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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 September 30, 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



Indicate by check mark whether the registrant is a shell company (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 September 30, 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 |  | 3  
|                             |  |                                                                                              
|                             |  | ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            |  | 17 
|                             |  |                                                                                              
|                             |  | ITEM 4.
CONTROLS AND PROCEDURES                                                               |  | 19 
|                             | 
|PART II
OTHER INFORMATION    |  | 19                                                                                           
|                             |  |                                                                                              
|                             |  | ITEM 1.
LEGAL PROCEEDINGS                                                                     |  | 19 
|                             |  |                                                                                              
|                             |  | ITEM 2.
CHANGES IN SECURITIES AND USE OF PROCEEDS                                             |  | 19 
|                             |  |                                                                                              
|                             |  | ITEM 3.
DEFAULTS UPON SENIOR SECURITIES                                                       |  | 19 
|                             |  |                                                                                              
|                             |  | ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS                                   |  | 19 
|                             |  |                                                                                              
|                             |  | ITEM 5.
OTHER INFORMATION                                                                     |  | 19 
|                             |  |                                                                                              
|                             |  | ITEM 6.
EXHIBITS                                                                              |  | 19 
|                             | 
|SIGNATURES                   |  | 21                                                                                           
|                             | 
|CERTIFICATIONS               |  |                                                                                              



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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 have generally been two-year contracts. Our customers generally pay an installation charge at the beginning of the contract and a monthly fee based on the
quantity and type of equipment installed and the type and amount of services provided. 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, node expenses and sales commissions paid to third-party sales representatives and
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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Currency and Related 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.



Under the Argentine pesification decree adopted in 2002, contracts in effect on that date that were denominated in U.S. dollars were converted intopesos at a specified rate and are eligible
for adjustment pursuant to an index published by the Argentine central bank called the coeficiente de estabilizacion de referencia, which is based on the Argentine consumer price index (CER). Contracts that were
denominated in pesos prior to the adoption of the pesification decree and contracts entered into after the decrees enactment are not entitled to be adjusted by CER or any other price or related index. An increase in inflation in
Argentina or our other countries of operation could adversely affect our results and our operating income (loss) by causing an increase in our costs that cannot be compensated for by adjustments to our prices for services.



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) are 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.



Changes in exchange rates between the U.S. dollar and the local currencies in the countries in which we operate also affect our costs incurred in local currencies. In
each of our countries of operation other than the United States and Ecuador, where the local currency is the U.S. dollar, an appreciation of the respective local currency against the U.S. dollar will result in an increase in U.S. dollar terms of our
local currency denominated costs, including salaries and wages and selling, general and administrative expenses. Accordingly, the benefits of the appreciation of the local currency to our revenues in countries such as Argentina and Brazil will be
offset in part by the increase in local currency denominated costs in those countries during the same period. In other countries of operation, where the majority of our revenues are denominated in U.S. dollars or U.S. dollar equivalents but the
majority of costs are denominated in local currency, an appreciation of the local currency against the U.S. dollar may adversely affect our results while a depreciation of the local currency against the U.S. dollar may positively affect our results.



The following table shows U.S. dollar exchange rates for the currencies of
Argentina, Colombia and Brazil, our three largest countries of operation measured by revenues, at the dates indicated:



|               |                               |                    |  |                    |  |                   
|-------------- | ----------------------------- | ------------------ |  | ------------------ |  | ------------------
|Currency       |                               | September 30, 2003 |  | September 30, 2004 |  | September 30, 2005
|               | (exchange rate per U.S.$1.00)
|Argentina peso |                               | 2.90               |  | 3.00               |  | 2.91              
|Colombia peso  |                               | 2,889              |  | 2,595              |  | 2,290             
|Brazil real    |                               | 2.92               |  | 2.87               |  | 2.22              



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



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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. Since then, thepeso has traded as high as 1.65pesos to the U.S. dollar in early January 2002 and as low as 3.87pesos to the
U.S. dollar. At September 30, 2004 the exchange rate was 3.00 pesos to the U.S. Dollar, appreciating to 2.91 pesos to the U.S. Dollar on September 30, 2005. Currently, a significant portion of IMPSAT
Argentinas customer contracts and operating cash inflows are denominated inpesos.



Brazil



At September 30, 2004, thereal traded at a rate of R$2.87 = $1.00, and it appreciated to R$2.22 = $1.00 at September 30, 2005. A significant
depreciation of the real against the U.S. dollar would adversely affect our future results.



Colombia



In March of 2003, the Colombian peso exchange rate peaked at Ps. 2,958 = $1.00, following over ten years of constant devaluation. Since April 2003, the Colombian
peso has appreciated against the U.S. dollar. At September 30, 2004, the peso traded at a rate of Ps. 2,595 = $1.00 and appreciated to Ps. 2,290 = $1.00 at September 30, 2005, the highest value since February 2001.



Venezuela



In February 2003, the Venezuelan government imposed foreign exchange and price controls in
response to adverse economic conditions resulting from a nation-wide strike that commenced in December 2002, setting a rate of Bs.1,600 = U.S.$1.00. The exchange controls make 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 and also severely limit our ability to convert local currency into U.S. dollars and transfer funds out of Venezuela. At September 30, 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, where it remains. 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 more stringent 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



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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.



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 impairment charges for some of these assets in future
periods.



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Basis for Translation



We maintain our consolidated accounts in U.S. dollars. Our subsidiaries, except for IMPSAT Brazil, use the U.S. dollar as their functional
currency. Except with respect to IMPSAT Brazil, effects of foreign currency translations are included as net gain or loss on foreign exchange. IMPSAT Brazil uses its local currency as its functional currency and the effects of translation of the
real into the U.S. dollar are included in 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 third quarter of 2005, nor have we made any material changes in any of the critical accounting estimates underlying these accounting policies during said period.



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.



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Results of Operations



The following table summarizes our results of operations:



|                                             |  |                                                             |        |   |                           |       |   |      |   |        |      |  |       |    |  |   |         |   |  |       |    |  |   |         |   |  |       |   
|-------------------------------------------- |  | ----------------------------------------------------------- | ------ | - | ------------------------- | ----- | - | ---- | - | ------ | ---- |  | ----- | -- |  | - | ------- | - |  | ----- | -- |  | - | ------- | - |  | ----- | --
|                                             |  | Three Months Ended September 30,                            |        |   | Nine Months September 30, |      
|                                             |  | 2004                                                        |        |   | 2005                      |       |   | 2004 |   |        | 2005 | 
|                                             |  | (in thousands and as a percentage of consolidated revenues) |       
|Net revenues:                                |  |                                                             |        |   |                           |       |   |      |   |        |      |  |       |    |  |   |         |   |  |       |    |  |   |         |   |  |       |   
|Net revenues from services:                  |  |                                                             |        |   |                           |       |   |      |   |        |      |  |       |    |  |   |         |   |  |       |    |  |   |         |   |  |       |   
|Broadband and satellite                      |  | $                                                           | 40,577 |   |                           | 70.5  | % |      | $ | 44,172 |      |  | 67.5  | %  |  | $ | 120,156 |   |  | 71.4  | %  |  | $ | 128,037 |   |  | 68.6  | % 
|Internet                                     |  |                                                             | 6,542  |   |                           | 11.3  |   |      |   | 7,873  |      |  | 12.0  |    |  |   | 19,242  |   |  | 11.4  |    |  |   | 22,200  |   |  | 11.9  |   
|Value added services                         |  |                                                             | 4,270  |   |                           | 7.4   |   |      |   | 6,351  |      |  | 9.7   |    |  |   | 12,306  |   |  | 7.3   |    |  |   | 17,147  |   |  | 9.2   |   
|Telephony                                    |  |                                                             | 5,479  |   |                           | 9.5   |   |      |   | 6,579  |      |  | 10.1  |    |  |   | 15,527  |   |  | 9.3   |    |  |   | 18,720  |   |  | 10.0  |   
|                                             |  |                                                             |        |   |                           |       |   |      |   |        |      |  |       |    |  |   |         |   |  |       |    |  |   |         |   |  |       |   
|Total net revenues from services             |  |                                                             | 56,868 |   |                           | 98.7  |   |      |   | 64,975 |      |  | 99.3  |    |  |   | 167,231 |   |  | 99.4  |    |  |   | 186,104 |   |  | 99.7  |   
|Sales of equipment                           |  |                                                             | 722    |   |                           | 1.3   |   |      |   | 433    |      |  | 0.7   |    |  |   | 964     |   |  | 0.6   |    |  |   | 634     |   |  | 0.3   |   
|                                             |  |                                                             |        |   |                           |       |   |      |   |        |      |  |       |    |  |   |         |   |  |       |    |  |   |         |   |  |       |   
|Total net revenues                           |  |                                                             | 57,590 |   |                           | 100.0 |   |      |   | 65,408 |      |  | 100.0 |    |  |   | 168,195 |   |  | 100.0 |    |  |   | 186,738 |   |  | 100.0 |   
|                                             |  |                                                             |        |   |                           |       |   |      |   |        |      |  |       |    |  |   |         |   |  |       |    |  |   |         |   |  |       |   
|Direct costs:                                |  |                                                             |        |   |                           |       |   |      |   |        |      |  |       |    |  |   |         |   |  |       |    |  |   |         |   |  |       |   
|Contracted services                          |  |                                                             | 5,364  |   |                           | 9.3   |   |      |   | 6,601  |      |  | 10.1  |    |  |   | 14,756  |   |  | 8.8   |    |  |   | 17,887  |   |  | 9.6   |   
|Other direct costs                           |  |                                                             | 5,343  |   |                           | 9.3   |   |      |   | 7,014  |      |  | 10.7  |    |  |   | 14,862  |   |  | 8.8   |    |  |   | 20,957  |   |  | 11.2  |   
|Leased capacity                              |  |                                                             | 16,960 |   |                           | 29.4  |   |      |   | 18,763 |      |  | 28.7  |    |  |   | 48,695  |   |  | 29.0  |    |  |   | 55,948  |   |  | 30.0  |   
|Cost of equipment sold                       |  |                                                             | 571    |   |                           | 0.9   |   |      |   | 375    |      |  | 0.6   |    |  |   | 747     |   |  | 0.4   |    |  |   | 572     |   |  | 0.3   |   
|                                             |  |                                                             |        |   |                           |       |   |      |   |        |      |  |       |    |  |   |         |   |  |       |    |  |   |         |   |  |       |   
|Total direct costs                           |  |                                                             | 28,238 |   |                           | 49.0  |   |      |   | 32,753 |      |  | 50.1  |    |  |   | 79,060  |   |  | 47.0  |    |  |   | 95,364  |   |  | 51.1  |   
|Salaries and wages                           |  |                                                             | 11,961 |   |                           | 20.8  |   |      |   | 12,100 |      |  | 18.5  |    |  |   | 35,941  |   |  | 21.4  |    |  |   | 37,347  |   |  | 20.0  |   
|Selling, general and administrative expenses |  |                                                             | 6,254  |   |                           | 10.8  |   |      |   | 5,766  |      |  | 8.8   |    |  |   | 17,719  |   |  | 10.5  |    |  |   | 16,903  |   |  | 9.1   |   
|Gain on extinguishment of debt               |  |                                                             | (115   | ) |                           | (0.2  | ) |      |   |        |      |  |       |    |  |   | (115    | ) |  | (0.1  | )  |  |   |         |   |  |       |   
|Depreciation and amortization                |  |                                                             | 11,525 |   |                           | 20.0  |   |      |   | 13,963 |      |  | 21.3  |    |  |   | 32,246  |   |  | 19.2  |    |  |   | 40,355  |   |  | 21.6  |   
|Interest expense, net                        |  |                                                             | (5,167 | ) |                           | (9.0  | ) |      |   | (7,122 | )    |  | (10.9 | )  |  |   | (14,765 | ) |  | (8.8  | )  |  |   | (21,241 | ) |  | (11.4 | ) 
|Net gain (loss) on foreign exchange          |  |                                                             | 7,159  |   |                           | 12.4  |   |      |   | 4,362  |      |  | 6.7   |    |  |   | (2,751  | ) |  | (1.6  | )  |  |   | 15,632  |   |  | 8.4   |   
|Other income (expense), net                  |  |                                                             | 64     |   |                           | 0.1   |   |      |   | (1,386 | )    |  | (2.1  | )  |  |   | 1,353   |   |  | 0.8   |    |  |   | (6,737  | ) |  | (3.6  | ) 
|Provision for foreign income taxes           |  |                                                             | (1,108 | ) |                           | (1.9  | ) |      |   | (1,843 | )    |  | (2.8  | )  |  |   | (2,989  | ) |  | (1.8  | )  |  |   | (4,777  | ) |  | (2.6  | ) 
|                                             |  |                                                             |        |   |                           |       |   |      |   |        |      |  |       |    |  |   |         |   |  |       |    |  |   |         |   |  |       |   
|Net Income (loss)                            |  | $                                                           | 675    |   |                           | 1.2   | % |      | $ | (5,163 | )    |  | (7.9  | )% |  | $ | (15,808 | ) |  | (9.4  | )% |  | $ | (20,354 | ) |  | (10.9 | )%
|                                             |  |                                                             |        |   |                           |       |   |      |   |        |      |  |       |    |  |   |         |   |  |       |    |  |   |         |   |  |       |   



Three and Nine
Months Ended September 30, 2005 Compared to Three and Nine Months Ended September 30, 2004



Revenues.Our total net revenues for the three and nine months ended September 30, 2005 equaled $65.4 million and $186.7 million,
respectively. This compares to total net revenues of $57.6 million and $168.2 million for the corresponding periods in 2004. Net revenues are composed of net revenues from services and sales of equipment.



Our net revenues from services for the three and nine months ended
September 30, 2005 totaled $65.0 million and $186.1 million, an increase of $8.1 million (or 14.3%) and $18.9 million (or 11.3%)



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compared to the corresponding periods in 2004. Our net revenues from services during the third quarter of 2005 increased
$3.6 million (or 5.9%) from net revenues from services for the second quarter of 2005. Our net revenues from services 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 September 30, |        |      | Nine Months Ended September 30, |           
|                                 |  | 2004                             |        | 2005 |                                 | %change(1) |  |      | 2004 |  | 2005 |         | %change(1) |  
|                                 |  | (dollar amounts in thousands)    |       
|Broadband and satellite          |  | $                                | 40,577 |      | $                               | 44,172     |  | 8.9  | %    |  | $    | 120,156 |            | $ | 128,037 |  | 6.6  | %
|Internet                         |  |                                  | 6,542  |      |                                 | 7,873      |  | 20.3 |      |  |      | 19,242  |            |   | 22,200  |  | 15.4 |  
|Value added services(2)          |  |                                  | 4,270  |      |                                 | 6,351      |  | 48.7 |      |  |      | 12,306  |            |   | 17,147  |  | 39.3 |  
|Telephony                        |  |                                  | 5,479  |      |                                 | 6,579      |  | 20.1 |      |  |      | 15,527  |            |   | 18,720  |  | 20.6 |  
|                                 |  |                                  |        |      |                                 |            |  |      |      |  |      |         |            |   |         |  |      |  
|Total net revenues from services |  | $                                | 56,868 |      | $                               | 64,975     |  | 14.3 | %    |  | $    | 167,231 |            | $ | 186,104 |  | 11.3 | %
|                                 |  |                                  |        |      |                                 |            |  |      |      |  |      |         |            |   |         |  |      |  

---

|(1) | Percentage increase (decrease) in relevant period 2005 compared to corresponding period in 2004.
|--- | ------------------------------------------------------------------------------------------------

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



The increase in our total net revenues from services in the third quarter of 2005, as compared to the corresponding period in 2004, is due
to increased revenues from services in all of our business lines:



| |  |  | Revenues from broadband and satellite services during the third quarter of 2005 increased as compared to the third quarter of 2004 as a result of increased revenues from new
customers and expansion of services to existing customers. Revenue growth was highest in Brazil, Argentina and Colombia.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We experienced higher internet revenues principally because of new customers and expansion of services to existing customers, primarily in Brazil. Internet revenues also increased
in Argentina, Colombia, the United States and Ecuador.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our revenues from value added services increased in the third quarter of 2005 compared to the same period in 2004, principally from revenues for housing and hosting services in
Brazil, including the contract entered into at the end of 2004 with Petrobras.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our telephony services revenues also increased during the third quarter of 2005 as compared to the third quarter of 2004. The increase was due principally to our increased delivery
of voice services to corporate customers and higher wholesale traffic. In addition, the increase in our telephony revenues was due in part to an increase of $0.6 million in interconnection fees received in Argentina from other carriers for
terminating calls as a result of the negotiation of the CER rate applicable to such fees received for the period from the third quarter of 2004 to the third quarter of 2005.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our net revenues discussed above were also impacted positively in U.S. dollar terms by the appreciation of the Brazilianreal to the
U.S. dollar during the third quarter of 2005 as compared to the same quarter in the prior year. In U.S. dollar terms, our revenues in Brazil, which are denominated in local currencies, generally increase when the local currency appreciates against
the U.S. dollar, and decreases when the local currency depreciates. We had 4,214 customers as of September 30, 2005, compared to 3,314 customers at December 31, 2004 and 3,150 customers at September 30, 2004.



