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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, 2005



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, 2005, the registrant had outstanding 10,116,100 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                            |  | 14 
|                             |  | ITEM 4.
CONTROLS AND PROCEDURES                                                               |  | 16 
|                             | 
|PART II OTHER INFORMATION    |  | 16                                                                                           
|                             |  |                                                                                              
|                             |  | ITEM 1.
LEGAL PROCEEDINGS                                                                     |  | 16 
|                             |  | ITEM 2.
CHANGES IN SECURITIES AND USE OF PROCEEDS                                             |  | 16 
|                             |  | ITEM 3.
DEFAULTS UPON SENIOR SECURITIES                                                       |  | 16 
|                             |  | ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS                                   |  | 16 
|                             |  | ITEM 5.
OTHER INFORMATION                                                                     |  | 16 
|                             |  | ITEM 6.
EXHIBITS                                                                              |  | 17 
|                             | 
|SIGNATURES                   |  | 19                                                                                           
|                             | 
|CERTIFICATIONS               |  |                                                                                              



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##### Table of Contents

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



Overview



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 by any price or related 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 Argentina and Brazil, the fees stipulated in the majority of our contracts with customers are denominated in U.S. dollar or 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 periodic 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 operations 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, fiber optic and other terrestrial capacity. 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
| | - |  | ---------------------------



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



| |  |  | rent
| | - |  | ----



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



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##### Table of Contents

Currency Risks



Except in Argentina and Brazil, the majority of our contracts with customers 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 three months
ending March 31, 2005. 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.



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. Any devaluation of the Argentinepeso or the Brazilian realagainst the U.S. dollar will generally affect our consolidated financial statements by generating foreign exchange gains or losses on
dollar-denominated monetary liabilities and assets and will generally result in a decrease, in U.S. dollar terms, in our revenues, costs and expenses. Because the majority of our debt service payments and a significant portion of our costs
(including capital equipment purchases and payments for certain leased telecommunications capacity) remain denominated and payable in U.S. dollars, our financial condition and results of operations are dependent upon our subsidiaries
(including IMPSAT Argentina and IMPSAT Brazil) ability to generate sufficient local currency (in U.S. dollar terms) to pay their costs and expenses and to satisfy our debt service requirements.



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       |  | March 31, 2003                |  | March 31, 2004 |  | March 31, 2005
|               |  | (exchange rate per U.S.$1.00)
|Argentina peso |  | 3.00                          |  | 2.88           |  | 2.92          
|Brazil real    |  | 3.35                          |  | 2.94           |  | 2.67          



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 of the current controls or other adverse effects that Venezuelan exchange controls may have on our operating results and financial condition.



Argentina



In early January 2002, the Argentine government 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 traded as low as 3.87pesos to the U.S. dollar on June 26, 2002. At March 31, 2004 the exchange rate was 2.88
pesos to the U.S. Dollar, as compared to 2.92 pesos to the U.S. Dollar on March 31, 2005. Currently, a significant proportion of IMPSAT Argentinas customer contracts and operating cash inflows are denominated inpesos.



Brazil



At March 31, 2004, thereal traded at a rate of R$2.94 = $1.00, and it appreciated to
R$2.67 = $1.00 at March 31, 2005. The daily average exchange rate for the realduring the first quarter of 2005 was R$2.63= $1.00, as compared to R$2.93 = $1.00 during the first quarter of 2004.



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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 March 31, 2004, the exchange rate for the bolivar was set at a rate of Bs.1,920 = $1.00, and on March 30, 2005, the Venezuelan
government devalued the bolivar to a rate of Bs. 2,150 = $1.00. We cannot predict the extent to which we may be affected by future changes in exchange rates and exchange controls in Venezuela. Future devaluations of the Venezuelan
bolivar and/or the implementation of stiffer exchange control restrictions in that country could have a material adverse effect on our financial condition and results of operations in Venezuela.



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, the company makes 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 condensed 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, 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, or may enter into in the future, 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, we received fixed advance payments for the IRUs, which would be recognized as revenue over the life of the IRU. Amounts received in
advance would be recorded as deferred revenue.



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.



In December 2004, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 153 (SFAS No. 153),Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29. The amendments made by SFAS No. 153 are based on the principle that
exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. The amendment also eliminates the narrow exception for nonmonetary exchanges of similar productive assets and replaces it with a broader exception
for exchanges of nonmonetary assets that do not have commercial substance. The provisions of SFAS No. 153 are effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. We do not expect the adoption of SFAS
153 to have a material impact on our financial condition or results of operations.



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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



We maintain our consolidated accounts in U.S. dollars. The accounts of our subsidiaries are
maintained in the currencies of the respective countries. 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 re-measured into the functional currency. This involves re-measuring monetary assets and liabilities using current exchange rates and non-monetary assets and liabilities using historical exchange rates. The
adjustments generated by re-measurement 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 condensed consolidated balance sheets.



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 condensed 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.



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 2005, nor have we made any material changes in any of the critical accounting estimates
underlying these accounting policies during said period.



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New Accounting Pronouncement



In December 2004, the FASB issued SFAS No. 123 (Revised 2004) (SFAS No. 123(R)), Share-Based Payment.SFAS No. 123(R)
requires companies to expense the estimated fair value of stock options and similar equity instruments issued to employees. Currently, companies are required to calculate the estimated fair value of these share-based payments and can elect to either
include the estimated cost in earnings or disclose the pro forma effect in the footnotes to their financial statements. The Company has chosen to disclose the pro forma effect. The fair value concepts were not changed significantly in SFAS No.
123(R); however, in adopting SFAS No. 123(R), companies must choose among alternative valuation models and amortization assumptions.



The valuation model and amortization assumption used by us continue to be available. However, we have not yet completed our assessment of the alternatives. SFAS No.
123(R) will be effective for the Company beginning January 1, 2006. Transition options allow companies to choose whether to adopt prospectively, restate results to the beginning of the year, or to restate prior periods with the amounts that have
been included in the footnotes. We have not yet concluded on which transition option we will select. See Note 3 to our condensed consolidated financial statements for the pro forma effect for the each of the periods presented, using our existing
valuation and amortization assumptions.



Results of Operations



The following table summarizes our results of operations:



|                                             |  |                                                             |        |   |      |       |   |  |   |        |   |  |       |  
|-------------------------------------------- |  | ----------------------------------------------------------- | ------ | - | ---- | ----- | - |  | - | ------ | - |  | ----- | -
|                                             |  | Three Months Ended March 31,                                |       
|                                             |  | 2004                                                        |        |   | 2005 |      
|                                             |  | (in thousands and as a percentage of consolidated revenues) |       
|Net revenues:                                |  |                                                             |        |   |      |       |   |  |   |        |   |  |       |  
|Net revenues from services:                  |  |                                                             |        |   |      |       |   |  |   |        |   |  |       |  
|Broadband and satellite                      |  | $                                                           | 39,573 |   |      | 71.9  | % |  | $ | 41,789 |   |  | 69.8  | %
|Internet                                     |  |                                                             | 5,984  |   |      | 10.9  |   |  |   | 6,931  |   |  | 11.6  |  
|Value added services                         |  |                                                             | 4,206  |   |      | 7.6   |   |  |   | 5,140  |   |  | 8.6   |  
|Telephony                                    |  |                                                             | 5,145  |   |      | 9.3   |   |  |   | 5,928  |   |  | 9.9   |  
|                                             |  |                                                             |        |   |      |       |   |  |   |        |   |  |       |  
|Total net revenues from services             |  |                                                             | 54,908 |   |      | 99.7  |   |  |   | 59,788 |   |  | 99.9  |  
|Sales of equipment                           |  |                                                             | 152    |   |      | 0.3   |   |  |   | 84     |   |  | 0.1   |  
|                                             |  |                                                             |        |   |      |       |   |  |   |        |   |  |       |  
|Total net revenues                           |  |                                                             | 55,060 |   |      | 100.0 |   |  |   | 59,872 |   |  | 100.0 |  
|                                             |  |                                                             |        |   |      |       |   |  |   |        |   |  |       |  
|Direct costs:                                |  |                                                             |        |   |      |       |   |  |   |        |   |  |       |  
|Contracted services                          |  |                                                             | 4,327  |   |      | 7.9   |   |  |   | 5,216  |   |  | 8.7   |  
|Other direct costs                           |  |                                                             | 3,758  |   |      | 6.8   |   |  |   | 7,459  |   |  | 12.5  |  
|Leased capacity                              |  |                                                             | 15,790 |   |      | 28.7  |   |  |   | 18,225 |   |  | 30.4  |  
|Cost of equipment sold                       |  |                                                             | 97     |   |      | 0.2   |   |  |   | 106    |   |  | 0.2   |  
|                                             |  |                                                             |        |   |      |       |   |  |   |        |   |  |       |  
|Total direct costs                           |  |                                                             | 23,972 |   |      | 43.5  |   |  |   | 31,006 |   |  | 51.8  |  
|Salaries and wages                           |  |                                                             | 12,207 |   |      | 22.2  |   |  |   | 12,970 |   |  | 21.7  |  
|Selling, general and administrative expenses |  |                                                             | 5,505  |   |      | 10.0  |   |  |   | 5,262  |   |  | 8.8   |  
|Depreciation and amortization                |  |                                                             | 10,161 |   |      | 18.5  |   |  |   | 12,026 |   |  | 20.1  |  
|Interest expense, net                        |  |                                                             | 4,623  |   |      | 8.4   |   |  |   | 5,181  |   |  | 8.7   |  
|Net loss on foreign exchange                 |  |                                                             | 4,391  |   |      | 8.0   |   |  |   | 640    |   |  | 1.1   |  
|Other expense, net                           |  |                                                             | 130    |   |      | 0.2   |   |  |   | 289    |   |  | 0.5   |  
|Provision for foreign income taxes           |  |                                                             | 543    |   |      | 9.9   |   |  |   | 722    |   |  | 1.2   |  
|                                             |  |                                                             |        |   |      |       |   |  |   |        |   |  |       |  
|Net loss                                     |  | $                                                           | (6,472 | ) |      | 11.8  | % |  | $ | (8,224 | ) |  | 13.7  | %
|                                             |  |                                                             |        |   |      |       |   |  |   |        |   |  |       |  



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Three Months Ended March 31, 2005 Compared to Three Months Ended March 31, 2004



Revenues. Our total net revenues for the three months ended March 31, 2005 and 2004
equaled $59.9 million and $55.1 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, 2005 totaled $59.8 million, an increase of $4.9 million (or 8.9%) compared to the three months ended
March 31, 2004. Our net revenues during the three months ended March 31, 2005 included net revenues from:



| |  |  | broadband and satellite data transmission services
| | - |  | --------------------------------------------------



| |  |  | Internet, which is composed of our Internet backbone access and managed modem services
| | - |  | --------------------------------------------------------------------------------------



| |  |  | value added services, including hosting, housing and collocation services, and
| | - |  | ------------------------------------------------------------------------------



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



The following table shows our revenues from services by business lines for the periods indicated:



|                                 |  |                               |        |             |      |      |   |       
|-------------------------------- |  | ----------------------------- | ------ | ----------- | ---- | ---- | - | ------
|                                 |  | Three Months Ended March 31, 
|                                 |  | 2004                          |        | % change(1) |      | 2005
|                                 |  | (dollar amounts in thousands)
|Broadband and satellite          |  | $                             | 39,573 |             | 5.6  |      | $ | 41,789
|Value added services(2)          |  |                               | 4,206  |             | 22.2 |      |   | 5,140 
|Internet                         |  |                               | 5,984  |             | 15.8 |      |   | 6,931 
|Telephony                        |  |                               | 5,145  |             | 15.2 |      |   | 5,928 
|                                 |  |                               |        |             |      |      |   |       
|Total net revenues from services |  | $                             | 54,908 |             | 8.9  |      | $ | 59,788
|                                 |  |                               |        |             |      |      |   |       

---

|(1) | Percentage increase (decrease) in first quarter of 2005 compared to first quarter 2004.
|--- | ---------------------------------------------------------------------------------------

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



The increase in our total net revenues from
services in the first quarter of 2005, as compared to the corresponding period in 2004, is due to increased revenues from services in all of our business lines. Changes in our revenues during the first quarter of 2005 as compared to the first
quarter of 2004 related to the following:



| |  |  | Revenues from broadband and satellite services during the first quarter of 2005 increased as compared to the first quarter of 2004, as a result of revenues from new customers and
expansion of services from existing customers, which more than offset price decreases resulting from contractual renewals with existing customers and customer losses.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We experienced higher Internet revenues principally because of new customers and expansion of services to existing customers, partially offset by pricing pressure resulting from
competition and customer losses.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our revenues from value added services increased in the first quarter of 2005 compared to the same period in 2004, principally because of revenues from new customers.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| |  |  | Our telephony services revenues increased during the first quarter of 2005 as compared to first quarter of 2004 due to our increased delivery of switched voice services to corporate
customers in Argentina, our expansion of international call terminations to end-user customers in Peru, and to increased revenues from our corporate customers in Brazil, where we launched our corporate telephony services at the end of 2003. These
effects were partially offset by a decline in traffic volume and services in the United States.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We had 3,596 customers at March 31, 2005, compared to 3,314 customers at December 31, 2004, and 2,910 customers at March 31, 2004. 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, 2004             |  | December 31, 2004 |  | March 31, 2005 |             |     
|IMPSAT Argentina |  | 1,046                      |  | 1,236             |  | 1,330          |             | 27.2 | % |  | 7.6 
|IMPSAT Colombia  |  | 741                        |  | 788               |  | 828            |             | 11.7 |   |  | 5.1 
|IMPSAT Brazil    |  | 391                        |  | 451               |  | 488            |             | 24.8 |   |  | 8.2 
|IMPSAT Venezuela |  | 178                        |  | 200               |  | 218            |             | 22.5 |   |  | 9.0 
|IMPSAT Ecuador   |  | 230                        |  | 263               |  | 327            |             | 42.2 |   |  | 24.3
|IMPSAT Chile     |  | 119                        |  | 113               |  | 119            |             | 0.0  |   |  | 5.3 
|IMPSAT Peru      |  | 127                        |  | 178               |  | 195            |             | 53.5 |   |  | 9.6 
|IMPSAT USA       |  | 78                         |  | 85                |  | 91             |             | 16.7 |   |  | 7.1 
|                 |  |                            |  |                   |  |                |             |      |   |  |     
|Total            |  | 2,910                      |  | 3,314             |  | 3,596          |             | 23.6 |   |  | 8.5 
|                 |  |                            |  |                   |  |                |             |      |   |  |     

---

|(1) | Increase as of end of first quarter of 2005 compared to end of first quarter of 2004.
|--- | -------------------------------------------------------------------------------------

|(2) | Increase as of end of first quarter of 2005 compared to end of 2004.
|--- | --------------------------------------------------------------------



During the first quarter of 2005, we gained a net total of 282 customers, an increase of 8.5% compared to December 31, 2004. Compared to March 31, 2004, we experienced a
net gain of 686 customers, an increase of 23.6%. As we expand, the average size of customers, including the average revenue per customer, has decreased. In addition, as we increase our customer base and the initial or renewed term of customer
contracts conclude, we face competition regarding subsequent renewals. We do not believe that any of our customer losses in the first quarter of 2005 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
first quarter of 2005 included revenues from sales of equipment, which totaled $0.1 million compared to $0.2 million for the first quarter of 2004. 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 2005.



