##### 









UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


FORM 10-Q



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

For the quarterly period ended
September 30, 2003

OR



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

For the transition period
from                               to

Commission File Number: 000-29085



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IMPSAT Fiber Networks, Inc.

(Exact name of registrant as specified in its
charter)


|                                                                        |  |                                               
|----------------------------------------------------------------------- |  | ----------------------------------------------
|Delaware(state or other jurisdiction
    incorporation or organization) |  | 52-1910372(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)


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 o

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Securities Exchange Act 

Rule 12b-2).     YES o     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 o

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, 2003, the registrant had outstanding
10,100,000 shares of common stock, $0.01 par value.









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##### 






IMPSAT FIBER NETWORKS, INC.





|                             |         |  |                                                                                           |          |  |     | 
|---------------------------- | ------- |  | ----------------------------------------------------------------------------------------- | -------- |  | --- | 
|                             |         |  |                                                                                           | Page No.
|                             |         |  |                                                                                           |         
|PART I FINANCIAL INFORMATION |         |  | F-1                                                                                       |         
|                             | Item 1. |  | Financial Statements                                                                      |          |  | F-1 | 
|                             | Item 2. |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations |          |  | 1   | 
|                             | Item 3. |  | Quantitative and Qualitative Disclosures About
    Market Risk                            |          |  | 13  | 
|                             | Item 4. |  | Controls and Procedures                                                                   |          |  | 15  | 
|PART II OTHER INFORMATION    |         |  | 16                                                                                        |         
|                             | Item 1. |  | Legal Proceedings                                                                         |          |  | 16  | 
|                             | Item 2. |  | Changes in Securities and Use of Proceeds                                                 |          |  | 16  | 
|                             | Item 3. |  | Defaults Upon Senior Securities                                                           |          |  | 16  | 
|                             | Item 4. |  | Submission of Matters to a Vote of
    Security-Holders                                   |          |  | 16  | 
|                             | Item 5. |  | Other Information                                                                         |          |  | 16  | 
|                             | Item 6. |  | Exhibits and Reports on Form 8-K                                                          |          |  | 17  | 
|SIGNATURES                   |         |  | 19                                                                                        |         



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##### 



PART I

FINANCIAL INFORMATION




|        |                     
|------- | --------------------
|Item 1. | Financial Statements

IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE
SHEETS

As of December 31, 2002 (Predecessor Company)
and September 30, 2003 (Successor Company)


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


(Unaudited)


|                                                                               |                                                                                                                                                                                                                                                     |                                             |         |               |           |   |         |        |         | 
|------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------- | ------- | ------------- | --------- | - | ------- | ------ | ------- | 
|                                                                               |                                                                                                                                                                                                                                                     | Predecessor                                 |         | Successor    
|                                                                               |                                                                                                                                                                                                                                                     | Company                                     |         | Company      
|                                                                               |                                                                                                                                                                                                                                                     | December 31,                                |         | September 30,
|                                                                               |                                                                                                                                                                                                                                                     | 2002                                        |         | 2003         
|                                                                               |                                                                                                                                                                                                                                                     |                                             |         |              
|ASSETS                                                                        
|CURRENT ASSETS:                                                                |                                                                                                                                                                                                                                                     |                                             |         |               |           |   |         |       
|                                                                               | Cash and cash equivalents                                                                                                                                                                                                                           |                                             | $       | 32,563        |           |   | $       | 62,645 |        
|                                                                               | Trading investments                                                                                                                                                                                                                                 |                                             |         | 23,021        |           |   |         | 1,932  |        
|                                                                               | Trade accounts receivable, net                                                                                                                                                                                                                      |                                             |         | 31,012        |           |   |         | 34,223 |        
|                                                                               | Other receivables                                                                                                                                                                                                                                   |                                             |         | 16,674        |           |   |         | 10,048 |        
|                                                                               | Prepaid expenses                                                                                                                                                                                                                                    |                                             |         | 2,746         |           |   |         | 3,299  |        
|                                                                               | Assets held for disposal                                                                                                                                                                                                                            |                                             |         |               |           |   |         | 2,808  |        
|                                                                               |                                                                                                                                                                                                                                                     |                                             |         |               |           |   |         |       
|                                                                               |                                                                                                                                                                                                                                                     | Total current assets                        |         |               | 106,016   |   |         |        | 114,955 | 
|                                                                               |                                                                                                                                                                                                                                                     |                                             |         |               |           |   |         |       
|PROPERTY, PLANT AND EQUIPMENT, Net                                             |                                                                                                                                                                                                                                                     |                                             | 403,948 |               |           |   | 318,970 |       
|                                                                               |                                                                                                                                                                                                                                                     |                                             |         |               |           |   |         |       
|NON-CURRENT ASSETS:                                                            |                                                                                                                                                                                                                                                     |                                             |         |               |           |   |         |       
|                                                                               | Investments in common stock                                                                                                                                                                                                                         |                                             |         | 86            |           |   |         | 387    |        
|                                                                               | Other non-current assets                                                                                                                                                                                                                            |                                             |         | 10,633        |           |   |         | 12,127 |        
|                                                                               |                                                                                                                                                                                                                                                     |                                             |         |               |           |   |         |       
|                                                                               |                                                                                                                                                                                                                                                     | Total non-current assets                    |         |               | 10,719    |   |         |        | 12,514  | 
|                                                                               |                                                                                                                                                                                                                                                     |                                             |         |               |           |   |         |       
|TOTAL                                                                          |                                                                                                                                                                                                                                                     | $                                           | 520,683 |               |           | $ | 446,439 |       
|                                                                               |                                                                                                                                                                                                                                                     |                                             |         |               |           |   |         |       
|LIABILITIES AND STOCKHOLDERS
    (DEFICIENCY) EQUITY                         
|LIABILITIES NOT SUBJECT TO COMPROMISE:                                         |                                                                                                                                                                                                                                                     |                                             |         |               |           |   |         |       
|CURRENT LIABILITIES:                                                           |                                                                                                                                                                                                                                                     |                                             |         |               |           |   |         |       
|                                                                               | Accounts payable  trade                                                                                                                                                                                                                            |                                             | $       | 72,860        |           |   | $       | 44,612 |        
|                                                                               | Current portion of long-term debt                                                                                                                                                                                                                   |                                             |         | 281,680       |           |   |         | 13,153 |        
|                                                                               | Accrued and other liabilities                                                                                                                                                                                                                       |                                             |         | 48,446        |           |   |         | 27,800 |        
|                                                                               |                                                                                                                                                                                                                                                     |                                             |         |               |           |   |         |       
|                                                                               |                                                                                                                                                                                                                                                     | Total current liabilities                   |         |               | 402,986   |   |         |        | 85,565  | 
|LONG-TERM DEBT, Net                                                            |                                                                                                                                                                                                                                                     |                                             | 27,592  |               |           |   | 244,340 |       
|OTHER LONG-TERM LIABILITIES                                                    |                                                                                                                                                                                                                                                     |                                             | 15,280  |               |           |   | 13,555  |       
|DEFERRED REVENUES                                                              |                                                                                                                                                                                                                                                     |                                             | 69,918  |               |           |   |         |       
|                                                                               |                                                                                                                                                                                                                                                     |                                             |         |               |           |   |         |       
|                                                                               |                                                                                                                                                                                                                                                     | Total liabilities not subject to compromise |         |               | 515,776   |   |         |        | 343,460 | 
|LIABILITIES SUBJECT TO COMPROMISE                                              |                                                                                                                                                                                                                                                     |                                             | 727,522 |               |           |   |         |       
|                                                                               |                                                                                                                                                                                                                                                     |                                             |         |               |           |   |         |       
|                                                                               |                                                                                                                                                                                                                                                     | Total liabilities                           |         |               | 1,243,298 |   |         |        | 343,460 | 
|                                                                               |                                                                                                                                                                                                                                                     |                                             |         |               |           |   |         |       
|COMMITMENTS AND CONTINGENCIES (NOTE 13)
    STOCKHOLDERS (DEFICIENCY) EQUITY: |                                                                                                                                                                                                                                                     |                                             |         |               |           |   |         |       
|                                                                               | Common Stock, $0.01 par value; 50,000,000 shares
    authorized, 10,100,000 shares issued and outstanding in 2003
    (including 686,000 shares held in the Common Stock Reserve Pool
    and 150,000 shares held in the 2003 Stock Incentive Plan) |                                             |         |               |           |   |         | 101    |        
|                                                                               | Common Stock, $0.01 par value; 300,000,000 shares
    authorized, 91,428,570 shares issued and outstanding in 2002                                                                                                                                  |                                             |         | 914           |           |   |         |        |        
|                                                                               | Additional paid in capital                                                                                                                                                                                                                          |                                             |         | 537,583       |           |   |         | 96,331 |        
|                                                                               | Common stock reserve pool (Note 2)                                                                                                                                                                                                                  |                                             |         |              |           |   |         | (6,037 | )      
|                                                                               | (Accumulated deficit) retained earnings                                                                                                                                                                                                             |                                             |         | (1,276,845    | )         |   |         | 19,205 |        
|                                                                               | Deferred stock-based compensation                                                                                                                                                                                                                   |                                             |         | (4,530        | )         |   |         | (1,320 | )      
|                                                                               | Accumulated other comprehensive income (loss)                                                                                                                                                                                                       |                                             |         | 20,263        |           |   |         | (5,301 | )      
|                                                                               |                                                                                                                                                                                                                                                     |                                             |         |               |           |   |         |       
|                                                                               |                                                                                                                                                                                                                                                     | Total stockholders (deficiency) equity     |         |               | (722,615  | ) |         |        | 102,979 | 
|                                                                               |                                                                                                                                                                                                                                                     |                                             |         |               |           |   |         |       
|TOTAL                                                                          |                                                                                                                                                                                                                                                     | $                                           | 520,683 |               |           | $ | 446,439 |       
|                                                                               |                                                                                                                                                                                                                                                     |                                             |         |               |           |   |         |       

See notes to condensed consolidated financial
statements.

F-1



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##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2002
(PREDECESSOR COMPANY),


FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER
30, 2003 (SUCCESSOR COMPANY),


FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002
(PREDECESSOR COMPANY) AND


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


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


(Unaudited)


|                                          |                                                                                                                                                                                                                       |                        |                               |               |        |              |        |               |        |           |          |          |        |          |         |         |        |         |        |         |        |         | 
|----------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------- | ----------------------------- | ------------- | ------ | ------------ | ------ | ------------- | ------ | --------- | -------- | -------- | ------ | -------- | ------- | ------- | ------ | ------- | ------ | ------- | ------ | ------- | 
|                                          |                                                                                                                                                                                                                       | Predecessor            |                               | Successor     |        | Predecessor  |        | Predecessor   |        | Successor
|                                          |                                                                                                                                                                                                                       | Company                |                               | Company       |        | Company      |        | Company       |        | Company  
|                                          |                                                                                                                                                                                                                       |                        |                               |               |        |              |        |               |        |          
|                                          |                                                                                                                                                                                                                       |                        |                               |               |        |              |        |              
|                                          |                                                                                                                                                                                                                       | Three Months Ended     |                               | Nine Months   |        | Three Months |        | Six Months   
|                                          |                                                                                                                                                                                                                       | September 30,          |                               | Ended         |        | Ended        |        | Ended        
|                                          |                                                                                                                                                                                                                       |                        |                               | September 30, |        | March 31,    |        | September 30,
|                                          |                                                                                                                                                                                                                       | 2002                   |                               | 2003          |        | 2002         |        | 2003          |        | 2003     
|                                          |                                                                                                                                                                                                                       |                        |                               |               |        |              |        |               |        |          
|NET REVENUES:                             |                                                                                                                                                                                                                       |                        |                               |               |        |              |        |               |        |           |          |          |        |          |         |         |        |         |        |        
|                                          | Broadband and satellite                                                                                                                                                                                               |                        | $                             | 42,318        |        |              | $      | 40,754        |        |           | $        | 133,089  |        |          | $       | 41,382  |        |         | $      | 82,534  |       
|                                          | Internet                                                                                                                                                                                                              |                        |                               | 6,332         |        |              |        | 6,199         |        |           |          | 21,459   |        |          |         | 5,733   |        |         |        | 11,960  |       
|                                          | Value added services                                                                                                                                                                                                  |                        |                               | 3,408         |        |              |        | 4,031         |        |           |          | 10,520   |        |          |         | 4,781   |        |         |        | 7,883   |       
|                                          | Telephony                                                                                                                                                                                                             |                        |                               | 2,915         |        |              |        | 4,844         |        |           |          | 11,231   |        |          |         | 4,106   |        |         |        | 9,440   |       
|                                          | Sales of equipment                                                                                                                                                                                                    |                        |                               | 335           |        |              |        | 611           |        |           |          | 763      |        |          |         | 74      |        |         |        | 996     |       
|                                          |                                                                                                                                                                                                                       |                        |                               |               |        |              |        |               |        |           |          |          |        |          |         |         |        |         |        |        
|                                          |                                                                                                                                                                                                                       |                        | Total net revenues            |               |        | 55,308       |        |               |        | 56,439    |          |          |        | 177,062  |         |         |        | 56,076  |        |         |        | 112,813 | 
|                                          |                                                                                                                                                                                                                       |                        |                               |               |        |              |        |               |        |           |          |          |        |          |         |         |        |         |        |        
|COSTS AND EXPENSES:                       |                                                                                                                                                                                                                       |                        |                               |               |        |              |        |               |        |           |          |          |        |          |         |         |        |         |        |        
|                                          | Direct costs:                                                                                                                                                                                                         |                        |                               |               |        |              |        |               |        |           |          |          |        |          |         |         |        |         |        |         |       
|                                          |                                                                                                                                                                                                                       | Contracted services    |                               |               | 3,491  |              |        |               | 4,218  |           |          |          | 14,574 |          |         |         | 4,125  |         |        |         | 8,744  |        
|                                          |                                                                                                                                                                                                                       | Other direct costs     |                               |               | 5,378  |              |        |               | 5,902  |           |          |          | 15,932 |          |         |         | 4,696  |         |        |         | 13,770 |        
|                                          |                                                                                                                                                                                                                       | Leased capacity        |                               |               | 17,417 |              |        |               | 16,757 |           |          |          | 57,305 |          |         |         | 17,407 |         |        |         | 34,315 |        
|                                          |                                                                                                                                                                                                                       | Cost of equipment sold |                               |               | 67     |              |        |               | 245    |           |          |          | 307    |          |         |         | 48     |         |        |         | 353    |        
|                                          |                                                                                                                                                                                                                       |                        |                               |               |        |              |        |               |        |           |          |          |        |          |         |         |        |         |        |        
|                                          |                                                                                                                                                                                                                       |                        | Total direct costs            |               |        | 26,353       |        |               |        | 27,122    |          |          |        | 88,118   |         |         |        | 26,276  |        |         |        | 57,182  | 
|                                          | Salaries and wages                                                                                                                                                                                                    |                        |                               | 10,852        |        |              |        | 11,983        |        |           |          | 36,486   |        |          |         | 10,727  |        |         |        | 23,825  |       
|                                          | Selling, general and administrative                                                                                                                                                                                   |                        |                               | 6,669         |        |              |        | 6,249         |        |           |          | 22,058   |        |          |         | 5,553   |        |         |        | 13,375  |       
|                                          | Gain on extinguishment of debt                                                                                                                                                                                        |                        |                               |               |        |              |        | (5,460        | )      |           |          | (16,367  | )      |          |         |         |        |         |        | (14,253 | )     
|                                          | Depreciation and amortization                                                                                                                                                                                         |                        |                               | 16,706        |        |              |        | 10,312        |        |           |          | 63,974   |        |          |         | 19,216  |        |         |        | 19,281  |       
|                                          |                                                                                                                                                                                                                       |                        |                               |               |        |              |        |               |        |           |          |          |        |          |         |         |        |         |        |        
|                                          |                                                                                                                                                                                                                       |                        | Total costs and expenses      |               |        | 60,580       |        |               |        | 50,206    |          |          |        | 194,269  |         |         |        | 61,772  |        |         |        | 99,410  | 
|                                          |                                                                                                                                                                                                                       |                        |                               |               |        |              |        |               |        |           |          |          |        |          |         |         |        |         |        |        
|Operating (loss) income                   |                                                                                                                                                                                                                       |                        | (5,272                        | )             |        |              | 6,233  |               |        |           | (17,207  | )        |        |          | (5,696  | )       |        |         | 13,403 |        
|                                          |                                                                                                                                                                                                                       |                        |                               |               |        |              |        |               |        |           |          |          |        |          |         |         |        |         |        |        
|OTHER INCOME (EXPENSES):                  |                                                                                                                                                                                                                       |                        |                               |               |        |              |        |               |        |           |          |          |        |          |         |         |        |         |        |        
|                                          | Interest income                                                                                                                                                                                                       |                        |                               | 436           |        |              |        | 328           |        |           |          | 1,963    |        |          |         | 200     |        |         |        | 690     |       
|                                          | Interest expense (contractual interest of $36,899
    and $114,385 for the three and nine months ended
    September 30, 2002, respectively, and $21,801 for the three
    months ended March 31, 2003 (Predecessor)) |                        |                               | (13,455       | )      |              |        | (4,493        | )      |           |          | (86,176  | )      |          |         | (1,909  | )      |         |        | (10,165 | )     
|                                          | Net (loss) gain on foreign exchange                                                                                                                                                                                   |                        |                               | (62,621       | )      |              |        | (3,611        | )      |           |          | (115,052 | )      |          |         | 9,969   |        |         |        | 17,834  |       
|                                          | Reorganization items                                                                                                                                                                                                  |                        |                               | (9,297        | )      |              |        |               |        |           |          | (14,989  | )      |          |         | 726,127 |        |         |        |         |       
|                                          | Other (loss) income, net                                                                                                                                                                                              |                        |                               | (2,103        | )      |              |        | (894          | )      |           |          | (3,808   | )      |          |         | 2,781   |        |         |        | (1,208  | )     
|                                          |                                                                                                                                                                                                                       |                        |                               |               |        |              |        |               |        |           |          |          |        |          |         |         |        |         |        |        
|                                          |                                                                                                                                                                                                                       |                        | Total other (expenses) income |               |        | (87,040      | )      |               |        | (8,670    | )        |          |        | (218,062 | )       |         |        | 737,168 |        |         |        | 7,151   | 
|                                          |                                                                                                                                                                                                                       |                        |                               |               |        |              |        |               |        |           |          |          |        |          |         |         |        |         |        |        
|(LOSS) INCOME BEFORE INCOME
    TAXES     |                                                                                                                                                                                                                       |                        | (92,312                       | )             |        |              | (2,437 | )             |        |           | (235,269 | )        |        |          | 731,472 |         |        |         | 20,554 |        
|PROVISION FOR FOREIGN INCOME
    TAXES    |                                                                                                                                                                                                                       |                        | (407                          | )             |        |              | (605   | )             |        |           | (1,558   | )        |        |          | (406    | )       |        |         | (1,349 | )      
|                                          |                                                                                                                                                                                                                       |                        |                               |               |        |              |        |               |        |           |          |          |        |          |         |         |        |         |        |        
|NET (LOSS) INCOME                         |                                                                                                                                                                                                                       | $                      | (92,719                       | )             |        | $            | (3,042 | )             |        | $         | (236,827 | )        |        | $        | 731,066 |         |        | $       | 19,205 |        
|                                          |                                                                                                                                                                                                                       |                        |                               |               |        |              |        |               |        |           |          |          |        |          |         |         |        |         |        |        
|NET (LOSS) INCOME PER COMMON SHARE:       |                                                                                                                                                                                                                       |                        |                               |               |        |              |        |               |        |           |          |          |        |          |         |         |        |         |        |        
|                                          | BASIC AND DILUTED                                                                                                                                                                                                     |                        | $                             | (1.01         | )      |              | $      | (0.30         | )      |           | $        | (2.59    | )      |          | $       | 8.00    |        |         | $      | 1.91    |       
|                                          |                                                                                                                                                                                                                       |                        |                               |               |        |              |        |               |        |           |          |          |        |          |         |         |        |         |        |        
|WEIGHTED AVERAGE NUMBER OF COMMON SHARES: |                                                                                                                                                                                                                       |                        |                               |               |        |              |        |               |        |           |          |          |        |          |         |         |        |         |        |        
|                                          | BASIC AND DILUTED                                                                                                                                                                                                     |                        |                               | 91,429        |        |              |        | 10,100        |        |           |          | 91,429   |        |          |         | 91,429  |        |         |        | 10,050  |       
|                                          |                                                                                                                                                                                                                       |                        |                               |               |        |              |        |               |        |           |          |          |        |          |         |         |        |         |        |        

See notes to condensed consolidated financial
statements.

