total direct costs                  |  |                |        |   |                 |   | 7,217  |                           |  |   | 25,518                   |   |  |                       | (8,763 | ) |  |   | 23,972 |  
|Salaries and wages                  |  |                | 440    |   |                 |   | 2,887  |                           |  |   | 8,880                    |   |  |                       |        |   |  |   | 12,207 |  
|Selling, general and administrative |  |                | 681    |   |                 |   | 1,749  |                           |  |   | 3,088                    |   |  |                       | (13    | ) |  |   | 5,505  |  
|Depreciation and amortization       |  |                |        |   |                 |   | 2,124  |                           |  |   | 8,037                    |   |  |                       |        |   |  |   | 10,161 |  
|                                    |  |                |        |   |                 |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |        |  
|Total costs and expenses            |  |                | 1,121  |   |                 |   | 13,977 |                           |  |   | 45,523                   |   |  |                       | (8,776 | ) |  |   | 51,845 |  
|                                    |  |                |        |   |                 |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |        |  
|Operating (loss) income             |  |                | (1,121 | ) |                 |   | 791    |                           |  |   | 3,545                    |   |  |                       |        |   |  |   | 3,215  |  
|                                    |  |                |        |   |                 |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |        |  
|OTHER INCOME (EXPENSE):             |  |                |        |   |                 |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |        |  
|Interest income                     |  |                | 1,589  |   |                 |   | 12     |                           |  |   | 200                      |   |  |                       | (1,490 | ) |  |   | 311    |  
|Interest expense                    |  |                | (1,292 | ) |                 |   | (1,270 | )                         |  |   | (3,862                   | ) |  |                       | 1,490  |   |  |   | (4,934 | )
|Net gain (loss) on foreign exchange |  |                | 12     |   |                 |   | (551   | )                         |  |   | (3,852                   | ) |  |                       |        |   |  |   | (4,391 | )
|Equity in income of affiliates      |  |                | (5,745 | ) |                 |   |        |                           |  |   |                          |   |  |                       | 5,745  |   |  |   |        |  
|Other income (loss), net            |  |                | 85     |   |                 |   | 381    |                           |  |   | (596                     | ) |  |                       |        |   |  |   | (130   | )
|                                    |  |                |        |   |                 |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |        |  
|Total other (expense) income        |  |                | (5,351 | ) |                 |   | (1,428 | )                         |  |   | (8,110                   | ) |  |                       | 5,745  |   |  |   | (9,144 | )
|                                    |  |                |        |   |                 |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |        |  
|(LOSS) INCOME BEFORE INCOME TAXES   |  |                | (6,472 | ) |                 |   | (637   | )                         |  |   | (4,565                   | ) |  |                       | 5,745  |   |  |   | (5,929 | )
|PROVISION FOR FOREIGN INCOME TAXES  |  |                |        |   |                 |   |        |                           |  |   | (543                     | ) |  |                       |        |   |  |   | (543   | )
|                                    |  |                |        |   |                 |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |        |  
|NET (LOSS) INCOME                   |  | $              | (6,472 | ) |                 | $ | (637   | )                         |  | $ | (5,108                   | ) |  | $                     | 5,745  |   |  | $ | (6,472 | )
|                                    |  |                |        |   |                 |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |        |  



F-25



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##### Table of Contents

CONSOLIDATING STATEMENT OF CASH FLOWS (SUCCESSOR COMPANY)

FOR THE THREE MONTHS ENDED MARCH 31, 2004

(In thousands of U.S. Dollars)



|                                                            |  |                |        |   |                 |   |       |                           |  |   |                          |   |  |                       |        |   |  |   |        |  
|----------------------------------------------------------- |  | -------------- | ------ | - | --------------- | - | ----- | ------------------------- |  | - | ------------------------ | - |  | --------------------- | ------ | - |  | - | ------ | -
|                                                            |  | HoldingCompany |        |   | IMPSATArgentina |   |       | Non-GuarantorSubsidiaries |  |   | IntercompanyEliminations |   |  | Condensedconsolidated |       
|                                                            |  |                |        |   | (Guarantor)     |   |       |                           |  |   |                          |   |  |                       |       
|Cash flows provided by (used in) operating activities       |  | $              | (2,068 | ) |                 | $ | 575   |                           |  | $ | 1,915                    |   |  | $                     | 3,256  |   |  | $ | 3,678  |  
|Cash flows provided by (used in) investing activities       |  |                | (1,367 | ) |                 |   | (837  | )                         |  |   | (1,456                   | ) |  |                       |        |   |  |   | (3,660 | )
|Cash flows provided by (used in) financing activities       |  |                |        |   |                 |   | 936   |                           |  |   | 969                      |   |  |                       | (3,256 | ) |  |   | (1,351 | )
|Effect of exchange rate change on cash and cash equivalents |  |                | 167    |   |                 |   |       |                           |  |   | (250                     | ) |  |                       |        |   |  |   | (83    | )
|                                                            |  |                |        |   |                 |   |       |                           |  |   |                          |   |  |                       |        |   |  |   |        |  
|Net increase in cash and cash equivalents                   |  |                | (3,268 | ) |                 |   | 674   |                           |  |   | 1,178                    |   |  |                       |        |   |  |   | (1,416 | )
|Cash and cash equivalents at beginning of the period        |  |                | 43,883 |   |                 |   | 1,432 |                           |  |   | 16,183                   |   |  |                       |        |   |  |   | 61,498 |  
|                                                            |  |                |        |   |                 |   |       |                           |  |   |                          |   |  |                       |        |   |  |   |        |  
|Cash and cash equivalents at end of the period              |  | $              | 40,615 |   |                 | $ | 2,106 |                           |  | $ | 17,361                   |   |  | $                     |       |   |  | $ | 60,082 |  
|                                                            |  |                |        |   |                 |   |       |                           |  |   |                          |   |  |                       |        |   |  |   |        |  





* * * * * *



F-26



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##### Table of Contents

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



Overview



Reorganization



As discussed in
our 2003 Annual Report on Form 10-K, which we filed with the Securities and Exchange Commission (the SEC) on March 30, 2004, (the 2003 Form 10-K), we filed a voluntary petition for relief under Chapter 11 of the United States
Bankruptcy Code with the United States District Court for the Southern District of New York on June 11, 2002 (the Bankruptcy Case). We subsequently filed a plan of reorganization (the Plan) in the Bankruptcy Case, which Plan
was confirmed in the Bankruptcy Case and became effective on March 25, 2003 (the Effective Date), at which time we emerged from bankruptcy. Pursuant to the Plan, we substantially reduced our outstanding debt and annual interest expense
and increased our liquidity. At December 31, 2002, prior to the effectiveness of the Plan, our long-term debt, including current maturities and estimated liabilities subject to the Chapter 11 proceeding, aggregated approximately $1.09 billion. Also
at December 31, 2002, our total indebtedness (including unpaid accrued interest through the petition date related to the Plan) aggregated $1.04 billion and our cash, cash equivalents and trading investments totaled $55.6 million. As of March 31,
2003, upon the effectiveness of the Plan, our total indebtedness was reduced to approximately $267.5 million, and our cash, cash equivalents and trading investments totaled approximately $61.9 million.



Upon our emergence from bankruptcy on March 25, 2003, we adopted fresh start
reporting as required by SOP 90-7. Under SOP 90-7 fresh start reporting, a new reporting entity is considered to be created and the recorded amounts of assets and liabilities are adjusted to reflect their estimated fair values at the date fresh
start reporting is applied. Among other things, this required us to allocate the reorganization value of our reorganized company to its specific tangible and identifiable assets and liabilities. The effect of the reorganization and the
implementation of SOP 90-7 fresh start reporting on our condensed consolidated financial statements is discussed in detail in Note 2 to our unaudited condensed consolidated financial statements included elsewhere in this Report. As a result of the
implementation of SOP 90-7 fresh start reporting, the consolidated financial statements of our company from and after its emergence from bankruptcy are not be comparable to the consolidated financial statements in prior periods.



Revenues



Our contracts with our customers have in the past typically ranged in duration from six months to five years and contracts with our private
telecommunications network customers have generally been three-year contracts. Under the Argentine pesification decree described below under Currency Risks, if a contract denominated inpesos is entered into
after the decrees enactment, payments under that contract are not entitled to be adjusted according to the CER or any other consumer price index. Accordingly, in order to mitigate our inflation risk, ourpeso-denominated contracts in
Argentina are typically for shorter terms ranging from three to six months. The customer generally pays an installation charge at the beginning of the contract and a monthly fee based on the quantity and type of equipment installed. Except in Brazil
and Argentina, the fees stipulated in the contracts are generally denominated in U.S. dollar equivalents. Services (other than installation fees) are billed on a monthly, predetermined basis, which coincide with the rendering of the services. We
report our revenues net of deductions for sales taxes.