We gained a net total of 302 and 900 customers during the three and nine months ended
September 30, 2005, respectively. Of this increase, we had a net gain of 222 and 477 customers in Argentina during the



9



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respective periods, including a significant number of new customers utilizing our VOIP telephony services. In general and
in particular in Argentina, these newer customers represent less revenue per customer than with the majority of our existing customers.



During the third quarter of 2005, the Government of the Province of Buenos Aires, IMPSAT Argentinas largest individual customer, announced that it would not renew
its contract upon the scheduled termination of the contract in 2006. The contract, the renewal of which was subject to a public bidding process and was awarded to certain competitors of the Company, accounts for approximately $401,000.00 in monthly
revenues during 2005. The Company anticipates that it will continue to provide services to the Government of the Province of Buenos Aires through the first three quarters of 2006 at a reduced level as the customer integrates its telecommunications
infrastructure with its new contract providers.



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



|                                                  |  |                                  |        |      |                                 |            |  |        |      |  |      |        |            |   |        |  |        |  
|------------------------------------------------- |  | -------------------------------- | ------ | ---- | ------------------------------- | ---------- |  | ------ | ---- |  | ---- | ------ | ---------- | - | ------ |  | ------ | -
|                                                  |  | Three Months Ended September 30, |        |      | Nine Months Ended September 30, |           
|                                                  |  | 2004                             |        | 2005 |                                 | %change(1) |  |        | 2004 |  | 2005 |        | %change(1) |  
|                                                  |  | (dollar amounts in thousands)    |       
|IMPSAT Argentina                                  |  |                                  |        |      |                                 |            |  |        |      |  |      |        |            |   |        |  |        |  
|Services                                          |  | $                                | 15,693 |      | $                               | 19,532     |  | 24.5   | %    |  | $    | 47,463 |            | $ | 56,275 |  | 18.6   | %
|Sale of equipment                                 |  |                                  | 522    |      |                                 | 12         |  | (97.7  | )    |  |      | 639    |            |   | 40     |  | (93.7  | )
|                                                  |  |                                  |        |      |                                 |            |  |        |      |  |      |        |            |   |        |  |        |  
|Total                                             |  | $                                | 16,215 |      | $                               | 19,544     |  | 20.5   |      |  | $    | 48,102 |            | $ | 56,315 |  | 17.1   |  
|                                                  |  |                                  |        |      |                                 |            |  |        |      |  |      |        |            |   |        |  |        |  
|IMPSAT Colombia                                   |  |                                  |        |      |                                 |            |  |        |      |  |      |        |            |   |        |  |        |  
|Services                                          |  | $                                | 14,235 |      | $                               | 16,125     |  | 13.3   |      |  | $    | 42,207 |            | $ | 44,335 |  | 5.0    |  
|Sale of equipment                                 |  |                                  | 7      |      |                                 | 53         |  | 657.1  |      |  |      | 43     |            |   | 92     |  | 114.0  |  
|                                                  |  |                                  |        |      |                                 |            |  |        |      |  |      |        |            |   |        |  |        |  
|Total                                             |  | $                                | 14,242 |      | $                               | 16,178     |  | 13.6   |      |  | $    | 42,250 |            | $ | 44,427 |  | 5.2    |  
|                                                  |  |                                  |        |      |                                 |            |  |        |      |  |      |        |            |   |        |  |        |  
|IMPSAT Brazil                                     |  |                                  |        |      |                                 |            |  |        |      |  |      |        |            |   |        |  |        |  
|Services                                          |  | $                                | 8,281  |      | $                               | 12,379     |  | 49.5   |      |  | $    | 23,332 |            | $ | 33,734 |  | 44.6   |  
|Sale of equipment                                 |  |                                  |       |      |                                 |           |  |       |      |  |      | 51     |            |   |       |  | (100.0 | )
|                                                  |  |                                  |        |      |                                 |            |  |        |      |  |      |        |            |   |        |  |        |  
|Total                                             |  | $                                | 8,281  |      | $                               | 12,379     |  | 49.5   |      |  | $    | 23,383 |            | $ | 33,734 |  | 44.3   |  
|                                                  |  |                                  |        |      |                                 |            |  |        |      |  |      |        |            |   |        |  |        |  
|IMPSAT Venezuela                                  |  |                                  |        |      |                                 |            |  |        |      |  |      |        |            |   |        |  |        |  
|Services                                          |  | $                                | 8,227  |      | $                               | 6,898      |  | (16.2  | )    |  | $    | 24,534 |            | $ | 23,110 |  | (5.8   | )
|Sale of equipment                                 |  |                                  | 12     |      |                                 | 7          |  | (41.7  | )    |  |      | 42     |            |   | 82     |  | 95.2   |  
|                                                  |  |                                  |        |      |                                 |            |  |        |      |  |      |        |            |   |        |  |        |  
|Total                                             |  | $                                | 8,239  |      | $                               | 6,905      |  | (16.2  | )    |  | $    | 24,576 |            | $ | 23,192 |  | (5.6   | )
|                                                  |  |                                  |        |      |                                 |            |  |        |      |  |      |        |            |   |        |  |        |  
|IMPSAT Ecuador                                    |  |                                  |        |      |                                 |            |  |        |      |  |      |        |            |   |        |  |        |  
|Services                                          |  | $                                | 4,407  |      | $                               | 5,033      |  | 14.2   |      |  | $    | 12,959 |            | $ | 14,771 |  | 14.0   |  
|Sale of equipment                                 |  |                                  | 182    |      |                                 | 353        |  | 94.0   |      |  |      | 191    |            |   | 354    |  | 85.3   |  
|                                                  |  |                                  |        |      |                                 |            |  |        |      |  |      |        |            |   |        |  |        |  
|Total                                             |  | $                                | 4,589  |      | $                               | 5,386      |  | 17.4   |      |  | $    | 13,150 |            | $ | 15,125 |  | 15.0   |  
|                                                  |  |                                  |        |      |                                 |            |  |        |      |  |      |        |            |   |        |  |        |  
|IMPSAT Chile                                      |  |                                  |        |      |                                 |            |  |        |      |  |      |        |            |   |        |  |        |  
|Services                                          |  | $                                | 1,682  |      | $                               | 2,202      |  | 30.9   |      |  | $    | 5,494  |            | $ | 6,356  |  | 15.7   |  
|                                                  |  |                                  |        |      |                                 |            |  |        |      |  |      |        |            |   |        |  |        |  
|Total                                             |  | $                                | 1,682  |      | $                               | 2,202      |  | 30.9   |      |  | $    | 5,494  |            | $ | 6,356  |  | 15.7   |  
|                                                  |  |                                  |        |      |                                 |            |  |        |      |  |      |        |            |   |        |  |        |  
|IMPSAT Peru                                       |  |                                  |        |      |                                 |            |  |        |      |  |      |        |            |   |        |  |        |  
|Services                                          |  | $                                | 3,824  |      | $                               | 3,857      |  | 0.9    |      |  | $    | 10,678 |            | $ | 11,489 |  | 7.6    |  
|                                                  |  |                                  |        |      |                                 |            |  |        |      |  |      |        |            |   |        |  |        |  
|Total                                             |  | $                                | 3,824  |      | $                               | 3,857      |  | 0.9    |      |  | $    | 10,678 |            | $ | 11,489 |  | 7.6    |  
|                                                  |  |                                  |        |      |                                 |            |  |        |      |  |      |        |            |   |        |  |        |  
|IMPSAT USA                                        |  |                                  |        |      |                                 |            |  |        |      |  |      |        |            |   |        |  |        |  
|Services                                          |  | $                                | 6,954  |      | $                               | 6,776      |  | (2.6   | )    |  | $    | 20,860 |            | $ | 20,099 |  | (3.6   | )
|Sale of equipment                                 |  |                                  |       |      |                                 | 7          |  | 100.0  |      |  |      |       |            |   | 66     |  | 100.0  |  
|                                                  |  |                                  |        |      |                                 |            |  |        |      |  |      |        |            |   |        |  |        |  
|Total                                             |  | $                                | 6,954  |      | $                               | 6,783      |  | (2.5   | )    |  | $    | 20,860 |            | $ | 20,165 |  | (3.3   | )
|                                                  |  |                                  |        |      |                                 |            |  |        |      |  |      |        |            |   |        |  |        |  
|International Satellite Capacity Holding, Ltd.(2) |  |                                  |        |      |                                 |            |  |        |      |  |      |        |            |   |        |  |        |  
|Services                                          |  | $                                | 2,724  |      | $                               | 2,461      |  | (9.7   | )    |  | $    | 8,344  |            | $ | 7,356  |  | (11.8  | )
|                                                  |  |                                  |        |      |                                 |            |  |        |      |  |      |        |            |   |        |  |        |  
|Total                                             |  | $                                | 2,724  |      | $                               | 2,461      |  | (9.7   | )    |  | $    | 8,344  |            | $ | 7,356  |  | (11.8  | )
|                                                  |  |                                  |        |      |                                 |            |  |        |      |  |      |        |            |   |        |  |        |  
|Other                                             |  |                                  |        |      |                                 |            |  |        |      |  |      |        |            |   |        |  |        |  
|Services                                          |  | $                                | 280    |      |                                 |           |  | (100.0 | )    |  | $    | 747    |            |   |       |  | (100.0 | )
|                                                  |  |                                  |        |      |                                 |            |  |        |      |  |      |        |            |   |        |  |        |  
|Total                                             |  | $                                | 280    |      |                                 |           |  | (100.0 | )    |  | $    | 747    |            |   |       |  | (100.0 | )
|                                                  |  |                                  |        |      |                                 |            |  |        |      |  |      |        |            |   |        |  |        |  

---

|(1) | Percentage increase (decrease) in relevant period in 2005 compared to corresponding period in 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.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Our net revenues from services at IMPSAT Argentina for the three and nine months ended September 30, 2005 totaled
$19.5 million and $56.3 million, respectively, an increase of $3.8 million (or 24.5%) and of $8.8 million (or 18.6%) compared to the corresponding periods in 2004. Argentina is our largest market in terms of number of customers and revenues. The
Argentine economy has grown during 2004 and the first nine months of 2005 after an extended period of economic difficulties and contraction that included the default by the Argentine government at the end of 2001 of its external public debt and the
devaluation of the peso. Nonetheless, Argentina continues to experience a lack of access to international capital markets and has recently experienced higher levels of inflation than in prior periods. A decline in political and economic
conditions in Argentina, our largest country of operation, could materially affect our financial condition and results of operations.



IMPSAT Brazils revenues from services for the three and nine months ended September 30, 2005 totaled $12.4 million and $33.7 million, an increase of $4.1
million (or 49.5%) and $10.4 million (or 44.6%) compared to the corresponding periods in 2004. IMPSAT Brazils results were positively affected by the appreciation of the real against the U.S. dollar over those periods. In local currency
terms, IMPSAT Brazils net revenues for the three and nine months ended September 30, 2005 increased by 16.8% and 19.9 %, respectively, compared to the corresponding periods in 2004. However, any future devaluations of thereal
or contraction of the Brazilian economy would have an adverse effect on IMPSAT Brazils and our companys overall financial condition and results of operations. Presidential elections are scheduled in Brazil for October 2006, and political
uncertainty surrounding such elections could adversely affect investor sentiment in Brazil, which in turn could result in a devaluation of the real.



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IMPSAT Colombia recorded revenues from services of $16.1 million and $44.3 million during the three and nine months ended
September 30, 2005, compared to $14.2 million and $42.2 million for the same periods in 2004. The increase in revenues at IMPSAT Colombia is attributable in part to an improvement in the retention of customers upon the completion of the term of
their contracts and an increase in recorded revenues from intercompany operations. Revenues from services at IMPSAT Venezuela equaled $6.9 million and $23.1 million for the three and nine months ended September 30, 2005, compared to $8.2
million and $24.5 million for the same periods in 2004. The decrease is due principally to a decrease in recorded revenues from certain intercompany contracts. IMPSAT USA recorded total net revenues from services of $6.8 million and $20.1 million
for the three and nine months ended September 30, 2005, compared to $7.0 million and $20.9 million for the corresponding periods in 2004.



Direct Costs.Our direct costs for the three and nine months ended September 30, 2005 totaled $32.8 million and $95.4 million, an increase of $4.5 million (or
16.0%) and $16.3 million (or 20.6%) compared to the same periods in 2004. Of our total direct costs for the three and nine months ended September 30, 2005, $10.5 million and $31.4 million related to the operations of IMPSAT Argentina, compared
to $9.2 million and $25.0 million for the corresponding periods in 2004. Direct costs for IMPSAT Brazil totaled $6.3 million and $17.0 million for the three and nine months ended September 30, 2005, compared to $4.3 million and $11.5 million
for the same periods in 2004. Direct costs of our subsidiaries are described prior to the elimination of intercompany transactions.



(1) Contracted Services.Contracted services costs include costs of maintenance and installation (and de-installation) services
provided by outside contractors. During the three and nine months ended September 30, 2005, our contracted services costs totaled $6.6 million and $17.9 million, an increase of $1.2 million (or 23.1%) and $3.1 million (or 21.2%) compared to the
same periods in 2004. Of these amounts, maintenance costs for our telecommunications network infrastructure, including the Broadband Network, totaled $3.8 million and $10.6 million for the three and nine months ended September 30, 2005,
compared to $3.4 million and $9.8 million for the same periods in 2004. Installation costs totaled $2.8 million and $7.3 million for the three and nine months ended September 30, 2005, compared to $2.0 million and $5.0 million during the
corresponding periods in 2004. Our installation costs increased because we had more new customers in the nine months ended September 30, 2005, compared to the same period in 2004. Of our total contracted services costs for the three and nine
months ended September 30, 2005, $2.3 million and $6.7 million related to the operations of IMPSAT Argentina, compared to $1.8 million and $5.0 million at IMPSAT Argentina for the same periods in 2004.



(2) Other Direct Costs.Other direct costs
principally include licenses and other fees, sales commissions paid to our salaried sales staff and to third-party sales representatives, and our provision for doubtful accounts and expenses related to the maintenance and operations of the
telecommunications nodes utilized to support telecommunication services provided to our customers. We recorded other direct costs of $7.0 million and $21.0 million during the three and nine months ended September 30, 2005, an increase of $1.7
million (or 31.3%) and $6.1 million (or 41.0%) compared to the same periods in 2004.



Sales commissions paid to our salaried sales force and third-party sales representatives for the three and nine months ended
September 30, 2005 totaled $2.1 million and $5.5 million, compared to $2.0 million and $5.9 million for the corresponding periods in 2004. Of these amounts, in the respective periods in 2005, $1.3 million and $3.6 million related to IMPSAT
Argentina.



We recorded net reversals of
provisions for doubtful accounts of $0.6 million and $0.4 million, respectively, for the three and nine months ended September 30, 2005, compared to net reversals of provisions for doubtful accounts of $1.0 million and $3.1 million for the same
periods in 2004. The net reversal of $3.1 million for the first nine months of 2004 related principally to our settlement of certain disputes with Global Crossing in the first quarter of 2004 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 for which we had reserved 100% of contractual amounts due.



Our expenses related to the maintenance and operations of our telecommunications nodes totaled $2.1 million
and $5.9 million, respectively, for the three and nine months ended September 30, 2005, an increase of $0.7 million (or 50%) and $1.6 million (or 37.2%) from the same periods in 2004. The increase in such node-related expenses resulted
primarily from required increases in



12



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node capacity proportionately relative to the increase in services provided, higher volumes and prices
for energy required for our nodes relative to expansion of our data center and other services, and the appreciation of the Brazilian real and Colombian peso.



(3) Leased Capacity.Our leased capacity costs for the three and nine months ended September 30,
2005 totaled $18.8 million and $55.9 million, an increase of $1.8 million (or 10.6%) and $7.3 million (or 14.9%) from the corresponding periods in 2004. This increase also reflects an overall growth in costs for interconnection and telephony
termination costs and frequency rights (which are components of our leased capacity costs), as described below.



Our leased satellite capacity costs for the three and nine months ended September 30, 2005 totaled $5.7 million and $17.3 million, a
decrease of $0.2 million (or 4.1%) and $0.4 million (or 2.4%) compared to the corresponding periods in 2004. In Argentina, our leased satellite capacity costs totaled $1.8 million and $5.5 million for the three and nine months ended
September 30, 2005, as compared to $1.8 million and $5.5 million for the same periods in 2004. Our leased satellite capacity costs for IMPSAT Brazil totaled $0.6 million and $2.0 million for the three and nine months ended September 30,
2005, as compared to $0.7 million and $2.1 million for the same periods in 2004. The overall reduction in our leased satellite capacity costs was principally due to our favorable renegotiation of, reduction of capacity, and settlement of disputes
relating to certain of our satellite capacity agreements. We had approximately 705 MHz of leased satellite capacity at September 30, 2005 and 722 MHz at September 30, 2004.