F-2



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE (LOSS) INCOME

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2002
(PREDECESSOR COMPANY),


FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER
30, 2003 (SUCCESSOR COMPANY),


FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002
(PREDECESSOR COMPANY) AND


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


(In thousands of U.S. Dollars)


(Unaudited)


|                                   |                                                                        |                    |         |               |        |              |        |               |      |           |          |        |        |   |         |        |        |   |        |        |        |  
|---------------------------------- | ---------------------------------------------------------------------- | ------------------ | ------- | ------------- | ------ | ------------ | ------ | ------------- | ---- | --------- | -------- | ------ | ------ | - | ------- | ------ | ------ | - | ------ | ------ | ------ | -
|                                   |                                                                        | Predecessor        |         | Successor     |        | Predecessor  |        | Predecessor   |      | Successor
|                                   |                                                                        | Company            |         | Company       |        | Company      |        | Company       |      | Company  
|                                   |                                                                        |                    |         |               |        |              |        |               |      |          
|                                   |                                                                        |                    |         |               |        |              |        |              
|                                   |                                                                        | Three Months Ended |         | Nine Months   |        | Three Months |        | Six Months   
|                                   |                                                                        | September 30,      |         | Ended         |        | Ended        |        | Ended        
|                                   |                                                                        |                    |         | September 30, |        | March 31,    |        | September 30,
|                                   |                                                                        | 2002               |         | 2003          |        | 2002         |        | 2003          |      | 2003     
|                                   |                                                                        |                    |         |               |        |              |        |               |      |          
|NET (LOSS) INCOME                  |                                                                        | $                  | (92,719 | )             |        | $            | (3,042 | )             |      | $         | (236,827 | )      |        | $ | 731,066 |        |        | $ | 19,205 |       
|                                   |                                                                        |                    |         |               |        |              |        |               |      |           |          |        |        |   |         |        |        |   |        |       
|OTHER COMPREHENSIVE (LOSS) INCOME: |                                                                        |                    |         |               |        |              |        |               |      |           |          |        |        |   |         |        |        |   |        |       
|                                   | Foreign currency translation
    adjustment                            |                    |         | 37,247        |        |              |        | (1,009        | )    |           |          | 44,954 |        |   |         | (4,097 | )      |   |        | (5,547 | )     
|                                   | Unrealized (loss) gain on investments
    available for sale           |                    |         | (225          | )      |              |        | 184           |      |           |          | (1,454 | )      |   |         | 55     |        |   |        | 246    |       
|                                   | Recognition of other-than-temporary decline in
    value of investment |                    |         | 41            |        |              |        |               |      |           |          | 857    |        |   |         |        |        |   |        |        |       
|                                   |                                                                        |                    |         |               |        |              |        |               |      |           |          |        |        |   |         |        |        |   |        |       
|                                   |                                                                        | TOTAL              |         |               | 37,063 |              |        |               | (825 | )         |          |        | 44,357 |   |         |        | (4,042 | ) |        |        | (5,301 | )
|                                   |                                                                        |                    |         |               |        |              |        |               |      |           |          |        |        |   |         |        |        |   |        |       
|COMPREHENSIVE (LOSS)
    INCOME    |                                                                        | $                  | (55,656 | )             |        | $            | (3,867 | )             |      | $         | (192,470 | )      |        | $ | 727,024 |        |        | $ | 13,904 |       
|                                   |                                                                        |                    |         |               |        |              |        |               |      |           |          |        |        |   |         |        |        |   |        |       

See notes to condensed consolidated financial
statements.

F-3



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF
STOCKHOLDERS (DEFICIENCY) EQUITY

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


FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003
(SUCCESSOR COMPANY)


(In thousands of U.S. Dollars)


(Unaudited)


|                                                       |                                                                                                       |              |            |             |   |         |     |              |   |             |         |               |   |               |        |        |   |   |            |         |  |   |        |        |   |   |        |         |   |   |          |         |  
|------------------------------------------------------ | ----------------------------------------------------------------------------------------------------- | ------------ | ---------- | ----------- | - | ------- | --- | ------------ | - | ----------- | ------- | ------------- | - | ------------- | ------ | ------ | - | - | ---------- | ------- |  | - | ------ | ------ | - | - | ------ | ------- | - | - | -------- | ------- | -
|                                                       |                                                                                                       |              |            |             |   | Common  |     | (Accumulated |   |             |         | Accumulated   |   |              
|                                                       |                                                                                                       | Common Stock |            | Additional  |   | Stock   |     | Deficit)     |   | Deferred    |         | Other         |   |              
|                                                       |                                                                                                       |              |            | Paid In     |   | Reserve |     | Retained     |   | Stock-Based |         | Comprehensive |   |              
|                                                       |                                                                                                       | Shares       |            | Amount      |   | Capital |     | Pool         |   | Earnings    |         | Compensation  |   | Income (Loss) |        | Total 
|                                                       |                                                                                                       |              |            |             |   |         |     |              |   |             |         |               |   |               |        |       
|BALANCE AT DECEMBER 31, 2002
    (PREDECESSOR COMPANY) |                                                                                                       |              | 91,428,570 |             |   | $       | 914 |              |   | $           | 537,583 |               |   |               |        |        |   | $ | (1,276,845 | )       |  | $ | (4,530 | )      |   | $ | 20,263 |         |   | $ | (722,615 | )      
|                                                       | Amortization of amount paid in excess of carrying
    value of net assets acquired from related party |              |            |             |   |         |     |              |   |             |         | 142           |   |               |        |        |   |   |            |         |  |   |        |        |   |   |        |         |   |   |          | 142     |  
|                                                       | Change in unrealized loss on Investment available
    for sale                                        |              |            |             |   |         |     |              |   |             |         |               |   |               |        |        |   |   |            |         |  |   |        |        |   |   |        | 55      |   |   |          | 55      |  
|                                                       | Foreign currency translation adjustment                                                               |              |            |             |   |         |     |              |   |             |         |               |   |               |        |        |   |   |            |         |  |   |        |        |   |   |        | (4,097  | ) |   |          | (4,097  | )
|                                                       | Net income for the period                                                                             |              |            |             |   |         |     |              |   |             |         |               |   |               |        |        |   |   |            | 731,066 |  |   |        |        |   |   |        |         |   |   |          | 731,066 |  
|                                                       |                                                                                                       |              |            |             |   |         |     |              |   |             |         |               |   |               |        |        |   |   |            |         |  |   |        |        |   |   |        |         |   |   |          |        
|BALANCE AT MARCH 31, 2003
    (PREDECESSOR COMPANY)    |                                                                                                       |              | 91,428,570 |             |   |         | 914 |              |   |             | 537,725 |               |   |               |        |        |   |   | (545,779   | )       |  |   | (4,530 | )      |   |   | 16,221 |         |   |   | 4,551    |        
|                                                       | Elimination of Predecessor Company
    stockholders equity                                           |              |            | (91,428,570 | ) |         |     | (914         | ) |             |         | (537,725      | ) |               |        |        |   |   |            | 545,779 |  |   |        | 4,530  |   |   |        | (16,221 | ) |   |          | (4,551  | )
|                                                       | Issuance of Successor Company common stock                                                            |              |            | 10,000,000  |   |         |     | 100          |   |             |         | 95,257        |   |               | $      | (6,037 | ) |   |            |         |  |   |        | (1,320 | ) |   |        |         |   |   |          | 88,000  |  
|                                                       |                                                                                                       |              |            |             |   |         |     |              |   |             |         |               |   |               |        |        |   |   |            |         |  |   |        |        |   |   |        |         |   |   |          |        
|BALANCE AT MARCH 31, 2003
    (SUCCESSOR COMPANY)      |                                                                                                       |              | 10,000,000 |             |   |         | 100 |              |   |             | 95,257  |               |   |               | (6,037 | )      |   |   |           |         |  |   | (1,320 | )      |   |   |       |         |   |   | 88,000   |        
|                                                       | Issuance of common stock                                                                              |              |            | 100,000     |   |         |     | 1            |   |             |         | 1,074         |   |               |        |        |   |   |            |         |  |   |        |        |   |   |        |         |   |   |          | 1,075   |  
|                                                       | Unrealized gain on investment available for sale                                                      |              |            |             |   |         |     |              |   |             |         |               |   |               |        |        |   |   |            |         |  |   |        |        |   |   |        | 246     |   |   |          | 246     |  
|                                                       | Foreign currency translation adjustment                                                               |              |            |             |   |         |     |              |   |             |         |               |   |               |        |        |   |   |            |         |  |   |        |        |   |   |        | (5,547  | ) |   |          | (5,547  | )
|                                                       | Net income for the period                                                                             |              |            |             |   |         |     |              |   |             |         |               |   |               |        |        |   |   |            | 19,205  |  |   |        |        |   |   |        |         |   |   |          | 19,205  |  
|                                                       |                                                                                                       |              |            |             |   |         |     |              |   |             |         |               |   |               |        |        |   |   |            |         |  |   |        |        |   |   |        |         |   |   |          |        
|BALANCE AT SEPTEMBER 30, 2003
    (SUCCESSOR COMPANY)  |                                                                                                       |              | 10,100,000 |             |   | $       | 101 |              |   | $           | 96,331  |               |   | $             | (6,037 | )      |   | $ | 19,205     |         |  | $ | (1,320 | )      |   |   | (5,301 | )       |   | $ | 102,979  |        
|                                                       |                                                                                                       |              |            |             |   |         |     |              |   |             |         |               |   |               |        |        |   |   |            |         |  |   |        |        |   |   |        |         |   |   |          |        

See notes to condensed consolidated financial
statements.

F-4



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS

FOR NINE MONTHS ENDED SEPTEMBER 30, 2002
(PREDECESSOR COMPANY),


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


FOR SIX MONTHS ENDED SEPTEMBER 30, 2003
(SUCCESSOR COMPANY)


(In thousands of U.S. Dollars)


(Unaudited)


|                                                                         |                                                                                              |                                                                         |                                                                           |                                                         |         |                    |         |         |          |        |         |        |         |         |        |  
|------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ------------------------------------------------------------------------- | ------------------------------------------------------- | ------- | ------------------ | ------- | ------- | -------- | ------ | ------- | ------ | ------- | ------- | ------ | -
|                                                                         |                                                                                              | Predecessor                                                             |                                                                           | Predecessor                                             |         | Successor         
|                                                                         |                                                                                              | Company                                                                 |                                                                           | Company                                                 |         | Company           
|                                                                         |                                                                                              |                                                                         |                                                                           |                                                         |         |                   
|                                                                         |                                                                                              | Nine Months                                                             |                                                                           | Three Months                                            |         | Six Months        
|                                                                         |                                                                                              | Ended                                                                   |                                                                           | Ended                                                   |         | Ended             
|                                                                         |                                                                                              | September 30, 2002                                                      |                                                                           | March 31, 2003                                          |         | September 30, 2003
|                                                                         |                                                                                              |                                                                         |                                                                           |                                                         |         |                   
|CASH FLOWS FROM OPERATING ACTIVITIES:                                    |                                                                                              |                                                                         |                                                                           |                                                         |         |                    |         |         |          |        |         |       
|                                                                         | Net (loss) income                                                                            |                                                                         | $                                                                         | (236,827                                                | )       |                    | $       | 731,066 |          |        | $       | 19,205 |        
|                                                                         | Adjustments to reconcile net (loss) income
    to net cash provided by operating activities: |                                                                         |                                                                           |                                                         |         |                    |         |         |          |        |         |        |        
|                                                                         |                                                                                              | Amortization and depreciation                                           |                                                                           |                                                         | 63,974  |                    |         |         | 19,216   |        |         |        | 19,281  |        
|                                                                         |                                                                                              | Gain on extinguishment of debt                                          |                                                                           |                                                         | (16,367 | )                  |         |         | (728,203 | )      |         |        | (14,253 | )      
|                                                                         |                                                                                              | Stock-based compensation                                                |                                                                           |                                                         |         |                    |         |         | 440      |        |         |        |         |        
|                                                                         |                                                                                              | Deferred income tax provision                                           |                                                                           |                                                         | 167     |                    |         |         | 82       |        |         |        | 312     |        
|                                                                         |                                                                                              | Provision for doubtful accounts
    7,653                               |                                                                           |                                                         | 515     |                    |         |         | 2,906    |        |         |        |         |        
|                                                                         |                                                                                              | Paid-in-kind interest on Senior Notes                                   |                                                                           |                                                         |         |                    |         |         |          |        |         |        | 6,602   |        
|                                                                         |                                                                                              | Recognition of other-than-temporary decline in
    value of investments |                                                                           |                                                         | 857     |                    |         |         |          |        |         |        |         |        
|                                                                         |                                                                                              | Loss on sale of assets held for disposal                                |                                                                           |                                                         |         |                    |         |         |          |        |         |        | 94      |        
|                                                                         |                                                                                              | Changes in assets and liabilities:                                      |                                                                           |                                                         |         |                    |         |         |          |        |         |        |         |        
|                                                                         |                                                                                              |                                                                         | Decrease (increase) in trade accounts
    receivable, net                 |                                                         |         | 14,875             |         |         |          | (3,996 | )       |        |         | (2,636  | )     
|                                                                         |                                                                                              |                                                                         | Increase in prepaid expenses                                              |                                                         |         | (14                | )       |         |          | (950   | )       |        |         | 397     |       
|                                                                         |                                                                                              |                                                                         | Decrease (increase) in other receivables and
    other non-current assets |                                                         |         | 67,121             |         |         |          | (12    | )       |        |         | 1,883   |       
|                                                                         |                                                                                              |                                                                         | Increase in accounts payable  trade                                      |                                                         |         | 45,710             |         |         |          | 1,584  |         |        |         | (14,601 | )     
|                                                                         |                                                                                              |                                                                         | Increase (decrease) in accrued and other
    liabilities                  |                                                         |         | 81,465             |         |         |          | (228   | )       |        |         | (5,350  | )     
|                                                                         |                                                                                              |                                                                         | Decrease in deferred revenues                                             |                                                         |         | (3,789             | )       |         |          | (1,132 | )       |        |         |         |       
|                                                                         |                                                                                              |                                                                         | Decrease in other long-term liabilities                                   |                                                         |         | (5,564             | )       |         |          | (1,515 | )       |        |         | (210    | )     
|                                                                         |                                                                                              |                                                                         |                                                                           |                                                         |         |                    |         |         |          |        |         |       
|                                                                         |                                                                                              |                                                                         |                                                                           | Net cash provided by operating activities               |         |                    | 19,261  |         |          |        | 16,867  |        |         |         | 13,630 |  
|                                                                         |                                                                                              |                                                                         |                                                                           |                                                         |         |                    |         |         |          |        |         |       
|CASH FLOWS FROM INVESTING ACTIVITIES:                                    |                                                                                              |                                                                         |                                                                           |                                                         |         |                    |         |         |          |        |         |       
|                                                                         | Net decrease (increase) in trading
    investments                                           |                                                                         |                                                                           | 3,245                                                   |         |                    |         | (3,303  | )        |        |         | 24,392 |        
|                                                                         | Proceeds from sale of assets held for disposal                                               |                                                                         |                                                                           |                                                         |         |                    |         |         |          |        |         | 2,435  |        
|                                                                         | Purchases of property, plant and equipment, net
    of disposals                             |                                                                         |                                                                           | (12,940                                                 | )       |                    |         | (8,205  | )        |        |         | (7,456 | )      
|                                                                         |                                                                                              |                                                                         |                                                                           |                                                         |         |                    |         |         |          |        |         |       
|                                                                         |                                                                                              |                                                                         |                                                                           | Net cash (used in) provided by investing
    activities |         |                    | (9,695  | )       |          |        | (11,508 | )      |         |         | 19,371 |  
|                                                                         |                                                                                              |                                                                         |                                                                           |                                                         |         |                    |         |         |          |        |         |       
|CASH FLOWS FROM FINANCING ACTIVITIES:                                    |                                                                                              |                                                                         |                                                                           |                                                         |         |                    |         |         |          |        |         |       
|                                                                         | Net payments on short-term debt                                                              |                                                                         |                                                                           | (8,323                                                  | )       |                    |         |         |          |        |         |        |        
|                                                                         | Proceeds from long-term debt                                                                 |                                                                         |                                                                           | 1,526                                                   |         |                    |         |         |          |        |         |        |        
|                                                                         | Repayments of long-term debt                                                                 |                                                                         |                                                                           | (5,894                                                  | )       |                    |         | (2,464  | )        |        |         | (6,046 | )      
|                                                                         |                                                                                              |                                                                         |                                                                           |                                                         |         |                    |         |         |          |        |         |       
|                                                                         |                                                                                              |                                                                         |                                                                           | Net cash used in financing activities                   |         |                    | (12,691 | )       |          |        | (2,464  | )      |         |         | (6,046 | )
|                                                                         |                                                                                              |                                                                         |                                                                           |                                                         |         |                    |         |         |          |        |         |       
|EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH
    EQUIVALENTS          |                                                                                              |                                                                         | 615                                                                       |                                                         |         |                    | 107     |         |          |        | 125     |       
|                                                                         |                                                                                              |                                                                         |                                                                           |                                                         |         |                    |         |         |          |        |         |       
|NET (DECREASE)INCREASE IN CASH AND CASH
    EQUIVALENTS                  |                                                                                              |                                                                         | (2,510                                                                    | )                                                       |         |                    | 3,002   |         |          |        | 27,080  |       
|CASH AND CASH EQUIVALENTS AT BEGINNING OF THE
    PERIOD                 |                                                                                              |                                                                         | 35,606                                                                    |                                                         |         |                    | 32,563  |         |          |        | 35,565  |       
|                                                                         |                                                                                              |                                                                         |                                                                           |                                                         |         |                    |         |         |          |        |         |       
|CASH AND CASH EQUIVALENTS AT END OF THE PERIOD                           |                                                                                              | $                                                                       | 33,096                                                                    |                                                         |         | $                  | 35,565  |         |          | $      | 62,645  |       
|                                                                         |                                                                                              |                                                                         |                                                                           |                                                         |         |                    |         |         |          |        |         |       
|SUPPLEMENTAL CASH FLOW INFORMATION:                                      |                                                                                              |                                                                         |                                                                           |                                                         |         |                    |         |         |          |        |         |       
|                                                                         | Interest paid                                                                                |                                                                         | $                                                                         | 16,126                                                  |         |                    | $       | 940     |          |        | $       | 3,486  |        
|                                                                         |                                                                                              |                                                                         |                                                                           |                                                         |         |                    |         |         |          |        |         |       
|                                                                         | Foreign income taxes paid                                                                    |                                                                         | $                                                                         | 1,769                                                   |         |                    | $       | 594     |          |        | $       | 2,851  |        
|                                                                         |                                                                                              |                                                                         |                                                                           |                                                         |         |                    |         |         |          |        |         |       
|CASH PAID DURING THE PERIOD FOR REORGANIZATION
    ITEMS:                |                                                                                              |                                                                         |                                                                           |                                                         |         |                    |         |         |          |        |         |       
|                                                                         |                                                                                              | Professional fees and other reorganization
    payments                 |                                                                           | $                                                       | 5,692   |                    |         | $       | 1,714    |        |         | $      | 5,841   |        
|                                                                         |                                                                                              |                                                                         |                                                                           |                                                         |         |                    |         |         |          |        |         |       
|SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
    FINANCING ACTIVITIES: |                                                                                              |                                                                         |                                                                           |                                                         |         |                    |         |         |          |        |         |       
|                                                                         | Change to unrealized (loss) gain in
    investment available for sale                        |                                                                         | $                                                                         | (1,454                                                  | )       |                    | $       | 55      |          |        | $       | 246    |        
|                                                                         |                                                                                              |                                                                         |                                                                           |                                                         |         |                    |         |         |          |        |         |       
|                                                                         | Issuance of common stock in settlement of
    accounts payable                               |                                                                         |                                                                           |                                                         |         |                    |         |         |          |        | $       | 1,075  |        
|                                                                         |                                                                                              |                                                                         |                                                                           |                                                         |         |                    |         |         |          |        |         |       

See notes to condensed consolidated financial
statements.

F-5



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS

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




|   |        
|-- | -------
|1. | GENERAL

IMPSAT Fiber Networks, Inc., a Delaware holding
company (the Holding Company), and subsidiaries
(collectively the Company) is a leading provider of
integrated broadband, data, Internet, voice and data center
services in Latin America. The Company offers integrated
telecommunications solutions, with an emphasis on end-to-end
broadband data transmission, for national and multinational
companies, financial institutions, governmental agencies and
other business customers.