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, 
|                  |  | 2004                          |        | % Change(1) |       |   | 2005
|                  |  | (dollar amounts in thousands)
|IMPSAT Argentina  |  |                               |        |             |       |   |      |   |       
|                  |  |                               |       
|Services          |  | $                             | 14,671 |             | 23.1  | % |      | $ | 18,055
|                  |  |                               |       
|Sale of equipment |  |                               | 97     |             | (89.7 | ) |      |   | 10    
|                  |  |                               |        |             |       |   |      |   |       
|Total             |  |                               | 14,768 |             | 22.3  |   |      |   | 18,065
|                  |  |                               |        |             |       |   |      |   |       
|IMPSAT Colombia   |  |                               |        |             |       |   |      |   |       
|                  |  |                               |       
|Services          |  |                               | 13,573 |             | 4.7   |   |      |   | 14,211
|Sale of equipment |  |                               | 34     |             | (61.8 | ) |      |   | 13    
|                  |  |                               |        |             |       |   |      |   |       



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|                                                  |  |                               |  |             |   |  |       
|------------------------------------------------- |  | ----------------------------- |  | ----------- | - |  | ------
|                                                  |  | Three Months Ended March 31, 
|                                                  |  | 2004                          |  | % Change(1) |   |  | 2005  
|                                                  |  | (dollar amounts in thousands)
|Total                                             |  | 13,607                        |  | 4.5         |   |  | 14,224
|                                                  |  |                               |  |             |   |  |       
|IMPSAT Brazil                                     |  |                               |  |             |   |  |       
|                                                  |  |                               | 
|Services                                          |  | 7,346                         |  | 37.1        |   |  | 10,068
|                                                  |  |                               |  |             |   |  |       
|Total                                             |  | 7,346                         |  | 37.1        |   |  | 10,068
|                                                  |  |                               |  |             |   |  |       
|IMPSAT Venezuela                                  |  |                               |  |             |   |  |       
|                                                  |  |                               | 
|Services                                          |  | 8,086                         |  | 0.6         |   |  | 8,135 
|Sale of equipment                                 |  | 20                            |  | 205.0       |   |  | 61    
|                                                  |  |                               |  |             |   |  |       
|Total                                             |  | 8,106                         |  | 1.1         |   |  | 8,196 
|                                                  |  |                               |  |             |   |  |       
|IMPSAT Ecuador                                    |  |                               |  |             |   |  |       
|                                                  |  |                               | 
|Services                                          |  | 4,265                         |  | 17.9        |   |  | 5,030 
|Sale of equipment                                 |  | 1                             |  | (100.0      | ) |  |      
|                                                  |  |                               |  |             |   |  |       
|Total                                             |  | 4,266                         |  | 17.9        |   |  | 5,030 
|                                                  |  |                               |  |             |   |  |       
|IMPSAT Chile                                      |  |                               |  |             |   |  |       
|                                                  |  |                               | 
|Services                                          |  | 1,938                         |  | 4.9         |   |  | 2,032 
|                                                  |  |                               |  |             |   |  |       
|Total                                             |  | 1,938                         |  | 4.9         |   |  | 2,032 
|                                                  |  |                               |  |             |   |  |       
|IMPSAT Peru                                       |  |                               |  |             |   |  |       
|                                                  |  |                               | 
|Services                                          |  | 3,509                         |  | 6.8         |   |  | 3,749 
|                                                  |  |                               |  |             |   |  |       
|Total                                             |  | 3,509                         |  | 6.8         |   |  | 3,749 
|                                                  |  |                               |  |             |   |  |       
|IMPSAT USA                                        |  |                               |  |             |   |  |       
|                                                  |  |                               | 
|Services                                          |  | 7,260                         |  | (9.6        | ) |  | 6,562 
|                                                  |  |                               |  |             |   |  |       
|Total                                             |  | 7,260                         |  | (9.6        | ) |  | 6,562 
|                                                  |  |                               |  |             |   |  |       
|International Satellite Capacity Holding, Ltd.(2) |  |                               |  |             |   |  |       
|                                                  |  |                               | 
|Services                                          |  | 2,819                         |  | (11.6       | ) |  | 2,493 
|                                                  |  |                               |  |             |   |  |       
|Total                                             |  | 2,819                         |  | (11.6       | ) |  | 2,493 
|                                                  |  |                               |  |             |   |  |       
|Other                                             |  |                               |  |             |   |  |       
|                                                  |  |                               | 
|Services                                          |  | 217                           |  | (100.0      | ) |  |      
|                                                  |  |                               |  |             |   |  |       
|Total                                             |  | 217                           |  | (100.0      | ) |  |      
|                                                  |  |                               |  |             |   |  |       

---

|(1) | Percentage increase (decrease) in first quarter of 2005 compared to first quarter of 2004.
|--- | ------------------------------------------------------------------------------------------

|(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.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our net revenues at IMPSAT Argentina
totaled $18.1 million, an increase of $3.3 million (or 22.3%) compared to the three months ended March 31, 2004. Argentina is our largest market in terms of number of customers and in revenues. After three years of adverse economic conditions that
commenced in 1999, in January 2002 the Argentine Government defaulted on its external debt payments and devalued its currency, exacerbating declining commercial confidence and activity and further inflating exorbitant costs of financing for
Argentine companies. Although Argentinas economy has shown signs of recovery during 2004 and the first three months of 2005, it continues to experience adverse economic conditions and a lack of access to international capital markets. The
political and economic conditions in Argentina, our largest country of operation, will continue to materially affect our financial condition and results of operations.



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IMPSAT Brazils net revenues from services for the first quarter of 2005 totaled $10.1 million, an increase of $2.7
million (37.1%) compared to the first quarter of 2004. In local currency terms, IMPSAT Brazils net revenues for the first quarter of 2005 increased by 26% compared to the corresponding quarter in 2004. IMPSAT Brazils results were
positively affected by the appreciation of the real against the U.S. dollar. At March 31, 2004, thereal traded at a rate of R$2.94 = $1.00 and it appreciated to R$2.67 = $1.00 at March 31, 2005. However, future devaluations of thereal and the decline in growth in the Brazilian economy would have an adverse effect on IMPSAT Brazils and our companys overall financial condition and results of operations.



IMPSAT Colombia recorded net revenues of $14.2 million, an increase of $0.6 million (4.5%)
compared to the first quarter of 2004. This increase is mainly attributed to the appreciation of the Colombian peso against the U.S. dollar, which resulted in an increase in recorded revenues in U.S. dollars for contracts denominated and
payable in Colombian pesos, new customer contracts and expansion of services (particularly data center and internet) provided to existing customers.



Total net revenues at IMPSAT Venezuela equaled $8.2 million for the first quarter of 2005, compared to $8.1 million for the first quarter of 2004. Venezuela has
experienced and continues to experience political and economic uncertainty following the attempted military coup staged against that countrys President Hugo Chavez during April 2002 and the labor strikes that commenced in December 2002 and
ended two months later. The Venezuelan government imposed foreign exchange and price controls during February 2003, 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 limit our ability to convert local currency into U.S. dollars and transfer funds out of Venezuela and to obtain U.S. dollars required to purchase needed telecommunications equipment and repair
parts. 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.



IMPSAT USA recorded total net revenues of $6.6 million for the first quarter of 2005, compared to $7.3 million for the first quarter of
2004. The difference is primarily a result of a $0.7 million decrease in broadband and satellite services due to downward price renegotiations.



Direct Costs. Our direct costs for the first quarter of 2005 totaled $31.0 million, an increase of $7.0 million (or 29.3%), compared to the first quarter of 2004.
Of our total direct costs for the first quarter of 2005, $10.5 million related to the operations of IMPSAT Argentina, compared to $7.2 million at IMPSAT Argentina for the first quarter of 2004. Direct costs for IMPSAT Brazil totaled $5.2 million for
the first quarter of 2005, compared to $3.6 million for the first quarter of 2004. 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 2005, our contracted services costs totaled $5.2 million, an increase of $0.9 million (or 20.5%) compared to the first quarter of 2004. Of this amount,
maintenance costs for our telecommunications network infrastructure, including the Broadband Network, totaled $3.3 million for the first quarter of 2005 compared to $3.0 million during the first quarter of 2004. Installation costs totaled $1.9
million for the first quarter of 2005 compared to $1.4 million in the first quarter of 2004. Of our total contracted services costs for the first quarter of 2005, $2.0 million related to the operations of IMPSAT Argentina, compared to $1.6 million
at IMPSAT Argentina for the first quarter of 2004. Our maintenance and installation costs increased because we had more infrastructure and more new customers during the first quarter of 2005 compared to the first quarter of 2004.



(2)Other Direct Costs. Other direct costs principally include
licenses and other fees; sales commissions paid to our salaried sales personnel and third-party sales representatives; and our provision for doubtful accounts. We recorded other direct costs of $7.5 million, an increase of $3.7 million (or 98.5%)
compared to the first quarter of 2004.



Sales commissions paid
to third-party sales representatives for the first quarter of 2005 totaled $1.5 million, compared to $1.6 million in the first quarter of 2004.



We recorded a provision for doubtful accounts of $0.7 million for the first quarter of 2005, compared to a net reversal of a provision for doubtful
accounts of $1.9 million for the same period during the previous year. The net reversal during the first quarter of 2004 related principally to our settlement of certain disputes with Global Crossing and the payment by Global Crossing in that
quarter of $1.4 million, which was applied against outstanding receivables that had been disputed by Global Crossing and



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for which we had reserved 100% of contractual revenues. At March 31, 2005, approximately 23.5% of our
gross trade accounts receivable were past due more than six months, compared to 32.8% at the end of the first quarter of 2004. At March 31, 2005, our allowance for doubtful accounts covered approximately 116.4% of our gross trade accounts receivable
past due more than six months. The average days outstanding in gross trade accounts receivable decreased from 68 days at March 31, 2004 to 55 days at March 31, 2005. IMPSAT Argentinas allowance for doubtful accounts at the end of the first
quarter of 2005 covered approximately 98.0% of its gross trade accounts receivable past due more than six months.



(3)Leased Capacity. Our leased capacity costs for the first quarter of 2005 totaled $18.2 million, an increase of $2.4 million (or 15.4%) compared
to the first quarter of 2004.



Our leased capacity costs for
satellite capacity for the first quarter of 2005 totaled $5.8 million, a decrease of $0.1 million (or 2.4%) compared to the first quarter of 2004. In Argentina, our leased satellite capacity costs totaled $1.8 million for the first quarter of 2005,
compared to $1.8 million for the first quarter of 2004. Our leased satellite capacity costs for IMPSAT Brazil totaled $0.7 million for the first quarter of 2005, compared to $0.7 million for the first quarter of 2004. We had approximately 693 MHz of
leased satellite capacity at the end of the first quarter of 2005, compared to 718 MHz at March 31, 2004.



Our costs for dedicated leased capacity on third-party fiber optic networks totaled $8.1 million for the first quarter of 2005, an increase of $1.2
million (or 17.9%) compared to the first quarter of 2004. These costs were incurred principally in Argentina, Brazil, Colombia and the United States. 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 our domestic and international long distance telephony services in Argentina, Peru and the United States, we incur costs for
interconnection and telephony termination (I&T) and frequency rights. Our I&T and frequency rights costs totaled $4.3 million during the first quarter of 2005 (which included $3.5 million of I&T costs). This compares to $3.0
million of I&T and frequency rights costs for the first quarter of 2004 (which included $2.3 million of I&T costs). Our I&T and frequency rights costs in Argentina totaled $2.4 million during the first quarter of 2005 (which included
$2.3 million of I&T costs). This compares to $1.3 million of I&T and frequency rights costs for the first quarter of 2004 (which included $1.1 million of I&T costs).