Our costs for dedicated leased capacity on third-party fiber optic networks totaled $9.2 million and $26.1
million for the three and nine months ended September 30, 2005, respectively, an increase of $1.9 million (or 25.5%) and $5.0 million (or 23.5%) as compared to the same periods in 2004. The increase in these costs is attributable in part to
growth in services provided and to our customer base, as well as to the appreciation of the Colombian peso and the Brazilian real. As we expand our services to existing clients and provide services to new clients, we are required to
lease additional capacity to provide increased telecommunications services to clients with facilities outside of the footprint of our Broadband Network in order to provide end-to-end telecommunications services. In addition, as a result of our
having reached full capacity on international underseas cable IRUs that we purchased in prior years, we have been required to lease additional international fiber optic capacity in order to meet the international telecommunications needs of our
clients. Our customers are increasingly expressing a desire for fiber optic telecommunications, which has resulted in an increase in leased fiber optic capacity costs and a decrease in leased satellite capacity costs described above.



In connection with our domestic and international long
distance telephony services, we incur costs for interconnection and telephony termination (I&T). Our I&T costs totaled $3.3 million and $10.4 million during the three and nine months ended September 30, 2005. This compares
to $3.1 million and $8.1 million of I&T costs during the three and nine months ended September 30, 2004. Our I&T costs increased during the three and nine months ended September 30, 2005 compared to the same periods in 2004 as a
result of the increase in our telephony services, offset in part by a positive adjustment of $0.4 million in the amounts paid to other telecommunications carriers in Argentina as a result of our negotiation of the CER payable by us for the period
between the third quarter of 2004 to the third quarter of 2005 in respect of telephone calls terminated on those carriers systems.



(4) Cost of Equipment Sold.In the three and nine months ended September 30, 2005, we incurred costs of equipment sold of $0.4
million and $0.6 million, compared to $0.6 million and $0.7 million for the same periods in 2004.



Salaries and Wages.Salaries and wages for the three and nine months ended September 30, 2005 totaled $12.1 million and $37.3 million, an increase of $0.1 million (or 1.2%) and $1.4 million (or 3.9%), from
the same periods in 2004. The increase was primarily related to the appreciation of the Colombianpeso and Brazilian real in comparison to the same periods in the previous year.



We reduced the aggregate number of our employees from 1,279 at September 30, 2004 to
1,241 at September 30, 2005. IMPSAT Argentina incurred salaries and wages for the three and nine months ended September 30, 2005, of $3.1 million and $9.4 million, an increase of $0.2 million (or 6.6%) and



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$0.6 million (or 6.5%) compared to the same periods in 2004. IMPSAT Argentina had 453 employees at September 30,
2005, compared to 466 employees at September 30, 2004. The increase in salaries and wages, despite the decrease in the number of employees, resulted from higher payroll taxes. IMPSAT Brazil incurred salaries and wages for the three and nine
months ended September 30, 2005 of $2.5 million and $7.4 million, an increase of $0.3 million (or 15.7%) and $1.1 million (or 17.7%) over the same periods in 2004. IMPSAT Brazil increased its number of employees to 198 persons at
September 30, 2005, compared to 193 persons at September 30, 2004.



Selling, General and Administrative Expenses. We incurred SG&A expenses of $5.8 million and $16.9 million for the three and nine months ended September 30, 2005, a decrease of $0.5 million (or 7.8%) and $0.8 million (or
4.6%) compared to the same periods in 2004. SG&A expenses at IMPSAT Argentina for the three and nine months ended September 30, 2005 totaled $1.6 million and $4.9 million, a decrease of $0.3 million (or 16.0%) and $0.5 million (or 8.7%),
compared to the same periods in 2004. The decreases experienced were primarily due to savings in advisory fees, office equipment rental and computer hardware maintenance.



Depreciation and Amortization.Our depreciation and amortization expenses for the three and nine months ended September 30, 2005
totaled $14.0 million and $40.4 million. This represents an increase of $2.4 million (or 21.2%) and $8.1 million (or 25.1%) compared to our depreciation and amortization for the corresponding periods in 2004. The increase in depreciation and
amortization expenses is due to an increase in the Companys depreciable fixed asset base as a result of increased capital expenditures. During the twelve-month period between September 30, 2004 and September 30, 2005, we made
purchases of property, plant and equipment totaling $37.6 million. Such additional equipment, which comprises principally customer premises and other central telecommunications equipment, is depreciated over a shorter period of time than other
components of our property, plant and equipment and results in higher depreciation charges in the current periods.



Interest Expense, Net.Our net interest expense for the three months ended September 30, 2005 totaled $7.1 million, consisting of interest expense of $7.4
million and interest income of $0.3 million. Our net interest expense for the nine months ended September 30, 2005 totaled $21.2 million, consisting of interest expense of $22.1 million and interest income of $0.9 million. Net interest expense
for the three and nine months ended September 30, 2004 totaled $5.2 million and $14.8 million, respectively. The increase in our net interest expense is due in part to the increase in the rate of interest on subsidiary indebtedness totaling
$113.2 million in outstanding principal amount as of September 30, 2005 and to increased withholding taxes on such subsidiary indebtedness. Commencing on March 26, 2005, the effective interest rate on such indebtedness increased from
6% per annum (based on the U.S. GAAP treatment of contractual accretion of the principal amount of such indebtedness between the effective date of our restructuring in 2003 and March 25, 2005), to 10% per annum. In connection with the
amendment of $107.3 million in outstanding principal amount of this indebtedness in July 2005 as described in greater detail under Liquidity and Capital Resources below, the interest rate on such indebtedness was further increased to
12% per annum. Our indebtedness as of September 30, 2005 totaled $247.7 million, as compared to $271.6 million as of September 30, 2004. On July 29, 2005, we entered into amendments with respect to $125.6 million of such
subsidiary indebtedness outstanding as of June 30, 2005. See Liquidity and Capital Resources for more information on the terms of those amendments.



Net Gain (Loss) on Foreign Exchange.We recorded net gains on foreign exchange for the three and nine months ended September 30,
2005 of $4.4 million and $15.6 million, compared to net gain on foreign exchange of $7.2 million and net loss on foreign exchange of $2.8 million for the same periods in 2004. These net gains on foreign exchange reflect principally the effect of the
appreciation during the three and nine months ended September 30, 2005 of the Brazilian real on the book value of our monetary assets and liabilities in Brazil, as compared to the effect of the devaluation of that currency against U.S.
dollar during the three and nine months ended September 30, 2004.



IMPSAT
Argentina recorded a net losses on foreign exchange for the three and nine months ended September 30, 2005 of $0.01 million and $0.2 million, compared to net losses of $0.5 million and $1.1 million for the same periods in 2004. IMPSAT Brazil
recorded a net gain on foreign exchange for the three and nine months ended September 30, 2005 of $5.3 million and $16.9 million, compared to net gains of $8.2 million and $1.0 million for the same periods in 2004.



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Other Income (Loss), Net.We recorded other expense, net, of $1.4 million and $6.7 million for the three and nine
months ended September 30, 2005, compared to other income, net, of $0.1 million and $1.4 million for the same periods of 2004. For the three and nine months ended September 30, 2005, $0.3 million and $4.0 million of other expense, net
related to legal and financial expenses incurred in connection with the amendment and modification of certain of our subsidiary indebtedness which became effective on July 29, 2005, as described below under Liquidity and Capital
Resources.



Provision for Foreign Income Taxes.For the three and
nine months ended September 30, 2005, we recorded a provision for foreign income taxes of $1.8 million and $4.8 million, compared to a provision of $1.1 million and $3.0 million for the same periods in 2004.



Net Income (Loss). For the three and nine months ended September 30, 2005, we
recorded net losses of $5.2 million and $20.4 million, compared to net income of $0.7 million and net loss of $15.8 million for the same periods in 2004.



Liquidity and Capital Resources



At September 30, 2005, we had total cash and cash equivalents of $19.8 million. This compares to our cash and cash equivalents of $57.1 million at September 30,
2004, $63.7 million as of December 31, 2004 and $41.8 million at June 30, 2005.



As of September 30, 2005, approximately $7.9 million of our cash and cash equivalents were held in Venezuelan bolivars by IMPSAT Venezuela, compared to $3.7 million at June 30, 2005 (in each case,
based on the official exchange rate at that date of Bs. 2,150 = $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. More recently, IMPSAT Venezuela has experienced significant delays in obtaining the required approvals from Venezuelas Commission of Currency Administration (known as CADIVI) for the purchase of U.S. dollars with Venezuelan
bolivars in order to make payment of its foreign currency denominated obligations (including intercompany obligations). As a result, we are unable to predict when these final approvals will be obtained. 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 September 30, 2005, our total indebtedness was $247.7 million (as compared to $271.6 million at September 30, 2004), of which $1.6 million represented short-term debt, $16.7 million represented current
portion of long-term debt and $229.4 million represented long-term debt.



Although we have emerged from bankruptcy, we remain in default under indebtedness owed to one creditor who voted against our plan of reorganization. Under the plan of reorganization, the claims of that creditor were contingent obligations
arising under guarantees by the Company 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 against IMPSAT Argentina 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.



On July 29, 2005, we entered into a series of amendments relating to $125.6 million of our vendor indebtedness which was held by
affiliates of certain members of our board of directors. Prior to the amendments, such indebtedness was required to be paid in eight remaining semi-annual principal installments aggregating $15.7 million between September 2005 and March 2009.
Pursuant to such amendments, we made an initial principal repayment of $18.3 million and modified the terms of the agreements to provide that the remaining outstanding principal amounts ($38.9 million owed by IMPSAT Argentina and $68.4 million owed
by IMPSAT Brazil) will be repaid in the aggregate amounts of $5 million in 2006, $20 million in 2007, $25 million in 2008 and $57.3 million in March 2009. The amended indebtedness will bear interest at a rate of 12% per annum, payable
semi-annually in arrears, as compared to 10% per annum for the period prior to the effectiveness of the amendments. The parties also agreed to amendments to the financial covenants in the agreements to reflect current financial and operating
conditions. The amended indebtedness will be subject to optional prepayment by IMPSAT at a



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cost of 101% until July 29, 2006 and at par thereafter. Subject to certain terms and conditions, IMPSAT and the
lenders of the amended indebtedness each have an option to further amend the agreements governing such indebtedness to provide that the Company will be the primary obligor, and each of IMPSAT Argentina and IMPSAT Brazil will guarantee the agreement
under which it is currently the primary obligor with such guarantees to be secured by the same collateral as is securing the existing agreements. The terms and conditions of the amendments were negotiated, and approved, by a special committee of the
Companys board of directors that was formed to explore recapitalization alternatives.



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 consolidated financial statements.



As set forth in our condensed consolidated statement of cash flows, our operating activities provided $19.4 million in net cash flows for both the nine months ended
September 30, 2005 and 2004.



For the nine months ended September 30,
2005, we used $24.8 million in net cash flows from investing activities, compared to $21.9 million during the corresponding period in 2004. This change was principally due to a decrease in proceeds from the sale of investment as compared to the
prior period.



During the nine months ended September 30, 2005, we used
$38.2 million in net cash flows from financing activities, as compared to $1.3 million in net cash flows used in financing activities during the corresponding period in 2004, such amounts representing the repayment of the current maturities of
long-term debt totaling $36.9 million. We do not have any significant commitments for additional indebtedness, including in connection with our planned and committed capital expenditures described in the following paragraph.



At September 30, 2005, we had leased satellite capacity with average annual rental
commitments of approximately $16.2 million through the year 2009 under non-cancelable agreements. The Company has entered into contracts for the purchase of satellite capacity for approximately $15.0 million through 2015. In addition, at
September 30, 2005, we currently anticipate additional purchases of telecommunications equipment in excess of $40.0 million for the remainder of 2005 and 2006. Of this amount, at the end of the third quarter of 2005 we had commitments to
purchase telecommunications equipment amounting to approximately $3.8 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, Venezuela and the United States for approximately $3.1 million per year through 2008. The
remainder of the leases are typically under one-year contracts, the early cancellation of which is subject to a fee.



The following table sets forth due dates of our contractual obligations as of September 30, 2005:



|                                   |  |                |        |      |   |        |  |      |        |      |   |            |  |       |        |  |   |         |  |   |        
|---------------------------------- |  | -------------- | ------ | ---- | - | ------ |  | ---- | ------ | ---- | - | ---------- |  | ----- | ------ |  | - | ------- |  | - | -------
|Type of Obligations                |  | 2005           |        | 2006 |   | 2007   |  | 2008 |        | 2009 |   | Thereafter |  | Total
|                                   |  | (in thousands)
|Short-term debt                    |  | $              | 1,000  |      | $ | 623    |  |      |        |      |   |            |  |       |        |  |   |         |  | $ | 1,623  
|Long-term debt                     |  | $              | 8,077  |      | $ | 8,995  |  | $    | 29,222 |      | $ | 36,418     |  | $     | 58,097 |  | $ | 102,731 |  | $ | 243,540
|Capital lease obligations          |  |                |        |      | $ | 176    |  | $    | 812    |      | $ | 786        |  | $     | 653    |  | $ | 106     |  | $ | 2,533  
|Operating leases(1)                |  | $              | 6,608  |      | $ | 23,447 |  | $    | 14,993 |      | $ | 10,484     |  | $     | 7,100  |  | $ | 2,201   |  | $ | 64,833 
|Purchase obligations               |  | $              | 3,813  |      |   |        |  |      |        |      |   |            |  |       |        |  |   |         |  | $ | 3,813  
|                                   |  |                |        |      |   |        |  |      |        |      |   |            |  |       |        |  |   |         |  |   |        
|Total contractual cash obligations |  | $              | 19,498 |      | $ | 33,241 |  | $    | 45,027 |      | $ | 47,688     |  | $     | 65,850 |  | $ | 105,038 |  | $ | 316,342

---

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



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Item 3. Quantitative and Qualitative Disclosures About Market Risk



The sections below highlight our exposure to interest rate and foreign exchange rate risks. The analyses presented below are illustrative and should not be viewed as predictive of our future financial performance.
Additionally, we cannot assure you that our actual results in any particular year will not differ from the amounts indicated below. However, we believe that these results are reasonable based on our financial instrument portfolio at
September 30, 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 September 30, 2005, our total floating rate
indebtedness aggregated $41.1 million, of which $12.6 million was denominated in U.S. dollars and accrued interest at specified spreads over the London Interbank Offered Rate (LIBOR) and $28.5 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 September 30, 2005, a hypothetical 100 basis point increase in the London Interbank Offered Rate
(LIBOR) would affect our annual interest cost related to our floating rate indebtedness by approximately $0.1 million annually. The fair value of financial instruments, which approximate their carrying value, have been determined using available
market information and interest rates as of September 30, 2005.



|                                 |  |                                      |       |   |      |   |       |      |  |   |        |   |  |      |        |   |            |   |        |       |  |   |        |   |  |   |        
|-------------------------------- |  | ------------------------------------ | ----- | - | ---- | - | ----- | ---- |  | - | ------ | - |  | ---- | ------ | - | ---------- | - | ------ | ----- |  | - | ------ | - |  | - | -------
|                                 |  | Expected Maturities at September 30,
|                                 |  | 2005                                 |       |   | 2006 |   |       | 2007 |  |   | 2008   |   |  | 2009 |        |   | Thereafter |   |        | Total
|Senior Notes (fixed rate)        |  | $                                    | 8     |   |      | $ | 6,694 |      |  | $ | 21,690 |   |  | $    | 26,690 |   |            | $ | 58,146 |       |  | $ | 92,903 |   |  | $ | 206,131
|Avg. interest rate               |  |                                      | 9.24  | % |      |   | 9.16  | %    |  |   | 7.84   | % |  |      | 8.30   | % |            |   | 6.00   | %     |  |   | 6.00   | % |  |   |        
|Term Notes (fixed rate)          |  | $                                    | 47    |   |      | $ | 138   |      |  | $ | 126    |   |  | $    | 100    |   |            | $ | 16     |       |  |   |        |   |  | $ | 427    
|Avg. interest rate               |  |                                      | 13.05 | % |      |   | 13.10 | %    |  |   | 13.15  | % |  |      | 13.30  | % |            |   | 13.30  | %     |  |   |        |   |  |   |        
|Term Notes (variable rate)       |  | $                                    | 1,340 |   |      | $ | 2,459 |      |  | $ | 8,218  |   |  | $    | 10,414 |   |            | $ | 587    |       |  | $ | 9,935  |   |  | $ | 32,953 
|Avg. interest rate               |  |                                      | 12.22 | % |      |   | 11.79 | %    |  |   | 11.82  | % |  |      | 12.55  | % |            |   | 12.53  | %     |  |   | 12.61  | % |  |   |        
|Vendor Financing (variable rate) |  | $                                    | 7,682 |   |      | $ | 503   |      |  |   |        |   |  |      |        |   |            |   |        |       |  |   |        |   |  | $ | 8,185  
|Avg. interest rate               |  |                                      | 7.75  | % |      |   | 8.90  | %    |  |   |        |   |  |      |        |   |            |   |        |       |  |   |        |   |  |   |        



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Foreign Currency Risk.A substantial portion of our costs, including lease payments for certain satellite
transponder and fiber optic capacity, purchases of capital equipment, and payments of interest and principal on our indebtedness, is payable in U.S. dollars. To date, we have not entered into hedging or swap contracts to address currency risks
because our contracts with our customers 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 September 30, 2005 was
pesos 2.91 = $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 Brazilianreal and the U.S. dollar. In Brazil, we are permitted to amend the pricing of our
services for our long-term telecommunication services contracts with our customers annually based on changes in the consumer price index in Brazil for the prior year. In Argentina, obligations that were mandatorily converted topesos under
the pesification decree may be adjusted pursuant to an index rate based on variations in the Argentine consumer price index. These aspects of the laws in Brazil and Argentina do not eliminate completely the currency exchange risk
facing our operations in those countries. Changes in the consumer price indices in Brazil and Argentina may lag or be lower than changes in the exchange rate between the Brazil and Argentine local currencies and the U.S. dollar and therefore may not
fully allow us to address the impact of a devaluation of those currencies against the U.S. dollar. Also, contracts entered into after the pesification decrees enactment that are initially denominated inpesos are not
entitled to be adjusted according to 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 and inflation risks. At September 30, 2005, the
real traded at a rate of R2.22 = $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. In the majority of cases, we have agreed to receive bolivars at the official rate in payment for our services in lieu of U.S. dollars. As a result, our holdings of bolivars at
September 30, 2005 totaled Bs.19.3 billion (or $7.9 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 three months ended September 30, 2005 and 2004 represented approximately 30.1% and 27.6% of our total net revenues from services for such periods. Net revenues from
services from our Brazilian operations for the three months ended September 30, 2005 and 2004 represented approximately 19.1% and 14.6% of our total net revenues from services for such periods. Our net revenues from services in Venezuela
accounted for 10.6% and 14.5% of our total revenues from services for the three months ended September 30, 2005 and 2004, respectively.