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

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

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

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



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

On March 11, 2002, the Holding Company
concluded negotiations with an ad hoc committee representing
certain creditors under the Holding Companys Broadband
Network Vendor Financing Agreements, and certain holders of its
$125.0 million 12 1/8% Senior Guaranteed Notes due
2003, $300.0 million 13 3/4% Senior Notes due 2005 and
$225.0 million 12 3/8% Senior Notes due 2008
(collectively, the Senior Notes) of a non-binding
term sheet agreement in principle (the Restructuring Term
Sheet) relating to the terms of a proposed restructuring
of these long-term obligations, as part of a comprehensive
financial restructuring of the Company.

In connection with the Restructuring Term Sheet,
on June 11, 2002 (the Petition Date), the
Holding Company filed a voluntary petition for relief under
Chapter 11 of the federal bankruptcy laws in the United
States Bankruptcy Court for the Southern District of New York
(the Bankruptcy Court). Under Chapter 11,
certain claims against the Holding Company in existence prior to
the filing of the petition for relief under the federal
bankruptcy laws were stayed while the Holding Company continued
business operations as Debtor-in-Possession. These claims are
reflected in the December 31, 2002 condensed consolidated
balance sheet as liabilities subject to compromise.

F-6



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


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

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

Although the Holding Company has emerged from
bankruptcy, the Company remains in default under indebtedness
owed to a creditor who voted against the Plan. Under the Plan,
the claims of this creditor was a contingent obligation arising
under a guarantee by the Holding Company of certain primary
indebtedness of IMPSAT Argentina. Notwithstanding the
Companys emergence from bankruptcy and the extinguishment
of Companys guarantee as a result, an event of default has
occurred and is continuing with respect to the related primary
underlying indebtedness of IMPSAT Argentina. This default, which
relates to indebtedness totaling approximately $8.0 million
as of September 30, 2003 in outstanding principal amount,
gives the respective creditor the right to accelerate such
indebtedness and seek immediate repayment of all outstanding
amounts and accrued interest thereon. The Company is currently
conducting negotiations at the level of IMPSAT Argentina with
this creditor with a view to rescheduling or otherwise
restructuring the defaulted debt obligation. There is no
assurance, however, that the Company will be successful in these
negotiations or that the Company will reach a definitive
agreement with this creditor to reschedule or restructure such
obligations. Under those circumstances, IMPSAT Argentina could
be forced to seek protection or liquidate under Argentine
bankruptcy law.

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



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | issued shares of New Common Stock to holders of
    the Companys 13 3/4% Senior Notes due 2005 and
    12 3/8% Senior Notes due 2008, (the 2005/2008
    Holders) in full satisfaction of their claims thereunder,
    including the outstanding principal and all accrued and unpaid
    interest. The 2005/2008 Holders received their ratable portion
    of 9.8 million shares of New Common Stock, less an
    allocation of a ratable number of such shares of New Common
    Stock to the holders of certain other claims of unsecured
    creditors of the Holding Company. Under the Plan, the dollar
    value of such other unsecured claims was determined after the
    Effective Date based on factors at the level of the Holding
    Companys operating subsidiaries. Accordingly, the Plan
    required the Company to establish on the Effective Date a
    reserve (the Common Stock Reserve Pool) consisting
    of an estimated portion of such 9.8 million shares of New
    Common Stock sufficient to enable the Company to make any
    distributions after the Effective Date on account of such other
    unsecured claims. To this end, based on the estimated maximum
    value of the post-Effective Date contingencies and other
    unsecured claims, the Company and the creditors committee under
    the Plan determined that the Common Stock Reserve Pool should

F-7



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | be composed of 686,000 shares of New Common
    Stock. The 2005/2008 holders have initially received on the
    Effective Date 9.1 million shares of New Common Stock, net
    of the Common Stock Reserve Pool. Pursuant to the Plan, any
    settlements or distributions from the Common Stock Reserve Pool
    with the holders of other unsecured claims shall be made in
    accordance with the disputed claims resolution process contained
    therein. Following the resolution of these claims, the Company
    will distribute any shares of New Common Stock remaining in the
    Common Stock Reserve Pool ratably among the 2005/2008 Holders in
    accordance with the terms of the Plan. Holders of the
    Companys pre-Chapter 11 common stock (the Old
    Common Stock) and holders of any other equity interest
    received no distribution under the Plan. All Old Common Stock
    and all other equity interests were cancelled on the Effective
    Date;
|
| |  | filed with the Delaware Secretary of State a
    Restated Certificate of Incorporation (Certificate of
    Incorporation);                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | amended and restated the Companys Bylaws
    (Bylaws);                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | cancelled all Old Common Stock, and all other
    existing securities and agreements to issue or purchase any
    equity interest;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | issued $67.5 million in aggregate principal
    amount of Series A 6% Senior Guaranteed Notes due 2011
    (the Series A Notes) (initially convertible, in
    the aggregate, into 22.8% of the New Common Stock on a fully
    diluted basis) to holders of the Holding Companys former
    12 1/8% Senior Guaranteed Notes due 2003 (the 2003
    Noteholders), in full satisfaction of the claims of the
    2003 Noteholders, including the outstanding principal and all
    accrued and unpaid interest thereon;                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | issued to (i) holders of debt under the
    Companys pre-Effective Date Broadband Network vendor
    financing agreements (the Original Vendor Financing
    Agreements) and (ii) other creditors of the
    Companys operating subsidiaries holding guarantees by the
    Holding Company of such indebtedness who voted to accept the
    Plan, a combination of new senior indebtedness totaling
    $144.0 million, $23.9 million in the aggregate of new
    Series B 6% Senior Guaranteed Notes due 2011
    (Series B Notes) (initially convertible in the
    aggregate into 5.3% of the New Common Stock on a fully diluted
    basis), and eight-year warrants to acquire 15.3% in the
    aggregate of the New Common Stock (on a fully diluted basis);                                                                                                                                                                                                                
|
| |  | issued 200,000 shares of restricted New Common
    Stock to certain officers of the Company in accordance with the
    Companys 2003 Stock Incentive Plan; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | approved stock options for 1,646,332 shares of
    New Common Stock to senior officers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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

As a result of these transactions, as of
March 31, 2003, the Company had 10,000,000 shares of new
common stock issued and outstanding (including 686,000 shares
held in the Common Stock Reserve Pool

F-8



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


pending the resolution of disputed claims and
150,000 shares of unvested restricted stock issued under the
2003 Stock Incentive Plan).

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

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

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

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

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

F-9



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


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

|                                                      |                                        |                                         |         |                |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         |        |         | 
|----------------------------------------------------- | -------------------------------------- | --------------------------------------- | ------- | -------------- | --------- | ------- | ------- | --------- | -------- | ------------------------- | - | -------------- | - | -------------- | - | ------ | - | - | - | -------- | - | - | ------- | ------ | ------- | - | ------- | ------ | ------- | 
|                                                      |                                        |                                         |         |                |           |         |         |           |          |                           |   |               
|                                                      |                                        |                                         |         |                |           |         |         |           |          | Elimination of Equity and |   |               
|                                                      |                                        | Pre                                     |         |                |           |         |         |           |          | Fresh Start Adjustments   |   | Post          
|                                                      |                                        | Reorganization                          |         | Debt           |           | Common  |         | 2003      |          |                           |   | Reorganization
|                                                      |                                        | Balance                                 |         | Extinguishment |           | Stock   |         | Stock     |          |                           |   | Allocation of  |   | Balance       
|                                                      |                                        | Sheet                                   |         | And            |           | Reserve |         | Incentive |          | Equity                    |   | Reorganization |   | Sheet         
|                                                      |                                        | March 31, 2003                          |         | Reorganization |           | Pool    |         | Plan      |          | Elimination               |   | Value          |   | March 31, 2003
|                                                      |                                        |                                         |         |                |           |         |         |           |          |                           |   |                |   |               
|ASSETS                                                |                                        |                                         |         |                |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         |       
|CURRENT ASSETS:                                       |                                        |                                         |         |                |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         |       
|                                                      | Cash and cash equivalents              |                                         | $       | 35,565         |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   | $       | 35,565 |        
|                                                      | Trading investments                    |                                         |         | 26,324         |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         | 26,324 |        
|                                                      | Trade accounts receivable, net         |                                         |         | 34,493         |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         | 34,493 |        
|                                                      | Other receivables                      |                                         |         | 13,235         |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         | 13,235 |        
|                                                      | Prepaid expenses                       |                                         |         | 3,696          |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         | 3,696  |        
|                                                      | Assets held for disposal               |                                         |         | 5,222          |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   | $       | 263    |         |   |         | 5,485  |        
|                                                      |                                        |                                         |         |                |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         |       
|                                                      |                                        | Total current assets                    |         |                | 118,535   |         |         |           |         |                           |   |                |   |                |   |        |  |   |   |          |  |   |         |        | 263     |   |         |        | 118,798 | 
|                                                      |                                        |                                         |         |                |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         |       
|PROPERTY, PLANT AND EQUIPMENT, Net                    |                                        |                                         | 390,674 |                |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   | (72,871 | )      |         |   | 317,803 |       
|                                                      |                                        |                                         |         |                |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         |       
|NON-CURRENT ASSETS:                                   |                                        |                                         |         |                |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         |       
|                                                      | Investments in common stock            |                                         |         | 141            |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         | 141    |        
|                                                      | Other non-current assets               |                                         |         | 10,987         |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         | 10,987 |        
|                                                      |                                        |                                         |         |                |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         |       
|                                                      |                                        | Total non-current assets                |         |                | 11,128    |         |         |           |         |                           |   |                |   |                |   |        |  |   |   |          |  |   |         |        |        |   |         |        | 11,128  | 
|                                                      |                                        |                                         |         |                |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         |       
|TOTAL                                                 |                                        | $                                       | 520,337 |                |           | $       |        |           |          | $                         |  |                |   | $              |  |        |   | $ |  |          |   | $ | (72,608 | )      |         | $ | 447,729 |       
|                                                      |                                        |                                         |         |                |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         |       
|LIABILITIES AND STOCKHOLDERS
    (DEFICIENCY) EQUITY |                                        |                                         |         |               
|LIABILITIES NOT SUBJECT TO COMPROMISE:                |                                        |                                         |         |                |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         |       
|CURRENT LIABILITIES:                                  |                                        |                                         |         |                |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         |       
|                                                      | Accounts payable  trade               |                                         | $       | 74,444         |           |         | $       | (22,442   | )        |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   | $       | 52,002 |        
|                                                      | Current portion of long-term debt      |                                         |         | 282,474        |           |         |         | (258,832  | )        |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         | 23,642 |        
|                                                      | Accrued and other liabilities          |                                         |         | 51,633         |           |         |         | (25,137   | )        |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         | 26,496 |        
|                                                      |                                        |                                         |         |                |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         |       
|                                                      |                                        | Total current liabilities               |         |                | 408,551   |         |         |           | (306,411 | )                         |   |                |   |                |   |        |  |   |   |          |  |   |         |        |        |   |         |        | 102,140 | 
|                                                      |                                        |                                         |         |                |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         |       
|LONG-TERM DEBT, Net                                   |                                        |                                         | 24,334  |                |           |         | 219,490 |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   | 243,824 |       
|                                                      |                                        |                                         |         |                |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         |       
|OTHER LONG-TERM LIABILITIES                           |                                        |                                         | 13,765  |                |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   | 13,765  |       
|                                                      |                                        |                                         |         |                |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         |       
|DEFERRED REVENUES                                     |                                        |                                         | 69,377  |                |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   | $ | (69,377 | )      |         |   |        |       
|                                                      |                                        |                                         |         |                |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         |       
|LIABILITIES SUBJECT TO                                |                                        |                                         |         |                |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         |       
|                                                      | COMPROMISE                             |                                         |         | 727,522        |           |         |         | (727,522  | )        |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         |       |        
|                                                      |                                        |                                         |         |                |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         |       
|                                                      |                                        | Total liabilities                       |         |                | 1,243,549 |         |         |           | (814,443 | )                         |   |                |   |                |   |        |   |   |   |          |  |   |         |        | (69,377 | ) |         |        | 359,729 | 
|                                                      |                                        |                                         |         |                |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         |       
|STOCKHOLDERS (DEFICIENCY) EQUITY:                    |                                        |                                         |         |                |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         |       
|                                                      | Common Stock  old                     |                                         |         | 914            |           |         |         |           |          |                           |   |                |   |                |   |        |   |   | $ | (914     | ) |   |         |        |         |   |         |       |        
|                                                      | Common Stock  new                     |                                         |         |                |           |         |         | 98        |          |                           |   |                |   |                | $ | 2      |   |   |   |          |   |   |         |        |         |   |         | 100    |        
|                                                      | Additional paid in capital  old       |                                         |         | 537,725        |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   | (537,725 | ) |   |         |        |         |   |         |       |        
|                                                      | Additional paid in capital  new       |                                         |         |                |           |         |         | 86,142    |          |                           | $ | 6,037          |   |                |   | 1,758  |   |   |   |          |   |   |         | 1,320  |         |   |         | 95,257 |        
|                                                      | Accumulated deficit                    |                                         |         | (1,273,542     | )         |         |         | 728,203   |          |                           |   |                |   |                |   | (440   | ) |   |   | 550,330  |   |   |         | (4,551 | )       |   |         |       |        
|                                                      | Common stock reserve pool              |                                         |         |                |           |         |         |           |          |                           |   | (6,037         | ) |                |   |        |   |   |   |          |   |   |         |        |         |   |         | (6,037 | )      
|                                                      | Deferred stock-based compensation      |                                         |         | (4,530         | )         |         |         |           |          |                           |   |                |   |                |   | (1,320 | ) |   |   | 4,530    |   |   |         |        |         |   |         | (1,320 | )      
|                                                      | Accumulated other comprehensive income |                                         |         | 16,221         |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   | (16,221  | ) |   |         |        |         |   |         |       |        
|                                                      |                                        |                                         |         |                |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         |       
|                                                      |                                        | Total stockholders (deficiency) equity |         |                | (723,212  | )       |         |           | 814,443  |                           |   |                |  |                |   |        |  |   |   |          |  |   |         |        | (3,231  | ) |         |        | 88,000  | 
|                                                      |                                        |                                         |         |                |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         |       
|TOTAL                                                 |                                        | $                                       | 520,337 |                |           | $       |        |           |          | $                         |  |                |   | $              |  |        |   | $ |  |          |   | $ | (72,608 | )      |         | $ | 447,729 |       
|                                                      |                                        |                                         |         |                |           |         |         |           |          |                           |   |                |   |                |   |        |   |   |   |          |   |   |         |        |         |   |         |       

F-10



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


These adjustments primarily include the following:

Debt Extinguishment and
Reorganization



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The extinguishment of the Companys
    2005/2008 Senior Notes plus accrued interest in exchange for the
    issuance of 9.8 million shares of the Companys new
    common stock; (including 686,800 shares held in the Common Stock
    Reserve Pool pending the resolution of disputed claims);                                                                                                                                                                                                                                        
|
| |  | The extinguishment of the Companys 2003
    Senior Notes plus accrued interest in exchange for the issuance
    of $67.5 million in aggregate principal amount of
    Series A Notes ($60.0 million as of March 31,
    2003);                                                                                                                                                                                                                                                                                                           
|
| |  | The extinguishment of the Companys
    Broadband Vendor Financing agreements that voted in favor of the
    plan plus accrued interest in exchange for the issuance of a
    combination of $144.0 million in senior indebtedness issued
    by IMPSAT Argentina and IMPSAT Brazil ($128.0 million as of
    March 31, 2003), $23.9 million in aggregate principal
    amount of Series B Notes ($21.2 million as of
    March 31, 2003) and eight-year warrants to acquire 15.3% in
    the aggregate of the Companys new common stock;

Common Stock Reserve Pool



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

2003 Stock Incentive Plan



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

Equity Eliminations



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

Allocation of Reorganization Value



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

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

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



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The adjustment to the Predecessor Companys
    deferred revenue in accordance with Emerging Issues Task Force
    (EITF) 01-3, Accounting in a Business Combination
    for Deferred Revenue of an Acquiree, which requires the
    acquiring entity to recognize a liability (based on its fair
    value at the date of acquisition) related to a deferred revenue
    of an acquired entity only if that deferred revenue represents a
    legal obligation assumed by the acquiring entity (a legal
    performance obligation). The Successor Company determined that
    the deferred revenue represented a legal performance obligation

F-11



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##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




| |  |                                                                                                                                                                                                                                                                         
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | under EITF 01-3; however, the fair value (based
    on incremental costs incurred to honor the legal performance
    obligation) was determined during the period ended June 30,
    2003, to not be material to the Successor Companys
    consolidated balance sheet.

Going Concern
Matters The Companys
history of losses and default under indebtedness owed to a
creditor who voted against the Plan raise substantial doubt
about the Companys ability to continue as a going concern.
Management continues its efforts to resolve this default and is
in negotiations with the creditor. The condensed consolidated
financial statements do not include any adjustments relating to
recoverability and classification of recorded asset amounts or
the amount and classification of liabilities that might be
necessary should the Company be unable to continue as a going
concern. The ability of the Holding Company to continue as a
going concern and to appropriately use the going concern basis
is dependent upon, among other things, (i) the
Companys ability to revise and implement its business
plan, (ii) the Companys ability to achieve profitable
operations, and (iii) the Companys ability to
generate sufficient cash from operations to meet its
obligations. The condensed consolidated financial statements do
not give effect to any adjustments to the carrying values of
assets or amounts and classifications of liabilities that might
result from the uncertainties described above.



|   |                                               
|-- | ----------------------------------------------
|3. | SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES

Basis of
Presentation The condensed
financial statements are presented on a consolidated basis and
include the accounts of IMPSAT Fiber Networks, Inc and its
subsidiaries. All significant intercompany transactions and
balances have been eliminated. SOP 90-7 (see Note 2)
was followed in the preparation of these condensed consolidated
financial statements.

Interim Financial Information The unaudited condensed
consolidated financial statements as of September 30, 2003
and for the six months then ended have been prepared on the
basis of fresh-start accounting as described in Note 2. The
other interim condensed consolidated financial statements
included herein have been prepared on the same basis as the
Companys audited consolidated financial statements for the
year ended December 31, 2002. In the opinion of management,
the unaudited condensed consolidated financial statements
include all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the results for such
period. The operating results for the three and six months ended
September 30, 2003 are not necessarily indicative of the
operating results to be expected for the remainder of calendar
year 2003 or for any future period.

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

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

Currency
Risks In early January
2002, as Argentinas ongoing political and financial crisis
deepened, the country defaulted on its massive foreign debt and
the government of President Eduardo Duhalde, who entered office
on January 1, 2002, abandoned the decade-old fixed
peso-dollar exchange rate and permitted the peso to float
freely against the U.S. dollar. The pesofree market
opened on January 11, 2002 at 1.65 pesos

F-12



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##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


to the U.S. dollar and has been volatile since.
At December 31, 2002, and September 30, 2003 the
Argentine pesotraded at 3.40 and 2.90 pesosto
the U.S. dollar, respectively. The devaluation of the Argentine
peso will generally affect the Companys consolidated
financial statements by generating foreign exchange gains or
losses on dollar-denominated monetary liabilities and
assets of IMPSAT Argentina and will generally result in a
decrease, in U.S. dollar terms, in the Companys revenues,
costs and expenses in Argentina.

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

Since the pesification decree, an
increasing portion of IMPSAT Argentinas customer contracts
and operating cash inflows are denominated in pesos while its
debt service payments and a portion of its costs (including
capital equipment purchases and payments for certain leased
telecommunication capacity) are denominated in U.S. dollars.
Accordingly, the Companys financial condition and results
of operations in Argentina are dependent upon IMPSAT
Argentinas ability to generate sufficient pesos(in
U.S. dollar terms) to pay its costs, expenses and to satisfy its
debt service requirements. There are significant uncertainties
regarding the extent and duration of the devaluation and the
direction of the fiscal policies in Argentina. Any continued or
additional adverse conditions in the Argentine economy,
including any further devaluation of the pesoor changes
in foreign exchange markets or regulations, could have a
material adverse effect on IMPSAT Argentinas and the
Companys overall cash flows, financial condition, and
results of operations.