(4)Costs of Equipment Sold. In the first quarter of 2005, 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 2004.



Salaries and Wages. Salaries and wages for the first quarter of 2005 totaled $13.0 million, an increase of $0.8 million (or 6.3%) compared to the first quarter of 2004. The increase was, in part, related to the appreciation of the
Colombianpeso and Brazilian real in comparison to the same period in the previous year.



We reduced the aggregate number of our employees from 1,242 at March 31, 2004 to 1,229 at March 31, 2005. IMPSAT Argentina had 298 employees at March 31, 2005, as compared to 297 employees at March 31, 2004. IMPSAT
Argentina incurred salaries and wages for the first quarter of 2005 totaling $3.2 million, an increase of $0.3 million (or 9.7%) over the first quarter of 2004. IMPSAT Brazil incurred salaries and wages for the first quarter of 2005 of $2.3 million,
an increase of $0.2 million (or 11.1%) compared to the first quarter of 2004. IMPSAT Brazil increased its number of employees to 194 persons at March 31, 2005, compared to 192 persons at March 31, 2004.



Selling, General and Administrative Expenses.We incurred SG&A expenses of $5.3
million for the first quarter of 2005, a decrease of $0.2 million (or 4.4%) compared to the first quarter of 2004. Our SG&A expenses for the first quarter of 2005 declined due principally to decreases in our publicity and promotion costs,
utilities and advisory fees, and overall costs control measures undertaken by management. SG&A expenses at IMPSAT Argentina for the first quarter of 2005 totaled $1.6 million, a decrease of $0.2 million (or 8.9%) compared to the first quarter of
2004.



Depreciation and Amortization. Our depreciation and amortization
expenses for the three months ended March 31, 2005 totaled $12.0 million, an increase of $1.9 million (or 18.4%) compared to depreciation and amortization for the first quarter of 2004. Depreciation and amortization increased during the first
quarter of 2005 as compared to the corresponding period in 2004 primarily due to our increased purchases of capital expenditures during 2004. Depreciation and amortization expenses for IMPSAT Argentina for the first quarter of 2005 totaled $2.5
million, an increase of $0.4 million (or 16.7%) compared to IMPSAT Argentinas depreciation and amortization expenses for the first quarter of 2004.



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Interest Expense, Net. Our net interest expense for the first quarter of 2005 totaled $5.2 million, an increase of
$0.6 million (or 12.1 %) as compared to net interest expense of $4.6 million for first quarter of 2004. 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 first quarter of 2005, represented $3.4 million. Our total indebtedness as of March 31, 2005 was $265.0 million, as compared to $264.1 million as of March 31, 2004.



Net Loss on Foreign Exchange. We recorded a net loss on foreign exchange for the first
quarter of 2005 of $0.6 million, compared to a net loss on foreign exchange of $4.4 million for the three months ended March 31, 2004. IMPSAT Argentina recorded a net loss on foreign exchange for the first quarter of 2005 of $0.2 million compared to
a net loss on foreign exchange for the first quarter of 2004 of $0.6 million. IMPSAT Brazil recorded a net loss on foreign exchange for the first quarter of 2005 of $0.5 million, compared to net loss of $1.8 million for the first quarter of 2004.



Net Loss. For the first quarter of 2005, we recorded a net loss
of $8.2 million, compared to net loss of $6.5 million for the three months ended March 31, 2004. For the first quarter of 2005, we recorded an operating loss of $1.4 million, compared to operating income of $3.2 million for the first three months of
2004.



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Liquidity and Capital Resources



At March 31, 2005, we had total cash and cash equivalents of $41.4 million, compared to $63.7 million at December 31, 2004.



At March 31, 2005, approximately $4.6 million of our total cash and cash equivalents were
held in Venezuelanbolivars by IMPSAT Venezuela (based on the official exchange rate at that date of Bs.2,150.00 = $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 condensed consolidated statement of operations.



At March 31, 2005, our total indebtedness was $265.0 million as compared to $281.1 million at December 31, 2004, of which $1.2 million
represented short-term debt, $45.4 million represented current portion of long-term debt and $218.4 million represented long-term debt. Our capital expenditures budget for 2005 contemplates that we will need approximately $32.5 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. There is no assurance that we will be successful in reaching a definitive agreement with this creditor to reschedule or restructure such obligations. Under those circumstances, IMPSAT Argentina could be forced to seek
protection or liquidate under the bankruptcy laws of Argentina.



In the first
quarter of 2005, IMPSAT Brazil failed to comply with a financial ratio on its approximately $81.1 million of Senior Secured Notes. Although we obtained a waiver of any non-compliance with this ratio through March 31, 2006 from the lender, we
cannot guarantee that the lender will grant any required waivers in the future.



In 2005, we are required to commence repayment of the principal amount of the restructured senior debt owed by our subsidiaries to certain of their vendor financiers who elected to participate in the Plan, and pay in cash the interest on
the Senior Notes, that was payable in kind between the Effective Date and March 25, 2005. Our vendor indebtedness, which totalled $132.4 million at March 31, 2005, is payable in nine equal installments, commencing March 25, 2005, through March 25,
2009. We paid the initial principal installment on this indebtedness, totalling $16.5 million, on March 25, 2005.



A significant portion of the indebtedness coming due in 2005 and thereafter is held by affiliates of certain members of our board of directors. Accordingly, a special
committee of the Companys board of directors has been formed to explore recapitalization alternatives. These alternatives may take the form of a repurchase, refinancing or rescheduling of the payment terms of the indebtedness of the Company
and/or its operating subsidiaries, a potential capital infusion, or other types of transactions. There can be no assurance, however, that any such transaction will be successfully negotiated or consummated. Our inability to successfully refinance
our indebtedness as it comes due would have a material adverse effect on our company, and would raise doubts as to our ability to continue as a going concern for a reasonable time period.



In its audit report in the Companys consolidated financial statements for the year ended December 31, 2004, Deloitte & Touche LLP,
the Companys independent registered public accounting firm, included a paragraph that noted that the Companys potential inability to meet certain of its debt covenants, and the amount of its debt obligations coming due in 2005 and
thereafter, raised substantial doubt as to our ability to continue as a going concern. The Companys financial statements included in this Quarterly Report on Form 10-Q have been prepared under the assumption that the Company will continue as a
going concern and do not include any adjustments that might result if we were forced to discontinue operations. For additional information, see Note 2 to our condensed financial statements.



As set forth in our condensed consolidated statement of cash flows, our operating activities
provided $5.5 million in net cash flows for the first quarter of 2005, compared to $3.7 million provided by operating activities during the first quarter of 2004. The increase in cash flow from operating activities in the first quarter of 2005 was
primarily due to our net loss during the first quarter of 2005 and to a decrease in accrued and other liabilities.



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For the first quarter of 2005, our investing activities used $8.3 million in net cash flows, compared to $3.7 million of
net cash flows used by investing activities during the corresponding period in 2004. During the first quarter of 2005, we used $19.6 million in net cash flows from financing activities, compared to $1.4 million in net cash flows used in financing
activities during the first quarter of 2004, $16.5 million of which were due to the repayment of Senior Debt at its stated maturity as discussed above.



At March 31, 2005, we had leased satellite capacity with average annual rental commitments of approximately $12.3 million through the year 2009 under non-cancelable
agreements. We have entered into contracts for the purchase of satellite capacity for approximately $15.0 million through 2015. In addition, at March 31, 2005, we had commitments to purchase telecommunications equipment amounting to approximately
$6.5 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 $3.1 million per year through 2009. The remainder of the leases are typically under one-year contracts, the early
cancellation of which is subject to a fee.



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



|                                   |  |                |        |      |   |        |  |      |        |      |   |            |  |       |        |  |   |         |  |   |        
|---------------------------------- |  | -------------- | ------ | ---- | - | ------ |  | ---- | ------ | ---- | - | ---------- |  | ----- | ------ |  | - | ------- |  | - | -------
|Type of Obligations                |  | 2005           |        | 2006 |   | 2007   |  | 2008 |        | 2009 |   | Thereafter |  | Total
|                                   |  | (in thousands)
|Short-term debt                    |  | $              | 1,204  |      |   |        |  |      |        |      |   |            |  |       |        |  |   |         |  | $ | 1,204  
|Long-term debt                     |  | $              | 45,375 |      | $ | 19,753 |  | $    | 37,180 |      | $ | 42,566     |  | $     | 16,549 |  | $ | 102,371 |  |   | 263,794
|Capital lease obligations          |  |                |       |      |   | 44     |  |      | 87     |      |   | 87         |  |       | 44     |  |   |         |  |   | 262    
|Operating leases(1)                |  |                | 24,045 |      |   | 19,337 |  |      | 13,316 |      |   | 9,811      |  |       | 6,583  |  |   | 995     |  |   | 74,087 
|Purchase obligations               |  |                | 6,536  |      |   |       |  |      |       |      |   |           |  |       |       |  |   |        |  |   | 6,536  
|                                   |  |                |        |      |   |        |  |      |        |      |   |            |  |       |        |  |   |         |  |   |        
|Total contractual cash obligations |  | $              | 77,160 |      | $ | 39,134 |  | $    | 50,583 |      | $ | 52,464     |  | $     | 23,176 |  | $ | 103,366 |  | $ | 345,883
|                                   |  |                |        |      |   |        |  |      |        |      |   |            |  |       |        |  |   |         |  |   |        

---

|(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. 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, 2005
and assuming that the hypothetical interest rate and foreign exchange rate changes used in the analyses occurred during year 2005. We do not hold or issue any market risk sensitive instruments for trading purposes.



Interest Rate Risk. Our cash and cash equivalents consist of highly liquid investments
with a maturity of less than 30 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, 2005, our total floating rate indebtedness
aggregated $39.2 million, of which $13.5 million was denominated in U.S. dollars and accrued interest at specified spreads over the London Interbank Offered Rate (LIBOR) and $25.7 million was denominated in local currencies of our operating
subsidiaries and accrued interest at variable rates tied to local interest rates and inflation indices. 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, 2005, a hypothetical 100



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basis point increase in LIBOR would affect our annual interest cost related to our floating rate indebtedness bearing interest based on LIBOR by
approximately $0.1 million annually. The fair value of financial instruments, which approximate their carrying value, except in the case of Senior Notes, have been determined using available market information and interest rates as of March 31,
2005.



|                               |  |                                  |        |            |      |   |        |      |  |   |        |   |  |      |        |   |            |   |        |       |  |   |        |   |  |   |         |  |   |        
|------------------------------ |  | -------------------------------- | ------ | ---------- | ---- | - | ------ | ---- |  | - | ------ | - |  | ---- | ------ | - | ---------- | - | ------ | ----- |  | - | ------ | - |  | - | ------- |  | - | -------
|                               |  | Expected Maturities at March 31, |        | Fair Value
|                               |  | 2005                             |        |            | 2006 |   |        | 2007 |  |   | 2008   |   |  | 2009 |        |   | Thereafter |   |        | Total | 
|Senior Notes(fixed rate)       |  | $                                | 33,098 |            |      | $ | 16,549 |      |  | $ | 33,098 |   |  | $    | 33,098 |   |            | $ | 16,549 |       |  | $ | 92,903 |   |  | $ | 225,295 |  | $ | 164,999
|                               |  |                                  |        |            |      |   |        |      |  |   |        |   |  |      |        |   |            |   |        |       |  |   |        |   |  |   |         |  |   |        
|Avg. interest rate             |  |                                  | 8.35   |            |      |   | 8.07   | %    |  |   | 7.88   | % |  |      | 7.39   | % |            |   | 6.60   | %     |  |   | 6.00   | % |  |   |         |  |   |        
|Term Notes(fixed rate)         |  | $                                | 251    |            |      | $ | 110    |      |  | $ | 159    |   |  |      |        |   |            |   |        |       |  |   |        |   |  | $ | 520     |  | $ | 520    
|                               |  |                                  |        |            |      |   |        |      |  |   |        |   |  |      |        |   |            |   |        |       |  |   |        |   |  |   |         |  |   |        
|Avg. interest rate             |  |                                  | 12.97  | %          |      |   | 13.30  | %    |  |   | 13.30  | % |  |      |        |   |            |   |        |       |  |   |        |   |  |   |         |  |   |        
|                               |  |                                  |        |            |      |   |        |      |  |   |        |   |  |      |        |   |            |   |        |       |  |   |        |   |  |   |         |  |   |        
|Term Notes(variable rate)      |  | $                                | 5,129  |            |      | $ | 2,712  |      |  | $ | 3,925  |   |  | $    | 9,468  |   |            |   |        |       |  | $ | 9,468  |   |  | $ | 30,702  |  | $ | 30,702 
|                               |  |                                  |        |            |      |   |        |      |  |   |        |   |  |      |        |   |            |   |        |       |  |   |        |   |  |   |         |  |   |        
|Avg. interest rate             |  |                                  | 12.87  | %          |      |   | 12.89  | %    |  |   | 13.27  | % |  |      | 14.11  | % |            |   | 14.11  | %     |  |   | 14.11  | % |  |   |         |  |   |        
|                               |  |                                  |        |            |      |   |        |      |  |   |        |   |  |      |        |   |            |   |        |       |  |   |        |   |  |   |         |  |   |        
|VendorFinancing(variable rate) |  | $                                | 8,101  |            |      | $ | 380    |      |  |   |        |   |  |      |        |   |            |   |        |       |  |   |        |   |  | $ | 8,481   |  | $ | 8,481  
|                               |  |                                  |        |            |      |   |        |      |  |   |        |   |  |      |        |   |            |   |        |       |  |   |        |   |  |   |         |  |   |        
|Avg. interest rate             |  |                                  | 7.78   | %          |      |   | 8.90   | %    |  |   |        |   |  |      |        |   |            |   |        |       |  |   |        |   |  |   |         |  |   |        
|                               |  |                                  |        |            |      |   |        |      |  |   |        |   |  |      |        |   |            |   |        |       |  |   |        |   |  |   |         |  |   |        



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.