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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, Use of Proceeds and Issuer Purchases of Equity Securities



Not applicable.



Item 3. Defaults Upon Senior Securities



Not applicable.



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



Not applicable.



Item 5. Other Information



Not applicable



Item 6. Exhibits



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).



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|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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 |  | 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).                                                                                                                                                                                                                                                                                                                                                                                                                                           
|     | 
|10.2 |  | Employment Agreement between Hector R. Alonso and the Company dated as of March 25, 2003 (filed on August 14, 2003 as Exhibit 10.6 to the Companys second quarter 2003 Quarterly Report on
Form 10Q and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                               
|     | 
|10.3 |  | 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.
|     | 
|10.4 |  | Second Amended and Restated Financing Agreement among IMPSAT Argentina, Morgan Stanley Senior Funding, Inc., and Deutsche Bank Trust Company Americas, as Administrative Agent and Collateral
Agent, dated as of July 29, 2005 (filed herewith).                                                                                                                                                                                                                                                                                                                                                                                                                                          
|     | 
|10.5 |  | Second Amended and Restated Financing Agreement among IMPSAT Brazil, Morgan Stanley Senior Funding, Inc., and Deutsche Bank Trust Company Americas, as Administrative Agent and Collateral Agent,
dated as of July 29, 2005 (filed herewith).                                                                                                                                                                                                                                                                                                                                                                                                                                             
|     | 
|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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         





20



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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: November 14, 2005




21



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PART I

FINANCIAL INFORMATION



IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2004 AND SEPTEMBER 30, 2005

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

( Unaudited )



|                                                                                                                                                                                                                                                          |  |                   |         |   |                    |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | ------------------ | - | ------- | -
|                                                                                                                                                                                                                                                          |  | December 31, 2004 |         |   | September 30, 2005 |  
|ASSETS                                                                                                                                                                                                                                                    |  |                   |         |   |                   
|CURRENT ASSETS:                                                                                                                                                                                                                                           |  |                   |         |   |                    |   |         |  
|Cash and cash equivalents                                                                                                                                                                                                                                 |  | $                 | 63,655  |   |                    | $ | 19,794  |  
|Trade accounts receivable, net                                                                                                                                                                                                                            |  |                   | 29,363  |   |                    |   | 36,586  |  
|Other receivables                                                                                                                                                                                                                                         |  |                   | 12,865  |   |                    |   | 11,941  |  
|Prepaid expenses                                                                                                                                                                                                                                          |  |                   | 3,008   |   |                    |   | 4,267   |  
|                                                                                                                                                                                                                                                          |  |                   |         |   |                    |   |         |  
|Total current assets                                                                                                                                                                                                                                      |  |                   | 108,891 |   |                    |   | 72,588  |  
|                                                                                                                                                                                                                                                          |  |                   |         |   |                    |   |         |  
|PROPERTY, PLANT AND EQUIPMENT, Net                                                                                                                                                                                                                        |  |                   | 317,310 |   |                    |   | 321,820 |  
|                                                                                                                                                                                                                                                          |  |                   |         |   |                    |   |         |  
|OTHER NON-CURRENT ASSETS                                                                                                                                                                                                                                  |  |                   | 17,706  |   |                    |   | 17,902  |  
|                                                                                                                                                                                                                                                          |  |                   |         |   |                    |   |         |  
|TOTAL                                                                                                                                                                                                                                                     |  | $                 | 443,907 |   |                    | $ | 412,310 |  
|                                                                                                                                                                                                                                                          |  |                   |         |   |                    |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                                                                      |  |                   |         |   |                    |   |         |  
|CURRENT LIABILITIES:                                                                                                                                                                                                                                      |  |                   |         |   |                    |   |         |  
|Accounts payable- trade                                                                                                                                                                                                                                   |  | $                 | 36,485  |   |                    | $ | 45,385  |  
|Short- term debt                                                                                                                                                                                                                                          |  |                   | 2,656   |   |                    |   | 1,623   |  
|Current portion of long-term debt                                                                                                                                                                                                                         |  |                   | 45,092  |   |                    |   | 16,727  |  
|Accrued and other liabilities                                                                                                                                                                                                                             |  |                   | 31,217  |   |                    |   | 42,678  |  
|                                                                                                                                                                                                                                                          |  |                   |         |   |                    |   |         |  
|Total current liabilities                                                                                                                                                                                                                                 |  |                   | 115,450 |   |                    |   | 106,413 |  
|LONG-TERM DEBT, Net                                                                                                                                                                                                                                       |  |                   | 233,335 |   |                    |   | 229,346 |  
|OTHER LONG-TERM LIABILITIES                                                                                                                                                                                                                               |  |                   | 16,109  |   |                    |   | 16,602  |  
|                                                                                                                                                                                                                                                          |  |                   |         |   |                    |   |         |  
|Total liabilities                                                                                                                                                                                                                                         |  |                   | 364,894 |   |                    |   | 352,361 |  
|                                                                                                                                                                                                                                                          |  |                   |         |   |                    |   |         |  
|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 September 30,
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 September 30, 2005, respectively) |  |                   | 101     |   |                    |   | 101     |  
|Additional paid in capital                                                                                                                                                                                                                                |  |                   | 90,542  |   |                    |   | 90,542  |  
|Accumulated deficit                                                                                                                                                                                                                                       |  |                   | (4,742  | ) |                    |   | (25,096 | )
|Deferred stock-based compensation                                                                                                                                                                                                                         |  |                   | (880    | ) |                    |   | (440    | )
|Accumulated other comprehensive loss                                                                                                                                                                                                                      |  |                   | (6,008  | ) |                    |   | (5,158  | )
|                                                                                                                                                                                                                                                          |  |                   |         |   |                    |   |         |  
|Total stockholders equity                                                                                                                                                                                                                                |  |                   | 79,013  |   |                    |   | 59,949  |  
|                                                                                                                                                                                                                                                          |  |                   |         |   |                    |   |         |  
|TOTAL                                                                                                                                                                                                                                                     |  | $                 | 443,907 |   |                    | $ | 412,310 |  
|                                                                                                                                                                                                                                                          |  |                   |         |   |                    |   |         |  



See notes to condensed
consolidated financial statements.



F-1



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##### Table of Contents

IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2005

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

(Unaudited)



|                                          |  |                                  |        |   |                                 |   |        |      |  |   |         |   |  |   |         |  
|----------------------------------------- |  | -------------------------------- | ------ | - | ------------------------------- | - | ------ | ---- |  | - | ------- | - |  | - | ------- | -
|                                          |  | Three Months Ended September 30, |        |   | Nine Months Ended September 30, |  
|                                          |  | 2004                             |        |   | 2005                            |   |        | 2004 |  |   | 2005    |  
|NET REVENUES:                             |  |                                  |        |   |                                 |   |        |      |  |   |         |   |  |   |         |  
|Broadband and satellite                   |  | $                                | 40,577 |   |                                 | $ | 44,172 |      |  | $ | 120,156 |   |  | $ | 128,037 |  
|Internet                                  |  |                                  | 6,542  |   |                                 |   | 7,873  |      |  |   | 19,242  |   |  |   | 22,200  |  
|Value added services                      |  |                                  | 4,270  |   |                                 |   | 6,351  |      |  |   | 12,306  |   |  |   | 17,147  |  
|Telephony                                 |  |                                  | 5,479  |   |                                 |   | 6,579  |      |  |   | 15,527  |   |  |   | 18,720  |  
|Sales of equipment                        |  |                                  | 722    |   |                                 |   | 433    |      |  |   | 964     |   |  |   | 634     |  
|                                          |  |                                  |        |   |                                 |   |        |      |  |   |         |   |  |   |         |  
|Total net revenues                        |  |                                  | 57,590 |   |                                 |   | 65,408 |      |  |   | 168,195 |   |  |   | 186,738 |  
|                                          |  |                                  |        |   |                                 |   |        |      |  |   |         |   |  |   |         |  
|COSTS AND EXPENSES:                       |  |                                  |        |   |                                 |   |        |      |  |   |         |   |  |   |         |  
|Direct costs:                             |  |                                  |        |   |                                 |   |        |      |  |   |         |   |  |   |         |  
|Contracted services                       |  |                                  | 5,364  |   |                                 |   | 6,601  |      |  |   | 14,756  |   |  |   | 17,887  |  
|Other direct costs                        |  |                                  | 5,343  |   |                                 |   | 7,014  |      |  |   | 14,862  |   |  |   | 20,957  |  
|Leased capacity                           |  |                                  | 16,960 |   |                                 |   | 18,763 |      |  |   | 48,695  |   |  |   | 55,948  |  
|Cost of equipment sold                    |  |                                  | 571    |   |                                 |   | 375    |      |  |   | 747     |   |  |   | 572     |  
|                                          |  |                                  |        |   |                                 |   |        |      |  |   |         |   |  |   |         |  
|Total direct costs                        |  |                                  | 28,238 |   |                                 |   | 32,753 |      |  |   | 79,060  |   |  |   | 95,364  |  
|Salaries and wages                        |  |                                  | 11,961 |   |                                 |   | 12,100 |      |  |   | 35,941  |   |  |   | 37,347  |  
|Selling, general and administrative       |  |                                  | 6,254  |   |                                 |   | 5,766  |      |  |   | 17,719  |   |  |   | 16,903  |  
|Gain on extinguishment of debt            |  |                                  | (115   | ) |                                 |   |        |      |  |   | (115    | ) |  |   |         |  
|Depreciation and amortization             |  |                                  | 11,525 |   |                                 |   | 13,963 |      |  |   | 32,246  |   |  |   | 40,355  |  
|                                          |  |                                  |        |   |                                 |   |        |      |  |   |         |   |  |   |         |  
|Total costs and expenses                  |  |                                  | 57,863 |   |                                 |   | 64,582 |      |  |   | 164,851 |   |  |   | 189,969 |  
|                                          |  |                                  |        |   |                                 |   |        |      |  |   |         |   |  |   |         |  
|Operating (loss) income                   |  |                                  | (273   | ) |                                 |   | 826    |      |  |   | 3,344   |   |  |   | (3,231  | )
|                                          |  |                                  |        |   |                                 |   |        |      |  |   |         |   |  |   |         |  
|OTHER INCOME (EXPENSE):                   |  |                                  |        |   |                                 |   |        |      |  |   |         |   |  |   |         |  
|Interest income                           |  |                                  | 262    |   |                                 |   | 250    |      |  |   | 870     |   |  |   | 852     |  
|Interest expense                          |  |                                  | (5,429 | ) |                                 |   | (7,372 | )    |  |   | (15,635 | ) |  |   | (22,093 | )
|Net gain (loss) on foreign exchange       |  |                                  | 7,159  |   |                                 |   | 4,362  |      |  |   | (2,751  | ) |  |   | 15,632  |  
|Other income (expense), net               |  |                                  | 64     |   |                                 |   | (1,386 | )    |  |   | 1,353   |   |  |   | (6,737  | )
|                                          |  |                                  |        |   |                                 |   |        |      |  |   |         |   |  |   |         |  
|Total other (expense) income              |  |                                  | 2,056  |   |                                 |   | (4,146 | )    |  |   | (16,163 | ) |  |   | (12,346 | )
|                                          |  |                                  |        |   |                                 |   |        |      |  |   |         |   |  |   |         |  
|Income (loss) before income taxes         |  |                                  | 1,783  |   |                                 |   | (3,320 | )    |  |   | (12,819 | ) |  |   | (15,577 | )
|Provision for foreign income taxes        |  |                                  | (1,108 | ) |                                 |   | (1,843 | )    |  |   | (2,989  | ) |  |   | (4,777  | )
|                                          |  |                                  |        |   |                                 |   |        |      |  |   |         |   |  |   |         |  
|NET INCOME (LOSS)                         |  | $                                | 675    |   |                                 | $ | (5,163 | )    |  | $ | (15,808 | ) |  | $ | (20,354 | )
|                                          |  |                                  |        |   |                                 |   |        |      |  |   |         |   |  |   |         |  
|NET INCOME (LOSS) PER COMMON SHARE:       |  |                                  |        |   |                                 |   |        |      |  |   |         |   |  |   |         |  
|BASIC AND DILUTED                         |  | $                                | 0.07   |   |                                 | $ | (0.51  | )    |  | $ | (1.58   | ) |  | $ | (2.03   | )
|                                          |  |                                  |        |   |                                 |   |        |      |  |   |         |   |  |   |         |  
|WEIGHTED AVERAGE NUMBER OF COMMON SHARES: |  |                                  |        |   |                                 |   |        |      |  |   |         |   |  |   |         |  
|BASIC AND DILUTED                         |  |                                  | 10,011 |   |                                 |   | 10,066 |      |  |   | 9,987   |   |  |   | 10,049  |  
|                                          |  |                                  |        |   |                                 |   |        |      |  |   |         |   |  |   |         |  



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 THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2005

(In thousands of U.S. Dollars)

(Unaudited)



|                                                             |  |                                  |        |   |                                 |   |        |      |  |   |         |   |  |   |         |  
|------------------------------------------------------------ |  | -------------------------------- | ------ | - | ------------------------------- | - | ------ | ---- |  | - | ------- | - |  | - | ------- | -
|                                                             |  | Three Months Ended September 30, |        |   | Nine Months Ended September 30, |  
|                                                             |  | 2004                             |        |   | 2005                            |   |        | 2004 |  |   | 2005    |  
|NET INCOME (LOSS)                                            |  | $                                | 675    |   |                                 | $ | (5,163 | )    |  | $ | (15,808 | ) |  | $ | (20,354 | )
|                                                             |  |                                  |        |   |                                 |   |        |      |  |   |         |   |  |   |         |  
|OTHER COMPREHENSIVE (LOSS) INCOME:                           |  |                                  |        |   |                                 |   |        |      |  |   |         |   |  |   |         |  
|Foreign currency translation adjustment                      |  |                                  | (1,679 | ) |                                 |   | 331    |      |  |   | (922    | ) |  |   | 850     |  
|Unrealized gain on investments available for sale            |  |                                  |        |   |                                 |   |        |      |  |   | 122     |   |  |   |         |  
|Reclassification adjustment for gains included in net income |  |                                  |        |   |                                 |   |        |      |  |   | (1,854  | ) |  |   |         |  
|                                                             |  |                                  |        |   |                                 |   |        |      |  |   |         |   |  |   |         |  
|TOTAL                                                        |  |                                  | (1,679 | ) |                                 |   | 331    |      |  |   | (2.654  | ) |  |   | 850     |  
|                                                             |  |                                  |        |   |                                 |   |        |      |  |   |         |   |  |   |         |  
|COMPREHENSIVE LOSS                                           |  | $                                | (1,004 | ) |                                 | $ | (4,832 | )    |  | $ | (18,462 | ) |  | $ | (19,504 | )
|                                                             |  |                                  |        |   |                                 |   |        |      |  |   |         |   |  |   |         |  



See notes to condensed
consolidated financial statements.