We have experienced,
and anticipate that we will continue to experience, downward pressure on our prices as we expand our customer base, confront growing competition for private telecommunications network services, and endure the effects of economic downturns in our
countries of operation. When we have renewed and/or expanded our contracts with existing customers, the prices we charge have generally declined.



Although we believe that our geographic diversification provides some protection against economic downturns in any particular country, our results of operations and
business prospects depend upon the overall financial and economic conditions in Latin America. Most of the countries in which we operate are undergoing, or have experienced in recent years, political and economic volatility. These conditions may
have material adverse effects on our business, results of operation and financial condition.



Costs and Expenses



Our costs
and expenses principally include:



| |  | direct costs
| | - | ------------



| |  | salaries and wages
| | - | ------------------



| |  | selling, general and administrative expenses
| | - | --------------------------------------------



| |  | depreciation and amortization
| | - | -----------------------------



Our direct costs include payments for leased satellite transponder and fiber optic capacity. Our pan-Latin American broadband fiber optic network (the Broadband
Network), which we begin to commercialize in the fourth quarter of 2000, has enabled us to decrease our payments for leased satellite capacity as we have shifted transmission from leased satellite facilities to our Broadband Network after
satellite contracts expire. Other principal items composing direct costs are contracted services costs and allowance for doubtful accounts. Contracted services costs include costs of maintenance and installation (and de-installation) services
provided by outside contractors. Installation and de-installation costs are the costs we incur when we install or remove earth stations, micro-stations and other equipment from customer premises. Direct costs also include licenses and other fees and
sales commissions paid to third-party sales representatives and to our salaried sales force.



Our selling, general and administrative expenses consist principally of:



| |  | publicity and promotion costs
| | - | -----------------------------



| |  | fees and other remuneration
| | - | ---------------------------



1



---

##### Table of Contents

| |  | travel and entertainment
| | - | ------------------------



| |  | rent
| | - | ----



| |  | plant services, insurance and corporate telecommunication and energy expenses
| | - | -----------------------------------------------------------------------------



Currency Risks



Except in Argentina and Brazil, our contracts with customers generally provide for payment in U.S. dollars or for payment in local currency linked to the exchange rate
between the local currency and the U.S. dollar at the time of invoicing. Accordingly, inflationary pressures on local economies in the other countries in which we operate did not have a material effect on our revenues during the first quarter of
2004. Nevertheless, given that the exchange rate is generally set at the date of invoicing and that we in some cases experience substantial delays in collecting receivables, we are exposed to exchange rate risk, even in countries other than
Argentina and Brazil. Furthermore, under applicable law, our contracts with customers in Brazil cannot and, under certain circumstances, our contracts with customers in Argentina may not, be linked to the exchange rate between the local currency and
the U.S. dollar. Accordingly, operations in Argentina and Brazil increase our exposure to exchange rate risks.



In addition, as a result of foreign currency exchange and transfer controls established by the Venezuelan government in February 2003, our contracts with customers in Venezuela are currently being paid in local
currency at the fixed exchange rate established by the Venezuelan government between the local currency and the U.S. dollar. As the exchange control regulations do not permit us to exchange our cash and cash equivalents in local currency into U.S.
dollars without specific governmental authorizations, the Venezuelan exchange control regulations have adversely affected our exchange-rate risks for all dollar-denominated liabilities owing by our Venezuelan operating subsidiary and our ability to
receive dividends or other distributions from that subsidiary. We cannot predict the duration or other adverse effects that the current Venezuelan exchange controls may have on our operating results and financial condition.



Argentina



In early January 2002, the government of then Argentine President Eduardo Duhalde abandoned
the decade-old fixedpeso-dollar exchange rate and permitted thepeso to float freely against the U.S. dollar. Thepeso free market opened on January 11, 2002 and traded at 1.65pesos to the U.S. dollar and has traded as
low as 3.87pesos to the U.S. dollar on June 26, 2002. As of March 31, 2003, the exchange rate was 3.00 pesos to the U.S. dollar, and as of March 31, 2004, the exchange rate was 2.88pesos to the U.S. dollar. Any devaluation of
the Argentinepeso will generally affect our consolidated financial statements by generating foreign exchange gains or losses on dollar-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.



Since
the pesification decree, IMPSAT Argentinas customer contracts and operating cash inflows are now predominantly denominated inpesos. However, IMPSAT Argentinas debt service payments and a significant portion of
its costs (including capital equipment purchases and payments for certain leased telecommunications 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 sufficientpesos (in U.S. dollar terms) to pay its costs and expenses and to satisfy its debt service requirements.



Brazil



At March 31, 2003, thereal traded at a rate of R$3.00 = $1.00 and it appreciated to R$2.94 = $1.00 at March 31, 2004. The daily average exchange rate for the
realduring the first quarter of 2004 was R$2.92= $1.00, as compared to the same average in the first quarter of 2003 of R$3.44 = $1.00. Accordingly, our revenues in Brazil during the first quarter of 2004 benefited from the appreciation of
the realas compared to the corresponding quarter in 2003. Such appreciation, however, has resulted in increases in our real-denominated costs and expenses as compared to the prior quarter.



Venezuela



Widespread discontent with the policies of the current Venezuelan government produced a
country-wide strike in the beginning of December 2002 that lasted two months and seriously disrupted economic activity in Venezuela and severely curtailed the production and export of oil, the major source of Venezuelas foreign exchange. In
response, on February 5, 2003, the Venezuelan government imposed foreign exchange and price controls, making it difficult for our customers in that country to obtain the U.S. dollars needed to make payments due to us in U.S. dollars on a timely
basis. These foreign exchange controls also severely limit our ability to convert local currency into U.S. dollars and transfer funds out of Venezuela. At December 31, 2002, thebolivar traded at a rate of Bs.1,392.00 = $1.00. On February 6,
2003, the Venezuelan government set a single fixed exchange rate for thebolivar against the U.S. dollar of approximately Bs.1,600.00 = $1.00 as part of the new currency controls, and further devalued the bolivar to Bs.1,920.00 = $1.00
on February 9, 2004. As such, on March 31, 2003, the bolivar traded at a rate of Bs.1,600.00 = $1.00, and on March 31, 2004, the Bolivar traded at a rate of Bs. 1,920.00 = $1.00.



Termination of Mexican Operations



During the first quarter of 2003, we determined to close our operations in Mexico, which we initially established in 1994. We entered into agreements with various parties
to sell our real estate and other real and personal property, including our permits and licenses and our contracts with customers. These transactions closed during 2003. Our results for the three months ended March 31, 2003 accordingly include
revenues and expenses related to our Mexican operations.



Global Crossing
Settlement. As reported in our 2003 Form 10-K, we entered into a settlement with Global Crossing Ltd. and certain of its subsidiaries in December 2003 regarding certain contracts entered into between our two organizations. Our results of
operations for the first three months of 2004 reflect the effectiveness of the amendments to those contracts and the payment by Global Crossing on March 31, 2004 of approximately $1.5 million as part of the settlement, which amount was applied
against its outstanding amounts and resulted in a reversal of the allowance for doubtful accounts as discussed below.



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##### Table of Contents

Off-Balance Sheet Arrangements



An off-balance sheet arrangement is any transaction, agreement or other contractual arrangement involving an unconsolidated entity under
which a company has (1) made guarantees, (2) a retained or a contingent interest in transferred assets, (3) an obligation under derivative instruments classified as equity; or (4) any obligation arising out of a material variable interest in an
unconsolidated entity that provides financing, liquidity, market risk or credit risk support to the company, or that engages in leasing, hedging or research and development arrangements with the company. We have no arrangements of the types
described in any of these four categories that we believe may have a material current or future effect on our financial condition, liquidity or results of operations.



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 U.S. GAAP. We use our best judgment based on our knowledge of existing facts and circumstances and actions that we may undertake in the future, as well as the advice of external
experts in determining the estimates that affect our consolidated financial statements. Actual results could differ significantly from those estimates under different assumptions and conditions. Our most critical accounting policies are:



Revenue Recognition



We record revenues from data, value-added telephony, IT solutions and Internet services
monthly as the services are provided. Equipment sales are recorded upon delivery to and acceptance by the customer.



We have entered into agreements with carriers granting indefeasible rights of use (IRUs) and access to portions of our Broadband Network capacity and
infrastructure. Pursuant to some of these agreements entered into prior to the filing of our Bankruptcy Case, we received fixed advance payments for the IRUs, which amounts received in advance were recorded as deferred revenue. See Note 2
Financial Restructuring, Petition For Relief Under Chapter 11 And Emergence  Allocation of Reorganization Value for a discussion of the treatment of deferred revenues not yet earned as of the Effective Date. In the event that we
enter into any such IRU agreements in the future, we expect that we will defer any fixed advanced payments for IRUs and will recognize the deferred revenues from such IRUs ratably over the life of the IRUs.