During January 2002, Argentina abandoned the fixed dollar-to-peso exchange rate and devalued the Argentine peso, and, on February 3, 2002, pursuant to the
pesification decree, the Argentine government announced the mandatory conversion of all foreign currency denominated contractual obligations governed by Argentine law into Argentine pesos at a rate of one Argentine
peso to one U.S. dollar. The floating exchange rate at March 31, 2005 was pesos 2.92 = $1.00. Devaluations of the peso have and will adversely affect IMPSAT Argentinas results of operations and, in turn, our companys
consolidated results of operations and financial condition. During the remainder of 2005, our consolidated results could be impacted from transaction gains or losses on our dollar-denominated monetary assets and liabilities. Potential balance sheet
exposures include the reduction to our consolidated stockholders equity due to the effects of lower net income on retained earnings.



Pursuant to Brazilian law, our contracts with customers in Brazil cannot be denominated in dollars or linked to the exchange rate between the Brazilian real and
the U.S. dollar. 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 to pesos under the pesification decree are to be adjusted pursuant to 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 currency and the U.S. dollar and therefore may not fully allow us to address the impact of a devaluation of those currencies against the U.S. dollar. Also, contracts entered into after the pesification
decrees enactment that are initially denominated in pesos are not entitled to be adjusted according to any other consumer or other price index. Accordingly, our operations in Brazil and Argentina have exposed us, and will increase our
exposure, to exchange rate risks. At March 31, 2005, the real traded at a rate of R2.67 = $1.00.



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 could also limit our ability to convert local currency into U.S. dollars and transfer funds out of
Venezuela. On February 6, 2003, the Venezuelan government set a single fixed exchange rate for the bolivar against the U.S. dollar of approximately Bs.1,600 = $1.00 as part of the new currency controls. The Venezuelan government further
devalued its currency to Bs. 1,920 = $1.00 in February 2004, and Bs. 2,150 = $1.00 on March 5, 2005. Hence, at March 31, 2004, the bolivar traded at a rate of Bs.1,920 = $1.00, and on March 31, 2005, it traded at a rate of Bs. 2,150 = $1.00.
In the majority of cases, we have agreed to receive bolivars at the official rate in payment for our services in lieu of



15



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##### Table of Contents

U.S. dollars. As a result, our holdings of bolivars at March 31, 2005 totaled Bs. 9.9 billion (or $4.6 million at the official exchange rate at such
date). The decline in the U.S. dollar value of our cash and cash equivalents denominated in bolivarsas a result of the devaluation of the bolivar will result in a loss in our consolidated financial statements.



Net revenues from services from our Argentine operations for the first quarters of 2005 and
2004 represented 30.2% and 26.7% of our total net revenues from services, respectively. Net revenues from services from our Brazilian operations for the first quarters of 2005 and 2004 represented approximately 16.8% and 13.4% of our total net
revenues from services respectively. Our net revenues from services in Venezuela accounted for 13.6% and 14.7% of our total revenues from services for the first quarters of 2005 and 2004, respectively.



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.



16



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##### Table of Contents

Item 6. Exhibits



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 security-holders 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).                                                                                                                                                                                                                                                                                                                                                                                                               



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|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|            | 
|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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|            | 
|31.1        |  | Certification by the Companys Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|            | 
|31.2        |  | Certification by the Companys Chief Financial Officer pursuant to Section 906 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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         



18



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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 23, 2005


|
|



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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

AS OF DECEMBER 31, 2004 AND MARCH 31, 2005

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

( Unaudited )



|                                                                                                                                                                                                                                                      |  |                   |         |   |                |   |         |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | -------------- | - | ------- | -
|                                                                                                                                                                                                                                                      |  | December 31, 2004 |         |   | March 31, 2005 |  
|ASSETS                                                                                                                                                                                                                                                |  |                   |         |   |                |   |         |  
|CURRENT ASSETS:                                                                                                                                                                                                                                       |  |                   |         |   |                |   |         |  
|Cash and cash equivalents                                                                                                                                                                                                                             |  | $                 | 63,655  |   |                | $ | 41,374  |  
|Trade accounts receivable, net                                                                                                                                                                                                                        |  |                   | 29,363  |   |                |   | 33,870  |  
|Other receivables                                                                                                                                                                                                                                     |  |                   | 12,865  |   |                |   | 13,968  |  
|Prepaid Expenses                                                                                                                                                                                                                                      |  |                   | 3,008   |   |                |   | 4,213   |  
|                                                                                                                                                                                                                                                      |  |                   |         |   |                |   |         |  
|Total current assets                                                                                                                                                                                                                                  |  |                   | 108,891 |   |                |   | 93,425  |  
|                                                                                                                                                                                                                                                      |  |                   |         |   |                |   |         |  
|PROPERTY, PLANT AND EQUIPMENT, Net                                                                                                                                                                                                                    |  |                   | 317,310 |   |                |   | 313,131 |  
|                                                                                                                                                                                                                                                      |  |                   |         |   |                |   |         |  
|OTHER NON-CURRENT ASSETS                                                                                                                                                                                                                              |  |                   | 17,706  |   |                |   | 17,174  |  
|                                                                                                                                                                                                                                                      |  |                   |         |   |                |   |         |  
|TOTAL                                                                                                                                                                                                                                                 |  | $                 | 443,907 |   |                | $ | 423,730 |  
|                                                                                                                                                                                                                                                      |  |                   |         |   |                |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                                                                  |  |                   |         |   |                |   |         |  
|CURRENT LIABILITIES:                                                                                                                                                                                                                                  |  |                   |         |   |                |   |         |  
|Accounts payable  trade                                                                                                                                                                                                                              |  | $                 | 36,485  |   |                | $ | 38,771  |  
|Short-term debt                                                                                                                                                                                                                                       |  |                   | 2,656   |   |                |   | 1,204   |  
|Current portion of long-term debt                                                                                                                                                                                                                     |  |                   | 45,092  |   |                |   | 45,375  |  
|Accrued and other liabilities                                                                                                                                                                                                                         |  |                   | 31,217  |   |                |   | 33,420  |  
|                                                                                                                                                                                                                                                      |  |                   |         |   |                |   |         |  
|Total current liabilities                                                                                                                                                                                                                             |  |                   | 115,450 |   |                |   | 118,770 |  
|LONG-TERM DEBT, Net                                                                                                                                                                                                                                   |  |                   | 233,335 |   |                |   | 218,419 |  
|OTHER LONG-TERM LIABILITIES                                                                                                                                                                                                                           |  |                   | 16,109  |   |                |   | 15,137  |  
|                                                                                                                                                                                                                                                      |  |                   |         |   |                |   |         |  
|Total liabilities                                                                                                                                                                                                                                     |  |                   | 364,894 |   |                |   | 352,326 |  
|                                                                                                                                                                                                                                                      |  |                   |         |   |                |   |         |  
|COMMITMENTS AND CONTINGENCIES (NOTE 11)                                                                                                                                                                                                               |  |                   |         |   |                |   |         |  
|STOCKHOLDERS EQUITY:                                                                                                                                                                                                                                 |  |                   |         |   |                |   |         |  
|Preferred stock, $0.01 par value; 5,000,000 shares authorized, no shares outstanding as of December 31, 2004 and March 31,
2005                                                                                                                       |  |                   |        |   |                |   |        |  
|Common stock, $0.01 par value; 50,000,000 shares authorized; 10,116,100 shares issued and outstanding (including 100,000 and 50,000 restricted
shares held in the 2003 Stock Incentive Plan as of December 31, 2004 and March 31, 2005, respectively) |  |                   | 101     |   |                |   | 101     |  
|Additional paid in capital                                                                                                                                                                                                                            |  |                   | 90,542  |   |                |   | 90,542  |  
|Accumulated deficit                                                                                                                                                                                                                                   |  |                   | (4,742  | ) |                |   | (12,966 | )
|Deferred stock-based compensation                                                                                                                                                                                                                     |  |                   | (880    | ) |                |   | (440    | )
|Accumulated other comprehensive loss                                                                                                                                                                                                                  |  |                   | (6,008  | ) |                |   | (5,833  | )
|                                                                                                                                                                                                                                                      |  |                   |         |   |                |   |         |  
|Total stockholders equity                                                                                                                                                                                                                            |  |                   | 79,013  |   |                |   | 71,404  |  
|                                                                                                                                                                                                                                                      |  |                   |         |   |                |   |         |  
|TOTAL                                                                                                                                                                                                                                                 |  | $                 | 443,907 |   |                | $ | 423,730 |  
|                                                                                                                                                                                                                                                      |  |                   |         |   |                |   |         |  



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 THREE MONTHS ENDED MARCH 31, 2004 AND 2005

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

(Unaudited)



|                                                            |  |           |        |   |      |   |        |  
|----------------------------------------------------------- |  | --------- | ------ | - | ---- | - | ------ | -
|                                                            |  | March 31, |       
|                                                            |  | 2004      |        |   | 2005 |  
|NET REVENUES:                                               |  |           |        |   |      |   |        |  
|Broadband and satellite                                     |  | $         | 39,573 |   |      | $ | 41,789 |  
|Internet                                                    |  |           | 5,984  |   |      |   | 6,931  |  
|Value added services                                        |  |           | 4,206  |   |      |   | 5,140  |  
|Telephony                                                   |  |           | 5,145  |   |      |   | 5,928  |  
|Sales of equipment                                          |  |           | 152    |   |      |   | 84     |  
|                                                            |  |           |        |   |      |   |        |  
|Total net revenues                                          |  |           | 55,060 |   |      |   | 59,872 |  
|                                                            |  |           |        |   |      |   |        |  
|COSTS AND EXPENSES:                                         |  |           |        |   |      |   |        |  
|Direct costs:                                               |  |           |        |   |      |   |        |  
|Contracted services                                         |  |           | 4,327  |   |      |   | 5,216  |  
|Other direct costs                                          |  |           | 3,758  |   |      |   | 7,459  |  
|Leased capacity                                             |  |           | 15,790 |   |      |   | 18,225 |  
|Cost of equipment sold                                      |  |           | 97     |   |      |   | 106    |  
|                                                            |  |           |        |   |      |   |        |  
|Total direct costs                                          |  |           | 23,972 |   |      |   | 31,006 |  
|Salaries and wages                                          |  |           | 12,207 |   |      |   | 12,970 |  
|Selling, general and administrative                         |  |           | 5,505  |   |      |   | 5,262  |  
|Depreciation and amortization                               |  |           | 10,161 |   |      |   | 12,026 |  
|                                                            |  |           |        |   |      |   |        |  
|Total costs and expenses                                    |  |           | 51,845 |   |      |   | 61,264 |  
|                                                            |  |           |        |   |      |   |        |  
|Operating income (loss)                                     |  |           | 3,215  |   |      |   | (1,392 | )
|                                                            |  |           |        |   |      |   |        |  
|OTHER INCOME (EXPENSE):                                     |  |           |        |   |      |   |        |  
|Interest income                                             |  |           | 311    |   |      |   | 303    |  
|Interest expense                                            |  |           | (4,934 | ) |      |   | (5,484 | )
|Net loss on foreign exchange                                |  |           | (4,391 | ) |      |   | (640   | )
|Other expense, net                                          |  |           | (130   | ) |      |   | (289   | )
|                                                            |  |           |        |   |      |   |        |  
|Total other expense                                         |  |           | (9,144 | ) |      |   | (6,110 | )
|                                                            |  |           |        |   |      |   |        |  
|Loss before income taxes                                    |  |           | (5,929 | ) |      |   | (7,502 | )
|Provision for foreign income taxes                          |  |           | (543   | ) |      |   | (722   | )
|                                                            |  |           |        |   |      |   |        |  
|NET LOSS                                                    |  | $         | (6,472 | ) |      | $ | (8,224 | )
|                                                            |  |           |        |   |      |   |        |  
|NET LOSS PER COMMON SHARE: BASIC AND DILUTED                |  |           | (0.64  | ) |      |   | (0.82  | )
|                                                            |  |           |        |   |      |   |        |  
|WEIGHTED AVERAGE NUMBER OF COMMON SHARES: BASIC AND DILUTED |  |           | 9,953  |   |      |   | 10,016 |  
|                                                            |  |           |        |   |      |   |        |  



See notes to condensed
consolidated financial statements.





F-2



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##### Table of Contents



IMPSAT FIBER NETWORKS,
INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE LOSS

FOR THREE MONTHS ENDED MARCH 31, 2004 AND 2005

(In thousands of U.S. Dollars)

(Unaudited)



|                                                                   |  |           |        |   |      |   |        |  
|------------------------------------------------------------------ |  | --------- | ------ | - | ---- | - | ------ | -
|                                                                   |  | March 31, |       
|                                                                   |  | 2004      |        |   | 2005 |  
|NET LOSS                                                           |  | $         | (6,472 | ) |      | $ | (8,224 | )
|                                                                   |  |           |        |   |      |   |        |  
|OTHER COMPREHENSIVE INCOME (LOSS):                                 |  |           |        |   |      |   |        |  
|Foreign currency translation adjustment                            |  |           | 167    |   |      |   | 175    |  
|Unrealized gain on investments available for sale                  |  |           | 1,484  |   |      |   |        |  
|Recognition of other-than-temporary decline in value of investment |  |           | 93     |   |      |   |        |  
|                                                                   |  |           |        |   |      |   |        |  
|TOTAL                                                              |  |           | 1,744  |   |      |   | 175    |  
|                                                                   |  |           |        |   |      |   |        |  
|COMPREHENSIVE LOSS                                                 |  | $         | (4,728 | ) |      | $ | (8,049 | )
|                                                                   |  |           |        |   |      |   |        |  



See notes to condensed
consolidated financial statements.