F-3



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##### Table of Contents

IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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 |  |              |  |                           |     |                    |   |        |                                   |   |         |                                    |  |   |       |   |  |   | 850    |   |  |   | 850     |  
|Net loss for the period                 |  |              |  |                           |     |                    |   |        |                                   |   | (20,354 | )                                  |  |   |       |   |  |   |        |   |  |   | (20,354 | )
|                                        |  |              |  |                           |     |                    |   |        |                                   |   |         |                                    |  |   |       |   |  |   |        |   |  |   |         |  
|BALANCE AT September 30, 2005           |  | 10,116,100   |  | $                         | 101 |                    | $ | 90,542 |                                   | $ | (25,096 | )                                  |  | $ | (440  | ) |  | $ | (5,158 | ) |  | $ | 59,949  |  
|                                        |  |              |  |                           |     |                    |   |        |                                   |   |         |                                    |  |   |       |   |  |   |        |   |  |   |         |  



See notes to condensed
consolidated financial statements



F-4



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##### Table of Contents

IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2005



(In thousands of U.S. Dollars)

(Unaudited)



|                                                                                |  |                                 |         |   |      |   |         |  
|------------------------------------------------------------------------------- |  | ------------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                |  | Nine Months Ended September 30, |        
|                                                                                |  | 2004                            |         |   | 2005 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                           |  |                                 |         |   |      |   |         |  
|Net loss                                                                        |  | $                               | (15,808 | ) |      | $ | (20,354 | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                                 |         |   |      |   |         |  
|Amortization and depreciation                                                   |  |                                 | 32,246  |   |      |   | 40,355  |  
|Gain on extinguishment of debt                                                  |  |                                 | (115    | ) |      |   |         |  
|Stock-based compensation                                                        |  |                                 | 440     |   |      |   | 440     |  
|Issuance of stock options to stockholder                                        |  |                                 | 141     |   |      |   |         |  
|Deferred income tax provision                                                   |  |                                 | 1,366   |   |      |   | 1,516   |  
|Reversal of allowance for doubtful accounts                                     |  |                                 | (3,073  | ) |      |   | (364    | )
|Paid-in-kind interest on Senior Notes                                           |  |                                 | 10,196  |   |      |   | 3,369   |  
|Net loss (gain) on foreign exchange                                             |  |                                 | 2,751   |   |      |   | (15,632 | )
|Net gain on sale of investments                                                 |  |                                 | (1,854  | ) |      |   |         |  
|Net loss (gain) on disposals of property, plant and equipment                   |  |                                 | 1,308   |   |      |   | (706    | )
|Changes in assets and liabilities:                                              |  |                                 |         |   |      |   |         |  
|Decrease (increase) in trade accounts receivable                                |  |                                 | 2,480   |   |      |   | (5,845  | )
|Increase in prepaid expenses                                                    |  |                                 | (1,369  | ) |      |   | (1,209  | )
|(Increase) decrease in other receivables and other non-current assets           |  |                                 | (3,299  | ) |      |   | 7,132   |  
|(Decrease) increase in accounts payable  trade                                 |  |                                 | (3,754  | ) |      |   | 6,860   |  
|(Decrease) increase in accrued and other liabilities                            |  |                                 | (5,627  | ) |      |   | 4,797   |  
|Increase (decrease) in other long-term liabilities                              |  |                                 | 3,394   |   |      |   | (1,000  | )
|                                                                                |  |                                 |         |   |      |   |         |  
|Net cash provided by operating activities                                       |  |                                 | 19,423  |   |      |   | 19,359  |  
|                                                                                |  |                                 |         |   |      |   |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                           |  |                                 |         |   |      |   |         |  
|Net decrease in trading investments                                             |  |                                 | 2,474   |   |      |   |         |  
|Purchases of property, plant and equipment                                      |  |                                 | (26,522 | ) |      |   | (24,790 | )
|Proceeds from sale of property, plant and equipment                             |  |                                 | 193     |   |      |   |         |  
|Proceeds from the sale of investment available for sale                         |  |                                 | 1,995   |   |      |   |         |  
|                                                                                |  |                                 |         |   |      |   |         |  
|Net cash used in investing activities                                           |  |                                 | (21,860 | ) |      |   | (24,790 | )
|                                                                                |  |                                 |         |   |      |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                           |  |                                 |         |   |      |   |         |  
|Net borrowings from (repayment of) short-term debt                              |  |                                 | 174     |   |      |   | (1,419  | )
|Proceeds from long-term debt                                                    |  |                                 | 2,211   |   |      |   | 1,990   |  
|Repayments of long-term debt                                                    |  |                                 | (3,661  | ) |      |   | (38,771 | )
|                                                                                |  |                                 |         |   |      |   |         |  
|Net cash used in financing activities                                           |  |                                 | (1,276  | ) |      |   | (38,200 | )
|                                                                                |  |                                 |         |   |      |   |         |  
|EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH EQUIVALENTS                     |  |                                 | (707    | ) |      |   | (230    | )
|                                                                                |  |                                 |         |   |      |   |         |  
|NET DECREASE IN CASH AND CASH EQUIVALENTS                                       |  |                                 | (4,420  | ) |      |   | (43,861 | )
|CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD                            |  |                                 | 61,498  |   |      |   | 63,655  |  
|                                                                                |  |                                 |         |   |      |   |         |  
|CASH AND CASH EQUIVALENTS AT END OF THE PERIOD                                  |  | $                               | 57,078  |   |      | $ | 19,794  |  
|                                                                                |  |                                 |         |   |      |   |         |  
|SUPPLEMENTAL CASH FLOW INFORMATION:                                             |  |                                 |         |   |      |   |         |  
|Interest paid                                                                   |  | $                               | 2,606   |   |      | $ | 12,697  |  
|                                                                                |  |                                 |         |   |      |   |         |  
|Foreign income taxes paid                                                       |  | $                               | 3,494   |   |      | $ | 3,240   |  
|                                                                                |  |                                 |         |   |      |   |         |  
|SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:            |  |                                 |         |   |      |   |         |  
|Change in unrealized gain in investment available for sale.                     |  | $                               | 122     |   |      |   |         |  
|                                                                                |  |                                 |         |   |      |   |         |  
|Issuance of common stock upon conversion of Series A Notes.                     |  | $                               | 99      |   |      |   |         |  
|                                                                                |  |                                 |         |   |      |   |         |  



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 (the 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 $19.4 million and $19.4 million, respectively, for the nine months ended September 30, 2004 and 2005 and has incurred net losses of $15.8 million and $20.4 million respectively. As of September 30, 2005, the Company has
cash and cash equivalents of $19.8 million, which includes approximately $7.9 million denominated in Venezuelan bolivars (see Note 3) and a working capital deficiency of approximately $33.8 million.



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 was formed at the end of 2004 to explore recapitalization alternatives. On
July 29, 2005, as discussed in Note 7, the Company entered into a series of amendments relating to such senior secured indebtedness, pursuant to which the Company made a principal payment of $18.3 million and modified the amortization schedule
for such indebtedness, along with other terms. In addition, as also discussed in Note 7, the Company continues to be in default on approximately $7.6 million of vendor financing indebtedness. Based on its current business plan, however, the Company
believes that it will generate sufficient internally-generated funds to meet its maturing obligations in the future. These can be no assurance, however that the Companys business plan will be accomplished and will generate sufficient cash
flows to meet the Companys cash flow and working capital needs. In order to achieve its longer term growth and operational goals, the Company will require additional financing. 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 September 30, 2005 and for
the three and nine 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 and nine months ended September 30, 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 controls limit the Companys ability to convert local currency into U.S. dollars and transfer funds out of Venezuela. As of
September 30, 2005, approximately $9.0 million of the Companys cash and cash equivalents were held in Venezuela ($7.9 million in local currency, 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 and nine months ended September 30, 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 income (loss) and net income (loss) per common share for the three and nine months ended September 30, 2004 and 2005 would have been as follows:



|                                                                                           |  |                                  |      |   |                                 |   |        |      |  |   |         |   |  |   |         |  
|------------------------------------------------------------------------------------------ |  | -------------------------------- | ---- | - | ------------------------------- | - | ------ | ---- |  | - | ------- | - |  | - | ------- | -
|                                                                                           |  | Three Months Ended September 30, |      |   | Nine Months Ended September 30, |  
|                                                                                           |  | 2004                             |      |   | 2005                            |   |        | 2004 |  |   | 2005    |  
|Net income (loss):                                                                         |  |                                  |      |   |                                 |   |        |      |  |   |         |   |  |   |         |  
|As reported                                                                                |  | $                                | 675  |   |                                 | $ | (5,163 | )    |  | $ | (15,808 | ) |  | $ | (20,354 | )
|Deduct: Stock-based employee compensation expense determined under fair-value-based method |  |                                  | (185 | ) |                                 |   | (174   | )    |  |   | (527    | ) |  |   | (523    | )
|                                                                                           |  |                                  |      |   |                                 |   |        |      |  |   |         |   |  |   |         |  
|Pro forma                                                                                  |  | $                                | 490  |   |                                 | $ | (5,337 | )    |  | $ | (16,335 | ) |  | $ | (20,877 | )
|                                                                                           |  |                                  |      |   |                                 |   |        |      |  |   |         |   |  |   |         |  
|Net income (loss) per common share:                                                        |  |                                  |      |   |                                 |   |        |      |  |   |         |   |  |   |         |  
|Basic and Diluted:                                                                         |  |                                  |      |   |                                 |   |        |      |  |   |         |   |  |   |         |  
|As reported                                                                                |  | $                                | 0.07 |   |                                 | $ | (0.51  | )    |  | $ | (1.58   | ) |  | $ | (2.03   | )
|Pro forma                                                                                  |  |                                  | 0.05 |   |                                 |   | (0.53  | )    |  |   | (1.64   | ) |  |   | (2.08   | )



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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 eight years. No stock options were granted during the nine months ended September 30, 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 September 30, 2005, the Companys financial
instruments include receivables, payables and short 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 September 30, 2005, the fair value of the Companys financial instruments was as follows:



|                                   |  |      |         |      |   |       
|---------------------------------- |  | ---- | ------- | ---- | - | ------
|                                   |  | 2004 |         | 2005
|Series A 6% Senior Guaranted Notes |  | $    | 42,282  |      | $ | 33,257
|Series B 6% Senior Guaranted Notes |  | $    | 24,104  |      | $ | 7,418 
|Senior Secured Notes (10% and 12%) |  | $    | 118,823 |      | $ | 91,711



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 September 30, 2005.



Net Income (Loss) Per Common Share Basic income (loss) per share is computed
based on the average number of common shares



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##### Table of Contents

outstanding and diluted income (loss) per share is computed based on the average number of common and potential common
shares outstanding using the treasury stock method. The calculation of diluted income (loss) per share was the same as the calculation of basic income (loss) per share for the three and nine months ended September 30, 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:



|                           |  |               |                  |      |   |                 
|-------------------------- |  | ------------- | ---------------- | ---- | - | ----------------
|                           |  | September 30,
|                           |  | 2004          |                  | 2005
|Stock Options              |  |               | 2,028,000        |      |   | 2,028,000       
|                           |  |               |                  |      |   |                 
|Exercise Price             |  | $             | 6.17 to $15.00   |      | $ | 6.17 to $15.00  
|                           |  |               |                  |      |   |                 
|Warrants                   |  |               | 3,257,000        |      |   | 3,257,000       
|                           |  |               |                  |      |   |                 
|Exercise Price             |  | $             | 15.00            |      | $ | 15.00           
|                           |  |               |                  |      |   |                 
|Series A and B Notes       |  |               | 6,105,000        |      |   | 6,071,000       
|                           |  |               |                  |      |   |                 
|Conversion Price           |  | $             | 13.76 and $21.10 |      | $ | 13.56 and $20.78
|                           |  |               |                  |      |   |                 
|Shares of restricted stock |  |               | 100,000          |      |   | 50,000          
|                           |  |               |                  |      |   |                 



4. TRADE ACCOUNTS RECEIVABLE



Trade accounts receivable, by operating subsidiaries, at
December 31, 2004 and September 30, 2005, are summarized as follows:



|                                      |  |                   |         |   |                    |   |         |  
|------------------------------------- |  | ----------------- | ------- | - | ------------------ | - | ------- | -
|                                      |  | December 31, 2004 |         |   | September 30, 2005 |  
|IMPSAT Argentina                      |  | $                 | 16,203  |   |                    | $ | 19,269  |  
|IMPSAT Brazil                         |  |                   | 5,419   |   |                    |   | 7,675   |  
|IMPSAT Colombia                       |  |                   | 4,270   |   |                    |   | 4,491   |  
|IMPSAT Venezuela                      |  |                   | 6,506   |   |                    |   | 7,399   |  
|All other countries                   |  |                   | 8,978   |   |                    |   | 9,618   |  
|                                      |  |                   |         |   |                    |   |         |  
|Total                                 |  |                   | 41,376  |   |                    |   | 48,452  |  
|Less: allowance for doubtful accounts |  |                   | (12,013 | ) |                    |   | (11,866 | )
|                                      |  |                   |         |   |                    |   |         |  
|Trade accounts receivable, net        |  | $                 | 29,363  |   |                    | $ | 36,586  |  
|                                      |  |                   |         |   |                    |   |         |  



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 nine months ended September 30, 2005 is as follows:



|                                            |  |                   |        |   |                    |   |        |  
|------------------------------------------- |  | ----------------- | ------ | - | ------------------ | - | ------ | -
|                                            |  | December 31, 2004 |        |   | September 30, 2005 |  
|Beginning balance                           |  | $                 | 20,642 |   |                    | $ | 12,013 |  
|Reversal of allowance for doubtful accounts |  |                   | (3,916 | ) |                    |   | (364   | )
|(Write-offs) recoveries                     |  |                   | (4,704 | ) |                    |   | 222    |  
|Effect of exchange rate change              |  |                   | (9     | ) |                    |   | (5     | )
|                                            |  |                   |        |   |                    |   |        |  
|Ending balance                              |  | $                 | 12,013 |   |                    | $ | 11,866 |  
|                                            |  |                   |        |   |                    |   |        |  



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##### Table of Contents

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 September 30, 2005:



|                    |  |                   |        |                    |   |       
|------------------- |  | ----------------- | ------ | ------------------ | - | ------
|                    |  | December 31, 2004 |        | September 30, 2005
|IMPSAT Argentina    |  | $                 | 497    |                    | $ | 553   
|IMPSAT Brazil       |  |                   | 2,358  |                    |   | 3,050 
|IMPSAT Colombia     |  |                   | 3,475  |                    |   | 1,871 
|IMPSAT Venezuela    |  |                   | 2,670  |                    |   | 2,418 
|All other countries |  |                   | 3,865  |                    |   | 4,049 
|                    |  |                   |        |                    |   |       
|Total               |  | $                 | 12,865 |                    | $ | 11,941
|                    |  |                   |        |                    |   |       



6. PROPERTY, PLANT AND EQUIPMENT



Property, plant and equipment at December 31, 2004
and September 30, 2005 consists of:



|                                                 |  |                   |         |   |                    |   |          |  
|------------------------------------------------ |  | ----------------- | ------- | - | ------------------ | - | -------- | -
|                                                 |  | December 31, 2004 |         |   | September 30, 2005 |  
|Land                                             |  | $                 | 10,109  |   |                    | $ | 10,109   |  
|Building and improvements                        |  |                   | 36,496  |   |                    |   | 37,147   |  
|Operating communications equipment               |  |                   | 194,449 |   |                    |   | 225,472  |  
|Network infrastructure (including rights of way) |  |                   | 111,433 |   |                    |   | 124,920  |  
|IRU investments                                  |  |                   | 20,407  |   |                    |   | 22,863   |  
|Furniture, fixtures and other equipment          |  |                   | 16,048  |   |                    |   | 17,406   |  
|                                                 |  |                   |         |   |                    |   |          |  
|Total                                            |  |                   | 388,942 |   |                    |   | 437,917  |  
|Less: accumulated depreciation                   |  |                   | (75,102 | ) |                    |   | (118,999 | )
|                                                 |  |                   |         |   |                    |   |          |  
|Total                                            |  |                   | 313,840 |   |                    |   | 318,918  |  
|Equipment in transit                             |  |                   | 3,442   |   |                    |   | 2,472    |  
|Construction in process                          |  |                   | 28      |   |                    |   | 430      |  
|                                                 |  |                   |         |   |                    |   |          |  
|Property, plant and equipment, net               |  | $                 | 317,310 |   |                    | $ | 321,820  |  
|                                                 |  |                   |         |   |                    |   |          |  



The activity in
accumulated depreciation for the year ended December 31, 2004 and for the nine months ended September 30, 2005 is as follows:



|                          |  |                  |        |   |                   |   |         |  
|------------------------- |  | ---------------- | ------ | - | ----------------- | - | ------- | -
|                          |  | December 31,2004 |        |   | September 30,2005 |  
|Beginning balance         |  | $                | 29,389 |   |                   | $ | 75,102  |  
|Depreciation expense      |  |                  | 44,797 |   |                   |   | 40,355  |  
|Exchange rate effects     |  |                  | 1,706  |   |                   |   | 4,850   |  
|Disposals and retirements |  |                  | (790   | ) |                   |   | (1,308  | )
|                          |  |                  |        |   |                   |   |         |  
|Ending balance            |  | $                | 75,102 |   |                   | $ | 118,999 |  
|                          |  |                  |        |   |                   |   |         |  



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 2.05% per month. As of December 31, 2004 and September 30, 2005, the outstanding balance amounted to $1.5 million and $1.6 million, respectively. The credit
facilities mature between October 2005 and July 2006. 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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##### Table of Contents

Long-Term Debt-The Companys long-term debt at December 31, 2004 and
September 30, 2005 is detailed as follows:



|                                                                                                                                        |  |                   |         |   |                    |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | ------------------ | - | ------- | -
|                                                                                                                                        |  | December 31, 2004 |         |   | September 30, 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 12%, maturing 2009                                                                                                 |  |                   |         |   |                    |   | 107,300 |  
|Senior Secured Notes 10%, maturing 2009                                                                                                 |  |                   | 146,877 |   |                    |   | 5,928   |  
|Senior Notes issued by IMPSAT Colombia due 2008 and 2010 (interest rate 12.66%), collateralized by the assignment of customer
contracts |  |                   | 18,830  |   |                    |   | 19,654  |  
|Term notes, maturing through 2007; collateralized by buildings and equipment and the assignment of customer contracts; denominated
in:  |  |                   |         |   |                    |   |         |  
|U.S. dollars (interest rates 8%)                                                                                                        |  |                   | 3,191   |   |                    |   | 2,327   |  
|Local currency (interest rates 10.87% to 13.3%)                                                                                         |  |                   | 6,390   |   |                    |   | 7,923   |  
|Eximbank notes (interest rate 5.73%), maturing semiannually through 2007                                                                |  |                   | 2,779   |   |                    |   | 1,853   |  
|Vendor financing (interest rates 7.65% to 8.9%)                                                                                         |  |                   | 8,744   |   |                    |   | 8,185   |  
|                                                                                                                                        |  |                   |         |   |                    |   |         |  
|Total long-term debt                                                                                                                    |  |                   | 278,427 |   |                    |   | 246,073 |  
|Less: current portion including defaulted indebtedness                                                                                  |  |                   | (45,092 | ) |                    |   | (16,727 | )
|                                                                                                                                        |  |                   |         |   |                    |   |         |  
|Long-term debt, net                                                                                                                     |  | $                 | 233,335 |   |                    | $ | 229,346 |  
|                                                                                                                                        |  |                   |         |   |                    |   |         |  



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 September 30, 2005, the Company was in compliance with all of its debt covenants.