Non-Monetary Transactions



We may exchange capacity on our Broadband Network for capacity from other carriers through
the exchange of IRUs. We account for these transactions as an exchange of similar IRUs at historical carryover basis with no revenue, gain or loss recognized.



Property, Plant and Equipment



Our business is capital intensive. We record at cost our telecommunications network assets and other improvements that, in managements opinion, extend the useful
lives of the underlying assets, and depreciate such assets and improvements over their estimated useful lives. Our telecommunications network is highly complex and, due to innovation and enhancements, certain components of the network may lose their
utility faster than anticipated. We periodically reassess the economic lives of these components and make adjustments to their expected lives after considering historical experience and capacity requirements, consulting with the vendors, and
assessing new product and market demands and other factors. When these factors indicate that network components may not be useful for as long as anticipated, we depreciate their remaining book values over their residual useful lives. The timing and
deployment of new technologies could affect the estimated remaining useful lives of our telecommunications network assets, which could have a significant impact on our results of operations in the future.



Impairment of Long-Lived Assets



We periodically review the carrying amounts of our property, plant, and equipment to
determine whether current events or circumstances warrant adjustments to the carrying amounts. As part of this review, we analyze the projected undiscounted cash flows associated with our property, plant, and equipment. Considerable management
judgment is required in establishing the assumptions necessary to complete this analysis. Although we believe these estimates to be reasonable, they could vary significantly from actual results and our estimates could change based on market
conditions. Variances in results or estimates could cause changes to the carrying value of our assets including, but not limited to, recording additional impairment charges for some of these assets in future periods.



Basis for Translation



IMPSAT maintains its accounts in U.S. dollars. The accounts of our subsidiaries are
maintained in the currencies of the respective countries. In accordance with Statement of Financial Accounting Standards No. 52, Foreign Currency Translation, the accounts of our subsidiaries are translated from local currency amounts to
U.S. dollars. The method of translation is determined by the functional currency of our subsidiaries. A subsidiarys functional currency is defined as the currency of the primary environment in which a subsidiary operates and is determined
based on managements judgment. When a subsidiarys accounts are not maintained in the functional currency, the financial statements must be remeasured into the functional currency. This involves remeasuring monetary assets and liabilities
using current exchange rates and non-monetary assets and liabilities using historical exchange rates. The adjustments generated by remeasurement are included in our consolidated statements of operations.



When the local currency of a subsidiary is determined to be the functional currency, the
statements are translated into U.S. dollars using the current exchange rate method. The adjustments generated by translation using the current exchange rate method are accumulated in an equity account entitled Accumulated other comprehensive
income (loss) within our consolidated balance sheets.



3



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##### Table of Contents

Tax and Legal Contingencies



We are involved in foreign tax and legal proceedings, claims and litigation arising in the ordinary course of business. We periodically
assess our liabilities and contingencies in connection with these matters based upon the latest information available. For those matters where it is probable that we have incurred a loss and the loss or range of loss can be reasonably estimated, we
have recorded reserves in our consolidated financial statements. In other instances, because of the uncertainties related to both the probable outcome and amount or range of loss, we are unable to make a reasonable estimate of any liability. As
additional information becomes available, we adjust our assessment and estimates of such liabilities accordingly.



In addition, we may be audited by foreign and state (as it relates to our U.S. operations) tax authorities. We provide reserves for potential exposures when we consider
it probable that a taxing authority may take a sustainable position on a matter contrary to our position. We evaluate these reserves, including interest thereon, on a quarterly basis to ensure that they have been appropriately adjusted for events
that may impact our ultimate payment for such exposures.



Financial
Reporting by Entities in Reorganization under the Bankruptcy Code



Our
consolidated financial statements have been prepared in accordance with SOP 90-7. Pursuant to SOP 90-7, an objective of financial statements issued by an entity in Chapter 11 is to reflect its financial evolution during the proceeding. For that
purpose, the consolidated financial statements for periods including and subsequent to the filing of our Chapter 11 petition should distinguish transactions and events that are directly associated with the reorganization from the ongoing operations
of our business. Expenses and other items not directly related to ongoing operations were reflected separately during the first quarter of 2003 in the consolidated statement of operations as reorganization items.



Upon consummation of the Plan, we applied Fresh-Start reporting in accordance
with GAAP and the requirements of SOP 90-7. Upon the Effective Date, a new capital structure was established and assets and liabilities, other than deferred taxes, were stated at their relative fair values. Deferred taxes are determined in
conformity with the Financial Accounting Standards Board, or FASB, Statement of Financial Accounting Standards No. 109.



Changes in Policies



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
quarter of 2004, nor have we made any material changes in any of the critical accounting estimates underlying these accounting policies during 2004.



Period Comparisons



As discussed above, under SOP 90-7 fresh starting reporting, our consolidated financial statements after the Effective Date are those of a new reporting entity (the Successor Company) and certain costs are not
comparable to those of our company during pre-Effective Date periods (the Predecessor Company). The lack of comparability in the accompanying unaudited condensed consolidated financial statements is most apparent in our capital costs (interest
expense and depreciation and amortization), as well as long-term indebtedness and reorganization items.



4



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##### Table of Contents

Results of Operations



The following table summarizes our results of operations:



|                                             |  |                                                             |          |   |                        |            |    |  |   |        |   |  |            |   
|-------------------------------------------- |  | ----------------------------------------------------------- | -------- | - | ---------------------- | ---------- | -- |  | - | ------ | - |  | ---------- | --
|                                             |  | Three Months Ended March 31,                                |         
|                                             |  | Predecessor Company 2003                                    |          |   | Successor Company 2004 |           
|                                             |  | (in thousands and as a percentage of consolidated revenues) |         
|Net revenues:                                |  |                                                             |          |   |                        |            |    |  |   |        |   |  |            |   
|Net revenues from services:                  |  |                                                             |          |   |                        | Percentage |    |  |   |        |   |  | Percentage |   
|Broadband and satellite                      |  | $                                                           | 41,382   |   |                        | 73.8       | %  |  | $ | 39,573 |   |  | 71.9       | % 
|Internet                                     |  |                                                             | 5,733    |   |                        | 10.2       | %  |  |   | 5,984  |   |  | 10.9       | % 
|Value added services                         |  |                                                             | 4,781    |   |                        | 8.5        | %  |  |   | 4,206  |   |  | 7.6        | % 
|Telephony                                    |  |                                                             | 4,106    |   |                        | 7.3        | %  |  |   | 5,145  |   |  | 9.3        | % 
|                                             |  |                                                             |          |   |                        |            |    |  |   |        |   |  |            |   
|Total net revenues from services             |  |                                                             | 56,002   |   |                        | 99.9       | %  |  |   | 54,908 |   |  | 99.7       | % 
|Sales of equipment                           |  |                                                             | 74       |   |                        | 0.1        | %  |  |   | 152    |   |  | 0.3        | % 
|                                             |  |                                                             |          |   |                        |            |    |  |   |        |   |  |            |   
|Total net revenues                           |  |                                                             | 56,076   |   |                        | 100.0      | %  |  |   | 55,060 |   |  | 100.0      | % 
|Direct costs:                                |  |                                                             |          |   |                        |            |    |  |   |        |   |  |            |   
|Contracted services                          |  |                                                             | 4,125    |   |                        | 7.4        | %  |  |   | 4,327  |   |  | 7.9        | % 
|Other direct costs                           |  |                                                             | 4,696    |   |                        | 8.4        | %  |  |   | 3,758  |   |  | 6.8        | % 
|Leased capacity                              |  |                                                             | 17,407   |   |                        | 31.0       | %  |  |   | 15,790 |   |  | 28.7       | % 
|Cost of equipment sold                       |  |                                                             | 48       |   |                        | 0.1        | %  |  |   | 97     |   |  | 0.2        | % 
|                                             |  |                                                             |          |   |                        |            |    |  |   |        |   |  |            |   
|Total direct costs                           |  |                                                             | 26,276   |   |                        | 46.9       | %  |  |   | 23,972 |   |  | 43.5       | % 
|Salaries and wages                           |  |                                                             | 10,727   |   |                        | 19.1       | %  |  |   | 12,207 |   |  | 22.2       | % 
|Selling, general and administrative expenses |  |                                                             | 5,553    |   |                        | 9.9        | %  |  |   | 5,505  |   |  | 10.0       | % 
|Depreciation and amortization                |  |                                                             | 19,358   |   |                        | 34.5       | %  |  |   | 10,161 |   |  | 18.5       | % 
|Interest expense, net1                       |  |                                                             | (1,709   | ) |                        | (3.0       | )% |  |   | (4,623 | ) |  | (8.4       | )%
|Net gain (loss) on foreign exchange          |  |                                                             | 9,969    |   |                        | 17.8       | %  |  |   | (4,391 | ) |  | (8.0       | )%
|Reorganization items                         |  |                                                             | (726,127 | ) |                        | (1,294.9   | )% |  |   |       |   |  |            |   
|Other income (loss), net                     |  |                                                             | 2,923    |   |                        | 5.2        | %  |  |   | (130   | ) |  | (0.2       | )%
|Provision for foreign income taxes           |  |                                                             | (406     | ) |                        | (0.7       | )% |  |   | (543   | ) |  | (1.0       | )%
|                                             |  |                                                             |          |   |                        |            |    |  |   |        |   |  |            |   
|Net income (loss)                            |  | $                                                           | 731,066  |   |                        | 1,303.7    | %  |  | $ | (6,472 | ) |  | (11.8      | )%
|                                             |  |                                                             |          |   |                        |            |    |  |   |        |   |  |            |   