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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, 2005

(In thousands of U.S. Dollars)

(Unaudited)



|                                        |  |              |  |                           |     |                    |   |        |                                  |   |         |                                    |  |   |       |   |  |   |        |   |  |   |        |  
|--------------------------------------- |  | ------------ |  | ------------------------- | --- | ------------------ | - | ------ | -------------------------------- | - | ------- | ---------------------------------- |  | - | ----- | - |  | - | ------ | - |  | - | ------ | -
|                                        |  | Common Stock |  | Additional Paid InCapital |     | AccumulatedDeficit |   |        | Deferred Stock-BasedCompensation |   |         | AccumulatedOther ComprehensiveLoss |  |   | Total |  
|                                        |  | Shares       |  | Amount                    |     |                    |   |        |                                 
|BALANCE AT DECEMBER 31, 2004            |  | 10,116,100   |  | $                         | 101 |                    | $ | 90,542 |                                  | $ | (4,742  | )                                  |  | $ | (880  | ) |  | $ | (6,008 | ) |  | $ | 79,013 |  
|Recognition of deferred compensation    |  |              |  |                           |     |                    |   |        |                                  |   |         |                                    |  |   | 440   |   |  |   |        |   |  |   | 440    |  
|Foreign currency translation adjustment |  |              |  |                           |     |                    |   |        |                                  |   |         |                                    |  |   |       |   |  |   | 175    |   |  |   | 175    |  
|Net loss for the period                 |  |              |  |                           |     |                    |   |        |                                  |   | (8,224  | )                                  |  |   |       |   |  |   |        |   |  |   | (8,224 | )
|                                        |  |              |  |                           |     |                    |   |        |                                  |   |         |                                    |  |   |       |   |  |   |        |   |  |   |        |  
|BALANCE AT March 31, 2005               |  | 10,116,100   |  | $                         | 101 |                    | $ | 90,542 |                                  | $ | (12,966 | )                                  |  | $ | (440  | ) |  | $ | (5,833 | ) |  | $ | 71,404 |  
|                                        |  |              |  |                           |     |                    |   |        |                                  |   |         |                                    |  |   |       |   |  |   |        |   |  |   |        |  



See notes to condensed
consolidated financial statements



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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, 2004 AND 2005

(In thousands of U.S. Dollars)

(Unaudited)



|                                                                                |  |           |        |   |      |   |         |  
|------------------------------------------------------------------------------- |  | --------- | ------ | - | ---- | - | ------- | -
|                                                                                |  | March 31, |       
|                                                                                |  | 2004      |        |   | 2005 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                           |  |           |        |   |      |   |         |  
|Net loss                                                                        |  | $         | (6,472 | ) |      | $ | (8,224  | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |           |        |   |      |   |         |  
|Amortization and depreciation                                                   |  |           | 10,161 |   |      |   | 12,026  |  
|Stock-based compensation                                                        |  |           | 440    |   |      |   | 440     |  
|Deferred income tax provision                                                   |  |           |        |   |      |   | 398     |  
|Provision for (reversal of allowance for) doubtful accounts                     |  |           | (1,855 | ) |      |   | 693     |  
|Paid-in-kind interest on Senior Notes                                           |  |           | 3,345  |   |      |   | 3,369   |  
|Net loss on foreign exchange                                                    |  |           | 4,391  |   |      |   | 640     |  
|Net loss on sale of investments                                                 |  |           | 46     |   |      |   |         |  
|Net loss on disposals of property, plant and equipment                          |  |           | 924    |   |      |   | 35      |  
|Changes in assets and liabilities:                                              |  |           |        |   |      |   |         |  
|Decrease (increase) in trade accounts receivable                                |  |           | 977    |   |      |   | (5,221  | )
|Increase in prepaid expenses                                                    |  |           | (1,583 | ) |      |   | (1,205  | )
|Increase in other receivables and other non-current assets                      |  |           | (4,462 | ) |      |   | (788    | )
|Increase in accounts payable  trade                                            |  |           | 1,069  |   |      |   | 2,331   |  
|(Decrease) increase in accrued and other liabilities                            |  |           | (3,543 | ) |      |   | 1,983   |  
|Increase (decrease) in other long-term liabilities                              |  |           | 240    |   |      |   | (936    | )
|                                                                                |  |           |        |   |      |   |         |  
|Net cash provided by operating activities                                       |  |           | 3,678  |   |      |   | 5,541   |  
|                                                                                |  |           |        |   |      |   |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                           |  |           |        |   |      |   |         |  
|Net decrease in trading investments                                             |  |           | 2,081  |   |      |   |         |  
|Purchases of property, plant and equipment                                      |  |           | (5,877 | ) |      |   | (8,306  | )
|Proceeds from sale of property, plant and equipment                             |  |           | 38     |   |      |   | 3       |  
|Proceeds from sale of investment                                                |  |           | 98     |   |      |   |         |  
|                                                                                |  |           |        |   |      |   |         |  
|Net cash used in investing activities                                           |  |           | (3,660 | ) |      |   | (8,303  | )
|                                                                                |  |           |        |   |      |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                           |  |           |        |   |      |   |         |  
|Net repayments of short-term debt                                               |  |           |        |   |      |   | (1,449  | )
|Repayments of long-term debt                                                    |  |           | (1,351 | ) |      |   | (18,145 | )
|                                                                                |  |           |        |   |      |   |         |  
|Net cash used in financing activities                                           |  |           | (1,351 | ) |      |   | (19,594 | )
|                                                                                |  |           |        |   |      |   |         |  
|EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH EQUIVALENTS                     |  |           | (83    | ) |      |   | 75      |  
|                                                                                |  |           |        |   |      |   |         |  
|NET DECREASE IN CASH AND CASH EQUIVALENTS                                       |  |           | (1,416 | ) |      |   | (22,281 | )
|CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD                            |  |           | 61,498 |   |      |   | 63,655  |  
|                                                                                |  |           |        |   |      |   |         |  
|CASH AND CASH EQUIVALENTS AT END OF THE PERIOD                                  |  | $         | 60,082 |   |      | $ | 41,374  |  
|                                                                                |  |           |        |   |      |   |         |  
|SUPPLEMENTAL CASH FLOW INFORMATION:                                             |  |           |        |   |      |   |         |  
|Interest paid                                                                   |  | $         | 893    |   |      | $ | 1,610   |  
|                                                                                |  |           |        |   |      |   |         |  
|Foreign income taxes paid                                                       |  | $         | 567    |   |      | $ | 378     |  
|                                                                                |  |           |        |   |      |   |         |  
|SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:            |  |           |        |   |      |   |         |  
|Change in unrealized gain in investment available for sale.                     |  | $         | 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 PER SHARE AMOUNTS)

(Unaudited)



1. GENERAL



IMPSAT Fiber Networks, Inc., a Delaware holding company (the Holding Company), and subsidiaries (collectively the 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. LIQUIDITY AND GOING CONCERN CONSIDERATIONS



The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business. The Holding Company successfully emerged from bankruptcy on March 25, 2003 with an approved reorganization plan. Prior to emergence, 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. As a result, the Company has generated cash flows from operations of $ 3.7 million
and $5.5 million, respectively, for the three months ended March 31, 2004 and 2005. As of March 31, 2005, the Company has cash and cash equivalents of $41.4 million, which includes approximately $4.6 million in Venezuela (see Note 3). Based on its
current business plan, however, the Company believes that it will be required to refinance a portion of its outstanding debt coming due in the next several years because the Company will not have sufficient internally-generated funds to meet the
maturing obligations.



A significant portion of the
Companys debt coming due in 2005 and thereafter is held by affiliates of certain members of the Companys board of directors. Accordingly, a special committee of the Companys board of directors has been formed to explore
recapitalization alternatives. These alternatives may take the form of a repurchase, refinancing or rescheduling of the payment terms of the indebtedness of the Company and/or its operating subsidiaries, a potential capital infusion, or other types
of transactions. There can be no assurance that any such transaction will be successfully negotiated or consummated. In addition, as discussed in Note 7, the Company was not in compliance with certain of its debt covenants as of March 31, 2005.
These factors, among others, may indicate that the Company will be unable to continue as a going concern for a reasonable period of time.



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##### Table of Contents

The condensed consolidated financial statements do not include any adjustments relating to the
recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Companys continuation as a going concern is dependent upon
its ability to generate sufficient cash flow to meet its obligations on a timely basis, to obtain additional financing or refinancing as may be required, and ultimately to obtain profitable operations.



3. 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.



Interim Financial Information  The unaudited condensed consolidated financial statements as of March 31, 2005 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 year ended December 31, 2004. 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 periods. The operating results for the three months ended March 31, 2005 are not necessarily indicative of the
operating results to be expected for the remainder of calendar year 2005 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 currency 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  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. During February 2004 and March 2005, the Venezuelan government further devalued the bolivar and fixed the bolivars
value to the U.S. dollar at 1,920 and 2,150, respectively. 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. As of March 31, 2005, approximately $4.6 million of the Companys cash and cash equivalents
were held in Venezuela (translated into U.S. dollars at the fixed exchange rate imposed by the Venezuelan government).



Cash and Cash Equivalents  Cash and cash equivalents include 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.



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 some of 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.



No single customer accounted for greater
than 10% of total net revenues for the three month ended March 31, 2004 and 2005.



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.



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In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 153 (SFAS No. 153),Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29. The amendments made by SFAS No. 153 are based on the principle that exchanges of
nonmonetary assets should be measured based on the fair value of the assets exchanged. The amendment also eliminates the narrow exception for nonmonetary exchanges of similar productive assets and replaces it with a broader exception for exchanges
of nonmonetary assets that do not have commercial substance. The provisions of SFAS No. 153 are effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The Company does not expect the adoption of SFAS 153
to have a material impact on its financial condition or results of operations.



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 



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
terms 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 period of time greater than 15 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.



Income Taxes  Deferred income taxes result from temporary differences in the
recognition of income and 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, except for IMPSAT Brazil, use the U.S. dollar as the functional currency. The effects of foreign currency transactions are included as net
gain or loss on foreign exchange. IMPSAT Brazil uses the local currency as the functional currency, therefore the effects of translation are included in accumulated other comprehensive loss within 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, the pro-forma amounts of the Companys net loss and net loss per
common share for the three months ended March 31, 2004 and 2005 would have been as follows:



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|                                                                                           |  |           |        |   |      |   |        |  
|------------------------------------------------------------------------------------------ |  | --------- | ------ | - | ---- | - | ------ | -
|                                                                                           |  | March 31, |       
|                                                                                           |  | 2004      |        |   | 2005 |  
|Net loss                                                                                   |  |           |        |   |      |   |        |  
|As reported                                                                                |  | $         | (6,472 | ) |      | $ | (8,224 | )
|Add: Stock-based compensation expense, as reported                                         |  |           |       |   |      |   |       |  
|Deduct: Stock-based employee compensation expense determined under fair-value-based method |  |           | (171   | ) |      |   | (174   | )
|                                                                                           |  |           |        |   |      |   |        |  
|Pro forma                                                                                  |  | $         | (6,643 | ) |      | $ | (8,398 | )
|                                                                                           |  |           |        |   |      |   |        |  
|Net (loss) income per common share:                                                        |  |           |        |   |      |   |        |  
|Basic:                                                                                     |  |           |        |   |      |   |        |  
|As reported                                                                                |  | $         | (0.64  | ) |      | $ | (0.82  | )
|Pro forma                                                                                  |  | $         | (0.66  | ) |      | $ | (0.84  | )
|Diluted:                                                                                   |  |           |        |   |      |   |        |  
|As reported                                                                                |  | $         | (0.64  | ) |      | $ | (0.82  | )
|Pro forma                                                                                  |  | $         | (0.66  | ) |      | $ | (0.84  | )



For purposes of the pro forma
disclosures, the fair value of the options granted in 2003 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. For purposes of the pro-forma disclosures, the fair value of the options granted
in 2004 was estimated using the Black-Scholes option pricing model. The assumptions used by the Company were as follows: no dividend yield; volatility of 39%; risk-free interest rate of 3.75%; and an expected term of 8 years. No stock options were
granted during the three months ended March 31, 2005. No stock-based compensation to employees 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.



In December 2004, the FASB issued SFAS No. 123 (Revised 2004) (SFAS No. 123(R)), Share-Based Payment.SFAS No. 123(R) requires companies to expense the estimated fair value of stock options and
similar equity instruments issued to employees. Currently, companies are required to calculate the estimated fair value of these share-based payments and can elect to either include the estimated cost in earnings or disclose the pro forma effect in
the footnotes to their financial statements. As discussed above, the Company has chosen to disclose the pro forma effect. The fair value concepts were not changed significantly in SFAS No. 123(R); however, in adopting SFAS N0. 123(R), companies must
choose among alternative valuation models and amortization assumptions.



The
valuation model and amortization assumption used by the Company continues to be available, but the Company has not yet completed its assessment of the alternatives. SFAS No. 123(R) will be effective for the Company beginning on January 1, 2006.
Transition options allow companies to choose whether to adopt prospectively, restate results to the beginning of the year, or to restate prior periods with the amounts that have been included in the footnotes. The Company has not yet concluded on
which transition option it will select. See above for the pro forma effect for the each of the periods presented, using our existing valuation and amortization assumptions.