On March 5, 2003, Argentinas Supreme
Court declared the pesificationdecree
unconstitutional to the extent that it required the mandatory
redenomination of U.S. dollar bank deposits to pesos.
Although the ruling applies only to amounts held by the
petitioner in that case on deposit at a state-owned bank, the
decision will likely strengthen existing (and create a profusion
of similar) claims by other depositors seeking to
redollarize their deposits. This could force the
Argentine government to issue long-term bonds in satisfaction of
such claims, which, in turn, could increase Argentinas
public debt burden and cause a further deterioration of its
national economy. The future judicial implementation of the
Argentine Supreme Courts decision as well as any
legislative or executive response could take an unknown variety
of forms. Accordingly, its potential impact on the Argentine
economy and on the Companys operations in that country
presently cannot be estimated.

Numerous uncertainties exist surrounding the
ultimate resolution of Argentinas economic and political
instability and actual results could differ from those estimates
and assumptions utilized. The Argentine

F-13



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##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


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

The Companys results in Brazil also are
adversely affected by devaluations of the Brazilian realagainst the U.S. dollar. At December 31, 2001, the
realtraded at a rate of R$2.41 = $1.00, and at
December 31, 2002 it had depreciated to
R$3.53 = $1.00. At September 30, 2003, the
realtraded at R$2.92 to the U.S. dollar. Devaluations of
the realagainst the U.S. dollar have had a negative
effect on the Companys real-denominated revenues.
Economic difficulties in Brazil, including further currency
devaluations, could have a material adverse effect on IMPSAT
Brazils and the Companys overall financial condition
and results of operations.

In addition, in 2002, the Venezuelan government
removed controls over the trading range of the bolivar,
allowing the exchange rate to be determined by market
conditions. As a result, during 2002, the bolivar decreased in
value in relation to the U.S. dollar by approximately 85%.
During February 2003, the Venezuelan government imposed exchange
rate controls, fixing the bolivars value to the U.S.
dollar at 1,600 bolivars to the U.S. dollar. These exchange rate
controls make it difficult for the Companys customers in
Venezuela to obtain the U.S. dollars needed to make payments due
to the Company in U.S. dollars on a timely basis. These exchange
controls also limit the Companys ability to convert local
currency into U.S. dollars and transfer funds out of Venezuela.
As of September 30, 2003, approximately $5.8 million
of the Companys cash and cash equivalents were held in
Venezuela bolivars by IMPSAT Venezuela (translated into U.S.
dollars at the fixed exchange rate imposed by the Venezuelan
government). Pursuant to the discussions by the AICPA
International Practices Task Force during their March 2003
meeting, the Company has used the official government exchange
rate of 1,600 bolivars to the U.S. dollar to remeasure the
financial statements of IMPSAT Venezuela.

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

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

No single customer accounted for greater than 10%
of total net revenues from services for the three and nine month
periods ended September 30, 2002 and for the three months
ended March 31, 2003 and for the six months ended
September 30, 2003.

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

F-14



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##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


accordance with Accounting Principles Board
Opinion No. 29, Accounting for Nonmonetary
Transactions, where an exchange of similar IRUs is recorded
at a historical carryover basis with no revenue or any gain or
loss being recorded.

Assets Held for Disposal During the first quarter of 2003, the
Company determined to close its operations in Mexico, and as
such reclassified the amounts of assets associated with the
operations in Mexico to assets held for disposal. The Company
has entered into agreements with various parties to sell the
Companys real estate and other real and personal property
in Mexico. During the second quarter of 2003, the Company sold
the real estate property in Mexico for $2.4 million to an
unrelated third party for cash. The Company continues its
efforts to sell its remaining personal property in Mexico and
expects to close such transactions in the first quarter of 2004.

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 term of the rights of way, which
range from 10 to 20 years. In addition, the Company has
acquired IRUs from other entities for its own purposes. Such IRU
investments are capitalized and amortized over their estimated
useful lives, not to exceed 15 years. The acquired IRUs
have a 25-year term. In those cases where the right of use has
been acquired for a longer period of time (25 years)
management believes that, due to anticipated advances in
technology, the Companys IRUs are not likely to be
productive assets beyond 15 years.

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

Long-Lived Assets Long-lived assets are reviewed on an
ongoing basis for impairment based on a comparison of carrying
values to the related undiscounted future cash flows. If the
carrying amounts exceed such cash flows, identifying a possible
impairment, the asset carrying amounts are adjusted to fair
value.

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

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

Foreign Currency Translation The Companys subsidiaries
generally use the U.S. dollar as the functional currency.
Accordingly, the financial statements of the subsidiaries were
remeasured. The effects of foreign currency transactions and of
remeasuring the financial position and results of operations
into the

F-15



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##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


functional currency are included as net gain or
loss on foreign exchange, except for IMPSAT Brazil, which uses
the local currency as the functional currency, and are included
in accumulated other comprehensive income (loss) in
stockholders equity.

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

For purposes of the following pro forma
disclosures, the fair value of the options granted in 2003 (see
Note 12) was estimated using the minimum value method prescribed
by SFAS No. 123, as the Companys new common stock has
not traded since emergence and through 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. Had
compensation cost been determined based on the fair value at the
date of grant consistent with the requirement of SFAS
No. 123, the Companys net income would have been
decreased by approximately $0.2 million and
$0.9 million, and basic (and diluted) earnings per share
would have decreased by $0.02 and $0.08 per share for the three
and six months ended September 30, 2003, respectively. No
stock-based compensation cost is reflected in the accompanying
condensed consolidated statements of income because all the
options granted had an exercise price greater than the market
value of the underlying common stock on the date of grant.

Fair Value of Financial
Instruments The
Companys financial instruments include trading
investments, receivables, investments in common stock, payables,
short- and long-term debt. The Companys trading
investments and common stock investments were valued at market
closing prices at September 30, 2003. The fair value of
these investments is presented in Note 4. The fair value of all
other financial instruments, which approximate their carrying
value, have been determined using available market information
and interest rates as of September 30, 2003.

Net (Loss) Income Per Common Share Basic earnings (loss) per share
is computed based on the average number of common shares
outstanding and diluted earnings (loss) per share is
computed based on the average number of common and potential
common shares outstanding under the treasury stock method. The
calculation of diluted income (loss) per share was the same
as the basic income per share for all periods presented, since
the inclusion of potential common stock in the computation would
be antidilutive.

F-16



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##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


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

|                                                                                     |                       |             |         |                 |  |       |     |    |  |   |         |        | 
|------------------------------------------------------------------------------------ | --------------------- | ----------- | ------- | --------------- |  | ----- | --- | -- |  | - | ------- | ------ | 
|                                                                                     |                       |             |         | Unrealized Gain |  |      
|                                                                                     |                       | Foreign     |         | on Investments  |  |      
|                                                                                     |                       | Currency    |         | Available For   |  |      
|                                                                                     |                       | Translation |         | Sale            |  | Total
|                                                                                     |                       |             |         |                 |  |      
|Balance at December 31, 2002
    (Predecessor Company)                               |                       | $           | 20,263  |                 |  | $     |    |    |  | $ | 20,263  |       
|Change during the period                                                             |                       |             | (4,097  | )               |  |       | 55  |    |  |   | (4,042  | )     
|                                                                                     |                       |             |         |                 |  |       |     |    |  |   |         |       
|Balance at March 31, 2003                                                            |                       |             |         |                 |  |       |     |    |  |   |         |       
|                                                                                     | (Predecessor Company) |             |         | 16,166          |  |       |     | 55 |  |   |         | 16,221 | 
|Elimination of Predecessor Company Accumulated
    Other Comprehensive Income (Loss) |                       |             | (16,166 | )               |  |       | (55 | )  |  |   | (16,221 | )     
|                                                                                     |                       |             |         |                 |  |       |     |    |  |   |         |       
|Balance at March 31, 2003
    (Successor Company)                                    |                       |             |        |                 |  |       |    |    |  |   |        |       
|Change during the period                                                             |                       |             | (5,547  | )               |  |       | 246 |    |  |   | (5,301  | )     
|                                                                                     |                       |             |         |                 |  |       |     |    |  |   |         |       
|Balance at September 30, 2003
    (Successor Company)                                |                       | $           | (5,547  | )               |  | $     | 246 |    |  | $ | (5,301  | )     
|                                                                                     |                       |             |         |                 |  |       |     |    |  |   |         |       

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

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

In November 2002, the FASB issued FASB
Interpretation No. 45 (FIN 45),
Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of
Others, an interpretation of FASB Statements No. 5, 57, and
107 and Rescission of FASB Interpretation No. 34. FIN
45 clarifies the requirements of SFAS No. 5, relating to
the guarantors accounting for, and disclosure of, the
issuance of certain types of guarantees. This Interpretation
clarifies that a guarantor is required to recognize, at the
inception of certain types of guarantees, a liability for the
fair value of the obligation undertaken in issuing the
guarantee. The initial recognition and initial measurement
provisions of this Interpretation are applicable on a
prospective basis to guarantees issued or modified after
December 31, 2002, irrespective of the guarantors
fiscal year-end. The disclosure requirements in this
Interpretation are effective for financial statements of interim
or annual periods ending after December 15, 2002. As the
provisions of FIN 45 are

F-17



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##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


required to be applied prospectively after the
adoption date, the Company can not determine the potential
effects that the adoption of FIN 45 will have on its condensed
consolidated financial statements.

In January 2003, the FASB issued FASB
Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities, an
Interpretation of APB No. 51. FIN 46 requires certain
variable interest entities to be consolidated by the primary
beneficiary of the entity if the equity investors in the entity
do not have the characteristics of a controlling financial
interest or do not have sufficient equity at risk for the entity
to finance its activities without additional subordinated
financial support from other parties. FIN 46 is effective for
all new variable interest entities created or acquired after
January 31, 2003. For variable interest entities created or
acquired prior to February 1, 2003, the provisions of FIN
46 must be applied for the first interim or annual period
beginning after June 15, 2003. During October 2003, the
FASB deferred the effective date of FIN 46 until the end of the
first interim or annual period ending after December 15,
2003. The Company is currently evaluating the effect that the
adoption of FIN 46 will have on its results of operations and
financial condition.

In April 2003, the FASB issued SFAS No. 149,
Amendment of Statement 133 on Derivative Instruments and
Hedging Activities. SFAS 149 amends and clarifies accounting
for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging
activities under SFAS 133. This Statement is effective for
contracts entered into or modified after June 30, 2003. The
Company does not expect the adoption of SFAS 149 to have a
significant impact on the Companys financial position or
results of operations.

In May 2003, the FASB issued SFAS No. 150,
Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. This
Statement requires that an issuer classify financial instruments
that are within its scope as a liability. Many of those
instruments were classified as equity under previous guidance.
Most of the guidance in SFAS No. 150 is effective for all
financial instruments entered into or modified after
May 31, 2003, and otherwise effective at the beginning of
the first interim period beginning after June 15, 2003. The
adoption of SFAS 150 is not expected to have a significant
impact on the Companys consolidated financial statements.

Reclassifications Certain amounts in the 2002 condensed
consolidated financial statements have been reclassified to
conform with the 2003 presentation.

4.     INVESTMENTS

The Companys investments consist of the
following at December 31, 2002 and September 30, 2003:

|                                   |  |                     |        |                    |  |   |       | 
|---------------------------------- |  | ------------------- | ------ | ------------------ |  | - | ----- | 
|                                   |  | Predecessor Company |        | Successor Company 
|                                   |  | December 31, 2002   |        | September 30, 2003
|                                   |  |                     |        |                   
|Trading investments, at fair value |  | $                   | 23,021 |                    |  | $ | 1,932 | 
|Investments in common stock        |  | $                   | 86     |                    |  | $ | 387   | 

The Companys trading investments as of
December 31, 2002, consisted of high-quality, short-term
investments with maturities of less than 360 days. During
the quarter ended June 30, 2003, the Company transferred
the funds previously classified as trading investments into a
money market fund and reclassified such funds to cash and cash
equivalents as of June 30, 2003. During the quarter ended
September 30, 2003, IMPSAT Venezuela invested approximately
$2.7 million in short-term government bonds. Such
investment is classified as trading investments as of
September 30, 2003.

The Companys investments in common stock at
December 31, 2002 and September 30, 2003, included a
3.3% ownership interest in the outstanding common stock of
Claxson Interactive Group Inc. (Claxson), an
integrated media company with operations in Latin America.

F-18



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




5.     TRADE ACCOUNTS
RECEIVABLE

Trade accounts receivable, by operating
subsidiaries, at December 31, 2002 and September 30,
2003, are summarized as follows:

|                                      |       |                     |         |                    |  |   |         |        | 
|------------------------------------- | ----- | ------------------- | ------- | ------------------ |  | - | ------- | ------ | 
|                                      |       | Predecessor Company |         | Successor Company 
|                                      |       | December 31, 2002   |         | September 30, 2003
|                                      |       |                     |         |                   
|IMPSAT Argentina                      |       | $                   | 27,739  |                    |  | $ | 27,205  |       
|IMPSAT Brazil                         |       |                     | 4,577   |                    |  |   | 6,630   |       
|IMPSAT Colombia                       |       |                     | 3,542   |                    |  |   | 4,605   |       
|IMPSAT Venezuela                      |       |                     | 8,154   |                    |  |   | 6,798   |       
|All other countries                   |       |                     | 10,384  |                    |  |   | 11,141  |       
|                                      |       |                     |         |                    |  |   |         |       
|                                      | Total |                     |         | 54,396             |  |   |         | 56,379 | 
|Less: allowance for doubtful accounts |       |                     | (23,384 | )                  |  |   | (22,156 | )     
|                                      |       |                     |         |                    |  |   |         |       
|Trade accounts receivable, net        |       | $                   | 31,012  |                    |  | $ | 34,223  |       
|                                      |       |                     |         |                    |  |   |         |       

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

The activity for the allowance for doubtful
accounts for the years ended December 31, 2002 and for the
three months ended March 31, 2003 and for the six months
ended September 30, 2003 is as follows:

|                                |  |                     |        |                     |  |                    |        |   |  |   |        |  
|------------------------------- |  | ------------------- | ------ | ------------------- |  | ------------------ | ------ | - |  | - | ------ | -
|                                |  | Predecessor Company |        | Predecessor Company |  | Successor Company 
|                                |  | December 31, 2002   |        | March 31, 2003      |  | September 30, 2003
|                                |  |                     |        |                     |  |                   
|Beginning balance               |  | $                   | 23,782 |                     |  | $                  | 23,384 |   |  | $ | 21,358 |  
|Provision for doubtful accounts |  |                     | 13,053 |                     |  |                    | 515    |   |  |   | 2,906  |  
|Write-offs, net of recoveries   |  |                     | (4,741 | )                   |  |                    | (1,553 | ) |  |   | (2,379 | )
|Effect of exchange rate change  |  |                     | (8,710 | )                   |  |                    | (988   | ) |  |   | 271    |  
|                                |  |                     |        |                     |  |                    |        |   |  |   |        |  
|Ending balance                  |  | $                   | 23,384 |                     |  | $                  | 21,358 |   |  | $ | 22,156 |  
|                                |  |                     |        |                     |  |                    |        |   |  |   |        |  

6.     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, 2002 and September 30, 2003:

|                    |       |                     |       |                    |  |   |       |        | 
|------------------- | ----- | ------------------- | ----- | ------------------ |  | - | ----- | ------ | 
|                    |       | Predecessor Company |       | Successor Company 
|                    |       | December 31, 2002   |       | September 30, 2003
|                    |       |                     |       |                   
|IMPSAT Argentina    |       | $                   | 3,576 |                    |  | $ | 600   |       
|IMPSAT Brazil       |       |                     | 2,150 |                    |  |   | 2,337 |       
|IMPSAT Colombia     |       |                     | 3,498 |                    |  |   | 1,756 |       
|IMPSAT Venezuela    |       |                     | 2,024 |                    |  |   | 2,412 |       
|All other countries |       |                     | 5,426 |                    |  |   | 2,943 |       
|                    |       |                     |       |                    |  |   |       |       
|                    | Total |                     | $     | 16,674             |  |   | $     | 10,048 | 
|                    |       |                     |       |                    |  |   |       |       

F-19



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




7.     PROPERTY,
PLANT AND EQUIPMENT

Property, plant and equipment at
December 31, 2002 and September 30, 2003 consist of:

|                                                 |       |                     |          |                    |  |   |         |         | 
|------------------------------------------------ | ----- | ------------------- | -------- | ------------------ |  | - | ------- | ------- | 
|                                                 |       | Predecessor Company |          | Successor Company 
|                                                 |       | December 31, 2002   |          | September 30, 2003
|                                                 |       |                     |          |                   
|Land                                             |       | $                   | 11,238   |                    |  | $ | 10,104  |        
|Building and improvements                        |       |                     | 70,070   |                    |  |   | 33,792  |        
|Operating communications equipment               |       |                     | 535,394  |                    |  |   | 155,538 |        
|Network infrastructure (including rights of way) |       |                     | 167,907  |                    |  |   | 103,475 |        
|IRU investments                                  |       |                     | 42,618   |                    |  |   | 19,244  |        
|Furniture, fixtures and other equipment          |       |                     | 38,824   |                    |  |   | 13,182  |        
|                                                 |       |                     |          |                    |  |   |         |        
|                                                 | Total |                     |          | 866,051            |  |   |         | 335,335 | 
|Less: accumulated depreciation                   |       |                     | (465,142 | )                  |  |   | (19,096 | )      
|                                                 |       |                     |          |                    |  |   |         |        
|                                                 | Total |                     |          | 400,909            |  |   |         | 316,239 | 
|Equipment in transit                             |       |                     | 2,705    |                    |  |   | 2,501   |        
|Works in process                                 |       |                     | 334      |                    |  |   | 230     |        
|                                                 |       |                     |          |                    |  |   |         |        
|Property, plant and equipment, net               |       | $                   | 403,948  |                    |  | $ | 318,970 |        
|                                                 |       |                     |          |                    |  |   |         |        

The recap of accumulated depreciation for the
year ended December 31, 2002 and for the three months ended
March 31, 2003 and for the six months ended
September 30, 2003 is as follows:

|                                     |  |                     |         |                     |  |                    |          |   |  |   |        |  
|------------------------------------ |  | ------------------- | ------- | ------------------- |  | ------------------ | -------- | - |  | - | ------ | -
|                                     |  | Predecessor Company |         | Predecessor Company |  | Successor Company 
|                                     |  | December 31, 2002   |         | March 31, 2003      |  | September 30, 2003
|                                     |  |                     |         |                     |  |                   
|Beginning balance                    |  | $                   | 415,718 |                     |  | $                  | 465,142  |   |  | $ |       |  
|Depreciation expense                 |  |                     | 82,199  |                     |  |                    | 18,654   |   |  |   | 19,281 |  
|Disposals and retirements            |  |                     | (32,775 | )                   |  |                    | (2,394   | ) |  |   | (185   | )
|Application of fresh-start reporting |  |                     |         |                     |  |                    | (481,402 | ) |  |   |        |  
|                                     |  |                     |         |                     |  |                    |          |   |  |   |        |  
|Ending balance                       |  | $                   | 465,142 |                     |  | $                  |         |   |  | $ | 19,096 |  
|                                     |  |                     |         |                     |  |                    |          |   |  |   |        |  

Global Crossing During the year ended
December 31, 2000, the Company completed and delivered to
Global Crossing the portion of the Trans-Andean Crossing System
connecting Las Toninas, Argentina and Santiago, Chile. As part
of the Broadband Network and Global Crossings South
American Crossing system, the Company also constructed turnkey
backhaul segments and granted IRUs to Global Crossing in Peru
and Brazil between Global Crossings landing points in
those countries and its metropolitan points of presence located
at the Companys telehouses in Lima, Peru and Sao Paulo and
Rio de Janeiro, Brazil.

As part of its arrangements with Global Crossing,
the Company agreed to purchase from Global Crossing indefeasible
rights of use of capacity valued at not less than
$46 million on any of Global Crossings fiber optic
cable networks worldwide. These rights enable the Company to
interconnect the Companys networks in Argentina and Brazil
and give the Company global international access. The Company
had purchased approximately $22.3 million under this
agreement as of December 31, 2001 and did not purchase any
amount during the year ended December 31, 2002 and during
the three months ended March 31, 2003 and the six months
ended September 30, 2003, respectively. As part of the
Holding Companys emergence from bankruptcy, the Company
rejected its obligation to purchase the outstanding balance of
$23.7 million in IRUs from Global Crossing as permitted by
the Bankruptcy Code.