---

|(1) | Contractual interest of $21.8 million for the three months ended March 31, 2003 (Predecessor
Company).
|--- | ------------------------------------------------------------------------------------------------------



Three Months Ended March 31, 2004 Compared to Three
Months Ended March 31, 2003



Revenues. Our total net revenues for
the three months ended March 31, 2004 and 2003 equaled $55.1 million and $56.1 million, respectively. Net revenues were composed of net revenues from services and sales of equipment.



Our net revenues from services for the three months ended March 31, 2004 totaled $54.9 million, a decrease of $1.1 million (or 2.0%)
compared to the three months ended March 31, 2003. Our net revenues from services during the three months ending March 31, 2004 included 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, managed security and managed modem services, and
| | - | -------------------------------------------------------------------------------------------------------------



| |  | telephony, including local, national and international long-distance services.
| | - | ------------------------------------------------------------------------------



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##### Table of Contents

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



|                                 |  |                               |        |             |       |   |                        |   |       
|-------------------------------- |  | ----------------------------- | ------ | ----------- | ----- | - | ---------------------- | - | ------
|                                 |  | Three Months Ended March 31, 
|                                 |  | 2003(PredecessorCompany)      |        | % change(1) |       |   | 2004(SuccessorCompany)
|                                 |  | (dollar amounts in thousands)
|Data and valued added services:  |  |                               |        |             |       |   |                        |   |       
|Broadband and satellite          |  | $                             | 41,382 |             | (4.4  | ) |                        | $ | 39,573
|Value added services(2)          |  |                               | 4,781  |             | (12.0 | ) |                        |   | 4,206 
|Internet                         |  |                               | 5,733  |             | 4.4   |   |                        |   | 5,984 
|Telephony                        |  |                               | 4,106  |             | 25.3  |   |                        |   | 5,145 
|                                 |  |                               |        |             |       |   |                        |   |       
|Total net revenues from services |  | $                             | 56,002 |             | (2.0  | ) |                        | $ | 54,908
|                                 |  |                               |        |             |       |   |                        |   |       

---

|(1) | Percentage increase (decrease) in first quarter of 2004 compared to first quarter 2003.
|--- | ---------------------------------------------------------------------------------------

|(2) | Includes our data center services, systems integration and other information technology
solutions services.
|--- | -----------------------------------------------------------------------------------------------------------



Our lower total net revenues from services
in the first quarter of 2004, as compared to the corresponding period in 2003, were due to lower revenues from broadband and satellite and value added services, which were only partially offset by increases in our revenues from Internet and
telephony services. Changes in our revenues during the first quarter of 2004 as compared to the first quarter of 2003 related to the following:



| |  | In connection with our application of fresh start accounting after the Effective Date, as of April 1, 2003, we no longer recognized as revenue any amounts of deferred revenue that
were previously included on our balance sheet (in first quarter of 2003, of our total recorded revenues from services of $56.0 million, $1.1 million were represented by the recognition of deferred revenue). Due to the fresh start accounting
adjustment, no amounts were recognized after March 31, 2003. See Note 2 to our consolidated financial statements.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | In addition, our revenues from broadband and satellite services decreased during the first quarter of 2004 in comparison to the first quarter of 2003 primarily due to lower
satellite-based services volume and pricing pressures.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Our revenues from value added services decreased principally because of our settlement with Global Crossing. As a result of the settlement, our revenues for data center services to
Global Crossing were reduced during 2004.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Our telephony revenues increased during the first quarter of 2004 as compared to the same quarter in 2003 due to our increased delivery during the first quarter of 2004 of switched
voice services to corporate customers in Argentina, increased traffic at higher rates and international call terminations to end-user customers in Peru and the relative appreciation of the Argentinepeso.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our net revenues discussed above were impacted positively in U.S. dollar terms by the
appreciation of the Argentinepeso and the Brazilianreal to the U.S. dollar during the first quarter of 2004 as compared to the same quarter in the prior year. The exchange rate for the Argentinepeso as of March 31, 2004 was
2.88pesos = $1.00, compared to 3.00pesos = $1.00 for the corresponding date in 2003. As of March 31, 2004, the exchange rate for the Brazilianreal was R$2.94 = $1.00, compared to R$3.46 = $1.00 for the corresponding date in
2003. In U.S. dollar terms, our revenues in Argentina and Brazil, which are denominated in local currencies and represent a significant proportion of our consolidated net revenues, generally increase when the currencies in those countries appreciate
against the U.S. dollar, and decrease when those currencies depreciate. The following table shows U.S. dollar exchange rates for the currencies of these countries at the dates indicated:



|               |  |                             |  |                |  |                   |  |               
|-------------- |  | --------------------------- |  | -------------- |  | ----------------- |  | --------------
|Currency       |  | December 31, 2002           |  | March 31, 2003 |  | December 31, 2003 |  | March 31, 2004
|               |  | Exchange Rate per U.S.$1.00
|Argentina Peso |  | 3.40                        |  | 3.00           |  | 2.95              |  | 2.88          
|Brazil Real    |  | 3.53                        |  | 3.46           |  | 2.89              |  | 2.94          



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##### Table of Contents

We had 2,910 customers at March 31, 2004, compared to 2,799 customers at December 31, 2003, and 2,596 customers at March
31, 2003. The following table shows the evolution of our customer base for the periods indicated:



|                 |  |                            |  |                   |  |                |             |       |   |  |     
|---------------- |  | -------------------------- |  | ----------------- |  | -------------- | ----------- | ----- | - |  | ----
|                 |  | Number of Customers as of: |  | % Change(1)       |  |                | % Change(2)
|                 |  | March 31, 2003             |  | December 31, 2003 |  | March 31, 2004 |             |      
|IMPSAT Argentina |  | 886                        |  | 997               |  | 1,046          |             | 18.1  | % |  | 4.9 
|IMPSAT Colombia  |  | 699                        |  | 723               |  | 741            |             | 6.0   |   |  | 2.5 
|IMPSAT Brazil    |  | 361                        |  | 390               |  | 391            |             | 8.3   |   |  | 0.3 
|IMPSAT Venezuela |  | 204                        |  | 172               |  | 178            |             | (12.7 | ) |  | 3.5 
|IMPSAT Ecuador   |  | 210                        |  | 229               |  | 230            |             | 9.5   |   |  | 0.4 
|IMPSAT Chile     |  | 92                         |  | 108               |  | 119            |             | 29.3  |   |  | 10.2
|IMPSAT Peru      |  | 78                         |  | 106               |  | 127            |             | 62.8  |   |  | 19.8
|IMPSAT USA       |  | 66                         |  | 74                |  | 78             |             | 18.2  |   |  | 5.4 
|                 |  |                            |  |                   |  |                |             |       |   |  |     
|Total            |  | 2,596                      |  | 2,799             |  | 2,910          |             | 12.1  |   |  | 4.0 
|                 |  |                            |  |                   |  |                |             |       |   |  |     

---

|(1) | Increase (decrease) as of end of first quarter of 2004 compared to end of first quarter of 2003.
|--- | ------------------------------------------------------------------------------------------------

|(2) | Increase (decrease) as of end of first quarter of 2004 compared to end of 2003.
|--- | -------------------------------------------------------------------------------



During the first quarter of 2004, we gained a net total of 111 customers, an increase of 4.0% compared to December 31, 2003. Compared to
March 31, 2003, we experienced a net gain of 314 customers, an increase of 12.1%. We do not believe that any of our customer losses in the first quarter of 2004 will have a significant aggregate effect on our total net revenues from services.



In addition to net revenues from services, our total net revenues for the
three months ended March 31, 2004 included revenues from sales of equipment, which totaled $0.2 million compared to $0.1 million for the first quarter of 2003. Because equipment sales are ancillary to our core business and are generally engaged in
by our company only on an opportunistic basis, we are currently unable to predict more than minimal sales of equipment during 2004.