Fair Value of Financial Instruments  As of December 31, 2004 and March 31, 2005, the Companys financial instruments
include receivables, payables and long-term debt. The Companys Series A, Series B and Senior Secured Notes were valued using available market information and interest rates. The fair value of receivables and payables is equal to their carrying
value due to their short term.



At December 31, 2004 and March 31, 2005,
the fair value of the Companys financial instruments was as follows:



|                                   |  |      |         |      |   |        
|---------------------------------- |  | ---- | ------- | ---- | - | -------
|                                   |  | 2004 |         | 2005
|Series A 6% Senior Guaranted Notes |  | $    | 42,282  |      | $ | 42,404 
|Series B 6% Senior Guaranted Notes |  | $    | 24,104  |      | $ | 15,357 
|Senior Secured Notes               |  | $    | 118,823 |      | $ | 107,238



The fair values of all
other financial instruments, which approximate their carrying value, have been estimated by management using available market information and interest rates as of December 31, 2004 and March 31, 2005.



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Net Loss Per Common Share Basic loss per share is computed based on the average number of common shares
outstanding and diluted 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 loss per share was the same as the calculation of basic loss
per share for the three months ended March 31, 2004 and 2005, since the inclusion of potential common stock in the computation would be antidilutive. Antidilutive securities not included in diluted earnings per common share computation are as
follows:



|                           |  |           |                  |      |   |                 
|-------------------------- |  | --------- | ---------------- | ---- | - | ----------------
|                           |  | March 31,
|                           |  | 2004      |                  | 2005
|Stock Options              |  |           | 1,676            |      |   | 2,068           
|                           |  |           |                  |      |   |                 
|Exercise Price             |  | $         | 15.00            |      | $ | 6.17 to $15.00  
|                           |  |           |                  |      |   |                 
|Warrants                   |  |           | 3,257            |      |   | 3,257           
|                           |  |           |                  |      |   |                 
|Exercise Price             |  | $         | 15.00            |      | $ | 15.00           
|                           |  |           |                  |      |   |                 
|Series A and B Notes       |  |           | 6,033            |      |   | 6,071           
|                           |  |           |                  |      |   |                 
|Conversion Price           |  | $         | 13.96 and $21.41 |      | $ | 13.56 and $20.78
|                           |  |           |                  |      |   |                 
|Shares of restricted stock |  |           | 100              |      |   | 50              
|                           |  |           |                  |      |   |                 



4. TRADE ACCOUNTS RECEIVABLE



Trade accounts receivable, by operating subsidiaries, at
December 31, 2004 and March 31, 2005, are summarized as follows:



|                                      |  |                   |         |   |                |   |         |  
|------------------------------------- |  | ----------------- | ------- | - | -------------- | - | ------- | -
|                                      |  | December 31, 2004 |         |   | March 31, 2005 |  
|IMPSAT Argentina                      |  | $                 | 16,203  |   |                | $ | 19,610  |  
|IMPSAT Brazil                         |  |                   | 5,419   |   |                |   | 5,542   |  
|IMPSAT Colombia                       |  |                   | 4,270   |   |                |   | 4,994   |  
|IMPSAT Venezuela                      |  |                   | 6,506   |   |                |   | 7,051   |  
|All other countries                   |  |                   | 8,978   |   |                |   | 9,419   |  
|                                      |  |                   |         |   |                |   |         |  
|Total                                 |  |                   | 41,376  |   |                |   | 46,616  |  
|Less: allowance for doubtful accounts |  |                   | (12,013 | ) |                |   | (12,746 | )
|                                      |  |                   |         |   |                |   |         |  
|Trade accounts receivable, net        |  | $                 | 29,363  |   |                | $ | 33,870  |  
|                                      |  |                   |         |   |                |   |         |  



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 financial history is analyzed.



The activity for the allowance for doubtful accounts for the year ended December 31, 2004 and the three months ended March 31, 2005 is as follows:



|                                                           |  |                   |        |   |                |   |        |  
|---------------------------------------------------------- |  | ----------------- | ------ | - | -------------- | - | ------ | -
|                                                           |  | December 31, 2004 |        |   | March 31, 2005 |  
|Beginning balance                                          |  | $                 | 20,642 |   |                | $ | 12,013 |  
|Provision for (reversal of allowance for)doubtful accounts |  |                   | (3,916 | ) |                |   | 693    |  
|Write-offs                                                 |  |                   | (4,704 | ) |                |   | (63    | )
|Effect of exchange rate change                             |  |                   | (9     | ) |                |   | 103    |  
|                                                           |  |                   |        |   |                |   |        |  
|Ending balance                                             |  | $                 | 12,013 |   |                | $ | 12,746 |  
|                                                           |  |                   |        |   |                |   |        |  



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5. OTHER RECEIVABLES



Other receivables consist primarily of refunds or credits pending from local governments for taxes other than income, advances to suppliers and other
miscellaneous amounts due to the Company and its operating subsidiaries and are as follows at December 31, 2004 and March 31, 2005:



|                    |  |                   |        |                |   |       
|------------------- |  | ----------------- | ------ | -------------- | - | ------
|                    |  | December 31, 2004 |        | March 31, 2005
|IMPSAT Argentina    |  | $                 | 497    |                | $ | 553   
|IMPSAT Brazil       |  |                   | 2,358  |                |   | 2,384 
|IMPSAT Colombia     |  |                   | 3,475  |                |   | 4,096 
|IMPSAT Venezuela    |  |                   | 2,670  |                |   | 2,672 
|All other countries |  |                   | 3,865  |                |   | 4,263 
|                    |  |                   |        |                |   |       
|Total               |  | $                 | 12,865 |                | $ | 13,968
|                    |  |                   |        |                |   |       



6. PROPERTY, PLANT AND EQUIPMENT



Property, plant and equipment at December 31, 2004 and
March 31, 2005 consists of:



|                                                 |  |                   |         |   |                |   |         |  
|------------------------------------------------ |  | ----------------- | ------- | - | -------------- | - | ------- | -
|                                                 |  | December 31, 2004 |         |   | March 31, 2005 |  
|Land                                             |  | $                 | 10,109  |   |                | $ | 10,109  |  
|Building and improvements                        |  |                   | 36,496  |   |                |   | 36,502  |  
|Operating communications equipment               |  |                   | 194,449 |   |                |   | 202,451 |  
|Network infrastructure (including rights of way) |  |                   | 111,433 |   |                |   | 111,357 |  
|IRU investments                                  |  |                   | 20,407  |   |                |   | 20,351  |  
|Furniture, fixtures and other equipment          |  |                   | 16,048  |   |                |   | 16,304  |  
|                                                 |  |                   |         |   |                |   |         |  
|Total                                            |  |                   | 388,942 |   |                |   | 397,074 |  
|Less: accumulated depreciation                   |  |                   | (75,102 | ) |                |   | (86,848 | )
|                                                 |  |                   |         |   |                |   |         |  
|Total                                            |  |                   | 313,840 |   |                |   | 310,226 |  
|Equipment in transit                             |  |                   | 3,442   |   |                |   | 2,806   |  
|Construction in process                          |  |                   | 28      |   |                |   | 99      |  
|                                                 |  |                   |         |   |                |   |         |  
|Property, plant and equipment, net               |  | $                 | 317,310 |   |                | $ | 313,131 |  
|                                                 |  |                   |         |   |                |   |         |  



The activity in
accumulated depreciation for the year ended December 31, 2004 and the three months ended March 31, 2005 is as follows:



|                          |  |                  |        |   |               |   |        |  
|------------------------- |  | ---------------- | ------ | - | ------------- | - | ------ | -
|                          |  | December 31,2004 |        |   | March 31,2005 |  
|Beginning balance         |  | $                | 29,389 |   |               | $ | 75,102 |  
|Depreciation expense      |  |                  | 44,797 |   |               |   | 12,026 |  
|Exchange rate effects     |  |                  | 1,706  |   |               |   | (126   | )
|Disposals and retirements |  |                  | (790   | ) |               |   | (154   | )
|                          |  |                  |        |   |               |   |        |  
|Ending balance            |  | $                | 75,102 |   |               | $ | 86,848 |  
|                          |  |                  |        |   |               |   |        |  



7. DEBT



Short-Term Debt-IMPSAT Brazil maintains short-term credit facilities
denominated in local currency with local banks. The facilities bear interest at 1.77% to 2.07% per month. As of December 31, 2004 and March 31, 2005, the outstanding balance amounted to $ 1.5 million and $1.2 million, respectively. The credit
facilities mature during May of 2005. In addition, as of December 31, 2004, IMPSAT Venezuela maintained a $1.2 million short-term credit facility denominated in local currency with a local bank. During the three months ended March 31, 2005, the
outstanding amount was repaid.



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Long-Term Debt-The Companys long-term debt at December 31, 2004 and March 31, 2005 is
detailed as follows:



|                                                                                                                                        |  |                   |         |   |                |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | -------------- | - | ------- | -
|                                                                                                                                        |  | December 31, 2004 |         |   | March 31, 2005 |  
|Series A 6% Senior Guaranteed Notes due 2011                                                                                            |  | $                 | 66,376  |   |                | $ | 67,308  |  
|Series B 6% Senior Guaranteed Notes due 2011                                                                                            |  |                   | 25,240  |   |                |   | 25,595  |  
|Senior Secured Notes 10%, maturing 2009                                                                                                 |  |                   | 146,877 |   |                |   | 132,392 |  
|Senior Notes issued by IMPSAT Colombia due 2008 and 2010 (interest rate 14.11%), collateralized by the assignment of customer
contracts |  |                   | 18,830  |   |                |   | 18,936  |  
|Term notes, maturing through 2007; collateralized by buildings and equipment, the assignment of customer contracts; denominated
in:     |  |                   |         |   |                |   |         |  
|U.S. dollars (interest rates 7% to 11.68%)                                                                                              |  |                   | 3,191   |   |                |   | 2,856   |  
|Local currency (interest rates 12.81% to 13.3%)                                                                                         |  |                   | 6,390   |   |                |   | 5,910   |  
|Eximbank notes (interest rate 3.93%), maturing semiannually through 2007                                                                |  |                   | 2,779   |   |                |   | 2,316   |  
|Vendor financing (interest rates 6.33% to 11%)                                                                                          |  |                   | 8,744   |   |                |   | 8,481   |  
|                                                                                                                                        |  |                   |         |   |                |   |         |  
|Total long-term debt                                                                                                                    |  |                   | 278,427 |   |                |   | 263,794 |  
|Less: current portion including defaulted indebtedness                                                                                  |  |                   | (45,092 | ) |                |   | (45,375 | )
|                                                                                                                                        |  |                   |         |   |                |   |         |  
|Long-term debt, net                                                                                                                     |  | $                 | 233,335 |   |                | $ | 218,419 |  
|                                                                                                                                        |  |                   |         |   |                |   |         |  



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. As of March 31, 2005, IMPSAT Brazil was not in compliance with a financial ratio on its approximately $81.1 million of Senior Secured Notes. The Company has obtained a waiver from the holder of the notes for any non-compliance with this
covenant through March 31, 2006.



In addition, 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. As a result of this default, which relates to vendor financing totaling approximately $7.6 million in outstanding principal amount as of March 31, 2005, such
indebtedness and accrued interest thereon is due and payable. The Company had been in negotiation discussions 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 reach a definitive agreement with this creditor to reschedule or restructure such obligations.



The Series A and Series B Notes are convertible into the Companys stock at a conversion price of $13.56 and $20.78, respectively, as of March 31,
2005. As of March 31, 2005, the Series A and Series B Notes were convertible into 4,963,748 and 1,107,147 shares of common stock, respectively.



8. INCOME TAXES



The composition of the provision for income taxes, all of which is for foreign taxes, for the three months ended March 31, 2004 and 2005 is as follows:



|         |  |           |      |   |      |   |      |  
|-------- |  | --------- | ---- | - | ---- | - | ---- | -
|         |  | March 31, |     
|         |  | 2004      |      |   | 2005 |  
|Current  |  | $         | (543 | ) |      | $ | (324 | )
|Deferred |  |           |      |   |      |   | (398 | )
|         |  |           |      |   |      |   |      |  
|Total    |  | $         | (543 | ) |      | $ | (722 | )
|         |  |           |      |   |      |   |      |  



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##### Table of Contents

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.



The Company recorded a valuation allowance to offset its deferred income tax asset as of March 31, 2005 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.



The Company has reserved for tax contingencies totaling approximately $6.0 million and $6.3 million as of December 31, 2004
and March 31, 2005, respectively, attributable primarily to its foreign subsidiaries tax return filings. These contingencies are for tax liabilities and related interest, as well as certain tax positions taken on foreign tax returns for which
the statutes remain open.



The Companys tax filings and
reserves for the contingencies described in the preceding paragraphs are subject to audit, and the respective taxing authorities may contest the information on which these tax filings are based and may make additional assessments beyond that which
has already been provided for.



The Company considers earnings
relating to its foreign subsidiaries to be indefinitely reinvested outside of the United States and, accordingly, no U.S. deferred income taxes have been recorded with respect to such earnings. Should the earnings be remitted as dividends, the
Company may be subject to additional U.S. taxes, net of allowable foreign tax credits. The Company has determined that it is not practicable to estimate the amount of any additional taxes which may be payable on the undistributed earnings.