F-20



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


In January 2002, Global Crossing filed for
protection under Chapter 11 of the U.S. Bankruptcy Code.
Although the Global Crossing subsidiaries to which the Company
provides services and infrastructure were not originally
included in the Global Crossings Chapter 11 filing,
during August 2002, Global Crossing amended its Chapter 11
proceeding to include its subsidiaries that are counter parties
to the agreements with the Company. As of December 31,
2002, and September 30, 2003, Global Crossing was in
default for a total of approximately $3.3 million and
$7.7 million, respectively, for services provided under
such agreements. The Company has recorded provisions for
doubtful accounts of approximately $2.1 million and
$5.5 million, respectively, against these receivables.

The Company has filed motions in Global
Crossings bankruptcy proceeding seeking an order that
Global Crossing make payment to the Company of the amounts
claimed by the Company and that Global Crossing either accept or
reject its agreements with the Company. Global Crossing has
disputed that it owes the Company any amounts under the
agreements at issue and has filed a proceeding seeking that the
bankruptcy court grant Global Crossing a property right in
certain of the IRUs that it acquired from the Company.

To link the Companys Broadband Network to
other parts of Latin America and the world, the Company has
secured IRU and leased capacity on Global Crossings
undersea fiber optic cable systems (and associated terrestrial
capacity) between the United States and Latin America, including
Global Crossings South American network. Although Global
Crossing has indicated its intention to assume these agreements
upon its emergence from bankruptcy, if Global Crossing is unable
to successfully reorganize and were to sell or terminate its
South American operations as part of its bankruptcy proceedings,
it is unclear what rights the Company would have to continue to
utilize the IRUs that the Company purchased from Global
Crossing. It is possible that the Companys agreements with
Global Crossing would be terminated and the Company would need
to seek substitute sources of IRU or other capacity from
competing undersea fiber optic systems to link its operations,
including the Companys Broadband Network, to other parts
of Latin America and the world. As of September 30, 2003,
the unamortized balance of IRU investments acquired from Global
Crossing approximated $8.3 million. See also Note 13 for a
further description of the Companys disputes with Global
Crossing.

IRU Agreements The Company has entered into
several agreements, including some with Global Crossing,
granting IRUs of up to 25 years on the Companys
Broadband Network, including network maintenance services and
telehousing space. The Company has received advance payments
related to these agreements. These advance payments were
recorded as deferred revenue in the accompanying condensed
consolidated balance sheets as of December 31, 2002. As
described in Note 2, the Predecessor Companys deferred
revenue liability was adjusted in the application of fresh-start
accounting in accordance with EITF 01-3.

F-21



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




8.     LONG TERM
DEBT

The Companys long-term debt at
December 31, 2002 (excluding liabilities subject to
compromise as described in Note 10), and at September 30,
2003 is detailed as follows:

|                                                                                                                                                           |                                               |                      |          |                    |         |   |         |        |         | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------- | -------------------- | -------- | ------------------ | ------- | - | ------- | ------ | ------- | 
|                                                                                                                                                           |                                               | Predecessor Company  |          | Successor Company 
|                                                                                                                                                           |                                               | December 31, 2002    |          | September 30, 2003
|                                                                                                                                                           |                                               |                      |          |                   
|Series A 6% Senior Guaranteed Notes due 2011.                                                                                                              |                                               |                      |          |                    |         | $ | 61,852  |       
|Series B 6% Senior Guaranteed Notes due 2011.                                                                                                              |                                               |                      |          |                    |         |   | 23,443  |       
|Senior Secured Notes 10%, maturing 2009.                                                                                                                   |                                               |                      |          |                    |         |   | 136,416 |       
|Term notes, maturing through 2005; collateralized
    by buildings and equipment, the assignment of customer contracts
    and investment; denominated in: |                                               |                      |          |                    |         |   |         |       
|                                                                                                                                                           | U.S. dollars (interest rates 5.34% to 11.68%) |                      | $        | 11,821             |         |   |         | 6,001  |        
|                                                                                                                                                           | Local currency (interest rates 12.85%)        |                      |          | 19,279             |         |   |         | 17,830 |        
|Eximbank notes (interest rates 3.34% to 3.88%),
    maturing semiannually through 2007.                                                                    |                                               |                      | 18,275   |                    |         |   | 3,770   |       
|Vendor financing (3.59% to 11.46%), maturing 2003
    to 2005.                                                                                             |                                               |                      | 259,897  |                    |         |   | 8,181   |       
|                                                                                                                                                           |                                               |                      |          |                    |         |   |         |       
|                                                                                                                                                           |                                               | Total long-term debt |          |                    | 309,272 |   |         |        | 257,493 | 
|Less: current portion including defaulted
    indebtedness                                                                                                 |                                               |                      | (281,680 | )                  |         |   | (13,153 | )     
|                                                                                                                                                           |                                               |                      |          |                    |         |   |         |       
|Long-term debt, net                                                                                                                                        |                                               | $                    | 27,592   |                    |         | $ | 244,340 |       
|                                                                                                                                                           |                                               |                      |          |                    |         |   |         |       

The Companys Series A, Series B
and Senior Secured notes shown above were originally issued in
conjunction with effecting the Plan described in Note 2.

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

The Companys liquidity difficulties in 2001
led to non-compliance with certain covenant requirements and
payment provisions under the Companys Original Vendor
Financing Agreements. On October 25, 2001, the Company
obtained a waiver of covenant defaults and an extension from
these lenders for scheduled principal and interest payments
under the Original Vendor Financing Agreements totaling
approximately $36.3 million that were due on that date. The
waiver expired on November 25, 2001 and the Original Vendor
Financing Agreements became due and payable. On June 11,
2002, the Holding Company filed a voluntary petition for
reorganization under Chapter 11 of the Bankruptcy Code and,
effective as of such date pursuant to the provisions of the
Bankruptcy Code, contractually accrued interest on the Holding
Companys unsecured, pre-petition obligations ceased to
accrue. As a result of the Companys default under the
Original Vendor Financing Agreements, the defaulted amounts were
reclassified to current portion of long-term debts as of
December 31, 2002.

During the second quarter of 2002, the Company
extinguished certain of its vendor financing obligations prior
to maturity for cash and recorded a gain on extinguishment of
approximately $16.4 million. During the three and six
months ended September 30, 2003, the Company extinguished
certain of its Eximbank notes, and certain of its vendor
financing and certain of its accounts payable-trade obligations
prior to their maturity for cash and recorded a gain on
extinguishment of approximately $ 5.5 million and
$8.8 million, respectively.

F-22



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


During the second quarter of 2003, the Company
issued a combination of new senior secured indebtedness totaling
$3.7 million ($3.4 million as of September 30, 2003)
and new Series B Notes totaling $1.7 million
($1.6 million as of September 30, 2003) in full
settlement of certain vendor financing obligations totaling
$10.3 million of IMPSAT Argentina. The Company recorded a
$5.5 million gain on extinguishment of debt as a result of
the above transaction.

9.     INCOME
TAXES

The composition of the provision for income
taxes, all of which is for foreign taxes, for the three and nine
months ended June 30, 2002 and the three months ended
March 31, 2003 and the three and six months ended
September 30, 2003 is as follows:

|         |       |                    |      |               |   |              |      |               |   |           |        |        |   |   |      |      |   |   |        |        |  
|-------- | ----- | ------------------ | ---- | ------------- | - | ------------ | ---- | ------------- | - | --------- | ------ | ------ | - | - | ---- | ---- | - | - | ------ | ------ | -
|         |       | Predecessor        |      | Successor     |   | Predecessor  |      | Predecessor   |   | Successor
|         |       | Company            |      | Company       |   | Company      |      | Company       |   | Company  
|         |       |                    |      |               |   |              |      |               |   |          
|         |       |                    |      |               |   |              |      |              
|         |       | Three Months Ended |      | Nine Months   |   | Three Months |      | Six Months   
|         |       | September 30,      |      | Ended         |   | Ended        |      | Ended        
|         |       |                    |      | September 30, |   | March 31,    |      | September 30,
|         |       | 2002               |      | 2003          |   | 2002         |      | 2003          |   | 2003     
|         |       |                    |      |               |   |              |      |               |   |          
|Current  |       | $                  | (412 | )             |   | $            | (396 | )             |   | $         | (1,391 | )      |   | $ | (324 | )    |   | $ | (1,037 | )     
|Deferred |       |                    | 5    |               |   |              | (209 | )             |   |           | (167   | )      |   |   | (82  | )    |   |   | (312   | )     
|         |       |                    |      |               |   |              |      |               |   |           |        |        |   |   |      |      |   |   |        |       
|         | Total |                    | $    | (407          | ) |              | $    | (605          | ) |           | $      | (1,558 | ) |   | $    | (406 | ) |   | $      | (1,349 | )
|         |       |                    |      |               |   |              |      |               |   |           |        |        |   |   |      |      |   |   |        |       

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 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.

10.     LIABILITIES
SUBJECT TO COMPROMISE AND REORGANIZATION ITEMS

Liabilities subject to
compromise This term
referred to liabilities incurred prior to the commencement of
the Chapter 11 case. These liabilities consist primarily of
amounts outstanding under the Companys Old Senior Notes
and also include accounts payable, accrued interest and other
accrued expenses. These amounts represented the Companys
estimate of known or potential claims to be resolved in
connection with the Chapter 11 case as of December 31,
2002. These liabilities were restructured in accordance with the
Plan, see Note 2.

Liabilities subject to compromise as of
December 31, 2002 were as follows:

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

Contractual interest expense not accrued on
prepetition debt totaled $52.2 million and $72.1 million
for the period that began as of June 11, 2002, the date of
the Companys petition for relief under chapter 11 of the

F-23



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


Bankruptcy Code, and ended December 31,
2002, and March 25, 2003, the date of the Companys
emergence from bankruptcy, respectively.

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

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

Reorganization items during the 2002 periods
consisted solely of professional fees.

11.     OPERATING
SEGMENT INFORMATION

The Companys operating segment information,
by subsidiary, is as follows for the three and nine months ended
September 30, 2002 and 2003:

Three Months Ended
September 30,

|                        |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |        |   |  |   |         |   |  |   |         | 
|----------------------- |  | --------- | ------- | ------ |  | -------- | ------- | --------- |  | --------- | ------ | ------------ |  | ----- | ------ |  |  | - | ------ | - |  | - | ------- | - |  | - | ------- | 
|                        |  |           |         |        |  |          |         |           |  | All other |        |              |  |      
|2003 Successor Company  |  | Argentina |         | Brazil |  | Colombia |         | Venezuela |  | countries |        | Eliminations |  | Total
|                        |  |           |         |        |  |          |         |           |  |           |        |              |  |      
|Net Revenues            |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |        |   |  |   |         |   |  |   |         | 
|Satellite and Broadband |  | $         | 8,779   |        |  | $        | 6,205   |           |  | $         | 11,854 |              |  | $     | 7,592  |  |  | $ | 13,234 |   |  | $ | (6,910  | ) |  | $ | 40,754  | 
|Internet                |  |           | 1,834   |        |  |          | 889     |           |  |           | 1,178  |              |  |       | 720    |  |  |   | 3,295  |   |  |   | (1,717  | ) |  |   | 6,199   | 
|Value added services    |  |           | 1,601   |        |  |          | 962     |           |  |           | 355    |              |  |       | 397    |  |  |   | 1,284  |   |  |   | (568    | ) |  |   | 4,031   | 
|Telephony               |  |           | 3,084   |        |  |          | 8       |           |  |           | 36     |              |  |       |        |  |  |   | 3,314  |   |  |   | (1,598  | ) |  |   | 4,844   | 
|Sales of equipment      |  |           | 461     |        |  |          |         |           |  |           | 58     |              |  |       | 23     |  |  |   | 69     |   |  |   |         |   |  |   | 611     | 
|                        |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |        |   |  |   |         |   |  |   |         | 
|Total net revenues      |  | $         | 15,759  |        |  | $        | 8,064   |           |  | $         | 13,481 |              |  | $     | 8,732  |  |  | $ | 21,196 |   |  | $ | (10,793 | ) |  | $ | 56,439  | 
|                        |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |        |   |  |   |         |   |  |   |         | 
|Operating income (loss) |  | $         | 3,730   |        |  | $        | (1,674  | )         |  | $         | 2,061  |              |  | $     | 2,588  |  |  | $ | (472   | ) |  |   |         |   |  | $ | 6,233   | 
|                        |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |        |   |  |   |         |   |  |   |         | 
|Total assets            |  | $         | 119,444 |        |  | $        | 110,334 |           |  | $         | 79,377 |              |  | $     | 52,670 |  |  | $ | 84,614 |   |  |   |         |   |  | $ | 446,439 | 
|                        |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |        |   |  |   |         |   |  |   |         | 

|                         |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |         |   |  |   |        |   |  |   |         |  
|------------------------ |  | --------- | ------- | ------ |  | -------- | ------- | --------- |  | --------- | ------ | ------------ |  | ----- | ------ |  |  | - | ------- | - |  | - | ------ | - |  | - | ------- | -
|                         |  |           |         |        |  |          |         |           |  | All other |        |              |  |      
|2002 Predecessor Company |  | Argentina |         | Brazil |  | Colombia |         | Venezuela |  | countries |        | Eliminations |  | Total
|                         |  |           |         |        |  |          |         |           |  |           |        |              |  |      
|Net Revenues             |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |         |   |  |   |        |   |  |   |         |  
|Satellite and Broadband  |  | $         | 8,608   |        |  | $        | 6,259   |           |  | $         | 12,866 |              |  | $     | 6,704  |  |  | $ | 12,852  |   |  | $ | (4,971 | ) |  | $ | 42,318  |  
|Internet                 |  |           | 1,585   |        |  |          | 856     |           |  |           | 1,132  |              |  |       | 631    |  |  |   | 2,703   |   |  |   | (575   | ) |  |   | 6,332   |  
|Value added services     |  |           | 1,334   |        |  |          | 784     |           |  |           | 187    |              |  |       | 206    |  |  |   | 3,777   |   |  |   | (2,880 | ) |  |   | 3,408   |  
|Telephony                |  |           | 1,858   |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   | 1,688   |   |  |   | (631   | ) |  |   | 2,915   |  
|Sales of equipment       |  |           | 204     |        |  |          | 9       |           |  |           | 5      |              |  |       | 86     |  |  |   | 31      |   |  |   |        |   |  |   | 335     |  
|                         |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |         |   |  |   |        |   |  |   |         |  
|Total net revenues       |  | $         | 13,589  |        |  | $        | 7,908   |           |  | $         | 14,190 |              |  | $     | 7,627  |  |  | $ | 21,051  |   |  | $ | (9,057 | ) |  | $ | 55,308  |  
|                         |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |         |   |  |   |        |   |  |   |         |  
|Operating income (loss)  |  | $         | (4,459  | )      |  | $        | (949    | )         |  | $         | 734    |              |  | $     | 1,595  |  |  | $ | (2,193  | ) |  |   |        |   |  | $ | (5,272  | )
|                         |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |         |   |  |   |        |   |  |   |         |  
|Total assets             |  | $         | 178,558 |        |  | $        | 106,938 |           |  | $         | 88,887 |              |  | $     | 55,352 |  |  | $ | 105,272 |   |  |   |        |   |  | $ | 535,007 |  
|                         |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |         |   |  |   |        |   |  |   |         |  

F-24



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


Nine Months Ended September 30,

|                                  |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |        |  |  |   |         |   |  |   |         |  
|--------------------------------- |  | --------- | ------- | ------ |  | -------- | ------- | --------- |  | --------- | ------ | ------------ |  | ----- | ------ |  |  | - | ------ |  |  | - | ------- | - |  | - | ------- | -
|January 1, 2003 to March 31, 2003 |  |           |         |        |  |          |         |           |  | All other |        |              |  |      
|(Predecessor Company)             |  | Argentina |         | Brazil |  | Colombia |         | Venezuela |  | countries |        | Eliminations |  | Total
|                                  |  |           |         |        |  |          |         |           |  |           |        |              |  |      
|Net Revenues                      |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |        |  |  |   |         |   |  |   |         |  
|Satellite and Broadband           |  | $         | 9,196   |        |  | $        | 5,504   |           |  | $         | 12,068 |              |  | $     | 7,510  |  |  | $ | 14,432 |  |  | $ | (7,328  | ) |  | $ | 41,382  |  
|Internet                          |  |           | 1,585   |        |  |          | 838     |           |  |           | 1,147  |              |  |       | 910    |  |  |   | 2,810  |  |  |   | (1,557  | ) |  |   | 5,733   |  
|Value added services              |  |           | 1,157   |        |  |          | 956     |           |  |           | 225    |              |  |       | 518    |  |  |   | 2,541  |  |  |   | (616    | ) |  |   | 4,781   |  
|Telephony                         |  |           | 2,701   |        |  |          |         |           |  |           | 117    |              |  |       |        |  |  |   | 2,439  |  |  |   | (1,151  | ) |  |   | 4,106   |  
|Sales of equipment                |  |           | 41      |        |  |          |         |           |  |           |        |              |  |       | 29     |  |  |   | 4      |  |  |   |         |   |  |   | 74      |  
|                                  |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |        |  |  |   |         |   |  |   |         |  
|Total net revenues                |  | $         | 14,680  |        |  | $        | 7,298   |           |  | $         | 13,557 |              |  | $     | 8,967  |  |  | $ | 22,226 |  |  | $ | (10,652 | ) |  | $ | 56,076  |  
|                                  |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |        |  |  |   |         |   |  |   |         |  
|Operating income (loss)           |  | $         | (3,004  | )      |  | $        | (2,761  | )         |  | $         | (2,729 | )            |  | $     | 2,459  |  |  | $ | 339    |  |  |   |         |   |  | $ | (5,696  | )
|                                  |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |        |  |  |   |         |   |  |   |         |  
|Total assets                      |  | $         | 124,570 |        |  | $        | 100,023 |           |  | $         | 79,925 |              |  | $     | 45,524 |  |  | $ | 97,687 |  |  |   |         |   |  | $ | 447,729 |  
|                                  |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |        |  |  |   |         |   |  |   |         |  

|                                    |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |        |  |  |   |         |   |  |   |         | 
|----------------------------------- |  | --------- | ------- | ------ |  | -------- | ------- | --------- |  | --------- | ------ | ------------ |  | ----- | ------ |  |  | - | ------ |  |  | - | ------- | - |  | - | ------- | 
|April 1, 2003 to September 30, 2003 |  |           |         |        |  |          |         |           |  | All other |        |              |  |      
|(Successor Company)                 |  | Argentina |         | Brazil |  | Colombia |         | Venezuela |  | countries |        | Eliminations |  | Total
|                                    |  |           |         |        |  |          |         |           |  |           |        |              |  |      
|Net Revenues                        |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |        |  |  |   |         |   |  |   |         | 
|Satellite and Broadband             |  | $         | 18,183  |        |  | $        | 12,367  |           |  | $         | 23,918 |              |  | $     | 15,072 |  |  | $ | 26,502 |  |  | $ | (13,508 | ) |  | $ | 82,534  | 
|Internet                            |  |           | 3,401   |        |  |          | 1,648   |           |  |           | 2,314  |              |  |       | 1,485  |  |  |   | 7,174  |  |  |   | (4,062  | ) |  |   | 11,960  | 
|Value added services                |  |           | 2,933   |        |  |          | 1,863   |           |  |           | 695    |              |  |       | 765    |  |  |   | 2,349  |  |  |   | (722    | ) |  |   | 7,883   | 
|Telephony                           |  |           | 6,070   |        |  |          | 12      |           |  |           | 77     |              |  |       |        |  |  |   | 6,439  |  |  |   | (3,158  | ) |  |   | 9,440   | 
|Sales of equipment                  |  |           | 800     |        |  |          |         |           |  |           | 59     |              |  |       | 52     |  |  |   | 85     |  |  |   |         |   |  |   | 996     | 
|                                    |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |        |  |  |   |         |   |  |   |         | 
|Total net revenues                  |  | $         | 31,387  |        |  | $        | 15,890  |           |  | $         | 27,063 |              |  | $     | 17,374 |  |  | $ | 42,549 |  |  | $ | (21,450 | ) |  | $ | 112,813 | 
|                                    |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |        |  |  |   |         |   |  |   |         | 
|Operating income (loss)             |  | $         | 4,852   |        |  | $        | (3,933  | )         |  | $         | 4,131  |              |  | $     | 5,220  |  |  | $ | 3,133  |  |  |   |         |   |  | $ | 13,403  | 
|                                    |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |        |  |  |   |         |   |  |   |         | 
|Total assets                        |  | $         | 119,444 |        |  | $        | 110,334 |           |  | $         | 79,377 |              |  | $     | 52,670 |  |  | $ | 84,614 |  |  |   |         |   |  | $ | 446,439 | 
|                                    |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |        |  |  |   |         |   |  |   |         | 

|                                       |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |         |   |  |   |         |   |  |   |         |  
|-------------------------------------- |  | --------- | ------- | ------ |  | -------- | ------- | --------- |  | --------- | ------ | ------------ |  | ----- | ------ |  |  | - | ------- | - |  | - | ------- | - |  | - | ------- | -
|January 1, 2002 to September 30, 2002, |  |           |         |        |  |          |         |           |  | All other |        |              |  |      
|(Predecessor Company)                  |  | Argentina |         | Brazil |  | Colombia |         | Venezuela |  | countries |        | Eliminations |  | Total
|                                       |  |           |         |        |  |          |         |           |  |           |        |              |  |      
|Net Revenues                           |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |         |   |  |   |         |   |  |   |         |  
|Satellite and Broadband                |  | $         | 26,920  |        |  | $        | 22,960  |           |  | $         | 40,268 |              |  | $     | 20,064 |  |  | $ | 39,323  |   |  | $ | (16,446 | ) |  | $ | 133,089 |  
|Internet                               |  |           | 5,285   |        |  |          | 3,366   |           |  |           | 3,379  |              |  |       | 1,896  |  |  |   | 10,007  |   |  |   | (2,474  | ) |  |   | 21,459  |  
|Value added services                   |  |           | 3,913   |        |  |          | 2,393   |           |  |           | 548    |              |  |       | 1,014  |  |  |   | 11,422  |   |  |   | (8,770  | ) |  |   | 10,520  |  
|Telephony                              |  |           | 7,279   |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   | 8,417   |   |  |   | (4,465  | ) |  |   | 11,231  |  
|Sales of equipment                     |  |           | 309     |        |  |          | 8       |           |  |           | 15     |              |  |       | 211    |  |  |   | 220     |   |  |   |         |   |  |   | 763     |  
|                                       |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |         |   |  |   |         |   |  |   |         |  
|Total net revenues                     |  | $         | 43,706  |        |  | $        | 28,727  |           |  | $         | 44,210 |              |  | $     | 23,185 |  |  | $ | 69,389  |   |  | $ | (32,155 | ) |  | $ | 177,062 |  
|                                       |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |         |   |  |   |         |   |  |   |         |  
|Operating income (loss)                |  | $         | (6,078  | )      |  | $        | (13,045 | )         |  | $         | 1,935  |              |  | $     | 3,601  |  |  | $ | (3,620  | ) |  |   |         |   |  | $ | (17,207 | )
|                                       |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |         |   |  |   |         |   |  |   |         |  
|Total assets                           |  | $         | 178,558 |        |  | $        | 106,938 |           |  | $         | 88,887 |              |  | $     | 55,352 |  |  | $ | 105,272 |   |  |   |         |   |  | $ | 535,007 |  
|                                       |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |         |   |  |   |         |   |  |   |         |  