7



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##### Table of Contents

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



|                                                  |  |                               |        |             |        |   |                        |   |       
|------------------------------------------------- |  | ----------------------------- | ------ | ----------- | ------ | - | ---------------------- | - | ------
|                                                  |  | Three Months Ended March 31, 
|                                                  |  | 2003(PredecessorCompany)      |        | % Change(1) |        |   | 2004(SuccessorCompany)
|                                                  |  | (dollar amounts in thousands)
|IMPSAT Argentina                                  |  |                               |        |             |        |   |                        |   |       
|                                                  |  |                               |       
|Services                                          |  | $                             | 14,639 |             | 0.2    | % |                        | $ | 14,671
|                                                  |  |                               |        |             |        |   |                        |   |       
|Sale of equipment                                 |  |                               | 41     |             | 136.6  |   |                        |   | 97    
|                                                  |  |                               |        |             |        |   |                        |   |       
|Total                                             |  |                               | 14,680 |             | 0.6    |   |                        |   | 14,768
|IMPSAT Colombia                                   |  |                               |        |             |        |   |                        |   |       
|                                                  |  |                               |       
|Services                                          |  |                               | 13,557 |             | 0.1    |   |                        |   | 13,573
|Sale of equipment                                 |  |                               |       |             | 0.0    |   |                        |   | 34    
|                                                  |  |                               |        |             |        |   |                        |   |       
|Total                                             |  |                               | 13,557 |             | 0.4    |   |                        |   | 13,607
|                                                  |  |                               |        |             |        |   |                        |   |       
|IMPSAT Brazil                                     |  |                               |        |             |        |   |                        |   |       
|                                                  |  |                               |       
|Services                                          |  |                               | 7,298  |             | 0.7    |   |                        |   | 7,346 
|                                                  |  |                               |        |             |        |   |                        |   |       
|Total                                             |  |                               | 7,298  |             | 0.7    |   |                        |   | 7,346 
|                                                  |  |                               |        |             |        |   |                        |   |       
|IMPSAT Venezuela                                  |  |                               |        |             |        |   |                        |   |       
|                                                  |  |                               |       
|Services                                          |  |                               | 8,938  |             | (9.5   | ) |                        |   | 8,086 
|Sale of equipment                                 |  |                               | 29     |             | (31.0  | ) |                        |   | 20    
|                                                  |  |                               |        |             |        |   |                        |   |       
|Total                                             |  |                               | 8,967  |             | (9.6   | ) |                        |   | 8,106 
|                                                  |  |                               |        |             |        |   |                        |   |       
|IMPSAT Ecuador                                    |  |                               |        |             |        |   |                        |   |       
|                                                  |  |                               |       
|Services                                          |  |                               | 3,927  |             | 8.6    |   |                        |   | 4,265 
|Sale of equipment                                 |  |                               |       |             | 0.0    |   |                        |   | 1     
|                                                  |  |                               |        |             |        |   |                        |   |       
|Total                                             |  |                               | 3,927  |             | 8.6    |   |                        |   | 4,266 
|                                                  |  |                               |        |             |        |   |                        |   |       
|IMPSAT Chile                                      |  |                               |        |             |        |   |                        |   |       
|                                                  |  |                               |       
|Services                                          |  |                               | 2,287  |             | (15.3  | ) |                        |   | 1,938 
|                                                  |  |                               |        |             |        |   |                        |   |       
|Total                                             |  |                               | 2,287  |             | (15.3  | ) |                        |   | 1,938 
|                                                  |  |                               |        |             |        |   |                        |   |       
|IMPSAT Peru                                       |  |                               |        |             |        |   |                        |   |       
|                                                  |  |                               |       
|Services                                          |  |                               | 3,210  |             | 9.3    |   |                        |   | 3,509 
|                                                  |  |                               |        |             |        |   |                        |   |       
|Total                                             |  |                               | 3,210  |             | 9.3    |   |                        |   | 3,509 
|                                                  |  |                               |        |             |        |   |                        |   |       
|IMPSAT USA                                        |  |                               |        |             |        |   |                        |   |       
|                                                  |  |                               |       
|Services                                          |  |                               | 8,380  |             | (13.4  | ) |                        |   | 7,260 
|Sale of equipment                                 |  |                               | 4      |             | (100.0 | ) |                        |   |      
|                                                  |  |                               |        |             |        |   |                        |   |       
|Total                                             |  |                               | 8,384  |             | (13.4  | ) |                        |   | 7,260 
|                                                  |  |                               |        |             |        |   |                        |   |       
|International Satellite Capacity Holding, Ltd.(2) |  |                               |        |             |        |   |                        |   |       
|Services                                          |  |                               | 3,660  |             | (23.0  | ) |                        |   | 2,819 
|                                                  |  |                               |        |             |        |   |                        |   |       
|Total                                             |  |                               | 3,660  |             | (23.0  | ) |                        |   | 2,819 
|                                                  |  |                               |        |             |        |   |                        |   |       
|Other                                             |  |                               |        |             |        |   |                        |   |       
|                                                  |  |                               |       
|Services                                          |  |                               | 758    |             | (71.4  | ) |                        |   | 217   
|                                                  |  |                               |        |             |        |   |                        |   |       
|Total                                             |  |                               | 758    |             | (71.4  | ) |                        |   | 217   
|                                                  |  |                               |        |             |        |   |                        |   |       





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---

|(1) | Percentage increase (decrease) in first quarter of 2004 compared to first quarter of 2003.
|--- | ------------------------------------------------------------------------------------------

|(2) | This subsidiarys principal function is to lease private telecommunications capacity from telecommunications carriers and then sublease this capacity at market rates to our
operating subsidiaries.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Argentina, which is showing signs of
emerging from the economic recession that has affected it since 1999, is our largest market in terms of number of customers and in revenues. Although Argentinas economy showed signs of recovery during 2003 and the first quarter of 2004, it
continues to experience a lack of access to international capital markets and a lack of international investor confidence. The Argentinepesogained strength during the first quarter of 2004 (2.88 pesos = $1.00 at March 31, 2004,
compared to 2.95pesos = $1.00 at December 31, 2003 and 3.00 pesos at March 31, 2003) and the Argentine economy improved during the first quarter of 2004 as compared the first quarter of 2003. Largely due to the average appreciation of
the Argentinepeso during the first quarter of 2004 as compared to 2003, our total net revenues at IMPSAT Argentina increased to $14.8 million for the first quarter of 2004, an increase of $0.1 million (or 0.6%) compared to the three months
ended March 31, 2003. Nonetheless, the Argentine economy continues to face severe challenges; and IMPSAT Argentinas financial condition and results of operations continue to be negatively impacted by the political and social uncertainty and
economic weakness.



We are unable to predict whether the current positive
conditions affecting the Argentine economy will subside or that future economic developments in Argentina will improve in any significant respect. It is possible that the Argentine economic and political environment could deteriorate. The political
and economic situation in Argentina, our largest country of operation, will continue to materially affect our financial condition and results of operations.



IMPSAT Brazils revenues from services for the first quarter of 2004 totaled $7.3 million, an increase of $0.1 million (0.7%) compared to the first quarter of 2003.
At March 31, 2003, thereal traded at a rate of R$3.46 = $1.00 and it appreciated to R$2.94 = $1.00 at March 31, 2004. Future or repeated devaluations of thereal and the decline in growth in the Brazilian economy could have an adverse
effect on IMPSAT Brazils and our companys overall financial condition and results of operations.



IMPSAT Colombias recorded revenues from services of $13.6 million during the first quarter of 2004 were approximately equal to the revenues for services at IMPSAT Colombia for the first quarter of 2003.



Revenues from services at IMPSAT Venezuela equaled $8.1 million for the first
quarter of 2004, compared to $9.0 million for the first quarter of 2003. Venezuela has experienced and continues to experience political and economic uncertainty following the attempted military coup staged against President Hugo Chavez during the
first weeks of April 2002 and the labor strikes that commenced in December 2002 and ended two months later. In response to this political and economic turmoil affecting Venezuela, that countrys government imposed foreign exchange and price
controls during February 2003, making it difficult for our customers in Venezuela to obtain the U.S. dollars needed to make payments due to us in U.S. dollars on a timely basis. In February 2004, Venezuelas government further devalued its
currency exchange rate to Bs 1,920.00 = $1.00. These foreign exchange controls also limit our ability to convert local currency into U.S. dollars and transfer funds out of Venezuela. The continuation or worsening of this 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 first quarter of 2004 totaled $24.0 million, a decrease of $2.3 million (or 8.8%), compared to the first quarter of 2003. Of our total direct costs for the first quarter
of 2004, $7.2 million related to the operations of IMPSAT Argentina, compared to $9.5 million at IMPSAT Argentina for the first quarter of 2003. Direct costs for IMPSAT Brazil totaled $3.6 million for the first quarter of 2004, compared to $3.8
million for the first quarter of 2003. Direct costs of our subsidiaries are described prior to the elimination of inter-company transactions.