9. OPERATING SEGMENT INFORMATION



The Companys operating segment information, by subsidiary, is as
follows for the three months ended March 31, 2004 and 2005.



|                        |  |           |         |        |         |   |          |        |           |        |                    |        |   |              |         |   |       |   |         |  
|----------------------- |  | --------- | ------- | ------ | ------- | - | -------- | ------ | --------- | ------ | ------------------ | ------ | - | ------------ | ------- | - | ----- | - | ------- | -
|2004                    |  | 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  |   |              | (1503   | ) |       |   | 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 |  
|                        |  |           |         |        |         |   |          |        |           |        |                    |        |   |              |         |   |       |   |         |  
|                        |  |           |         |        |         |   |         
|2005                    |  | Argentina |         | Brazil |         |   | Colombia |        | Venezuela |        | All othercountries |        |   | Eliminations |         |   | Total |  
|Net Revenues            |  |           |         |        |         |   |          |        |           |        |                    |        |   |              |         |   |       |   |         |  
|Satellite and Broadband |  | $         | 8,183   |        | 6,706   |   |          | 12,034 |           | 6,948  |                    | 12,277 |   |              | (4,359  | ) |       | $ | 41,789  |  
|Internet                |  |           | 1,880   |        | 1,131   |   |          | 1,390  |           | 645    |                    | 3,324  |   |              | (1,439  | ) |       |   | 6,931   |  
|Value added services    |  |           | 3,634   |        | 1,831   |   |          | 721    |           | 542    |                    | 894    |   |              | (2,482  | ) |       |   | 5,140   |  
|Telephony               |  |           | 4,358   |        | 400     |   |          | 66     |           |        |                    | 3,371  |   |              | (2,267  | ) |       |   | 5,928   |  
|Sales of equipment      |  |           | 10      |        |         |   |          | 13     |           | 61     |                    |        |   |              |         |   |       |   | 84      |  
|                        |  |           |         |        |         |   |          |        |           |        |                    |        |   |              |         |   |       |   |         |  
|Total net revenues      |  | $         | 18,065  |        | 10,068  |   |          | 14,224 |           | 8,196  |                    | 19,866 |   |              | (10,547 | ) |       | $ | 59,872  |  
|                        |  |           |         |        |         |   |          |        |           |        |                    |        |   |              |         |   |       |   |         |  
|Operating income (loss) |  | $         | 284     |        | (1,320  | ) |          | 346    |           | 2,297  |                    | (2,999 | ) |              |         |   |       | $ | (1,392  | )
|                        |  |           |         |        |         |   |          |        |           |        |                    |        |   |              |         |   |       |   |         |  
|Total assets            |  | $         | 120,076 |        | 112,274 |   |          | 74,284 |           | 55,432 |                    | 61,664 |   |              |         |   |       | $ | 423,730 |  
|                        |  |           |         |        |         |   |          |        |           |        |                    |        |   |              |         |   |       |   |         |  



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##### Table of Contents

10. STOCKHOLDERS EQUITY



Restricted Stock  The Holding Company during 2003 granted certain officers 200,000 shares of the Holding
Companys 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 Holding Company recorded approximately $1.3 million in stockholders equity as deferred compensation. The deferred compensation is being amortized to expense over the vesting period. Amortization for the three months
ended March 31, 2004 and 2005 was $440,000 respectively.



Stock Options No stock options were granted during the three months ended March 31, 2004 and 2005.



Warrants  The Holding Company during 2003 issued 3,257,178 eight-year warrants to acquire the Holding Companys stock at $15.00
per share. As of March 31, 2005, all the warrants remain outstanding.



11.
COMMITMENTS AND CONTINGENCIES



Commitments
 The Company leases satellite capacity with average annual rental commitments of approximately $12.3 million through the year 2009 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 $14.6 million through 2015 and 2009, respectively. The Company has commitments to purchase communications and data center equipment amounting to approximately
$6.5 million at March 31, 2005.



The Company is a guarantor of
the Senior Secured Notes issued by its subsidiaries and other financing agreements entered by certain of its subsidiaries. At March 31, 2005, the aggregate balances outstanding were approximately $132.4 million (see Note 7).



The Company maintains commercial insurance policies which serve to guarantee
certain of the Companys performance obligations for services under some public and private contract bids which total approximately $33.5 million as of March 31, 2005.



Employment Agreements  The Company entered into employment agreements with certain of its senior
executives which 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.



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.



Pursuant to a Court order in August 2001, the IPO Class Action was consolidated for all pre-trial purposes in In re Initial Public Offering Securities
Litigation, 21 MC 92, an intra-district proceeding involving approximately 900 lawsuits relating to the initial public offerings of approximately 310 companies. In July 2002, the Holding Company and the other defendants filed a motion to
dismiss, which was denied as to the Holding Company and one individual officer in February 2003. In April 2003, the Holding Company was advised that global settlement discussions between the plaintiffs and the Holding Companys insurer (on
behalf of the Holding Company and the individual defendants) to resolve plaintiffs claims against all 310 companies had reached an advanced stage. Among other things, the proposed settlement would result in a broad release of claims against
the Holding Company, its officers and directors, and other issuers, and their officers and directors without a direct financial contribution by the Holding Company. Settlement papers seeking preliminary approval of the settlement and certification
of the investor class were submitted to the court in June 2004. The settlement is subject to certain final determinations and a fairness hearing.



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##### Table of Contents

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 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 is defending 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 it is 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.



12. 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, 2004 and March 31, 2005 and for the three months ended March 31, 2004 and 2005 is shown in a separate column in the accompanying consolidating financial information, as follows:



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##### Table of Contents

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF DECEMBER 31, 2004

(In thousands of U.S. Dollars)



|                                     |  |                 |         |                  |   |                            |  |                           |         |  |              |          |   |  |   |        
|------------------------------------ |  | --------------- | ------- | ---------------- | - | -------------------------- |  | ------------------------- | ------- |  | ------------ | -------- | - |  | - | -------
|                                     |  | Holding Company |         | IMPSAT Argentina |   | Non-Guarantor Subsidiaries |  | Intercompany Eliminations |         |  | Consolidated
|                                     |  |                 |         | (Guarantor)      |   |                            |  |                           |         |  |             
|ASSETS                               |  |                 |         |                  |   |                            |  |                           |         |  |              |          |   |  |   |        
|CURRENT ASSETS:                      |  |                 |         |                  |   |                            |  |                           |         |  |              |          |   |  |   |        
|Cash and cash equivalents            |  | $               | 39,775  |                  | $ | 3,835                      |  | $                         | 20,045  |  | $            |          |   |  | $ | 63,655 
|Trade accounts receivable, net       |  |                 |         |                  |   | 9,783                      |  |                           | 19,580  |  |              |          |   |  |   | 29,363 
|Other receivables                    |  |                 | 85,608  |                  |   | 22,867                     |  |                           | 44,084  |  |              | (139,694 | ) |  |   | 12,865 
|Prepaid expenses                     |  |                 | 172     |                  |   | 904                        |  |                           | 2,908   |  |              | (976     | ) |  |   | 3,008  
|                                     |  |                 |         |                  |   |                            |  |                           |         |  |              |          |   |  |   |        
|Total current assets                 |  |                 | 125,555 |                  |   | 37,389                     |  |                           | 86,617  |  |              | (140,670 | ) |  |   | 108,891
|                                     |  |                 |         |                  |   |                            |  |                           |         |  |              |          |   |  |   |        
|PROPERTY, PLANT AND EQUIPMENT, Net   |  |                 |         |                  |   | 73,904                     |  |                           | 243,406 |  |              |          |   |  |   | 317,310
|                                     |  |                 |         |                  |   |                            |  |                           |         |  |              |          |   |  |   |        
|NON-CURRENT ASSETS:                  |  |                 |         |                  |   |                            |  |                           |         |  |              |          |   |  |   |        
|Investments                          |  |                 | 57,169  |                  |   |                            |  |                           |         |  |              | (57,169  | ) |  |   |        
|Other non-current assets             |  |                 | 4       |                  |   | 7,668                      |  |                           | 10,034  |  |              |          |   |  |   | 17,706 
|                                     |  |                 |         |                  |   |                            |  |                           |         |  |              |          |   |  |   |        
|Total non-current assets             |  |                 | 57,173  |                  |   | 7,668                      |  |                           | 10,034  |  |              | (57,169  | ) |  |   | 17,706 
|                                     |  |                 |         |                  |   |                            |  |                           |         |  |              |          |   |  |   |        
|TOTAL                                |  | $               | 182,728 |                  | $ | 118,961                    |  | $                         | 340,057 |  | $            | (197,839 | ) |  | $ | 443,907
|                                     |  |                 |         |                  |   |                            |  |                           |         |  |              |          |   |  |   |        
|LIABILITIES AND STOCKHOLDERS EQUITY |  |                 |         |                  |   |                            |  |                           |         |  |              |          |   |  |   |        
|CURRENT LIABILITIES:                 |  |                 |         |                  |   |                            |  |                           |         |  |              |          |   |  |   |        
|Accounts payable  trade             |  | $               | 12,066  |                  | $ | 20,547                     |  | $                         | 54,720  |  | $            | (50,848  | ) |  | $ | 36,485 
|Short term debt                      |  |                 |         |                  |   |                            |  |                           | 2,656   |  |              |          |   |  |   | 2,656  
|Current portion of long-term debt    |  |                 |         |                  |   | 20,202                     |  |                           | 24,890  |  |              |          |   |  |   | 45,092 
|Accrued and other liabilities        |  |                 | 33      |                  |   | 10,791                     |  |                           | 39,006  |  |              | (18,613  | ) |  |   | 31,217 
|                                     |  |                 |         |                  |   |                            |  |                           |         |  |              |          |   |  |   |        
|Total current liabilities            |  |                 | 12,099  |                  |   | 51,540                     |  |                           | 121,272 |  |              | (69,461  | ) |  |   | 115,450
|LONG-TERM DEBT, Net                  |  |                 | 91,616  |                  |   | 43.901                     |  |                           | 97,818  |  |              |          |   |  |   | 233,335
|OTHER LONG-TERM LIABILITIES          |  |                 |         |                  |   | 4,539                      |  |                           | 82,774  |  |              | (71,204  | ) |  |   | 16,109 
|                                     |  |                 |         |                  |   |                            |  |                           |         |  |              |          |   |  |   |        
|Total liabilities                    |  |                 | 103,715 |                  |   | 99,980                     |  |                           | 301,864 |  |              | (140,665 | ) |  |   | 364,894
|STOCKHOLDERS EQUITY                 |  |                 | 79,013  |                  |   | 18,981                     |  |                           | 38,193  |  |              | (57,174  | ) |  |   | 79,013 
|                                     |  |                 |         |                  |   |                            |  |                           |         |  |              |          |   |  |   |        
|TOTAL                                |  | $               | 182,728 |                  | $ | 118,961                    |  | $                         | 340,057 |  | $            | (197,839 | ) |  | $ | 443,907
|                                     |  |                 |         |                  |   |                            |  |                           |         |  |              |          |   |  |   |        



F-16



---

##### Table of Contents

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF MARCH 31, 2005

(In thousands of U.S. Dollars)