12.     STOCKHOLDERS
EQUITY

2003 Stock Incentive
Plan On the Effective
Date, in accordance with the Plan, the Company adopted the 2003
Stock Incentive Plan (the 2003 Plan), which provides
for the grant to the Companys officers, key employees,
consultants, advisors, directors or affiliates of
(i) incentive stock options within the meaning
of Section 422 of the U.S. Internal Revenue Code of 1986,
as amended, (ii) stock options that are non-qualified

F-25



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


for U.S. federal income tax purposes,
(iii) restricted stock grants and (iv) stock
appreciation rights (collectively the Awards). The
total number of shares of common stock for which Awards may be
granted pursuant to the 2003 Plan is 3,087,044, subject to
certain adjustments reflecting changes in the Companys
capitalization (provided that no more than 200,000 shares of
common stock may be issued pursuant to Awards that are not stock
options or stock appreciation rights). The 2003 Plan is
administered by the Companys compensation committee. The
compensation committee determines, among other things, which of
the Companys officers, employees, consultants, advisors,
affiliates and directors will receive Awards under the Plan, the
time when Awards will be granted, and the type of Awards to be
granted. Awards granted under the 2003 Plan are on such terms,
including the number of shares subject to each Award, the time
or times when the Awards will become exercisable, and the price
and duration of the Award, as determined by the compensation
committee.

The exercise price of incentive and non-qualified
stock options is determined by the compensation committee, but
may not be less than the fair market value of the common stock
on the date of grant and the term of any such option may not
exceed ten years from the date of grant (or five years in the
case of an incentive stock option granted to an employee owning
10% or more of the companys voting stock).

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

The Companys board has the right at any
time and from time to time to amend or modify the 2003 Plan,
without the consent of the Companys stockholders (unless
otherwise required by law) or grantees of Awards. However, no
such action may adversely affect Awards previously granted
without the grantees consent.

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

In connection with the restricted stock grant
above, the Company recorded approximately $1.3 million in
stockholders equity as deferred compensation (see
Note 2) and approximately $0.4 million as compensation
expense (see Note 10) on the date of grant. The deferred
compensation will be amortized to expense over the vesting
period.

Stock
Options On
May 19, 2003, the Company granted stock options for
1,646,332 shares of the Companys New Common Stock, at an
exercise price of $15 per share to certain key employees. These
stock options vest in one-quarter increments on the date of
grant and on each of the successive first three anniversaries of
the date of grant. In addition, on such date, the Company also
granted stock options for 30,000 shares to certain directors of
the Company at an exercise price of $15 per share. These stock
options vested immediately.

Common
Stock On July 18,
2003, pursuant to a subscription agreement as of that date, the
Company issued 100,000 shares of its common stock to Houlihan
Lokey Howard & Zukin Capital (Houlihan Lokey).
In consideration of this issuance, Houlihan Lokey agreed not to
collect a $1.5 million fee otherwise payable to them for
services provided during the Companys Chapter 11
reorganization. The shares were recorded at the fair value of
the stock at the date of the issuance ($10.75). The difference
between the amounts due to Houlihan Lokey and the fair value of
the common stock issued was recorded as a gain.

F-26



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


13.     COMMITMENTS
AND CONTINGENCIES

Commitments
The Company leases satellite capacity with average annual rental
commitments of approximately $20.2 million through the year
2007. In addition, the Company has committed to long-term
contracts for the purchase of terrestrial links from third
parties for approximately $2.3 million per year through
2007. The Company has commitments to purchase communications and
data center equipment amounting to approximately
$3.6 million at September 30, 2003.

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.

Global
Crossing Global
Crossing, Ltd. filed for protection under Chapter 11 of the
Bankruptcy Code in January 2002, and the Global Crossing
subsidiaries to whom the Company provides services and
infrastructure, as described below, were included in Global
Crossings Chapter 11 proceedings during August 2002.
The Company is party to a series of agreements with Global
Crossing for the provision of telecommunications services.
Pursuant to those agreements, the Company constructed a
terrestrial portion of Global Crossings South American
network between landing points on the Atlantic Ocean in
Argentina and the Pacific Ocean in Chile, granted Global
Crossing a series of indefeasible rights of use (IRU) over
ducts and dark fiber on its broadband telecommunication network
in Argentina, Brazil and Peru, provided Global Crossing with
collocation space and related services in its telehouses in
Argentina, Brazil, Chile, Venezuela and Peru and provided Global
Crossing with maintenance services for their telecommunications
assets in Latin America. In addition, the Company acquired IRU
and leased capacity on Global Crossings South American
undersea fiber optic cable system in order to connect the
Broadband Network with other parts of Latin America and the
world, See Note 7.

Commencing in the first quarter of 2002 and
subsequent to the filing of Global Crossings petition
under Chapter 11, Global Crossing has disputed a number of
invoices that the Company delivered to it in connection with the
services the Company is rendering to Global Crossing and has
failed to make full payment in accordance with the terms of such
invoices. The principal disputed matters include the following:

Beginning in the first quarter of 2002, Global
Crossing disputed certain of the invoices sent by the Company to
its Argentine and Brazilian subsidiaries for collocation and
related services in the Companys telehouses in those
countries. On January 15, 2003, the Company filed a motion
in the Global Crossing Chapter 11 proceeding seeking an
order that Global Crossing either irrevocably reject or assume
the telehouse agreements and that Global Crossing make payment
of all shortfalls under the telehouse agreements after the
respective petition dates of the Global Crossing debtors,
through December 31, 2002, in the aggregate amount of
approximately $1.1 million, plus interest on the past due
amounts, as administrative expense claims. On February 19,
2003, Global Crossing responded to the Companys motion.
Global Crossing denied that it owed any unpaid amounts with
respect to the Argentine or Brazilian telehouse agreements. On
July 25, 2003, Global Crossing rejected its obligations
under the telehouse agreements in Buenos Aires, Argentina,
Caracas, Venezuela and Lima, Peru. Such rejections will be
effective at specified dates in the fourth quarter of 2003 and
first quarter of 2004.

In October 2002, Global Crossing failed to make
payment of the full amount of recurring service charges for
operation and maintenance of the IRUs that Global Crossing
acquired under the TAC Turnkey

F-27



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


Construction and IRU Agreement dated
September 22, 1999 (the TAC Agreement). During
the first two quarters of 2003, Global Crossing also has paid
recurring service charges under the TAC Agreement and the other
backhaul agreements in amounts less than the Company asserts to
be contractually required. As part of the Companys
January 15, 2003 motion in Global Crossings
bankruptcy proceeding, the Company requested that the bankruptcy
court find that Global Crossing has failed to make the full
recurring service charges required by the TAC Agreement and
order Global Crossing to make payment of such amounts as
administrative expenses through December 31, 2002, in the
amount of approximately $0.6 million, plus interest on the
past due amounts as set forth in the TAC Agreement. On
March 26, 2003, Global Crossing filed an adversary
proceeding with the bankruptcy court overseeing its
Chapter 11 case asserting a proprietary interest in the
IRUs granted to them under the TAC Agreement and other backhaul
agreements entered into between the two companies.

On March 26, 2003, Global Crossing
Bandwidth, Inc., one of the debtors in Global Crossings
Chapter 11 proceeding, filed an adversary proceeding in the
Global Crossing Chapter 11 case claiming IMPSAT USA had
failed to pay Global Crossing Bandwidth, Inc. a total of
approximately $0.5 million for IP transit services pursuant
to a Carrier Service Agreement dated January 19, 2001
between IMPSAT USA and Global Crossing Bandwidth, Inc. The
Company has disputed Global Crossing Bandwidths complaint
on the basis that IMPSAT USA has paid in full all amounts owed
by it under the Carrier Services Agreement.

14.       GUARANTOR
FINANCIAL INFORMATION

The financial information of IMPSAT Argentina, a
guarantor subsidiary of the Holding Companys new
Series A 6% Senior Guaranteed Notes due 2011 and
Series B 6% Senior Guaranteed Notes due 2011, as of and for
the three and six months ended September 30, 2003 is shown
in a separate column in the accompanying consolidating financial
information, as follows:

F-28



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


CONDENSED CONSOLIDATING BALANCE
SHEET

(SUCCESSOR COMPANY)


AS OF SEPTEMBER 30, 2003


(In thousands of U.S. Dollars)


|                                         |                           |         |         |             |  |               |         |              |  |              |         |         |  |   |          |          |   |   |         |         | 
|---------------------------------------- | ------------------------- | ------- | ------- | ----------- |  | ------------- | ------- | ------------ |  | ------------ | ------- | ------- |  | - | -------- | -------- | - | - | ------- | ------- | 
|                                         |                           |         |         | IMPSAT      |  |               |         |              |  |             
|                                         |                           | Holding |         | Argentina   |  | Non-Guarantor |         | Intercompany |  |             
|                                         |                           | Company |         | (Guarantor) |  | Subsidiaries  |         | Eliminations |  | Consolidated
|                                         |                           |         |         |             |  |               |         |              |  |             
|ASSETS                                  
|CURRENT ASSETS:                          |                           |         |         |             |  |               |         |              |  |              |         |         |  |   |          |          |   |   |         |        
|Cash and cash equivalents                |                           | $       | 30,990  |             |  | $             | 2,376   |              |  | $            | 29,279  |         |  |   |          |          |   | $ | 62,645  |        
|Trading investments                      |                           |         |         |             |  |               |         |              |  |              | 1,932   |         |  |   |          |          |   |   | 1,932   |        
|Trade accounts receivable, net           |                           |         |         |             |  |               | 15,472  |              |  |              | 18,751  |         |  |   |          |          |   |   | 34,223  |        
|Other receivables                        |                           |         | 112,235 |             |  |               | 20,325  |              |  |              | 43,840  |         |  | $ | (166,352 | )        |   |   | 10,048  |        
|Prepaid expenses                         |                           |         | 385     |             |  |               | 446     |              |  |              | 3,180   |         |  |   | (712     | )        |   |   | 3,299   |        
|Assets held for disposal                 |                           |         |         |             |  |               |         |              |  |              | 2,808   |         |  |   |          |          |   |   | 2,808   |        
|                                         |                           |         |         |             |  |               |         |              |  |              |         |         |  |   |          |          |   |   |         |        
|                                         | Total current assets      |         |         | 143,610     |  |               |         | 38,619       |  |              |         | 99,790  |  |   |          | (167,064 | ) |   |         | 114,955 | 
|                                         |                           |         |         |             |  |               |         |              |  |              |         |         |  |   |          |          |   |   |         |        
|PROPERTY, PLANT AND EQUIPMENT, Net       |                           |         |         |             |  |               | 75,247  |              |  |              | 243,723 |         |  |   |          |          |   |   | 318,970 |        
|                                         |                           |         |         |             |  |               |         |              |  |              |         |         |  |   |          |          |   |   |         |        
|NON-CURRENT ASSETS:                      |                           |         |         |             |  |               |         |              |  |              |         |         |  |   |          |          |   |   |         |        
|Investments                              |                           |         | 47,009  |             |  |               |         |              |  |              |         |         |  |   | (46,622  | )        |   |   | 387     |        
|Other non-current assets                 |                           |         |         |             |  |               | 5,578   |              |  |              | 6,549   |         |  |   |          |          |   |   | 12,127  |        
|                                         |                           |         |         |             |  |               |         |              |  |              |         |         |  |   |          |          |   |   |         |        
|                                         | Total non-current assets  |         |         | 47,009      |  |               |         | 5,578        |  |              |         | 6,549   |  |   |          | (46,622  | ) |   |         | 12,514  | 
|                                         |                           |         |         |             |  |               |         |              |  |              |         |         |  |   |          |          |   |   |         |        
|TOTAL                                    |                           | $       | 190,619 |             |  | $             | 119,444 |              |  | $            | 350,062 |         |  | $ | (213,686 | )        |   | $ | 446,439 |        
|                                         |                           |         |         |             |  |               |         |              |  |              |         |         |  |   |          |          |   |   |         |        
|                                        
|LIABILITIES AND STOCKHOLDERS
    EQUITY
|CURRENT LIABILITIES:                     |                           |         |         |             |  |               |         |              |  |              |         |         |  |   |          |          |   |   |         |        
|Accounts payable  trade                 |                           | $       | 2,316   |             |  | $             | 24,080  |              |  | $            | 71,109  |         |  | $ | (52,893  | )        |   | $ | 44,612  |        
|Current portion of long-term debt        |                           |         |         |             |  |               | 7,749   |              |  |              | 5,404   |         |  |   |          |          |   |   | 13,153  |        
|Accrued and other liabilities            |                           |         | 30      |             |  |               | 14,239  |              |  |              | 34,812  |         |  |   | (21,281  | )        |   |   | 27,800  |        
|                                         |                           |         |         |             |  |               |         |              |  |              |         |         |  |   |          |          |   |   |         |        
|                                         | Total current liabilities |         |         | 2,346       |  |               |         | 46,068       |  |              |         | 111,325 |  |   |          | (74,174  | ) |   |         | 85,565  | 
|LONG-TERM DEBT, Net                      |                           |         | 85,294  |             |  |               | 52,121  |              |  |              | 106,925 |         |  |   |          |          |   |   | 244,340 |        
|OTHER LONG-TERM LIABILITIES              |                           |         |         |             |  |               | 144     |              |  |              | 106,817 |         |  |   | (93,406  | )        |   |   | 13,555  |        
|                                         |                           |         |         |             |  |               |         |              |  |              |         |         |  |   |          |          |   |   |         |        
|                                         | Total liabilities         |         |         | 87,640      |  |               |         | 98,333       |  |              |         | 325,067 |  |   |          | (167,580 | ) |   |         | 343,460 | 
|STOCKHOLDERS EQUITY                     |                           |         | 102,979 |             |  |               | 21,111  |              |  |              | 24,995  |         |  |   | (46,106  | )        |   |   | 102,979 |        
|                                         |                           |         |         |             |  |               |         |              |  |              |         |         |  |   |          |          |   |   |         |        
|TOTAL                                    |                           | $       | 190,619 |             |  | $             | 119,444 |              |  | $            | 350,062 |         |  | $ | (213,686 | )        |   | $ | 446,439 |        
|                                         |                           |         |         |             |  |               |         |              |  |              |         |         |  |   |          |          |   |   |         |        

F-29



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


CONDENSED CONSOLIDATING STATEMENT OF
OPERATIONS

(SUCCESSOR COMPANY)


FOR THE THREE MONTHS ENDED SEPTEMBER 30,
2003


(In thousands of U.S. Dollars)