(1)Contracted Services. Contracted services costs include costs of maintenance and installation (and de-installation) services provided by outside
contractors. During the first quarter of 2004, our contracted services costs totaled $4.3 million, an increase of $0.2 million (or 4.9%) compared to the first quarter of 2003. Of this amount, maintenance costs for our telecommunications network
infrastructure, including the Broadband Network, totaled $3.0 million for the first quarter of 2004 compared to $3.2 million during the first quarter of 2003. Installation costs totaled $1.4 million for the first quarter of 2004 compared to $1.0
million in the first quarter of 2003. Of our total contracted services costs for the first quarter of 2004, $1.6 million related to the operations of IMPSAT Argentina, compared to $1.4 million at IMPSAT Argentina for the first quarter of 2003. Our
installation costs increased because we had more new customers during the first quarter of 2004 compared to the first quarter of 2003.



(2)Other Direct Costs. Other direct costs principally include licenses and other fees; sales commissions paid to our salaried sales force and to
third-party sales representatives; and our provision for doubtful accounts. We recorded other direct costs of $3.8 million, a decrease of $0.9 million (or 20.0%) compared to the first quarter of 2003.



Sales commissions paid for the first quarter of 2004 totaled $1.6 million
compared to $1.2 million in the first quarter of 2003.



We
recorded a net reversal of a provision for doubtful accounts of $1.9 million for the first quarter of 2004, compared to a provision for doubtful accounts of $0.5 million for the same period during the previous year. The reversal is due to
principally to the settlement of our disputes with Global Crossing. As a result of the settlement, Global Crossing made a payment on March 31, 2004, principally to our operating subsidiaries in Argentina and Brazil, of $1.4 million, which was
applied against outstanding receivables that had been disputed by Global Crossing and for which we had reserved 100% of contractual revenues. At March 31, 2004, approximately 32.8% of our gross trade accounts receivable were past due more than six
months, compared to 31.6% at the end of the first quarter of 2003. At March 31, 2004, our allowance for doubtful accounts covered approximately 112.8% of our gross trade accounts receivable past due more than six months. The average days outstanding
in gross trade accounts receivable decreased from 82 days at March 31, 2003 to 78 days at March 31, 2004. IMPSAT Argentinas allowance for doubtful accounts at the end of the first quarter of 2004 covered approximately 100.9% of its gross trade
accounts receivable past due more than six months.



(3)Leased Capacity. Our leased capacity costs for the first quarter of 2004 totaled $15.8 million, which represented a decrease of $1.6 million (or 9.3%) compared to the first quarter of 2003. This reduction in leased capacity costs reflects
favorable renegotiation of certain capacity agreements, either through reduction of charges, amount of capacity, or both.



Our leased capacity costs for satellite capacity for the first quarter of 2004 totaled $5.9 million, a decrease of $1.3 million (or 18.1%) compared to the
first quarter of 2003. In Argentina, our leased satellite capacity costs totaled $1.8 million for the first quarter of 2004, compared to $2.1 million for the first quarter of 2003. Our leased satellite capacity costs for IMPSAT Brazil totaled $1.0
million for the first quarter of 2004, compared to $1.0 million for the first quarter of 2003.



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The reduction in our leased satellite capacity costs was principally due to our favorable renegotiation
of, and settlement of disputes relating to, certain of our satellite capacity agreements. We had approximately 718 MHz of leased satellite capacity at the end of the first quarter of 2004, compared to 779 MHz at March 31, 2003.



Our costs for dedicated leased capacity on third-party fiber optic networks
totaled $6.9 million for the first quarter of 2004, an increase of $0.2 million (or 3.0%) compared to the first quarter of 2003. These costs were incurred principally in Colombia, followed by Brazil and Venezuela. 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.



In connection with services we have offered since the effectiveness of our license in Argentina to provide domestic and
international long distance services, we incur costs for interconnection and telephony termination (I&T) and frequency rights. Our I&T and frequency rights costs totaled $3.0 million during the first quarter of 2004 (which
includes $2.3 million of I&T costs). This compares to $3.5 million of I&T and frequency rights costs for the first quarter of 2003 (which includes $2.6 million of I&T costs). Our I&T and frequency rights costs in Argentina totaled
$1.3 million during the first quarter of 2004 (which includes $1.1 million of I&T costs). This compares to $1.7 million of I&T and frequency rights costs for the first quarter of 2003 (which included $1.6 million of I&T costs).



(4)Costs of Equipment Sold. In the first quarter of
2004, we incurred costs of equipment sold of $0.1 million, compared to costs of equipment sold of $0.1 million for the first quarter of 2003.



Salaries and Wages. Salaries and wages for the first quarter of 2004 totaled $12.2 million, an increase of $1.5 million (or 13.8%) compared to the first quarter of
2003. We reduced the aggregate number of our employees from 1,271 at March 31, 2003 to 1,242 at March 31, 2004. Management expects to continue to monitor the size of its total workforce and to make appropriate adjustments as required by financial
and competitive circumstances.



IMPSAT Argentina incurred salaries and wages
for the first quarter of 2004 totaling $2.9 million, an increase of $0.3 million (or 11.5%) over the first quarter of 2003. The increase was, in part, related to the appreciation of thepeso in comparison to the same period in the previous
year, and to the accrual of certain bonus compensation to management under the Companys bonus plan adopted in 2003. IMPSAT Argentina had 297 employees at March 31, 2004, as compared to 316 employees at March 31, 2003.



IMPSAT Brazil incurred salaries and wages for the first quarter of 2004 of $2.1 million, a
increase of $0.1 million (or 5.0%) compared to the first quarter of 2003. IMPSAT Brazil decreased its number of employees to 192 persons at March 31, 2004, compared to 218 persons at March 31, 2003.



Selling, General and Administrative Expenses.We incurred SG&A expenses of $5.5
million for the first quarter of 2004, a decrease of $0.1 million (or 0.9%) compared to the first quarter of 2003. Our SG&A expenses for the first quarter of 2004 declined due principally to the effects of the relative currency devaluations of
local currencies in Colombia and Venezuela against the U.S. dollar during 2003 and overall cost control measures undertaken by management. SG&A expenses at IMPSAT Argentina for the first quarter of 2004 totaled $1.7 million, a decrease of $0.1
million (or 5.6%) compared to the first quarter of 2003.



Depreciation and
Amortization. Our depreciation and amortization expenses for the three months (Predecessor Company) ended March 31, 2003 totaled $19.4 million. Our depreciation and amortization expenses for the first quarter of 2004 (Successor Company) totaled
$10.2 million, a decrease of $9.2 million (or 47.5%) compared to depreciation and amortization for the first quarter of 2003. The decrease in depreciation and amortization is primarily due to the application of fresh start accounting. Depreciation
and amortization expenses for IMPSAT Argentina for the first quarter of 2004 totaled $2.1 million. This represents a decrease of $1.7 million (or 44.7%) compared to IMPSAT Argentinas depreciation and amortization expenses for the first quarter
of 2003.



Interest Expense, Net. Our net interest expense for the three
months (Predecessor Company) ended March 31, 2003 totaled $1.7 million, consisting of interest expense of $1.9 million and interest income of $0.2 million. Our net interest expense for the three months ended March 31, 2004 (Successor Company)
totaled $4.6 million, consisting of interest expense of $4.9 million and interest income of $0.3 million, an increase of $2.9 million (or 170.5 %) as compared to the net interest expense for first quarter of 2003. Our interest expense increased
principally because of payment in kind accretion to our Senior Notes and certain indebtedness of our subsidiaries, which, of our total interest expense for the three months ended March 31, 2004, represented $3.3 million. Our total
indebtedness as of March 31, 2004 was $264.1 million, as compared to $267.5 million as of March 31, 2003.



Net (Loss) Gain on Foreign Exchange. We recorded a net loss on foreign exchange for the first quarter of 2004 (Successor Company) of $4.4 million, compared to a net gain on foreign exchange of $10.0 million for
the three months ended March 31, 2003. The net loss on foreign exchange was primarily due to the depreciation during the first quarter of 2004 of the Venezuelan bolivar and the Brazilianreal on the book value of our monetary assets
and liabilities in Venezuela and Brazil. IMPSAT Argentina recorded a net loss on foreign exchange for the first quarter of 2004 of $0.6 million compared to a net gain on foreign exchange for the first quarter of 2003 of $0.6 million. IMPSAT Brazil
recorded a net loss on foreign exchange for the first quarter of 2004 of $1.8 million, compared to net gain of $9.6 million for the first quarter of 2003.



Reorganization Items. We recorded reorganization items for the three months (Predecessor Company) ended March 31, 2003 of $726.1 million related to the
Companys emergence from bankruptcy. See Note 11 to the Condensed Consolidated Financial Statements for a detail of this amount.