On July 29, 2005, IMPSAT Argentina, IMPSAT Brazil and the Company entered into a series of amendments relating to $125.6 million of Senior Secured
Notes due 2009 which was held by affiliates of certain members of the board of directors. Prior to the amendments, such indebtedness was required to be paid in eight remaining semi-annual principal installments aggregating $15.7 million between
September 2005 and March 2009. Pursuant to such amendments, the Company made an initial principal repayment of $18.3 million and modified the terms of the agreements such that the remaining outstanding principal amounts ($38.9 million owed by IMPSAT
Argentina and $68.4 million owed by IMPSAT Brazil) will be repaid in the aggregate amounts of $5 million in 2006, $20 million in 2007, $25 million in 2008 and $57.3 million in March 2009. The amended indebtedness will bear interest at a rate of
12% per annum, payable semi-annually in arrears, as compared to 10% per annum for the period prior to the effectiveness of the amendments. The parties also agreed to amendments to the financial covenants in the agreements to reflect
current financial and operating conditions. The amended indebtedness will be subject to optional prepayment by the Company at a cost of 101% until July 29, 2006 and at par thereafter. The Company and the lenders of the amended indebtedness each
have an option to further amend the agreements governing such indebtedness to provide that the Company shall be the primary borrower, and IMPSAT Argentina and IMPSAT Brazil the respective guarantors of the portions of the indebtedness currently owed
by them, subject to certain terms and conditions. The terms and conditions of the amendments were negotiated by a special committee of the Companys board of directors that was formed to explore recapitalization alternatives.



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 September 30, 2005, such indebtedness and accrued interest thereon is due
and payable. The Company has been in discussions 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.



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##### Table of Contents

The Series A and Series B Notes are convertible into approximately 4,964,000 and 1,107,000 shares of the
Companys common stock at a conversion price of $13.56 and $20.78, respectively, as of September 30, 2005.



8. INCOME TAXES



The composition of the provision for income taxes, all of which is for foreign taxes, for the three and nine months ended September 30, 2004 and 2005
is as follows:



|         |  |                                  |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|-------- |  | -------------------------------- | ------ | - | ------------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|         |  | Three Months Ended September 30, |        |   | Nine Months Ended September 30, |  
|         |  | 2004                             |        |   | 2005                            |   |        | 2004 |  |   | 2005   |  
|Current  |  | $                                | (898   | ) |                                 | $ | (1,162 | )    |  | $ | (1.623 | ) |  | $ | (3,261 | )
|Deferred |  |                                  | (210   | ) |                                 |   | (681   | )    |  |   | (1,366 | ) |  |   | (1,516 | )
|         |  |                                  |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|Total    |  | $                                | (1,108 | ) |                                 | $ | (1,843 | )    |  | $ | (2,989 | ) |  | $ | (4,777 | )
|         |  |                                  |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  



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 September 30, 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 $9.0 million as of December 31, 2004 and September 30, 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:



|                                      |  |           |         |   |        |   |         |          |  |           |        |                    |   |        |              |   |        |       |  |   |        |   |  |   |         |  
|------------------------------------- |  | --------- | ------- | - | ------ | - | ------- | -------- |  | --------- | ------ | ------------------ | - | ------ | ------------ | - | ------ | ----- |  | - | ------ | - |  | - | ------- | -
|Three months ended September 30, 2004 |  | Argentina |         |   | Brazil |   |         | Colombia |  | Venezuela |        | All othercountries |   |        | Eliminations |   |        | Total | 
|Net Revenues                          |  |           |         |   |        |   |         |          |  |           |        |                    |   |        |              |   |        |       |  |   |        |   |  |   |         |  
|Satellite and broadband               |  | $         | 7,881   |   |        | $ | 5,927   |          |  | $         | 12,126 |                    | $ | 7,174  |              | $ | 12,375 |       |  | $ | (4,906 | ) |  | $ | 40,577  |  
|Internet                              |  |           | 1,935   |   |        |   | 925     |          |  |           | 1,472  |                    |   | 607    |              |   | 3,138  |       |  |   | (1,535 | ) |  |   | 6,542   |  
|Value added services                  |  |           | 2,472   |   |        |   | 1,209   |          |  |           | 594    |                    |   | 446    |              |   | 1,071  |       |  |   | (1,522 | ) |  |   | 4,270   |  
|Telephony                             |  |           | 3,405   |   |        |   | 220     |          |  |           | 43     |                    |   |        |              |   | 3,289  |       |  |   | (1,478 | ) |  |   | 5,479   |  
|Sales of equipment                    |  |           | 522     |   |        |   |         |          |  |           | 7      |                    |   | 12     |              |   | 181    |       |  |   |        |   |  |   | 722     |  
|                                      |  |           |         |   |        |   |         |          |  |           |        |                    |   |        |              |   |        |       |  |   |        |   |  |   |         |  
|Total net revenues                    |  | $         | 16,215  |   |        | $ | 8,281   |          |  | $         | 14,242 |                    | $ | 8,239  |              | $ | 20,054 |       |  | $ | (9,441 | ) |  | $ | 57,590  |  
|                                      |  |           |         |   |        |   |         |          |  |           |        |                    |   |        |              |   |        |       |  |   |        |   |  |   |         |  
|Operating income (loss)               |  | $         | (60     | ) |        | $ | (1,771  | )        |  | $         | 864    |                    | $ | 2,289  |              | $ | (1,595 | )     |  |   |        |   |  | $ | (273    | )
|                                      |  |           |         |   |        |   |         |          |  |           |        |                    |   |        |              |   |        |       |  |   |        |   |  |   |         |  
|Total assets                          |  | $         | 111,507 |   |        | $ | 103,807 |          |  | $         | 75,424 |                    | $ | 54,825 |              | $ | 84,404 |       |  |   |        |   |  | $ | 429,967 |  
|                                      |  |           |         |   |        |   |         |          |  |           |        |                    |   |        |              |   |        |       |  |   |        |   |  |   |         |  



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##### Table of Contents

|                                      |  |           |         |        |   |         |          |  |   |           |   |                    |   |        |              |   |        |       |  |   |         |   |  |   |         |  
|------------------------------------- |  | --------- | ------- | ------ | - | ------- | -------- |  | - | --------- | - | ------------------ | - | ------ | ------------ | - | ------ | ----- |  | - | ------- | - |  | - | ------- | -
|Three months ended September 30, 2005 |  | Argentina |         | Brazil |   |         | Colombia |  |   | Venezuela |   | All othercountries |   |        | Eliminations |   |        | Total | 
|Net Revenues                          |  |           |         |        |   |         |          |  |   |           |   |                    |   |        |              |   |        |       |  |   |         |   |  |   |         |  
|Satellite and broadband               |  | $         | 8,796   |        | $ | 8,194   |          |  | $ | 13,350    |   |                    | $ | 5,829  |              | $ | 12,591 |       |  | $ | (4,588  | ) |  | $ | 44,172  |  
|Internet                              |  |           | 2,166   |        |   | 1,531   |          |  |   | 1,450     |   |                    |   | 493    |              |   | 3,354  |       |  |   | (1,121  | ) |  |   | 7,873   |  
|Value added services                  |  |           | 3,773   |        |   | 2,302   |          |  |   | 1,279     |   |                    |   | 576    |              |   | 1,056  |       |  |   | (2,635  | ) |  |   | 6,351   |  
|Telephony                             |  |           | 4,797   |        |   | 352     |          |  |   | 46        |   |                    |   |       |              |   | 3,329  |       |  |   | (1,945  | ) |  |   | 6,579   |  
|Sales of equipment                    |  |           | 12      |        |   |         |          |  |   | 53        |   |                    |   | 7      |              |   | 361    |       |  |   |         |   |  |   | 433     |  
|                                      |  |           |         |        |   |         |          |  |   |           |   |                    |   |        |              |   |        |       |  |   |         |   |  |   |         |  
|Total net revenues                    |  | $         | 19,544  |        | $ | 12,379  |          |  | $ | 16,178    |   |                    | $ | 6,905  |              | $ | 20,691 |       |  | $ | (10,289 | ) |  | $ | 65,408  |  
|                                      |  |           |         |        |   |         |          |  |   |           |   |                    |   |        |              |   |        |       |  |   |         |   |  |   |         |  
|Operating income (loss)               |  | $         | 1,298   |        | $ | (901    | )        |  | $ | (589      | ) |                    | $ | 2,071  |              | $ | (1,053 | )     |  |   |         |   |  | $ | 826     |  
|                                      |  |           |         |        |   |         |          |  |   |           |   |                    |   |        |              |   |        |       |  |   |         |   |  |   |         |  
|Total assets                          |  | $         | 124,237 |        | $ | 131,572 |          |  | $ | 70,798    |   |                    | $ | 59,869 |              | $ | 25,834 |       |  |   |         |   |  | $ | 412,310 |  
|                                      |  |           |         |        |   |         |          |  |   |           |   |                    |   |        |              |   |        |       |  |   |         |   |  |   |         |  
|                                      |  |           |         |        |   |         |         
|Nine months ended September 30, 2004  |  | Argentina |         | Brazil |   |         | Colombia |  |   | Venezuela |   | All othercountries |   |        | Eliminations |   |        | Total | 
|Net Revenues                          |  |           |         |        |   |         |          |  |   |           |   |                    |   |        |              |   |        |       |  |   |         |   |  |   |         |  
|Satellite and broadband               |  | $         | 24,274  |        | $ | 16,990  |          |  | $ | 35,964    |   |                    | $ | 21,531 |              | $ | 37,514 |       |  | $ | (16,117 | ) |  | $ | 120,156 |  
|Internet                              |  |           | 5,254   |        |   | 2,701   |          |  |   | 4,475     |   |                    |   | 1,804  |              |   | 9,426  |       |  |   | (4,418  | ) |  |   | 19,242  |  
|Value added services                  |  |           | 7,862   |        |   | 3,318   |          |  |   | 1,617     |   |                    |   | 1,199  |              |   | 2,857  |       |  |   | (4,547  | ) |  |   | 12,306  |  
|Telephony                             |  |           | 10,073  |        |   | 323     |          |  |   | 151       |   |                    |   |       |              |   | 9,285  |       |  |   | (4,305  | ) |  |   | 15,527  |  
|Sales of equipment                    |  |           | 639     |        |   | 51      |          |  |   | 43        |   |                    |   | 42     |              |   | 189    |       |  |   |        |   |  |   | 964     |  
|                                      |  |           |         |        |   |         |          |  |   |           |   |                    |   |        |              |   |        |       |  |   |         |   |  |   |         |  
|Total net revenues                    |  | $         | 48,102  |        | $ | 23,383  |          |  | $ | 42,250    |   |                    | $ | 24,576 |              | $ | 59,271 |       |  | $ | (29,387 | ) |  | $ | 168,195 |  
|                                      |  |           |         |        |   |         |          |  |   |           |   |                    |   |        |              |   |        |       |  |   |         |   |  |   |         |  
|Operating income (loss)               |  | $         | 2,510   |        | $ | (4,716  | )        |  | $ | 3,796     |   |                    | $ | 6,996  |              | $ | (5,242 | )     |  |   |         |   |  | $ | 3,344   |  
|                                      |  |           |         |        |   |         |          |  |   |           |   |                    |   |        |              |   |        |       |  |   |         |   |  |   |         |  
|Total assets                          |  | $         | 111,507 |        | $ | 103,807 |          |  | $ | 75,424    |   |                    | $ | 54,825 |              | $ | 84,404 |       |  |   |         |   |  | $ | 429,967 |  
|                                      |  |           |         |        |   |         |          |  |   |           |   |                    |   |        |              |   |        |       |  |   |         |   |  |   |         |  
|                                      |  |           |         |        |   |         |         
|Nine months ended September 30, 2005  |  | Argentina |         | Brazil |   |         | Colombia |  |   | Venezuela |   | All othercountries |   |        | Eliminations |   |        | Total | 
|Net Revenues                          |  |           |         |        |   |         |          |  |   |           |   |                    |   |        |              |   |        |       |  |   |         |   |  |   |         |  
|Satellite and broadband               |  | $         | 25,628  |        | $ | 22,374  |          |  | $ | 36,961    |   |                    | $ | 19,677 |              | $ | 36,623 |       |  | $ | (13,226 | ) |  | $ | 128,037 |  
|Internet                              |  |           | 5,944   |        |   | 3,989   |          |  |   | 4,247     |   |                    |   | 1,766  |              |   | 10,208 |       |  |   | (3,954  | ) |  |   | 22,200  |  
|Value added services                  |  |           | 10,935  |        |   | 6,292   |          |  |   | 2,955     |   |                    |   | 1,667  |              |   | 2,904  |       |  |   | (7,606  | ) |  |   | 17,147  |  
|Telephony                             |  |           | 13,768  |        |   | 1,079   |          |  |   | 172       |   |                    |   |       |              |   | 10,335 |       |  |   | (6,634  | ) |  |   | 18,720  |  
|Sales of equipment                    |  |           | 40      |        |   |        |          |  |   | 92        |   |                    |   | 82     |              |   | 420    |       |  |   |        |   |  |   | 634     |  
|                                      |  |           |         |        |   |         |          |  |   |           |   |                    |   |        |              |   |        |       |  |   |         |   |  |   |         |  
|Total net revenues                    |  | $         | 56,315  |        | $ | 33,734  |          |  | $ | 44,427    |   |                    | $ | 23,192 |              | $ | 60,490 |       |  | $ | (31,420 | ) |  | $ | 186,738 |  
|                                      |  |           |         |        |   |         |          |  |   |           |   |                    |   |        |              |   |        |       |  |   |         |   |  |   |         |  
|Operating income (loss)               |  | $         | 1,998   |        | $ | (4,180  | )        |  | $ | (453      | ) |                    | $ | 5,735  |              | $ | (6,331 | )     |  |   |         |   |  | $ | (3,231  | )
|                                      |  |           |         |        |   |         |          |  |   |           |   |                    |   |        |              |   |        |       |  |   |         |   |  |   |         |  
|Total assets                          |  | $         | 124,237 |        | $ | 131,572 |          |  | $ | 70,798    |   |                    | $ | 59,869 |              | $ | 25,834 |       |  |   |         |   |  | $ | 412,310 |  
|                                      |  |           |         |        |   |         |          |  |   |           |   |                    |   |        |              |   |        |       |  |   |         |   |  |   |         |  



10. STOCKHOLDERS EQUITY



Restricted Stock During 2003,
the Holding Company 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, 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 nine months ended September 30, 2004 and 2005 was $440,000, respectively.



Stock OptionsNo stock options were granted
during the nine months ended September 30, 2005.



Warrants  During 2003, the Holding Company issued 3,257,178 eight-year warrants to acquire the Holding Companys stock at $15.00 per share. As of September 30, 2005, all the warrants remain outstanding.



11. COMMITMENTS AND CONTINGENCIES



Commitments  The Company leases satellite capacity with
average annual rental commitments of approximately $16.2 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 $13.4 million through 2015 and 2009, respectively. The Company has commitments to purchase communications equipment amounting to approximately $3.8 million at September 30, 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 September 30, 2005, the aggregate balances outstanding were approximately $113.2 million (see Note 7).



F-14



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##### Table of Contents

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 $38.8 million as of September 30, 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.



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.