|                                   |                                     |                        |                               |             |   |               |       |              |       |              |        |        |        |        |       |        |         |         |        |        |        |        |  
|---------------------------------- | ----------------------------------- | ---------------------- | ----------------------------- | ----------- | - | ------------- | ----- | ------------ | ----- | ------------ | ------ | ------ | ------ | ------ | ----- | ------ | ------- | ------- | ------ | ------ | ------ | ------ | -
|                                   |                                     |                        |                               | IMPSAT      |   |               |       |              |       |             
|                                   |                                     | Holding                |                               | Argentina   |   | Non-Guarantor |       | Intercompany |       |             
|                                   |                                     | Company                |                               | (Guarantor) |   | Subsidiaries  |       | Eliminations |       | Consolidated
|                                   |                                     |                        |                               |             |   |               |       |              |       |             
|NET REVENUES:                      |                                     |                        |                               |             |   |               |       |              |       |              |        |        |        |        |       |        |         |         |        |       
|                                   | Broadband and satellite             |                        |                               |             |   |               | $     | 8,779        |       |              | $      | 38,885 |        |        | $     | (6,910 | )       |         | $      | 40,754 |       
|                                   | Internet                            |                        |                               |             |   |               |       | 1,834        |       |              |        | 6,082  |        |        |       | (1,717 | )       |         |        | 6,199  |       
|                                   | Value added services                |                        |                               |             |   |               |       | 1,601        |       |              |        | 2,998  |        |        |       | (568   | )       |         |        | 4,031  |       
|                                   | Telephony                           |                        |                               |             |   |               |       | 3,084        |       |              |        | 3,358  |        |        |       | (1,598 | )       |         |        | 4,844  |       
|                                   | Sales of equipment                  |                        |                               |             |   |               |       | 461          |       |              |        | 150    |        |        |       |        |         |         |        | 611    |       
|                                   |                                     |                        |                               |             |   |               |       |              |       |              |        |        |        |        |       |        |         |         |        |       
|                                   |                                     |                        | Total net revenues            |             |   |               |       |              |       | 15,759       |        |        |        | 51,473 |       |        |         | (10,793 | )      |        |        | 56,439 |  
|                                   |                                     |                        |                               |             |   |               |       |              |       |              |        |        |        |        |       |        |         |         |        |       
|COSTS AND EXPENSES:                |                                     |                        |                               |             |   |               |       |              |       |              |        |        |        |        |       |        |         |         |        |       
|                                   | Direct costs:                       |                        |                               |             |   |               |       |              |       |              |        |        |        |        |       |        |         |         |        |        |       
|                                   |                                     | Contracted services    |                               |             |   |               |       |              | 1,462 |              |        |        | 2,791  |        |       |        | (35     | )       |        |        | 4,218  |       
|                                   |                                     | Other direct costs     |                               |             |   |               |       |              | 2,504 |              |        |        | 3,398  |        |       |        |         |         |        |        | 5,902  |       
|                                   |                                     | Leased capacity        |                               |             |   |               |       |              | 5,488 |              |        |        | 21,946 |        |       |        | (10,677 | )       |        |        | 16,757 |       
|                                   |                                     | Cost of equipment sold |                               |             |   |               |       |              | 147   |              |        |        | 98     |        |       |        |         |         |        |        | 245    |       
|                                   |                                     |                        |                               |             |   |               |       |              |       |              |        |        |        |        |       |        |         |         |        |       
|                                   |                                     |                        | Total direct costs            |             |   |               |       |              |       | 9,601        |        |        |        | 28,233 |       |        |         | (10,712 | )      |        |        | 27,122 |  
|                                   | Salaries and wages                  |                        |                               |             |   |               |       | 3,467        |       |              |        | 8,516  |        |        |       |        |         |         |        | 11,983 |       
|                                   | Selling, general and administrative |                        | $                             | 800         |   |               |       | 2,041        |       |              |        | 3,489  |        |        |       | (81    | )       |         |        | 6,249  |       
|                                   | Gain on extinguishment of debt      |                        |                               |             |   |               |       | (5,460       | )     |              |        |       |        |        |       |        |         |         |        | (5,460 | )     
|                                   | Depreciation and amortization       |                        |                               |             |   |               |       | 2,380        |       |              |        | 7,932  |        |        |       |        |         |         |        | 10,312 |       
|                                   |                                     |                        |                               |             |   |               |       |              |       |              |        |        |        |        |       |        |         |         |        |       
|                                   |                                     |                        | Total costs and expenses      |             |   | 800           |       |              |       | 12,029       |        |        |        | 48,170 |       |        |         | (10,793 | )      |        |        | 50,206 |  
|                                   |                                     |                        |                               |             |   |               |       |              |       |              |        |        |        |        |       |        |         |         |        |       
|Operating income (loss)            |                                     |                        | (800                          | )           |   |               | 3,730 |              |       |              | 3,303  |        |        |        |      |        |         |         | 6,233  |       
|                                   |                                     |                        |                               |             |   |               |       |              |       |              |        |        |        |        |       |        |         |         |        |       
|OTHER INCOME (EXPENSES):           |                                     |                        |                               |             |   |               |       |              |       |              |        |        |        |        |       |        |         |         |        |       
|                                   | Interest income                     |                        |                               | 712         |   |               |       | 58           |       |              |        | 261    |        |        |       | (703   | )       |         |        | 328    |       
|                                   | Interest expense                    |                        |                               | (815        | ) |               |       | (1,563       | )     |              |        | (2,818 | )      |        |       | 703    |         |         |        | (4,493 | )     
|                                   | Net gain (loss) on foreign exchange |                        |                               | 14          |   |               |       | 784          |       |              |        | (4,409 | )      |        |       |        |         |         |        | (3,611 | )     
|                                   | Equity in income of affiliates      |                        |                               | (3,291      | ) |               |       |              |       |              |        |       |        |        |       | 3,291  |         |         |        |        |       
|                                   | Other income (loss), net            |                        |                               | 1,138       |   |               |       | (98          | )     |              |        | (1,903 | )      |        |       | (31    | )       |         |        | (894   | )     
|                                   |                                     |                        |                               |             |   |               |       |              |       |              |        |        |        |        |       |        |         |         |        |       
|                                   |                                     |                        | Total other (expenses) income |             |   | (2,242        | )     |              |       | (819         | )      |        |        | (8,869 | )     |        |         | 3,260   |        |        |        | (8,670 | )
|                                   |                                     |                        |                               |             |   |               |       |              |       |              |        |        |        |        |       |        |         |         |        |       
|(LOSS) INCOME BEFORE INCOME TAXES  |                                     |                        | (3,042                        | )           |   |               | 2,911 |              |       |              | (5,566 | )      |        |        | 3,260 |        |         |         | (2,437 | )     
|PROVISION FOR FOREIGN INCOME TAXES |                                     |                        |                               |             |   |               |       |              |       |              | (605   | )      |        |        |       |        |         |         | (605   | )     
|                                   |                                     |                        |                               |             |   |               |       |              |       |              |        |        |        |        |       |        |         |         |        |       
|NET INCOME (LOSS)                  |                                     | $                      | (3,042                        | )           |   | $             | 2,911 |              |       | $            | (6,171 | )      |        | $      | 3,260 |        |         | $       | (3,042 | )     
|                                   |                                     |                        |                               |             |   |               |       |              |       |              |        |        |        |        |       |        |         |         |        |       

F-30



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


CONDENSED CONSOLIDATING STATEMENT OF
OPERATIONS

(SUCCESSOR COMPANY)


FOR THE SIX MONTHS ENDED SEPTEMBER 30,
2003


(In thousands of U.S. Dollars)


|                                   |                                     |                        |                               |             |   |               |       |              |        |              |        |         |        |         |         |         |         |         |        |         |        |         | 
|---------------------------------- | ----------------------------------- | ---------------------- | ----------------------------- | ----------- | - | ------------- | ----- | ------------ | ------ | ------------ | ------ | ------- | ------ | ------- | ------- | ------- | ------- | ------- | ------ | ------- | ------ | ------- | 
|                                   |                                     |                        |                               | IMPSAT      |   |               |       |              |        |             
|                                   |                                     | Holding                |                               | Argentina   |   | Non-Guarantor |       | Intercompany |        |             
|                                   |                                     | Company                |                               | (Guarantor) |   | Subsidiaries  |       | Eliminations |        | Consolidated
|                                   |                                     |                        |                               |             |   |               |       |              |        |             
|NET REVENUES:                      |                                     |                        |                               |             |   |               |       |              |        |              |        |         |        |         |         |         |         |         |        |        
|                                   | Broadband and satellite             |                        |                               |             |   |               | $     | 18,183       |        |              | $      | 77,859  |        |         | $       | (13,508 | )       |         | $      | 82,534  |       
|                                   | Internet                            |                        |                               |             |   |               |       | 3,401        |        |              |        | 12,621  |        |         |         | (4,062  | )       |         |        | 11,960  |       
|                                   | Value added services                |                        |                               |             |   |               |       | 2,933        |        |              |        | 5,672   |        |         |         | (722    | )       |         |        | 7,883   |       
|                                   | Telephony                           |                        |                               |             |   |               |       | 6,070        |        |              |        | 6,528   |        |         |         | (3,158  | )       |         |        | 9,440   |       
|                                   | Sales of equipment                  |                        |                               |             |   |               |       | 800          |        |              |        | 196     |        |         |         |         |         |         |        | 996     |       
|                                   |                                     |                        |                               |             |   |               |       |              |        |              |        |         |        |         |         |         |         |         |        |        
|                                   |                                     |                        | Total net revenues            |             |   |               |       |              |        | 31,387       |        |         |        | 102,876 |         |         |         | (21,450 | )      |         |        | 112,813 | 
|                                   |                                     |                        |                               |             |   |               |       |              |        |              |        |         |        |         |         |         |         |         |        |        
|COSTS AND EXPENSES:                |                                     |                        |                               |             |   |               |       |              |        |              |        |         |        |         |         |         |         |         |        |        
|                                   | Direct costs:                       |                        |                               |             |   |               |       |              |        |              |        |         |        |         |         |         |         |         |        |         |       
|                                   |                                     | Contracted services    |                               |             |   |               |       |              | 2,881  |              |        |         | 5,908  |         |         |         | (45     | )       |        |         | 8,744  |        
|                                   |                                     | Other direct costs     |                               |             |   |               |       |              | 6,967  |              |        |         | 6,803  |         |         |         |         |         |        |         | 13,770 |        
|                                   |                                     | Leased capacity        |                               |             |   |               |       |              | 11,178 |              |        |         | 43,983 |         |         |         | (20,846 | )       |        |         | 34,315 |        
|                                   |                                     | Cost of equipment sold |                               |             |   |               |       |              | 210    |              |        |         | 143    |         |         |         |         |         |        |         | 353    |        
|                                   |                                     |                        |                               |             |   |               |       |              |        |              |        |         |        |         |         |         |         |         |        |        
|                                   |                                     |                        | Total direct costs            |             |   |               |       |              |        | 21,236       |        |         |        | 56,837  |         |         |         | (20,891 | )      |         |        | 57,182  | 
|                                   | Salaries and wages                  |                        |                               |             |   |               |       | 6,541        |        |              |        | 17,284  |        |         |         |         |         |         |        | 23,825  |       
|                                   | Selling, general and administrative |                        | $                             | 1,786       |   |               |       | 4,232        |        |              |        | 7,916   |        |         |         | (559    | )       |         |        | 13,375  |       
|                                   | Gain on extinguishment of debt      |                        |                               | (4,538      | ) |               |       | (9,715       | )      |              |        |         |        |         |         |         |         |         |        | (14,253 | )     
|                                   | Depreciation and amortization       |                        |                               |             |   |               |       | 4,240        |        |              |        | 15,041  |        |         |         |         |         |         |        | 19,281  |       
|                                   |                                     |                        |                               |             |   |               |       |              |        |              |        |         |        |         |         |         |         |         |        |        
|                                   |                                     |                        | Total costs and expenses      |             |   | (2,752        | )     |              |        | 26,534       |        |         |        | 97,078  |         |         |         | (21,450 | )      |         |        | 99,410  | 
|                                   |                                     |                        |                               |             |   |               |       |              |        |              |        |         |        |         |         |         |         |         |        |        
|Operating income (loss)            |                                     |                        | 2,752                         |             |   |               | 4,853 |              |        |              | 5,798  |         |        |         |         |         |         |         | 13,403 |        
|                                   |                                     |                        |                               |             |   |               |       |              |        |              |        |         |        |         |         |         |         |         |        |        
|OTHER INCOME (EXPENSES):           |                                     |                        |                               |             |   |               |       |              |        |              |        |         |        |         |         |         |         |         |        |        
|                                   | Interest income                     |                        |                               | 5,612       |   |               |       | 170          |        |              |        | 452     |        |         |         | (5,544  | )       |         |        | 690     |       
|                                   | Interest expense                    |                        |                               | (2,488      | ) |               |       | (3,102       | )      |              |        | (10,119 | )      |         |         | 5,544   |         |         |        | (10,165 | )     
|                                   | Net gain on foreign exchange        |                        |                               | 18          |   |               |       | 1,445        |        |              |        | 16,371  |        |         |         |         |         |         |        | 17,834  |       
|                                   | Equity in income of affiliates      |                        |                               | 14,599      |   |               |       |              |        |              |        |         |        |         |         | (14,599 | )       |         |        |         |       
|                                   | Other income (loss), net            |                        |                               | (986        | ) |               |       | (98          | )      |              |        | (84     | )      |         |         | (40     | )       |         |        | (1,208  | )     
|                                   |                                     |                        |                               |             |   |               |       |              |        |              |        |         |        |         |         |         |         |         |        |        
|                                   |                                     |                        | Total other (expenses) income |             |   | 16,755        |       |              |        | (1,585       | )      |         |        | 6,620   |         |         |         | (14,639 | )      |         |        | 7,151   | 
|                                   |                                     |                        |                               |             |   |               |       |              |        |              |        |         |        |         |         |         |         |         |        |        
|INCOME BEFORE INCOME TAXES         |                                     |                        | 19,507                        |             |   |               | 3,268 |              |        |              | 12,418 |         |        |         | (14,639 | )       |         |         | 20,554 |        
|PROVISION FOR FOREIGN INCOME TAXES |                                     |                        | (302                          | )           |   |               |       |              |        |              | (1,047 | )       |        |         |         |         |         |         | (1,349 | )      
|                                   |                                     |                        |                               |             |   |               |       |              |        |              |        |         |        |         |         |         |         |         |        |        
|NET INCOME                         |                                     | $                      | 19,205                        |             |   | $             | 3,268 |              |        | $            | 11,371 |         |        | $       | (14,639 | )       |         | $       | 19,205 |        
|                                   |                                     |                        |                               |             |   |               |       |              |        |              |        |         |        |         |         |         |         |         |        |        

F-31



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


CONDENSED CONSOLIDATING STATEMENT OF CASH
FLOWS

(SUCCESSOR COMPANY)


FOR THE SIX MONTHS ENDED SEPTEMBER 30,
2003


(In thousands of U.S. Dollars)


|                                                                |  |         |        |             |  |               |        |              |  |              |        |   |  |   |        |   |  |   |        |  
|--------------------------------------------------------------- |  | ------- | ------ | ----------- |  | ------------- | ------ | ------------ |  | ------------ | ------ | - |  | - | ------ | - |  | - | ------ | -
|                                                                |  |         |        | IMPSAT      |  |               |        |              |  |             
|                                                                |  | Holding |        | Argentina   |  | Non-Guarantor |        | Intercompany |  |             
|                                                                |  | Company |        | (Guarantor) |  | Subsidiaries  |        | Eliminations |  | Consolidated
|                                                                |  |         |        |             |  |               |        |              |  |             
|Cash flows provided by (used in) from operating
    activities  |  | $       | (3,770 | )           |  | $             | (790   | )            |  | $            | 10,145 |   |  | $ | 8,045  |   |  | $ | 13,630 |  
|Cash flows provided by (used in) from investing
    activities  |  |         | 26,570 |             |  |               | (2,635 | )            |  |              | (4,564 | ) |  |   |        |   |  |   | 19,371 |  
|Cash flows provided by (used in) from financing
    activities  |  |         | 11,151 |             |  |               | (2,266 | )            |  |              | (6,886 | ) |  |   | (8,045 | ) |  |   | (6,046 | )
|Effect of exchange rate change on cash and cash
    equivalents |  |         | (8,020 | )           |  |               |        |              |  |              | 8,145  |   |  |   |        |   |  |   | 125    |  
|                                                                |  |         |        |             |  |               |        |              |  |              |        |   |  |   |        |   |  |   |        |  
|Net increase in cash and cash equivalents                       |  |         | 25,931 |             |  |               | (5,691 | )            |  |              | 6,840  |   |  |   |        |   |  |   | 27,080 |  
|Cash and cash equivalents at beginning of the
    period        |  |         | 5,059  |             |  |               | 8,067  |              |  |              | 22,439 |   |  |   |        |   |  |   | 35,565 |  
|                                                                |  |         |        |             |  |               |        |              |  |              |        |   |  |   |        |   |  |   |        |  
|Cash and cash equivalents at end of the period                  |  | $       | 30,990 |             |  | $             | 2,376  |              |  | $            | 29,279 |   |  | $ |       |   |  | $ | 62,645 |  
|                                                                |  |         |        |             |  |               |        |              |  |              |        |   |  |   |        |   |  |   |        |  

* * * * * *

F-32



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##### 



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

Reorganization.As
discussed in our prior filings with the Securities and Exchange
Commission (SEC), on June 11, 2002, we filed a
voluntary petition for relief under Chapter 11 of the
United States Bankruptcy Code with the United States Bankruptcy
Court for the Southern District of New York (the
Bankruptcy Court). On September 4, 2002, we
also filed with the Bankruptcy Court our plan of reorganization
(as amended, the Plan). By order dated
December 16, 2002, the Bankruptcy Court confirmed the Plan.
In accordance with the terms of the Plan, we formally emerged
from bankruptcy on March 25, 2003 (the Effective
Date). Pursuant to the Plan, on the Effective Date, all of
the shares of our pre-Chapter 11 common stock (the
Old Common Stock), options for Old Common Stock
granted under our stock option plans and any other equity
interests were cancelled, retired and eliminated with no
consideration paid thereon. We also adopted a new 2003 Stock
Incentive Plan and terminated our 1998 Stock Option Plan and our
1999 Stock Option Plan. Also under the Plan, we restructured our
obligations with certain holders of our pre-Effective Date
indebtedness in the manner described in the Plan. (For a more
detailed description of our Chapter 11 restructuring, see
the section Business  Chapter 11 Filing
and Emergence in our 2002 Annual Report on Form 10-K,
which we filed with the SEC on April 15, 2003 (the
2002 Form 10-K)).

Pursuant to our reorganization, we have
substantially reduced our outstanding debt and annual interest
expense and increased our liquidity. At December 31, 2002,
prior to the reorganization, our long-term debt, including
current maturities and estimated liabilities subject to
Chapter 11 proceedings, aggregated approximately
$1.09 billion. Also at December 31, 2002, our total
indebtedness aggregated $1.04 billion and our cash, cash
equivalents and trading investments totaled $55.6 million.
As of September 30, 2003, our total indebtedness was
approximately $257.5 million and our cash, cash equivalents
and trading investments totaled approximately
$64.6 million. Our reported net interest expense for 2002
totaled $73.9 million (not including $52.2 million of
contractually accrued interest on our unsecured, pre-petition
obligations, which, pursuant to the provisions of the Bankruptcy
Code, ceased to accrue at and after June 11, 2002, the date
of our Chapter 11 filing). As a consequence of our
Chapter 11 reorganization, we estimate that our net cash
interest expense will be reduced to approximately
$15.0 million for 2003.

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

Global Crossing Insolvency.We are party to a series of agreements
with several subsidiaries of Global Crossing Ltd. for the
provision of telecommunications services. Pursuant to those
agreements, which were initially signed in 1999, we constructed
a terrestrial portion of Global Crossings South American
network between landing points on the Atlantic Ocean in
Argentina and the Pacific Ocean in Chile, granted Global
Crossing a series of indefeasible rights of use
(IRU) over ducts and dark fiber on our Broadband
Network in Argentina, Brazil and Peru, provided Global Crossing
with collocation space and related services in our data centers
in Argentina, Brazil, Chile, Venezuela and Peru and provided
Global Crossing with maintenance services for their terrestrial
fiber optic networks in Latin America. In addition, we acquired
IRU and leased capacity on Global Crossings South American
undersea fiber optic cable system in order to connect our
Broadband Network with other parts of Latin America and the
world.

1



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##### 



During the third quarter of 2003, we recognized
revenues totaling $3.0 million from Global Crossing for the
services provided under our agreements with Global Crossing.
During the third quarter of 2003, Global Crossing invoiced us a
total of $0.4 million, principally for maintenance services
on the IRUs that we have acquired from Global Crossing. In
general, invoices under our agreements with Global Crossing are
submitted quarterly in advance and are payable 30 days
after receipt.

In January 2002, Global Crossing Ltd. filed for
protection under Chapter 11 of the U.S. Bankruptcy Code.
During August 2002 Global Crossing Ltd. amended its
Chapter 11 proceeding to include its subsidiaries that are
counterparties to the agreements with us.

We are engaged in a series of disputes with
Global Crossing regarding amounts owed under the various
contracts between or among the parties. Those disputes are
currently the subject of various proceedings in Global
Crossings Chapter 11 proceeding and as part of the
disputed claims procedures in our Chapter 11 proceeding. As
of September 30, 2003, Global Crossing owed us
$7.7 million that we invoiced to them during prior periods.
We have recorded a provision for doubtful accounts of
$5.5 million against these receivables. We are currently
recording as revenue all amounts invoiced to Global Crossing,
which are billed quarterly in advance, and are recording a
provision for doubtful accounts to cover any portion of such
amounts remaining unpaid at the end of that quarter.

We have disputed a total of $1.5 million
that Global Crossing has invoiced us for services through
September 30, 2003. The amounts that we owe Global Crossing
are principally owed to Global Crossing Bandwidth, Inc., a
subsidiary of Global Crossing that is among the Global Crossing
parties that have filed for relief under Chapter 11.
Certain of these amounts are the subject of disputes and claims
in our Chapter 11 proceeding and in Global Crossings
Chapter 11 proceeding.

Global Crossings reorganization plan was
confirmed by the U.S. Bankruptcy Court in December 2002.
However, Global Crossing is awaiting satisfaction of the
conditions to the effectiveness of its plan of reorganization.

The difficulties being experienced by Global
Crossing, including Global Crossings Chapter 11
proceeding, have had an adverse effect on our financial
condition and operations. In the event that Global Crossing were
to reject some or all of its contracts with us, any pre-petition
damages that we might have in respect of such rejected contracts
would be treated as claims in the applicable Global Crossing
bankruptcy proceedings, which claims may not result in any
meaningful recovery to us. In this regard, as part of its
bankruptcy proceedings, Global Crossing has rejected some of its
agreements with us, including agreements pursuant to which
certain of our operating subsidiaries had agreed to lease to
Global Crossing space in our telehouses in Bogota, Colombia,
Buenos Aires, Argentina, Caracas, Venezuela and Lima, Peru.
Global Crossing has indicated in its filings related to its
Chapter 11 proceeding that it would assume certain
contracts with us, including the IRUs which Global Crossing has
granted us over parts of its network, and may reject some or all
of the other agreements that it has with us.