Net Income (Loss). For the three months ended March 31, 2004 (Successor Company), we recorded a net loss of $6.5 million, compared to net income of $731.1 million
for the three months ended March 31, 2003 (Predecessor Company). For the first quarter of 2004, we recorded an operating income of $3.2 million, compared to an operating loss of $5.8 million for the first three months of 2003.



10



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##### Table of Contents

Liquidity and Capital Resources



At March 31, 2004, we had total cash, cash equivalents and trading investments of $60.3 million, compared to $61.9 million at March 31,
2003. Of our total cash, cash equivalents and trading investments, approximately $6.7 million were held in Venezuelanbolivars by IMPSAT Venezuela (based on the official exchange rate at that date of Bs. 1,920.00 = $1.00). Foreign exchange
controls instituted in Venezuela since February 2003 severely limit our ability to repatriate these amounts and any other earnings from our Venezuelan operations. Future devaluations of the Venezuelanbolivar and/or the implementation of more
stringent exchange control restrictions in that country could have a material adverse effect on the recorded U.S. dollar value or our cash and cash equivalents held by IMPSAT Venezuela and would result in a loss in future periods in our consolidated
financial statement of operations.



At March 31, 2004, our total indebtedness
as Successor Company was $264.1 million as compared to $267.5 million as Predecessor Company at March 31, 2003, of which $27.6 million represented current portion of long-term debt and $236.5 million represented long-term debt. Our capital
expenditures budget for 2004 contemplates that we will need approximately $12.6 million (including amounts spent to date) for capital expenditures.



Although we have emerged from bankruptcy, we remain in default under indebtedness owed to one creditor who voted against the Plan. Under the Plan, the claims of that
creditor were contingent obligations arising under guarantees by us of certain primary indebtedness of IMPSAT Argentina. This default, which relates to indebtedness totaling approximately $7.6 million in outstanding principal amount, gives the
creditor the right to accelerate such indebtedness and seek immediate repayment of all outstanding amounts and accrued interest thereon.



As set forth in our condensed consolidated statement of cash flows, our operating activities provided $3.7 million in net cash flows for the first quarter of 2004,
compared to $11.5 million provided by operating activities during the first quarter of 2003. The decrease in cash flow from operating activities in the first quarter of 2004 was primarily due to our net loss during the first quarter of 2004 and to
decreases in depreciation and amortization and in accrued and other liabilities.



For the first quarter of 2004, our investing activities used $3.7 million in net cash flows, compared to $6.2 million of net cash flows used by investing activities during the corresponding period in 2003. During the first quarter of 2004,
we used $1.4 million in net cash flows from financing activities, compared to $1.9 million in net cash flows used in financing activities during the first quarter of 2003.



At March 31, 2004, we had leased satellite capacity with average annual rental commitments of approximately $15.4 million through the year
2008 under non-cancelable agreements. The company has entered into contracts for the purchase of satellite capacity for approximately $15.0 million through 2015. In addition, at March 31, 2004, we had commitments to purchase telecommunications
equipment amounting to approximately $5.3 million. Furthermore, we have 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 $3.4 million per year through 2007. The remainder of the leases are typically under
one-year contracts, the early cancellation of which is subject to a fee.



11



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



|                                   |  |                |        |      |   |        |  |      |        |      |   |            |  |       |        |  |   |         |  |   |        
|---------------------------------- |  | -------------- | ------ | ---- | - | ------ |  | ---- | ------ | ---- | - | ---------- |  | ----- | ------ |  | - | ------- |  | - | -------
|Type of Obligations                |  | 2004           |        | 2005 |   | 2006   |  | 2007 |        | 2008 |   | Thereafter |  | Total
|                                   |  | (in thousands)
|Long-term debt                     |  | $              | 27,553 |      | $ | 12,337 |  | $    | 35,110 |      | $ | 35,077     |  | $     | 40,776 |  | $ | 113,237 |  | $ | 264,090
|Capital lease obligations          |  |                |       |      |   | 133    |  |      | 82     |      |   | 82         |  |       | 82     |  |   | 41      |  |   | 420    
|Operating leases(1)                |  |                | 26,532 |      |   | 23,925 |  |      | 18,964 |      |   | 13,063     |  |       | 10,669 |  |   | 6,271   |  |   | 99,424 
|Purchase obligations               |  |                | 5,298  |      |   |       |  |      |       |      |   |           |  |       |       |  |   |        |  |   | 5,298  
|                                   |  |                |        |      |   |        |  |      |        |      |   |            |  |       |        |  |   |         |  |   |        
|Total contractual cash obligations |  | $              | 59,383 |      | $ | 36,395 |  | $    | 54,156 |      | $ | 48,222     |  | $     | 51,527 |  | $ | 119,549 |  | $ | 369,232
|                                   |  |                |        |      |   |        |  |      |        |      |   |            |  |       |        |  |   |         |  |   |        

---

|(1) | This includes commitments for satellite capacity and terrestrial links.
|--- | -----------------------------------------------------------------------



Item 3. Quantitative and Qualitative Disclosures About Market Risk



The sections below highlight our exposure to interest rate and foreign exchange rate risks and changes in the market values of our investment in equity securities. The analyses presented below are illustrative and
should not be viewed as predictive of our future financial performance. Additionally, we cannot assure you that our actual results in any particular year will not differ from the amounts indicated below. However, we believe that these results are
reasonable based on our financial instrument portfolio at March 31, 2004 and assuming that the hypothetical interest rate and foreign exchange rate changes used in the analyses occurred during year 2004. 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. At March 31, 2004, our total floating rate indebtedness aggregated $11.4 million. 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 March 31, 2004, a hypothetical 100 basis point increase in the London Interbank Offered Rate (LIBOR) would affect our annual
interest cost related to our floating rate indebtedness by approximately $0.1 million annually. The fair value of financial instruments, which approximate their carrying value, have been determined using available market information and interest
rates as of March 31, 2004.



|                                 |  |                                  |        |   |      |   |        |      |  |   |        |   |  |      |        |   |            |   |        |       |  |   |         |   |  |   |         |  
|-------------------------------- |  | -------------------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | - |  | ---- | ------ | - | ---------- | - | ------ | ----- |  | - | ------- | - |  | - | ------- | -
|                                 |  | Expected Maturities at March 31, |       
|                                 |  | 2004                             |        |   | 2005 |   |        | 2006 |  |   | 2007   |   |  | 2008 |        |   | Thereafter |   |        | Total | 
|Senior Notes (fixed rate)        |  | $                                | 16,050 |   |      | $ | 10,324 |      |  | $ | 32,378 |   |  | $    | 32,378 |   |            | $ | 32,378 |       |  | $ | 104,839 |   |  | $ | 228,347 |  
|                                 |  |                                  |        |   |      |   |        |      |  |   |        |   |  |      |        |   |            |   |        |       |  |   |         |   |  |   |         |  
|Avg. interest rate               |  |                                  | 8.46   |   |      |   | 8.46   | %    |  |   | 8.46   | % |  |      | 8.46   | % |            |   | 8.46   | %     |  |   | 8.46    | % |  |   | 8.46    | %
|Term Notes (fixed rate)          |  | $                                | 2,616  |   |      | $ | 1,396  |      |  | $ | 1,773  |   |  | $    | 1,773  |   |            | $ | 8,398  |       |  | $ | 8,397   |   |  | $ | 24,353  |  
|                                 |  |                                  |        |   |      |   |        |      |  |   |        |   |  |      |        |   |            |   |        |       |  |   |         |   |  |   |         |  
|Avg. interest rate               |  |                                  | 12.84  | % |      |   | 12.84  | %    |  |   | 12.84  | % |  |      | 12.84  | % |            |   | 12.84  | %     |  |   | 12.84   | % |  |   | 12.84   | %
|                                 |  |                                  |        |   |      |   |        |      |  |   |        |   |  |      |        |   |            |   |        |       |  |   |         |   |  |   |         |  
|Term Notes (variable rate)       |  | $                                | 959    |   |      | $ | 463    |      |  | $ | 926    |   |  | $    | 926    |   |            |   |        |       |  |   |         |   |  | $ | 3,274   |  
|                                 |  |                                  |        |   |      |   |        |      |  |   |        |   |  |      |        |   |            |   |        |       |  |   |         |   |  |   |         |  
|Avg. interest rate               |  |                                  | 3.35   | % |      |   | 3.35   | %    |  |   | 3.35   | % |  |      | 3.35   | % |            |   |        |       |  |   |         |   |  |   | 3.35    | %
|                                 |  |                                  |        |   |      |   |        |      |  |   |        |   |  |      |        |   |            |   |        |       |  |   |         |   |  |   |         |  
|Vendor Financing (variable rate) |  | $                                | 7,928  |   |      | $ | 154    |      |  | $ | 34     |   |  |      |        |   |            |   |        |       |  |   |         |   |  | $ | 8,116   |  
|                                 |  |                                  |        |   |      |   |        |      |  |   |        |   |  |      |        |   |            |   |        |       |  |   |         |   |  |   |         |  
|Avg. interest rate               |  |                                  | 10.61  | % |      |   | 10.61  | %    |  |   | 10.61  | % |  |      |        |   |            |   |        |       |  |   |         |   |  |   | 10.61   | %
|                                 |  |                                  |        |   |      |   |        |      |  |   |        |   |  |      |        |   |            |   |        |       |  |   |         |   |  |   |         |  



12



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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, except in Brazil and Argentina, 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.