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 September 30, 2005 and for the three and nine months ended September 30, 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)



|                                     |  |                |         |                            |   |                           |  |                          |         |  |              |          |   |  |   |        
|------------------------------------ |  | -------------- | ------- | -------------------------- | - | ------------------------- |  | ------------------------ | ------- |  | ------------ | -------- | - |  | - | -------
|                                     |  | HoldingCompany |         | IMPSATArgentina(Guarantor) |   | Non-GuarantorSubsidiaries |  | IntercompanyEliminations |         |  | Consolidated
|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 SEPTEMBER 30, 2005

(In thousands of U.S. Dollars)



|                                     |  |                |         |                            |   |                           |  |                          |         |  |              |          |   |  |   |        
|------------------------------------ |  | -------------- | ------- | -------------------------- | - | ------------------------- |  | ------------------------ | ------- |  | ------------ | -------- | - |  | - | -------
|                                     |  | HoldingCompany |         | IMPSATArgentina(Guarantor) |   | Non-GuarantorSubsidiaries |  | IntercompanyEliminations |         |  | Consolidated
|ASSETS                               |  |                |         |                            |   |                           |  |                          |         |  |              |          |   |  |   |        
|CURRENT ASSETS:                      |  |                |         |                            |   |                           |  |                          |         |  |              |          |   |  |   |        
|Cash and cash equivalents            |  | $              | 308     |                            | $ | 1,019                     |  | $                        | 18,467  |  |              |          |   |  | $ | 19,794 
|Trade accounts receivable, net       |  |                |         |                            |   | 12,996                    |  |                          | 23,590  |  |              |          |   |  |   | 36,586 
|Other receivables                    |  |                | 58,874  |                            |   | 29,855                    |  |                          | 53,305  |  | $            | (130,093 | ) |  |   | 11,941 
|Prepaid expenses                     |  |                | 325     |                            |   | 918                       |  |                          | 3,262   |  |              | (238     | ) |  |   | 4,267  
|                                     |  |                |         |                            |   |                           |  |                          |         |  |              |          |   |  |   |        
|Total current assets                 |  |                | 59,507  |                            |   | 44,788                    |  |                          | 98,624  |  |              | (130,331 | ) |  |   | 72,588 
|                                     |  |                |         |                            |   |                           |  |                          |         |  |              |          |   |  |   |        
|PROPERTY, PLANT AND EQUIPMENT, Net   |  |                |         |                            |   | 71,039                    |  |                          | 250,781 |  |              |          |   |  |   | 321,820
|                                     |  |                |         |                            |   |                           |  |                          |         |  |              |          |   |  |   |        
|NON-CURRENT ASSETS:                  |  |                |         |                            |   |                           |  |                          |         |  |              |          |   |  |   |        
|Investments                          |  |                | 64,002  |                            |   |                           |  |                          |         |  |              | (64,002  | ) |  |   |        
|Other non-current assets             |  |                | 51,319  |                            |   | 8,409                     |  |                          | 9,485   |  |              | (51,311  | ) |  |   | 17,902 
|                                     |  |                |         |                            |   |                           |  |                          |         |  |              |          |   |  |   |        
|Total non-current assets             |  |                | 115,321 |                            |   | 8,409                     |  |                          | 9,485   |  |              | (115,313 | ) |  |   | 17,902 
|                                     |  |                |         |                            |   |                           |  |                          |         |  |              |          |   |  |   |        
|TOTAL                                |  | $              | 174,828 |                            | $ | 124,236                   |  | $                        | 358,890 |  | $            | (245,644 | ) |  | $ | 412,310
|                                     |  |                |         |                            |   |                           |  |                          |         |  |              |          |   |  |   |        
|LIABILITIES AND STOCKHOLDERS EQUITY |  |                |         |                            |   |                           |  |                          |         |  |              |          |   |  |   |        
|CURRENT LIABILITIES:                 |  |                |         |                            |   |                           |  |                          |         |  |              |          |   |  |   |        
|Accounts payable  trade             |  | $              | 21,719  |                            | $ | 25,559                    |  | $                        | 62,655  |  | $            | (64,548  | ) |  | $ | 45,385 
|Short term debt                      |  |                |         |                            |   |                           |  |                          | 1,623   |  |              |          |   |  |   | 1,623  
|Current portion of long-term debt    |  |                |         |                            |   | 9,156                     |  |                          | 7,571   |  |              |          |   |  |   | 16,727 
|Accrued and other liabilities        |  |                | 257     |                            |   | 13,863                    |  |                          | 46,783  |  |              | (18,225  | ) |  |   | 42,678 
|                                     |  |                |         |                            |   |                           |  |                          |         |  |              |          |   |  |   |        
|Total current liabilities            |  |                | 21,976  |                            |   | 48,578                    |  |                          | 118,632 |  |              | (82,773  | ) |  |   | 106,413
|LONG-TERM DEBT, Net                  |  |                | 92,903  |                            |   | 42,889                    |  |                          | 93,554  |  |              |          |   |  |   | 229,346
|OTHER LONG-TERM LIABILITIES          |  |                |         |                            |   | 18,521                    |  |                          | 96,947  |  |              | (98,866  | ) |  |   | 16,602 
|                                     |  |                |         |                            |   |                           |  |                          |         |  |              |          |   |  |   |        
|Total liabilities                    |  |                | 114,879 |                            |   | 109,988                   |  |                          | 309,133 |  |              | (181,639 | ) |  |   | 352,361
|STOCKHOLDERS EQUITY                 |  |                | 59,949  |                            |   | 14,248                    |  |                          | 49,757  |  |              | (64,005  | ) |  |   | 59,949 
|                                     |  |                |         |                            |   |                           |  |                          |         |  |              |          |   |  |   |        
|TOTAL                                |  | $              | 174,828 |                            | $ | 124,236                   |  | $                        | 358,890 |  | $            | (245,644 | ) |  | $ | 412,310
|                                     |  |                |         |                            |   |                           |  |                          |         |  |              |          |   |  |   |        



F-17



---

##### Table of Contents

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED 30, 2004

(In thousands of U.S. Dollars)



|                                     |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |        |  
|------------------------------------ |  | -------------- | ------ | - | -------------------------- | - | ------ | ------------------------- |  | - | ------------------------ | - |  | --------------------- | ------ | - |  | - | ------ | -
|                                     |  | HoldingCompany |        |   | IMPSATArgentina(Guarantor) |   |        | Non-GuarantorSubsidiaries |  |   | IntercompanyEliminations |   |  | CondensedConsolidated |       
|NET REVENUES:                        |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |        |  
|Broadband and satellite              |  |                |        |   |                            | $ | 7,881  |                           |  | $ | 37,602                   |   |  | $                     | (4,906 | ) |  | $ | 40,577 |  
|Internet                             |  |                |        |   |                            |   | 1,935  |                           |  |   | 6,142                    |   |  |                       | (1,535 | ) |  |   | 6,542  |  
|Value added services                 |  |                |        |   |                            |   | 2,472  |                           |  |   | 3,320                    |   |  |                       | (1,522 | ) |  |   | 4,270  |  
|Telephony                            |  |                |        |   |                            |   | 3,405  |                           |  |   | 3,552                    |   |  |                       | (1,478 | ) |  |   | 5,479  |  
|Sales of equipment                   |  |                |        |   |                            |   | 522    |                           |  |   | 200                      |   |  |                       |        |   |  |   | 722    |  
|                                     |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |        |  
|Total net revenues                   |  |                |        |   |                            |   | 16,215 |                           |  |   | 50,816                   |   |  |                       | (9,441 | ) |  |   | 57,590 |  
|                                     |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |        |  
|COSTS AND EXPENSES:                  |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |        |  
|Direct costs:                        |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |        |  
|Contracted services                  |  |                |        |   |                            |   | 2,165  |                           |  |   | 5,570                    |   |  |                       | (2,371 | ) |  |   | 5,364  |  
|Other direct costs                   |  |                |        |   |                            |   | 1,501  |                           |  |   | 3,842                    |   |  |                       |        |   |  |   | 5,343  |  
|Leased capacity                      |  |                |        |   |                            |   | 5,211  |                           |  |   | 17,496                   |   |  |                       | (5,747 | ) |  |   | 16,960 |  
|Cost of equipment sold               |  |                |        |   |                            |   | 357    |                           |  |   | 248                      |   |  |                       | (34    | ) |  |   | 571    |  
|                                     |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |        |  
|Total direct costs                   |  |                |        |   |                            |   | 9,234  |                           |  |   | 27,156                   |   |  |                       | (8,152 | ) |  |   | 28,238 |  
|Salaries and wages                   |  |                |        |   |                            |   | 2,942  |                           |  |   | 9,019                    |   |  |                       |        |   |  |   | 11,961 |  
|Selling, general and administrative  |  | $              | 2,316  |   |                            |   | 1,899  |                           |  |   | 3,328                    |   |  |                       | (1,289 | ) |  |   | 6,254  |  
|Gain on early extinguishment of debt |  |                | (115   | ) |                            |   |        |                           |  |   |                          |   |  |                       |        |   |  |   | (115   | )
|Depreciation and amortization        |  |                |        |   |                            |   | 2,200  |                           |  |   | 9,325                    |   |  |                       |        |   |  |   | 11,525 |  
|                                     |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |        |  
|Total costs and expenses             |  |                | 2,201  |   |                            |   | 16,275 |                           |  |   | 48,828                   |   |  |                       | (9,441 | ) |  |   | 57,863 |  
|                                     |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |        |  
|Operating (loss) income              |  |                | (2,201 | ) |                            |   | (60    | )                         |  |   | 1,988                    |   |  |                       |        |   |  |   | (273   | )
|                                     |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |        |  
|OTHER INCOME (EXPENSE):              |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |        |  
|Interest income                      |  |                | 1,599  |   |                            |   | 19     |                           |  |   | (2,870                   | ) |  |                       | 1,514  |   |  |   | 262    |  
|Interest expense                     |  |                | (1,336 | ) |                            |   | (1,581 | )                         |  |   | (998                     | ) |  |                       | (1,514 | ) |  |   | (5,429 | )
|Net (loss) gain on foreign exchange  |  |                |        |   |                            |   | (515   | )                         |  |   | 7,674                    |   |  |                       |        |   |  |   | 7,159  |  
|Equity in income of affiliates       |  |                | 2,940  |   |                            |   |        |                           |  |   |                          |   |  |                       | (2,940 | ) |  |   |        |  
|Other income (loss), net             |  |                |        |   |                            |   | 129    |                           |  |   | (65                      | ) |  |                       |        |   |  |   | 64     |  
|                                     |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |        |  
|Total other income (expense)         |  |                | 3,203  |   |                            |   | (1,948 | )                         |  |   | 3,741                    |   |  |                       | (2,940 | ) |  |   | 2,056  |  
|                                     |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |        |  
|INCOME (LOSS) BEFORE INCOME TAXES    |  |                | 1,002  |   |                            |   | (2,008 | )                         |  |   | 5,729                    |   |  |                       | (2,940 | ) |  |   | 1,783  |  
|PROVISION FOR FOREIGN INCOME TAXES   |  |                | (327   | ) |                            |   | (206   | )                         |  |   | (575                     | ) |  |                       |        |   |  |   | (1,108 | )
|                                     |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |        |  
|NET INCOME (LOSS)                    |  | $              | 675    |   |                            | $ | (2,214 | )                         |  | $ | 5,154                    |   |  | $                     | (2,940 | ) |  | $ | 675    |  
|                                     |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |        |  



F-18



---

##### Table of Contents

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2005

(In thousands of U.S. Dollars)



|                                    |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |              |         |   |  |   |        |  
|----------------------------------- |  | -------------- | ------ | - | -------------------------- | - | ------ | ------------------------- |  | - | ------------------------ | - |  | ------------ | ------- | - |  | - | ------ | -
|                                    |  | HoldingCompany |        |   | IMPSATArgentina(Guarantor) |   |        | Non-GuarantorSubsidiaries |  |   | IntercompanyEliminations |   |  | Consolidated |        
|NET REVENUES:                       |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |              |         |   |  |   |        |  
|Broadband and satellite             |  |                |        |   |                            | $ | 8,796  |                           |  | $ | 39,964                   |   |  | $            | (4,588  | ) |  | $ | 44,172 |  
|Internet                            |  |                |        |   |                            |   | 2,166  |                           |  |   | 6,828                    |   |  |              | (1,121  | ) |  |   | 7,873  |  
|Value added services                |  |                |        |   |                            |   | 3,773  |                           |  |   | 5,213                    |   |  |              | (2,635  | ) |  |   | 6,351  |  
|Telephony                           |  |                |        |   |                            |   | 4,797  |                           |  |   | 3,727                    |   |  |              | (1,945  | ) |  |   | 6,579  |  
|Sales of equipment                  |  |                |        |   |                            |   | 12     |                           |  |   | 421                      |   |  |              |         |   |  |   | 433    |  
|                                    |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |              |         |   |  |   |        |  
|Total net revenues                  |  |                |        |   |                            |   | 19,544 |                           |  |   | 56,153                   |   |  |              | (10,289 | ) |  |   | 65,408 |  
|                                    |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |              |         |   |  |   |        |  
|COSTS AND EXPENSES:                 |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |              |         |   |  |   |        |  
|Direct costs:                       |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |              |         |   |  |   |        |  
|Contracted services                 |  |                |        |   |                            |   | 2,312  |                           |  |   | 6,449                    |   |  |              | (2,160  | ) |  |   | 6,601  |  
|Other direct costs                  |  |                |        |   |                            |   | 2,331  |                           |  |   | 4,683                    |   |  |              |         |   |  |   | 7,014  |  
|Leased capacity                     |  |                |        |   |                            |   | 5,822  |                           |  |   | 18,534                   |   |  |              | (5,593  | ) |  |   | 18,763 |  
|Cost of equipment sold              |  |                |        |   |                            |   | 19     |                           |  |   | 356                      |   |  |              |         |   |  |   | 375    |  
|                                    |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |              |         |   |  |   |        |  
|Total direct costs                  |  |                |        |   |                            |   | 10,484 |                           |  |   | 30,022                   |   |  |              | (7,753  | ) |  |   | 32,753 |  
|Salaries and wages                  |  |                |        |   |                            |   | 3,135  |                           |  |   | 8,965                    |   |  |              |         |   |  |   | 12,100 |  
|Selling, general and administrative |  | $              | 2,756  |   |                            |   | 1,595  |                           |  |   | 3,951                    |   |  |              | (2,536  | ) |  |   | 5,766  |  
|Depreciation and amortization       |  |                |        |   |                            |   | 3,032  |                           |  |   | 10,931                   |   |  |              |         |   |  |   | 13,963 |  
|                                    |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |              |         |   |  |   |        |  
|Total costs and expenses            |  |                | 2,756  |   |                            |   | 18,246 |                           |  |   | 53,869                   |   |  |              | (10,289 | ) |  |   | 64,582 |  
|                                    |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |              |         |   |  |   |        |  
|Operating (loss) income             |  |                | (2,756 | ) |                            |   | 1,298  |                           |  |   | 2,284                    |   |  |              |         |   |  |   | 826    |  
|                                    |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |              |         |   |  |   |        |  
|OTHER INCOME (EXPENSES):            |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |              |         |   |  |   |        |  
|Interest income                     |  |                | 1,274  |   |                            |   | 31     |                           |  |   | 194                      |   |  |              | (1,249  | ) |  |   | 250    |  
|Interest expense                    |  |                | (1,415 | ) |                            |   | (2,437 | )                         |  |   | (4,769                   | ) |  |              | 1,249   |   |  |   | (7,372 | )
|Net gain on foreign exchange        |  |                | (5     | ) |                            |   | (69    | )                         |  |   | 4,436                    |   |  |              |         |   |  |   | 4,362  |  
|Equity in income of affiliates      |  |                | (2,204 | ) |                            |   |        |                           |  |   | 408                      |   |  |              | 1,796   |   |  |   |        |  
|Other (loss), net                   |  |                | (57    | ) |                            |   | (32    | )                         |  |   | (1,297                   | ) |  |              |         |   |  |   | (1,386 | )
|                                    |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |              |         |   |  |   |        |  
|Total other (expenses) income       |  |                | (2,407 | ) |                            |   | (2,507 | )                         |  |   | (1,028                   | ) |  |              | 1,796   |   |  |   | (4,146 | )
|                                    |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |              |         |   |  |   |        |  
|(LOSS) INCOME BEFORE INCOME TAXES   |  |                | (5,163 | ) |                            |   | (1,209 | )                         |  |   | 1,256                    |   |  |              | 1,796   |   |  |   | (3,320 | )
|PROVISION FOR FOREIGN INCOME TAXES  |  |                |        |   |                            |   |        |                           |  |   | (1,843                   | ) |  |              |         |   |  |   | (1,843 | )
|                                    |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |              |         |   |  |   |        |  
|NET (LOSS) INCOME                   |  | $              | (5,163 | ) |                            | $ | (1,209 | )                         |  | $ | (587                     | ) |  | $            | 1,796   |   |  | $ | (5,163 | )
|                                    |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |              |         |   |  |   |        |  