|                                     |  |                 |         |                  |   |                            |  |                           |         |  |              |          |   |  |   |        
|------------------------------------ |  | --------------- | ------- | ---------------- | - | -------------------------- |  | ------------------------- | ------- |  | ------------ | -------- | - |  | - | -------
|                                     |  | Holding Company |         | IMPSAT Argentina |   | Non-Guarantor Subsidiaries |  | Intercompany Eliminations |         |  | Consolidated
|                                     |  |                 |         | (Guarantor)      |   |                            |  |                           |         |  |             
|ASSETS                               |  |                 |         |                  |   |                            |  |                           |         |  |              |          |   |  |   |        
|CURRENT ASSETS:                      |  |                 |         |                  |   |                            |  |                           |         |  |              |          |   |  |   |        
|Cash and cash equivalents            |  | $               | 24,668  |                  | $ | 772                        |  | $                         | 15,934  |  |              |          |   |  | $ | 41,374 
|Trade accounts receivable, net       |  |                 |         |                  |   | 13,242                     |  |                           | 20,628  |  |              |          |   |  |   | 33,870 
|Other receivables                    |  |                 | 100,563 |                  |   | 24,187                     |  |                           | 50,173  |  | $            | (160,955 | ) |  |   | 13,968 
|Prepaid expenses                     |  |                 |         |                  |   | 1,099                      |  |                           | 3,714   |  |              | (600     | ) |  |   | 4,213  
|                                     |  |                 |         |                  |   |                            |  |                           |         |  |              |          |   |  |   |        
|Total current assets                 |  |                 | 125,231 |                  |   | 39,300                     |  |                           | 90,449  |  |              | (161,555 | ) |  |   | 93,425 
|                                     |  |                 |         |                  |   |                            |  |                           |         |  |              |          |   |  |   |        
|PROPERTY, PLANT AND EQUIPMENT, Net   |  |                 |         |                  |   | 73,787                     |  |                           | 239,344 |  |              |          |   |  |   | 313,131
|                                     |  |                 |         |                  |   |                            |  |                           |         |  |              |          |   |  |   |        
|NON-CURRENT ASSETS:                  |  |                 |         |                  |   |                            |  |                           |         |  |              |          |   |  |   |        
|Investments                          |  |                 | 52,494  |                  |   |                            |  |                           |         |  |              | (52,494  | ) |  |   |        
|Other non-current assets             |  |                 |         |                  |   | 6,989                      |  |                           | 10,185  |  |              |          |   |  |   | 17,174 
|                                     |  |                 |         |                  |   |                            |  |                           |         |  |              |          |   |  |   |        
|Total non-current assets             |  |                 | 52,494  |                  |   | 6,989                      |  |                           | 10,185  |  |              | (52,494  | ) |  |   | 17,174 
|                                     |  |                 |         |                  |   |                            |  |                           |         |  |              |          |   |  |   |        
|TOTAL                                |  | $               | 177,725 |                  | $ | 120,076                    |  | $                         | 339,978 |  | $            | (214,049 | ) |  | $ | 423,730
|                                     |  |                 |         |                  |   |                            |  |                           |         |  |              |          |   |  |   |        
|LIABILITIES AND STOCKHOLDERS EQUITY |  |                 |         |                  |   |                            |  |                           |         |  |              |          |   |  |   |        
|CURRENT LIABILITIES:                 |  |                 |         |                  |   |                            |  |                           |         |  |              |          |   |  |   |        
|Accounts payable  trade             |  | $               | 13,300  |                  | $ | 22,003                     |  | $                         | 60,755  |  | $            | (57,287  | ) |  | $ | 38,771 
|Short term debt                      |  |                 |         |                  |   |                            |  |                           | 1,204   |  |              |          |   |  |   | 1,204  
|Current portion of long-term debt    |  |                 |         |                  |   | 20,371                     |  |                           | 25,004  |  |              |          |   |  |   | 45,375 
|Accrued and other liabilities        |  |                 | 118     |                  |   | 17,742                     |  |                           | 49,940  |  |              | (34,080  | ) |  |   | 33,420 
|                                     |  |                 |         |                  |   |                            |  |                           |         |  |              |          |   |  |   |        
|Total current liabilities            |  |                 | 13,418  |                  |   | 59,816                     |  |                           | 136,903 |  |              | (91,367  | ) |  |   | 118,770
|LONG-TERM DEBT, Net                  |  |                 | 92,903  |                  |   | 38,157                     |  |                           | 87,359  |  |              |          |   |  |   | 218,419
|OTHER LONG-TERM LIABILITIES          |  |                 |         |                  |   | 4,459                      |  |                           | 80,863  |  |              | (70,185  | ) |  |   | 15,137 
|                                     |  |                 |         |                  |   |                            |  |                           |         |  |              |          |   |  |   |        
|Total liabilities                    |  |                 | 106,321 |                  |   | 102,432                    |  |                           | 305,125 |  |              | (161,552 | ) |  |   | 352,326
|STOCKHOLDERS EQUITY                 |  |                 | 71,404  |                  |   | 17,644                     |  |                           | 34,853  |  |              | (52,497  | ) |  |   | 71,404 
|                                     |  |                 |         |                  |   |                            |  |                           |         |  |              |          |   |  |   |        
|TOTAL                                |  |                 | 177,725 |                  | $ | 120,076                    |  | $                         | 339,978 |  | $            | (214,049 | ) |  | $ | 423,730
|                                     |  |                 |         |                  |   |                            |  |                           |         |  |              |          |   |  |   |        



F-17



---

##### Table of Contents

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2004

(In thousands of U,S, Dollars)



|                                    |  |                 |        |   |                  |   |        |                            |  |   |                           |   |  |                        |        |   |  |   |        |  
|----------------------------------- |  | --------------- | ------ | - | ---------------- | - | ------ | -------------------------- |  | - | ------------------------- | - |  | ---------------------- | ------ | - |  | - | ------ | -
|                                    |  | Holding Company |        |   | IMPSAT Argentina |   |        | Non-Guarantor Subsidiaries |  |   | Intercompany Eliminations |   |  | Condensed Consolidated |       
|                                    |  |                 |        |   | (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-18



---

##### Table of Contents

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE MONTHS ENDED MARCH 31, 2005

(In thousands of U.S. Dollars)



|                                    |  |                 |        |   |                  |   |        |                            |  |   |                           |   |  |              |         |   |  |   |        |  
|----------------------------------- |  | --------------- | ------ | - | ---------------- | - | ------ | -------------------------- |  | - | ------------------------- | - |  | ------------ | ------- | - |  | - | ------ | -
|                                    |  | Holding Company |        |   | IMPSAT Argentina |   |        | Non-Guarantor Subsidiaries |  |   | Intercompany Eliminations |   |  | Consolidated |        
|                                    |  |                 |        |   | (Guarantor)      |   |        |                            |  |   |                           |   |  |              |        
|NET REVENUES:                       |  |                 |        |   |                  |   |        |                            |  |   |                           |   |  |              |         |   |  |   |        |  
|Broadband and satellite             |  |                 |        |   |                  | $ | 8,183  |                            |  | $ | 37,965                    |   |  | $            | (4,359  | ) |  | $ | 41,789 |  
|Internet                            |  |                 |        |   |                  |   | 1,880  |                            |  |   | 6,490                     |   |  |              | (1,439  | ) |  |   | 6,931  |  
|Value added services                |  |                 |        |   |                  |   | 3,634  |                            |  |   | 3,988                     |   |  |              | (2,482  | ) |  |   | 5,140  |  
|Telephony                           |  |                 |        |   |                  |   | 4,358  |                            |  |   | 3,837                     |   |  |              | (2,267  | ) |  |   | 5,928  |  
|Sales of equipment                  |  |                 |        |   |                  |   | 10     |                            |  |   | 74                        |   |  |              |         |   |  |   | 84     |  
|                                    |  |                 |        |   |                  |   |        |                            |  |   |                           |   |  |              |         |   |  |   |        |  
|Total net revenues                  |  |                 |        |   |                  |   | 18,065 |                            |  |   | 52,354                    |   |  |              | (10,547 | ) |  |   | 59,872 |  
|                                    |  |                 |        |   |                  |   |        |                            |  |   |                           |   |  |              |         |   |  |   |        |  
|COSTS AND EXPENSES:                 |  |                 |        |   |                  |   |        |                            |  |   |                           |   |  |              |         |   |  |   |        |  
|Direct costs:                       |  |                 |        |   |                  |   |        |                            |  |   |                           |   |  |              |         |   |  |   |        |  
|Contracted services                 |  |                 |        |   |                  |   | 2,283  |                            |  |   | 4,873                     |   |  |              | (1,940  | ) |  |   | 5,216  |  
|Other direct costs                  |  |                 |        |   |                  |   | 2,384  |                            |  |   | 5,075                     |   |  |              |         |   |  |   | 7,459  |  
|Leased capacity                     |  |                 |        |   |                  |   | 5,870  |                            |  |   | 18,561                    |   |  |              | (6,206  | ) |  |   | 18,225 |  
|Cost of equipment sold              |  |                 |        |   |                  |   | 7      |                            |  |   | 99                        |   |  |              |         |   |  |   | 106    |  
|                                    |  |                 |        |   |                  |   |        |                            |  |   |                           |   |  |              |         |   |  |   |        |  
|Total direct costs                  |  |                 |        |   |                  |   | 10,544 |                            |  |   | 28,608                    |   |  |              | (8,146  | ) |  |   | 31,006 |  
|Salaries and wages                  |  | $               | 440    |   |                  |   | 3,167  |                            |  |   | 9,363                     |   |  |              |         |   |  |   | 12,970 |  
|Selling, general and administrative |  |                 | 2,873  |   |                  |   | 1,593  |                            |  |   | 3,197                     |   |  |              | (2,401  | ) |  |   | 5,262  |  
|Depreciation and amortization       |  |                 |        |   |                  |   | 2,478  |                            |  |   | 9,548                     |   |  |              |         |   |  |   | 12,026 |  
|                                    |  |                 |        |   |                  |   |        |                            |  |   |                           |   |  |              |         |   |  |   |        |  
|Total costs and expenses            |  |                 | 3,313  |   |                  |   | 17,782 |                            |  |   | 50,716                    |   |  |              | (10,547 | ) |  |   | 61,264 |  
|                                    |  |                 |        |   |                  |   |        |                            |  |   |                           |   |  |              |         |   |  |   |        |  
|Operating income                    |  |                 | (3,313 | ) |                  |   | 283    |                            |  |   | 1,638                     |   |  |              |         |   |  |   | (1,392 | )
|                                    |  |                 |        |   |                  |   |        |                            |  |   |                           |   |  |              |         |   |  |   |        |  
|OTHER INCOME (EXPENSES):            |  |                 |        |   |                  |   |        |                            |  |   |                           |   |  |              |         |   |  |   |        |  
|Interest income                     |  |                 | 1,558  |   |                  |   | 18     |                            |  |   | (1,273                    | ) |  |              |         |   |  |   | 303    |  
|Interest expense                    |  |                 | (1,381 | ) |                  |   | (1,484 | )                          |  |   | (2,619                    | ) |  |              |         |   |  |   | (5,484 | )
|Net gain on foreign exchange        |  |                 | 5      |   |                  |   | (185   | )                          |  |   | (460                      | ) |  |              |         |   |  |   | (640   | )
|Equity in income of affiliates      |  |                 | (4,850 | ) |                  |   |        |                            |  |   | (1,954                    | ) |  |              | 6,804   |   |  |   |        |  
|Other (loss), net                   |  |                 | (243   | ) |                  |   | 30     |                            |  |   | (76                       | ) |  |              |         |   |  |   | (289   | )
|                                    |  |                 |        |   |                  |   |        |                            |  |   |                           |   |  |              |         |   |  |   |        |  
|Total other (expenses) income       |  |                 | (4,911 | ) |                  |   | (1,621 | )                          |  |   | (6,382                    | ) |  |              | 6,804   |   |  |   | (6,110 | )
|                                    |  |                 |        |   |                  |   |        |                            |  |   |                           |   |  |              |         |   |  |   |        |  
|INCOME BEFORE INCOME TAXES          |  |                 | (8,224 | ) |                  |   | (1,338 | )                          |  |   | (4,744                    | ) |  |              | 6,804   |   |  |   | (7,502 | )
|PROVISION FOR FOREIGN INCOME TAXES  |  |                 |        |   |                  |   |        |                            |  |   | (722                      | ) |  |              |         |   |  |   | (722   | )
|                                    |  |                 |        |   |                  |   |        |                            |  |   |                           |   |  |              |         |   |  |   |        |  
|NET INCOME                          |  | $               | (8,224 | ) |                  | $ | (1,338 | )                          |  | $ | (5,466                    | ) |  | $            | 6,804   |   |  | $ | (8,224 | )
|                                    |  |                 |        |   |                  |   |        |                            |  |   |                           |   |  |              |         |   |  |   |        |  



F-19



---

##### Table of Contents

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2004

(In thousands of U,S, Dollars)



|                                                            |  |                 |        |   |                  |   |       |                            |  |   |                           |   |  |                        |        |   |  |   |        |  
|----------------------------------------------------------- |  | --------------- | ------ | - | ---------------- | - | ----- | -------------------------- |  | - | ------------------------- | - |  | ---------------------- | ------ | - |  | - | ------ | -
|                                                            |  | Holding Company |        |   | IMPSAT Argentina |   |       | Non-Guarantor Subsidiaries |  |   | Intercompany Eliminations |   |  | Condensed consolidated |       
|                                                            |  |                 |        |   | (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 |  
|                                                            |  |                 |        |   |                  |   |       |                            |  |   |                           |   |  |                        |        |   |  |   |        |  



FOR THE THREE MONTHS
ENDED MARCH 31, 2005



|                                                            |  |                |         |   |                 |   |        |                           |  |   |                          |   |  |              |        |   |  |         |  
|----------------------------------------------------------- |  | -------------- | ------- | - | --------------- | - | ------ | ------------------------- |  | - | ------------------------ | - |  | ------------ | ------ | - |  | ------- | -
|                                                            |  | HoldingCompany |         |   | IMPSATArgentina |   |        | Non-GuarantorSubsidiaries |  |   | IntercompanyEliminations |   |  | Consolidated |       
|                                                            |  |                |         |   | (Guarantor)     |   |        |                           |  |   |                          |   |  |              |       
|Cash flows provided by (used in) operating activities       |  | $              | (343    | ) |                 | $ | 5,643  |                           |  | $ | 9,091                    |   |  | $            | (8,850 | ) |  | 5,541   |  
|Cash flows provided by (used in) investing activities       |  |                | (14,939 | ) |                 |   | (2,326 | )                         |  |   | 112                      |   |  |              | 8,850  |   |  | (8,303  | )
|Cash flows provided by (used in) financing activities       |  |                |         |   |                 |   | (6,380 | )                         |  |   | (13,214                  | ) |  |              |        |   |  | (19,594 | )
|Effect of exchange rate change on cash and cash equivalents |  |                | 175     |   |                 |   |        |                           |  |   | (100                     | ) |  |              |        |   |  | 75      |  
|                                                            |  |                |         |   |                 |   |        |                           |  |   |                          |   |  |              |        |   |  |         |  
|Net increase in cash and cash equivalents                   |  |                | (15,107 | ) |                 |   | (3,063 | )                         |  |   | (4,111                   | ) |  |              |       |   |  | (22,281 | )
|Cash and cash equivalents at beginning of the period        |  |                | 39,775  |   |                 |   | 3,835  |                           |  |   | 20,045                   |   |  |              |        |   |  | 63,655  |  
|                                                            |  |                |         |   |                 |   |        |                           |  |   |                          |   |  |              |        |   |  |         |  
|Cash and cash equivalents at end of the period              |  | $              | 24,668  |   |                 | $ | 772    |                           |  | $ | 15,934                   |   |  | $            |       |   |  | 41,374  |  
|                                                            |  |                |         |   |                 |   |        |                           |  |   |                          |   |  |              |        |   |  |         |  





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