Pursuant
to laws in Brazil, our contracts with customers in Brazil cannot be denominated in dollars or linked to the exchange rate between the Brazilianreal and the U.S. dollar. In Brazil, we are permitted to amend the pricing of our services for our
long-term telecommunication services contracts with our customers annually based on changes in the consumer price index in Brazil for the prior year. In Argentina, obligations that were mandatorily converted topesos under 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 completely 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 currencies 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 inpesos
are 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.



As discussed above, in response to political and economic turmoil currently affecting
Venezuela, the Venezuelan government imposed foreign exchange and price controls during 2003, making it difficult for our customers in Venezuela to obtain the U.S. dollars needed to make payments due to us in U.S. dollars on a timely basis. These
foreign exchange controls also limit our ability to convert local currency into U.S. dollars and transfer funds out of Venezuela. At December 31, 2002, thebolivar traded at a rate of Bs.1,392.00 = $1.00, at December 31, 2003, it traded at a
rate of Bs.1,600.00 = $1.00. On February 6, 2003, the Venezuelan government set a single fixed exchange rate for thebolivar against the U.S. dollar of approximately Bs.1,600.00 = $1.00 as part of the new currency controls. We currently are
receiving bolivares at the official rate in payment for our services in lieu of U.S. dollars. As a result, our holdings ofbolivars at March 31, 2004 totaled Bs.12.9 billion (or $6.7 million at the official exchange rate at such date).
In February 2004, the Venezuelan government further devalued its currency to Bs.1,920.00 = $1.00.



Net revenues from services from our Argentine operations for the first quarters of 2004 and 2003 represented 26.7% and 26.1% of our total net revenues from services, respectively. Net revenues from services from our
Brazilian operations for the first quarters of 2004 and 2003 represented approximately 13.4% and 13.0% of our total net revenues from services respectively. Our net revenues from services in Venezuela accounted for 14.7% and 16.0% of our total
revenues from services for the first quarters of 2004 and 2003.



Item 4. Controls and Procedures



Within the 90-day period prior to the filing of this Report, an evaluation was carried out under the supervision and with the participation of the Companys management, including its Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-14(c) under the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the design and operation of these disclosure controls and procedures were effective. No significant changes were made in the Companys internal controls or in other factors that could significantly affect these controls
subsequent to the date of their evaluation.



PART II

OTHER INFORMATION



Item 1. Legal Proceedings



Not
applicable.



Item 2. Changes in Securities and Use of Proceeds



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.



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##### Table of Contents

Item 6. Exhibits and Reports on Form 8-K



(a)(1)



Exhibit Index:



|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|            | 
|3.1         |  | Restated Certificate of Incorporation of the Company (filed on March 26, 2003 as Exhibit No. 2.1 to the Companys Amendment No. 1 to Registration Statement on Form 8-A and incorporated
herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|            | 
|3.2         |  | Restated Bylaws of the Company (filed on March 26, 2003 as Exhibit No. 2.2 to the Companys Amendment No. 1 to Registration Statement on Form 8-A and incorporated herein by
reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|            | 
|4.1         |  | Indenture for the Companys 6% Senior Guaranteed Convertible Notes due 2011  Series A, dated as of March 25, 2003, among the Company, The Bank of New York, as trustee and IMPSAT
Argentina, as guarantor (including form of Note) (filed on April 15, 2003 as Exhibit 4.1 to the Companys 2002 Annual Report on Form 10-K and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                       
|            | 
|4.2         |  | Indenture for the Companys 6% Senior Guaranteed Convertible Notes due 2011  Series B, dated as of March 25, 2003, among the Company, The Bank of New York, as trustee and IMPSAT
Argentina, as guarantor (including form of Note) (filed on April 15, 2003 as Exhibit 4.2 to the Companys 2002 Annual Report on Form 10-K and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                       
|            | 
|4.3         |  | Disclosure Statement Under Chapter 11 of the Bankruptcy Code (filed on December 19, 2002 as Exhibit No. 99.2 to the Companys Current Report on Form 8-K, and incorporated herein by
reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|            | 
|4.4         |  | Plan of Reorganization of the Company Under Chapter 11 of the Bankruptcy Code (filed on December 19, 2002 as Exhibit No. 99.3 to the Companys Current Report on Form 8-K, and
incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|            | 
|4.5         |  | Order Confirming the Companys Plan of Reorganization Under Chapter 11 of the Bankruptcy Code dated December 16, 2002 (filed on December 19, 2002 as Exhibit 99.1 to the Companys
Current Report on Form 8-K, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                     
|            | 
|4.6         |  | Registration Rights Agreement among the Company, IMPSAT Argentina and the securityholders party thereto, dated as of March 25, 2003 (filed on April 15, 2003 as Exhibit 4.6 to the
Companys 2002 Annual Report on Form 10-K and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                       
|            | 
|4.7         |  | Specimen Common Stock Certificate (filed on March 26, 2003 as Exhibit No. 2.6 to the Companys Amendment No. 1 to Registration Statement on Form 8-A and incorporated herein by
reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|            | 
|4.8         |  | Warrant Agreement between the Company and The Bank of New York, as warrant agent, dated as of March 25, 2003 (including form of Warrant) (filed on April 15, 2003 as Exhibit 4.8 to the
Companys 2002 Annual Report on Form 10-K and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                  
|            | 
|9.1         |  | 2003 Stock Incentive Plan (filed on April 15, 2003 as Exhibit 9.1 to the Companys 2002 Annual Report on Form 10-K and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|            | 
|10.1        |  | Amended and Restated Financing Agreement among IMPSAT Argentina, Nortel Networks Limited, and Deutsche Bank Trust Company Americas and the Lenders party thereto, dated as of March 25, 2003
(filed on April 15, 2003 as Exhibit 10.4 to the Companys 2002 Annual Report on Form 10-K and incorporated herein by reference). In accordance with Instruction 2 to Item 601 of Regulation S-K, the following agreement was not filed as exhibits
because they are substantially identical in all material respects to Exhibit 10.1: Amended and Restated Financing Agreement between IMPSAT Brazil and Nortel Networks Limited, dated as of March 25, 2003.                                
|            | 
|10.2        |  | Employment Agreement between Ricardo A. Verdaguer and the Company dated as of March 25, 2003 (filed on August 14, 2003 as Exhibit 10.5 to the Companys second quarter 2003 Quarterly
Report on Form 10Q and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                           
|            | 
|10.3        |  | Employment Agreement between Hector R. Alonso and the Company dated as of March 25, 2003 (filed on August 14, 2003 as Exhibit 10.6 to the Companys second quarter 2003 Quarterly Report
on Form 10Q and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                               
|            | 
|10.4        |  | Letter Agreement between Marcelo Girotti and the Company dated March 25, 2003 (filed on August 14, 2003 as Exhibit 10.7 to the Companys second quarter 2003 Quarterly Report on Form 10Q
and incorporated herein by reference). In accordance with Instruction 2 to Item 601 of Regulation S-K, the following agreements were not filed as exhibits because they are substantially identical in all material respects to Exhibit 10.4: Letter
Agreement between Mariano Torre Gomez and the Company dated March 25, 2003; Letter Agreement between Matias Heinrich and the Company dated March 25, 2003; Letter Agreement between Alexander Rivelis and the Company dated March 25,
2003.
|            | 
|21.1        |  | List of subsidiaries of the registrants (incorporated by reference to the Business  General section of the Companys 2003 Annual Report on Form 10-K and incorporated
herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            



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##### Table of Contents

|     |  |                                                                                                                                                                                  
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|31.1 |  | Certification by the Companys Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)                                                
|     | 
|31.2 |  | Certification by the Companys Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)                                                
|     | 
|32.1 |  | 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).
|     | 
|32.2 |  | 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).



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



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



15



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##### Table of Contents

SIGNATURES



Pursuant to the
requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, in the City of Buenos Aires in the Republic of Argentina, in the
capacity and on the date indicated.



IMPSAT Fiber Networks, Inc.By:

/s/ Héctor AlonsoHéctor AlonsoChief Financial OfficerDate: May 17, 2004








16