F-19



---

##### Table of Contents

CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004

(In thousands of U.S. Dollars)



|                                     |  |                |         |   |                            |   |        |                           |  |   |                          |   |  |                       |         |   |  |   |         |  
|------------------------------------ |  | -------------- | ------- | - | -------------------------- | - | ------ | ------------------------- |  | - | ------------------------ | - |  | --------------------- | ------- | - |  | - | ------- | -
|                                     |  | HoldingCompany |         |   | IMPSATArgentina(Guarantor) |   |        | Non-GuarantorSubsidiaries |  |   | IntercompanyEliminations |   |  | CondensedConsolidated |        
|NET REVENUES:                        |  |                |         |   |                            |   |        |                           |  |   |                          |   |  |                       |         |   |  |   |         |  
|Broadband and satellite              |  |                |         |   |                            | $ | 24,274 |                           |  | $ | 111,999                  |   |  | $                     | (16,117 | ) |  | $ | 120,156 |  
|Internet                             |  |                |         |   |                            |   | 5,254  |                           |  |   | 18,406                   |   |  |                       | (4,418  | ) |  |   | 19,242  |  
|Value added services                 |  |                |         |   |                            |   | 7,862  |                           |  |   | 8,991                    |   |  |                       | (4,547  | ) |  |   | 12,306  |  
|Telephony                            |  |                |         |   |                            |   | 10,073 |                           |  |   | 9,759                    |   |  |                       | (4,305  | ) |  |   | 15,527  |  
|Sales of equipment                   |  |                |         |   |                            |   | 639    |                           |  |   | 325                      |   |  |                       |         |   |  |   | 964     |  
|                                     |  |                |         |   |                            |   |        |                           |  |   |                          |   |  |                       |         |   |  |   |         |  
|Total net revenues                   |  |                |         |   |                            | $ | 48,102 |                           |  | $ | 149,480                  |   |  | $                     | (29,387 | ) |  | $ | 168,195 |  
|                                     |  |                |         |   |                            |   |        |                           |  |   |                          |   |  |                       |         |   |  |   |         |  
|COSTS AND EXPENSES:                  |  |                |         |   |                            |   |        |                           |  |   |                          |   |  |                       |         |   |  |   |         |  
|Direct costs:                        |  |                |         |   |                            |   |        |                           |  |   |                          |   |  |                       |         |   |  |   |         |  
|Contracted services                  |  |                |         |   |                            |   | 6,214  |                           |  |   | 16,720                   |   |  |                       | (8,178  | ) |  |   | 14,756  |  
|Other direct costs                   |  |                |         |   |                            |   | 3,988  |                           |  |   | 10,874                   |   |  |                       |         |   |  |   | 14,862  |  
|Leased capacity                      |  |                |         |   |                            |   | 14,362 |                           |  |   | 51,592                   |   |  |                       | (17,259 | ) |  |   | 48,695  |  
|Cost of equipment sold               |  |                |         |   |                            |   | 426    |                           |  |   | 363                      |   |  |                       | (42     | ) |  |   | 747     |  
|                                     |  |                |         |   |                            |   |        |                           |  |   |                          |   |  |                       |         |   |  |   |         |  
|Total direct costs                   |  |                |         |   |                            |   | 24,990 |                           |  |   | 79,549                   |   |  |                       | (25,479 | ) |  |   | 79,060  |  
|Salaries and wages                   |  | $              | 440     |   |                            |   | 8,867  |                           |  |   | 26,634                   |   |  |                       |         |   |  |   | 35,941  |  
|Selling, general and administrative  |  |                | 6,441   |   |                            |   | 5,322  |                           |  |   | 9,864                    |   |  |                       | (3,908  | ) |  |   | 17,719  |  
|Gain on early extinguishment of debt |  |                | (115    | ) |                            |   |        |                           |  |   |                          |   |  |                       |         |   |  |   | (115    | )
|Depreciation and amortization        |  |                |         |   |                            |   | 6,413  |                           |  |   | 25,833                   |   |  |                       |         |   |  |   | 32,246  |  
|                                     |  |                |         |   |                            |   |        |                           |  |   |                          |   |  |                       |         |   |  |   |         |  
|Total costs and expenses             |  |                | 6,766   |   |                            |   | 45,592 |                           |  |   | 141,880                  |   |  |                       | (29,387 | ) |  |   | 164,851 |  
|                                     |  |                |         |   |                            |   |        |                           |  |   |                          |   |  |                       |         |   |  |   |         |  
|Operating (loss) income              |  |                | (6,766  | ) |                            |   | 2,510  |                           |  |   | 7,600                    |   |  |                       |         |   |  |   | 3,344   |  
|                                     |  |                |         |   |                            |   |        |                           |  |   |                          |   |  |                       |         |   |  |   |         |  
|OTHER INCOME (EXPENSE):              |  |                |         |   |                            |   |        |                           |  |   |                          |   |  |                       |         |   |  |   |         |  
|Interest income                      |  |                | 4,751   |   |                            |   | 85     |                           |  |   | (8,430                   | ) |  |                       | 4,464   |   |  |   | 870     |  
|Interest expense                     |  |                | (4,038  | ) |                            |   | (4,150 | )                         |  |   | (2,983                   | ) |  |                       | (4,464  | ) |  |   | (15,635 | )
|Net (loss) gain on foreign exchange  |  |                |         |   |                            |   | (1,137 | )                         |  |   | (1,614                   | ) |  |                       |         |   |  |   | (2,751  | )
|Equity in income of affiliates       |  |                | (11,274 | ) |                            |   |        |                           |  |   |                          |   |  |                       | 11,274  |   |  |   |         |  
|Other income (loss), net             |  |                | 1,845   |   |                            |   | 257    |                           |  |   | (749                     | ) |  |                       |         |   |  |   | 1,353   |  
|                                     |  |                |         |   |                            |   |        |                           |  |   |                          |   |  |                       |         |   |  |   |         |  
|Total other (expense) income         |  |                | (8,716  | ) |                            |   | (4,945 | )                         |  |   | (13,776                  | ) |  |                       | 11,274  |   |  |   | (16,163 | )
|                                     |  |                |         |   |                            |   |        |                           |  |   |                          |   |  |                       |         |   |  |   |         |  
|(LOSS) INCOME BEFORE INCOME TAXES    |  |                | (15,482 | ) |                            |   | (2,435 | )                         |  |   | (6,176                   | ) |  |                       | 11,274  |   |  |   | (12,819 | )
|PROVISION FOR FOREIGN INCOME TAXES   |  |                | (326    | ) |                            |   | (206   | )                         |  |   | (2,457                   | ) |  |                       |         |   |  |   | (2,989  | )
|                                     |  |                |         |   |                            |   |        |                           |  |   |                          |   |  |                       |         |   |  |   |         |  
|NET (LOSS) INCOME                    |  | $              | (15,808 | ) |                            | $ | (2,641 | )                         |  | $ | (8,633                   | ) |  | $                     | 11,274  |   |  | $ | (15,808 | )
|                                     |  |                |         |   |                            |   |        |                           |  |   |                          |   |  |                       |         |   |  |   |         |  



F-20



---

##### Table of Contents

CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005

(In thousands of U.S. Dollars)



|                                    |  |                |         |   |                            |   |        |                           |  |   |                          |   |  |                       |         |   |  |   |         |  
|----------------------------------- |  | -------------- | ------- | - | -------------------------- | - | ------ | ------------------------- |  | - | ------------------------ | - |  | --------------------- | ------- | - |  | - | ------- | -
|                                    |  | HoldingCompany |         |   | IMPSATArgentina(Guarantor) |   |        | Non-GuarantorSubsidiaries |  |   | IntercompanyEliminations |   |  | CondensedConsolidated |        
|NET REVENUES:                       |  |                |         |   |                            |   |        |                           |  |   |                          |   |  |                       |         |   |  |   |         |  
|Broadband and satellite             |  |                |         |   |                            | $ | 25,628 |                           |  | $ | 115,635                  |   |  | $                     | (13,226 | ) |  | $ | 128,037 |  
|Internet                            |  |                |         |   |                            |   | 5,944  |                           |  |   | 20,210                   |   |  |                       | (3,954  | ) |  |   | 22,200  |  
|Value added services                |  |                |         |   |                            |   | 10,935 |                           |  |   | 13,818                   |   |  |                       | (7,606  | ) |  |   | 17,147  |  
|Telephony                           |  |                |         |   |                            |   | 13,768 |                           |  |   | 11,586                   |   |  |                       | (6,634  | ) |  |   | 18,720  |  
|Sales of equipment                  |  |                |         |   |                            |   | 40     |                           |  |   | 594                      |   |  |                       |         |   |  |   | 634     |  
|                                    |  |                |         |   |                            |   |        |                           |  |   |                          |   |  |                       |         |   |  |   |         |  
|Total net revenues                  |  |                |         |   |                            |   | 56,315 |                           |  |   | 161,843                  |   |  |                       | (31,420 | ) |  |   | 186,738 |  
|                                    |  |                |         |   |                            |   |        |                           |  |   |                          |   |  |                       |         |   |  |   |         |  
|COSTS AND EXPENSES:                 |  |                |         |   |                            |   |        |                           |  |   |                          |   |  |                       |         |   |  |   |         |  
|Direct costs:                       |  |                |         |   |                            |   |        |                           |  |   |                          |   |  |                       |         |   |  |   |         |  
|Contracted services                 |  |                |         |   |                            |   | 6,735  |                           |  |   | 17,296                   |   |  |                       | (6,144  | ) |  |   | 17,887  |  
|Other direct costs                  |  |                |         |   |                            |   | 6,581  |                           |  |   | 14,376                   |   |  |                       |         |   |  |   | 20,957  |  
|Leased capacity                     |  |                |         |   |                            |   | 18,006 |                           |  |   | 55,876                   |   |  |                       | (17,934 | ) |  |   | 55,948  |  
|Cost of equipment sold              |  |                |         |   |                            |   | 41     |                           |  |   | 538                      |   |  |                       | (7      | ) |  |   | 572     |  
|                                    |  |                |         |   |                            |   |        |                           |  |   |                          |   |  |                       |         |   |  |   |         |  
|Total direct costs                  |  |                |         |   |                            |   | 31,363 |                           |  |   | 88,086                   |   |  |                       | (24,085 | ) |  |   | 95,364  |  
|Salaries and wages                  |  | $              | 440     |   |                            |   | 9,445  |                           |  |   | 27,462                   |   |  |                       |         |   |  |   | 37,347  |  
|Selling, general and administrative |  |                | 8,507   |   |                            |   | 4,860  |                           |  |   | 10,871                   |   |  |                       | (7,335  | ) |  |   | 16,903  |  
|Depreciation and amortization       |  |                |         |   |                            |   | 8,649  |                           |  |   | 31,706                   |   |  |                       |         |   |  |   | 40,355  |  
|                                    |  |                |         |   |                            |   |        |                           |  |   |                          |   |  |                       |         |   |  |   |         |  
|Total costs and expenses            |  |                | 8,947   |   |                            |   | 54,317 |                           |  |   | 158,125                  |   |  |                       | (31,420 | ) |  |   | 189,969 |  
|                                    |  |                |         |   |                            |   |        |                           |  |   |                          |   |  |                       |         |   |  |   |         |  
|Operating (loss) income             |  |                | (8,947  | ) |                            |   | 1,998  |                           |  |   | 3,718                    |   |  |                       |         |   |  |   | (3,231  | )
|                                    |  |                |         |   |                            |   |        |                           |  |   |                          |   |  |                       |         |   |  |   |         |  
|OTHER INCOME (EXPENSE):             |  |                |         |   |                            |   |        |                           |  |   |                          |   |  |                       |         |   |  |   |         |  
|Interest income                     |  |                | 4,222   |   |                            |   | 63     |                           |  |   | 533                      |   |  |                       | (3,966  | ) |  |   | 852     |  
|Interest expense                    |  |                | (4,208  | ) |                            |   | (6,390 | )                         |  |   | (15,461                  | ) |  |                       | 3,966   |   |  |   | (22,093 | )
|Net gain (loss) on foreign exchange |  |                | 7       |   |                            |   | (207   | )                         |  |   | 15,832                   |   |  |                       |         |   |  |   | 15,632  |  
|Equity in income of affiliates      |  |                | (7,593  | ) |                            |   |        |                           |  |   | 1,586                    |   |  |                       | 6,007   |   |  |   |         |  
|Other income (loss), net            |  |                | (3,835  | ) |                            |   | (197   | )                         |  |   | (2,705                   | ) |  |                       |         |   |  |   | (6,737  | )
|                                    |  |                |         |   |                            |   |        |                           |  |   |                          |   |  |                       |         |   |  |   |         |  
|Total other (expense) income        |  |                | (11,407 | ) |                            |   | (6,731 | )                         |  |   | (215                     | ) |  |                       | 6,007   |   |  |   | (12,346 | )
|                                    |  |                |         |   |                            |   |        |                           |  |   |                          |   |  |                       |         |   |  |   |         |  
|(LOSS) INCOME BEFORE INCOME TAXES   |  |                | (20,354 | ) |                            |   | (4,733 | )                         |  |   | 3,503                    |   |  |                       | 6,007   |   |  |   | (15,577 | )
|PROVISION FOR FOREIGN INCOME TAXES  |  |                |         |   |                            |   |        |                           |  |   | (4,777                   | ) |  |                       |         |   |  |   | (4,777  | )
|                                    |  |                |         |   |                            |   |        |                           |  |   |                          |   |  |                       |         |   |  |   |         |  
|NET (LOSS) INCOME                   |  | $              | (20,354 | ) |                            | $ | (4,733 | )                         |  | $ | (1,274                   | ) |  | $                     | 6,007   |   |  | $ | (20,354 | )
|                                    |  |                |         |   |                            |   |        |                           |  |   |                          |   |  |                       |         |   |  |   |         |  



F-21



---

##### Table of Contents

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004

(In thousands of U.S. Dollars)



|                                                            |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |         |  
|----------------------------------------------------------- |  | -------------- | ------ | - | -------------------------- | - | ------ | ------------------------- |  | - | ------------------------ | - |  | --------------------- | ------ | - |  | - | ------- | -
|                                                            |  | HoldingCompany |        |   | IMPSATArgentina(Guarantor) |   |        | Non-GuarantorSubsidiaries |  |   | IntercompanyEliminations |   |  | Condensedconsolidated |       
|Cash flows provided by (used in) operating activities       |  | $              | (8,077 | ) |                            | $ | 5,074  |                           |  | $ | 17,765                   |   |  | $                     | 4,661  |   |  | $ | 19,423  |  
|Cash flows provided by (used in) investing activities       |  |                | 5,393  |   |                            |   | (5,047 | )                         |  |   | (17,545                  | ) |  |                       | (4,661 | ) |  |   | (21,860 | )
|Cash flows provided by (used in) financing activities       |  |                |        |   |                            |   | 852    |                           |  |   | (2,128                   | ) |  |                       |        |   |  |   | (1,276  | )
|Effect of exchange rate change on cash and cash equivalents |  |                | (922   | ) |                            |   |        |                           |  |   | 215                      |   |  |                       |        |   |  |   | (707    | )
|                                                            |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |         |  
|Net increase (decrease) in cash and cash equivalents        |  |                | (3,606 | ) |                            |   | 879    |                           |  |   | (1,693                   | ) |  |                       |        |   |  |   | (4,420  | )
|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              |  | $              | 40,277 |   |                            | $ | 2,311  |                           |  | $ | 14,490                   |   |  | $                     |       |   |  | $ | 57,078  |  
|                                                            |  |                |        |   |                            |   |        |                           |  |   |                          |   |  |                       |        |   |  |   |         |  



CONDENSED
CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005



|                                                            |  |                |         |   |                            |   |         |                           |  |   |                          |   |  |              |         |   |  |   |         |  
|----------------------------------------------------------- |  | -------------- | ------- | - | -------------------------- | - | ------- | ------------------------- |  | - | ------------------------ | - |  | ------------ | ------- | - |  | - | ------- | -
|                                                            |  | HoldingCompany |         |   | IMPSATArgentina(Guarantor) |   |         | Non-GuarantorSubsidiaries |  |   | IntercompanyEliminations |   |  | Consolidated |        
|Cash flows provided by (used in) operating activities       |  | $              | (19,268 | ) |                            | $ | 14,102  |                           |  | $ | 62,957                   |   |  | $            | (38,432 | ) |  | $ | 19,359  |  
|Cash flows provided by (used in) investing activities       |  |                |         |   |                            |   | (5,682  | )                         |  |   | (57,540                  | ) |  |              | 38,432  |   |  |   | (24,790 | )
|Cash flows provided by (used in) financing activities       |  |                | (21,049 | ) |                            |   | (11,236 | )                         |  |   | (5,915                   | ) |  |              |         |   |  |   | (38,200 | )
|Effect of exchange rate change on cash and cash equivalents |  |                | 850     |   |                            |   |         |                           |  |   | (1,080                   | ) |  |              |         |   |  |   | (230    | )
|                                                            |  |                |         |   |                            |   |         |                           |  |   |                          |   |  |              |         |   |  |   |         |  
|Net increase (decrease) in cash and cash equivalents        |  |                | (39,467 | ) |                            |   | (2,816  | )                         |  |   | (1,578                   | ) |  |              |         |   |  |   | (43,861 | )
|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              |  | $              | 308     |   |                            | $ | 1,019   |                           |  | $ | 18,467                   |   |  | $            |        |   |  | $ | 19,794  |  
|                                                            |  |                |         |   |                            |   |         |                           |  |   |                          |   |  |              |         |   |  |   |         |  



F-22