Critical Accounting Policies

In the ordinary course of business, we have made
a number of estimates and assumptions relating to the reporting
of results of operations and financial position in the
preparation of our financial statements in conformity with U.S.
generally accepted accounting principles (GAAP). We
use our best judgment based on our knowledge of existing facts
and circumstances and actions that we may undertake in the
future, as well as the advice of external experts in determining
the estimates that affect our consolidated financial statements.
Actual results could differ significantly from those estimates
under different assumptions and conditions. Our most critical
accounting policies are:

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

2



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##### 



We have entered into agreements with carriers
granting IRUs and access to portions of our Broadband Network
capacity and infrastructure. Pursuant to some of these
agreements, we may receive fixed advance payments for the IRUs
and will recognize the revenue from the IRUs ratably over the
life of the IRUs. Amounts received in advance (if any) were
recorded by the Predecessor Company as deferred revenue. See
Note 2 (Financial Restructuring, Petition For Relief Under
Chapter 11 And Emergence  Allocation of
Reorganization Value) and Note 3 (Summary of Significant
Accounting Policies  Revenue Recognition) to our
unaudited condensed consolidated financial statements.

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

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

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

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

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

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
2003, nor have we made any material changes in any of the
critical accounting estimates underlying these accounting
policies during the third quarter of 2003.

3



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##### 



Period Comparisons

As discussed above, under SOP 90-7 fresh start
reporting, our consolidated financial statements after the
Effective Date are those of a new reporting entity (the
Successor Company) and certain costs are not
comparable to those of our company during pre-Effective Date
periods (the Predecessor Company). For purposes of
this discussion, the six-month period ended September 30,
2003 (for the Successor Company) has been combined with the
three-month period ended March 31, 2003 (for the
Predecessor Company) and then compared to the nine months ended
September 30, 2002 (for the Predecessor Company).
Differences between periods due to fresh-start accounting
adjustments are explained when necessary. The lack of
comparability in the accompanying unaudited condensed
consolidated financial statements is most apparent in our
capital costs (interest expense and depreciation and
amortization), as well as long-term indebtedness and
reorganization items.

Results of Operations

The following table summarizes our results of
operations:

|                                             |                             |                                                             |                                  |                                 |        |                     |        |                  |      |       |        |        |        |        |      |      |      |       |          |        |         |         |        |      |      |       |         |        |         |         |       |      |      |       | 
|-------------------------------------------- | --------------------------- | ----------------------------------------------------------- | -------------------------------- | ------------------------------- | ------ | ------------------- | ------ | ---------------- | ---- | ----- | ------ | ------ | ------ | ------ | ---- | ---- | ---- | ----- | -------- | ------ | ------- | ------- | ------ | ---- | ---- | ----- | ------- | ------ | ------- | ------- | ----- | ---- | ---- | ----- | 
|                                             |                             |                                                             |                                  |                                
|                                             |                             | Three Months Ended September 30,                            |                                  | Nine months Ended September 30,
|                                             |                             |                                                             |                                  |                                
|                                             |                             |                                                             |                                  |                                 |        |                     |        |                 
|                                             |                             | Predecessor Company                                         |                                  | Successor Company               |        | Predecessor Company |        | Combined Results
|                                             |                             | 2002                                                        |                                  | 2003                            |        | 2002                |        | 2003            
|                                             |                             |                                                             |                                  |                                 |        |                     |        |                 
|                                             |                             |                                                             |                                  |                                 |        |                     |        |                  |      |       |        |        |        |        |      |     
|                                             |                             |                                                            
|                                             |                             | (in thousands and as a percentage of consolidated revenues)
|Net revenues:                                |                             |                                                             |                                  |                                 |        |                     |        |                  |      |       |        |        |        |        |      |      |      |       |          |        |         |         |        |      |      |       |         |        |         |         |       |     
|                                             | Net revenues from services: |                                                             |                                  |                                 |        |                     |        |                  |      |       |        |        |        |        |      |      |      |       |          |        |         |         |        |      |      |       |         |        |         |         |       |      |     
|                                             |                             | Broadband and satellite                                     |                                  | $                               | 42,318 |                     |        |                  | 76.5 | %     |        | $      | 40,754 |        |      |      | 72.2 | %     |          | $      | 133,089 |         |        |      | 75.2 | %     |         | $      | 123,916 |         |       |      | 73.4 | %    
|                                             |                             | Internet                                                    |                                  |                                 | 6,332  |                     |        |                  | 11.4 |       |        |        | 6,199  |        |      |      | 11.0 |       |          |        | 21,459  |         |        |      | 12.1 |       |         |        | 17,693  |         |       |      | 10.5 |      
|                                             |                             | Value added services                                        |                                  |                                 | 3,408  |                     |        |                  | 6.2  |       |        |        | 4,031  |        |      |      | 7.1  |       |          |        | 10,520  |         |        |      | 6.0  |       |         |        | 12,664  |         |       |      | 7.5  |      
|                                             |                             | Telephony                                                   |                                  |                                 | 2,915  |                     |        |                  | 5.3  |       |        |        | 4,844  |        |      |      | 8.6  |       |          |        | 11,231  |         |        |      | 6.3  |       |         |        | 13,546  |         |       |      | 8.0  |      
|                                             |                             |                                                             |                                  |                                 |        |                     |        |                  |      |       |        |        |        |        |      |      |      |       |          |        |         |         |        |      |      |       |         |        |         |         |       |     
|                                             |                             |                                                             | Total net revenues from services |                                 |        | 54,973              |        |                  |      | 99.4  |        |        |        | 55,828 |      |      |      | 98.9  |          |        |         | 176,299 |        |      |      | 99.6  |         |        |         | 167,819 |       |      |      | 99.4  | 
|                                             | Sales of equipment          |                                                             |                                  | 335                             |        |                     |        | 0.6              |      |       |        | 611    |        |        |      | 1.1  |      |       |          | 763    |         |         |        | 0.4  |      |       |         | 1,070  |         |         |       | 0.6  |     
|                                             |                             |                                                             |                                  |                                 |        |                     |        |                  |      |       |        |        |        |        |      |      |      |       |          |        |         |         |        |      |      |       |         |        |         |         |       |     
|                                             |                             |                                                             | Total net revenues               |                                 |        | 55,308              |        |                  |      | 100.0 |        |        |        | 56,439 |      |      |      | 100.0 |          |        |         | 177,062 |        |      |      | 100.0 |         |        |         | 168,889 |       |      |      | 100.0 | 
|Direct costs:                                |                             |                                                             |                                  |                                 |        |                     |        |                  |      |       |        |        |        |        |      |      |      |       |          |        |         |         |        |      |      |       |         |        |         |         |       |     
|                                             | Contracted services         |                                                             |                                  | 3,491                           |        |                     |        | 6.3              |      |       |        | 4,218  |        |        |      | 7.5  |      |       |          | 14,574 |         |         |        | 8.2  |      |       |         | 12,869 |         |         |       | 7.6  |     
|                                             | Other direct costs          |                                                             |                                  | 5,378                           |        |                     |        | 9.7              |      |       |        | 5,902  |        |        |      | 10.5 |      |       |          | 15,932 |         |         |        | 9.0  |      |       |         | 18,466 |         |         |       | 10.9 |     
|                                             | Leased capacity             |                                                             |                                  | 17,417                          |        |                     |        | 31.5             |      |       |        | 16,757 |        |        |      | 29.7 |      |       |          | 57,305 |         |         |        | 32.4 |      |       |         | 51,722 |         |         |       | 30.6 |     
|                                             | Cost of equipment sold      |                                                             |                                  | 67                              |        |                     |        | 0.1              |      |       |        | 245    |        |        |      | 0.4  |      |       |          | 307    |         |         |        | 0.2  |      |       |         | 401    |         |         |       | 0.2  |     
|                                             |                             |                                                             |                                  |                                 |        |                     |        |                  |      |       |        |        |        |        |      |      |      |       |          |        |         |         |        |      |      |       |         |        |         |         |       |     
|                                             |                             |                                                             | Total direct costs               |                                 |        | 26,353              |        |                  |      | 47.6  |        |        |        | 27,122 |      |      |      | 48.1  |          |        |         | 88,118  |        |      |      | 49.8  |         |        |         | 83,458  |       |      |      | 49.4  | 
|Salaries and wages                           |                             |                                                             | 10,852                           |                                 |        |                     | 19.6   |                  |      |       | 11,983 |        |        |        | 21.2 |      |      |       | 36,486   |        |         |         | 20.6   |      |      |       | 34,552  |        |         |         | 20.5  |     
|Selling, general and administrative expenses |                             |                                                             | 6,669                            |                                 |        |                     | 12.1   |                  |      |       | 6,249  |        |        |        | 11.1 |      |      |       | 22,058   |        |         |         | 12.5   |      |      |       | 18,928  |        |         |         | 11.2  |     
|Gain on extinguishment of debt               |                             |                                                             |                                 |                                 |        |                     |       |                  |      |       | (5,460 | )      |        |        | (9.7 | )    |      |       | (16,367  | )      |         |         | (9.2   | )    |      |       | (14,253 | )      |         |         | (8.4  | )   
|Depreciation and amortization                |                             |                                                             | 16,706                           |                                 |        |                     | 30.2   |                  |      |       | 10,312 |        |        |        | 18.3 |      |      |       | 63,974   |        |         |         | 36.1   |      |      |       | 38,497  |        |         |         | 22.8  |     
|Interest expense, net                        |                             |                                                             | (13,019                          | )                               |        |                     | (23.5  | )                |      |       | (4,165 | )      |        |        | (7.4 | )    |      |       | (84,213  | )      |         |         | (47.6  | )    |      |       | (11,184 | )      |         |         | (6.6  | )   
|Net (loss) gain on foreign exchange          |                             |                                                             | (62,621                          | )                               |        |                     | (113.2 | )                |      |       | (3,611 | )      |        |        | (6.4 | )    |      |       | (115,052 | )      |         |         | (65.0  | )    |      |       | 27,803  |        |         |         | 16.5  |     
|Reorganization items                         |                             |                                                             | (9,297                           | )                               |        |                     | (16.8  | )                |      |       |       |        |        |        |     |      |      |       | (14,989  | )      |         |         | (8.5   | )    |      |       | 726,127 |        |         |         | 429.9 |     
|Other (loss) income, net                     |                             |                                                             | (2,103                           | )                               |        |                     | (3.8   | )                |      |       | (894   | )      |        |        | (1.6 | )    |      |       | (3,808   | )      |         |         | (2.2   | )    |      |       | 1,573   |        |         |         | 0.9   |     
|Provision for foreign income taxes           |                             |                                                             | (407                             | )                               |        |                     | (0.7   | )                |      |       | (605   | )      |        |        | (1.1 | )    |      |       | (1,558   | )      |         |         | (0.9   | )    |      |       | (1,755  | )      |         |         | (1.0  | )   
|                                             |                             |                                                             |                                  |                                 |        |                     |        |                  |      |       |        |        |        |        |      |      |      |       |          |        |         |         |        |      |      |       |         |        |         |         |       |     
|Net (loss) income                            |                             | $                                                           | (92,719                          | )                               |        |                     | (167.6 | )%               |      | $     | (3,042 | )      |        |        | (5.4 | )%   |      | $     | (236,827 | )      |         |         | (133.8 | )%   |      | $     | 750,271 |        |         |         | 444.2 | %   
|                                             |                             |                                                             |                                  |                                 |        |                     |        |                  |      |       |        |        |        |        |      |      |      |       |          |        |         |         |        |      |      |       |         |        |         |         |       |     

Three and Nine months Ended
September 30, 2003 Compared to Three and Nine months Ended
September 30, 2002

Revenues.Our total
net revenues for the three and nine months ended
September 30, 2003 equaled $56.4 million and
$168.9 million. This compares to total net revenues of
$55.3 million and $177.1 million for

4



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##### 



the corresponding periods in 2002. Our total net
revenues for the three months ended June 30, 2003 also totaled
$56.4 million. Net revenues were composed of net revenues
from services and sales of equipment. The increase in our net
revenues during the third quarter of 2003 compared to the same
period in 2002 was principally due to the positive impact on
these revenues (in U.S. dollar terms) of the relative
appreciation of the Argentine pesoand the Brazilian
realduring the third quarter in 2003 as compared to the
same quarter in 2002. The average exchange rate for the
Argentine peso during the nine months ended September 30,
2003 was 2.98 pesos = $1.00, as compared to 3.02
pesos = $1.00 for the corresponding period in 2002.
During the first three quarters of 2003, the average exchange
rate for the Brazilian real was R$3.11 = $1.00, as
compared to R$2.78 = $1.00 for the corresponding
period in 2002.


In U.S. dollar terms, our revenues in Argentina
and Brazil, which are denominated in local currencies and
represent a significant proportion of our consolidated net
revenues, generally increase when the currencies in those
countries appreciate against the U.S. dollar, and decrease when
those currencies depreciate. The following table shows U.S.
dollar exchange rates for the currencies of these countries at
the dates indicated:

|               |  |                               |      |           |  |          |      |              |  |              |      |           |  |          |      |              |  |  |      |  |  |  |      |  |  |  |      |  |  |  |      | 
|-------------- |  | ----------------------------- | ---- | --------- |  | -------- | ---- | ------------ |  | ------------ | ---- | --------- |  | -------- | ---- | ------------ |  |  | ---- |  |  |  | ---- |  |  |  | ---- |  |  |  | ---- | 
|               |  | December 31,                  |      | March 31, |  | June 30, |      | September 30 |  | December 31, |      | March 31, |  | June 30, |      | September 30
|Currency       |  | 2001                          |      | 2002      |  | 2002     |      | 2002         |  | 2002         |      | 2003      |  | 2003     |      | 2003        
|               |  |                               |      |           |  |          |      |              |  |              |      |           |  |          |      |             
|               |  |                              
|               |  | (exchange rate per U.S.$1.00)
|Argentina peso |  |                               | 1.00 |           |  |          | 2.85 |              |  |              | 3.90 |           |  |          | 3.75 |              |  |  | 3.40 |  |  |  | 3.00 |  |  |  | 2.82 |  |  |  | 2.90 | 
|Brazil real    |  |                               | 2.41 |           |  |          | 2.32 |              |  |              | 2.83 |           |  |          | 3.84 |              |  |  | 3.53 |  |  |  | 3.46 |  |  |  | 2.87 |  |  |  | 2.92 | 

Our net revenues from services for the three and
nine months ended September 30, 2003 totaled
$55.8 million and $167.8 million, an increase of
$0.9 million (or 1.6%) and a decrease of $8.5 million
(or 4.8%) compared to the corresponding periods in 2002. Our net
revenues from services during the third quarter of 2003 included
net revenues from:



| |   |                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | data and value added services, which include
    satellite and broadband data transmission services, data center
    services, and other value-added services 
|
| |  | Internet, which is composed of our Internet
    backbone access and managed modem services                                                                    
|
| |  | telephony, including local, national and
    international long-distance services, and                                                                        
|
| |  | services to carriers, which consist of our
    wholesale services to other telecommunications carriers and
    related maintenance services to those carriers.

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,
|                                 |  |                                  |        |                                
|                                 |  | 2002                             |        | 2003                            |  | % change(1) |        | 2002 |  | 2003 |      | % change(1)
|                                 |  |                                  |        |                                 |  |             |        |      |  |      |      |            
|                                 |  |                                 
|                                 |  | (dollar amounts in thousands)   
|Broadband and satellite          |  | $                                | 42,318 |                                 |  | $           | 40,754 |      |  |      | (3.7 | )%          |  | $ | 133,089 |  |  | $ | 123,916 |  |  |  | (6.9  | )%
|Internet                         |  |                                  | 6,332  |                                 |  |             | 6,199  |      |  |      | (2.1 | )           |  |   | 21,459  |  |  |   | 17,693  |  |  |  | (17.5 | ) 
|Value added services(2)          |  |                                  | 3,408  |                                 |  |             | 4,031  |      |  |      | 18.3 |             |  |   | 10,520  |  |  |   | 12,664  |  |  |  | 20.4  |   
|Telephony                        |  |                                  | 2,915  |                                 |  |             | 4,844  |      |  |      | 66.2 |             |  |   | 11,231  |  |  |   | 13,546  |  |  |  | 20.6  |   
|                                 |  |                                  |        |                                 |  |             |        |      |  |      |      |             |  |   |         |  |  |   |         |  |  |  |       |   
|Total net revenues from services |  | $                                | 54,973 |                                 |  | $           | 55,828 |      |  |      | 1.6  |             |  | $ | 176,299 |  |  | $ | 167,819 |  |  |  | (4.8  | ) 
|                                 |  |                                  |        |                                 |  |             |        |      |  |      |      |             |  |   |         |  |  |   |         |  |  |  |       |   



---



|    |                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------
|(1) | Percentage increase (decrease) in relevant
    period 2003 compared to corresponding period in 2002.
|   
|(2) | Includes data center services and systems
    integration and other information technology services.

Our relatively flat and lower net revenues from
services in the three and nine months ended September 30,
2003, as compared to the corresponding periods in 2002, was due
to lower revenues from broadband

5



---



##### 



and satellite and Internet services, which were
only partially offset by increases in our revenues from
telephony and value added services.




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The decrease in our revenues from broadband and
    satellite services during the third quarter and first nine
    months of 2003 in comparison to the same periods in 2002 was due
    to lower satellite-based services volume.                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | We experienced lower Internet revenues
    principally because of pricing pressure resulting from
    competition and adverse economic conditions.                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | Our revenues from value added services increased
    in U.S. dollar terms principally because of the appreciation of
    the Argentine peso during the second and third quarters
    of 2003 compared to the same periods in 2002.                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | Our telephony services revenues increased during
    the third quarter and first nine months of 2003 as compared to
    the same periods in 2002 due to (i) our increased delivery
    during the periods in 2003 of switched voice services to
    corporate customers in Argentina and international call
    terminations to end-user customers in Peru (which more than
    offset a decline in traffic volume and services in the United
    States) and (ii) the relative appreciation of the Argentine
    pesoduring the second and third quarters of 2003
    compared to the same periods in 2002.

We had 2,790 customers as of September 30,
2003, compared to 2,649 customers at December 31, 2002 and
2,840 customers at September 30, 2002. The following table
shows the evolution of our customer base as of the dates
indicated:

|                 |  |                            |       |              |  |               |       |             |  |             |       |  |  |  |        |   |  |  |        |  
|---------------- |  | -------------------------- | ----- | ------------ |  | ------------- | ----- | ----------- |  | ----------- | ----- |  |  |  | ------ | - |  |  | ------ | -
|                 |  |                            |       |              |  |              
|                 |  | Number of Customers as of: |       |              |  |              
|                 |  |                            |       |              |  |              
|                 |  | September 30,              |       | December 31, |  | September 30, |       |             |  |            
|                 |  | 2002                       |       | 2002         |  | 2003          |       | % Change(1) |  | % Change(2)
|                 |  |                            |       |              |  |               |       |             |  |            
|IMPSAT Argentina |  |                            | 1,103 |              |  |               | 953   |             |  |             | 967   |  |  |  | (12.3  | ) |  |  | 1.5    |  
|IMPSAT Colombia  |  |                            | 698   |              |  |               | 678   |             |  |             | 722   |  |  |  | 3.4    |   |  |  | 6.5    |  
|IMPSAT Brazil    |  |                            | 368   |              |  |               | 366   |             |  |             | 391   |  |  |  | 6.3    |   |  |  | 6.8    |  
|IMPSAT Venezuela |  |                            | 216   |              |  |               | 215   |             |  |             | 202   |  |  |  | (6.5   | ) |  |  | (6.0   | )
|IMPSAT Ecuador   |  |                            | 221   |              |  |               | 216   |             |  |             | 224   |  |  |  | 1.4    |   |  |  | 3.7    |  
|IMPSAT Mexico    |  |                            | 47    |              |  |               | 24    |             |  |             |      |  |  |  | (100.0 | ) |  |  | (100.0 | )
|IMPSAT Chile     |  |                            | 56    |              |  |               | 60    |             |  |             | 104   |  |  |  | 85.7   |   |  |  | 73.3   |  
|IMPSAT Peru      |  |                            | 63    |              |  |               | 70    |             |  |             | 100   |  |  |  | 58.7   |   |  |  | 42.9   |  
|IMPSAT USA       |  |                            | 68    |              |  |               | 67    |             |  |             | 71    |  |  |  | 4.4    |   |  |  | 6.0    |  
|Other            |  |                            |      |              |  |               |      |             |  |             | 9     |  |  |  |       |   |  |  |       |  
|                 |  |                            |       |              |  |               |       |             |  |             |       |  |  |  |        |   |  |  |        |  
|Total            |  |                            | 2,840 |              |  |               | 2,649 |             |  |             | 2,790 |  |  |  | (1.8   | ) |  |  | 5.3    |  
|                 |  |                            |       |              |  |               |       |             |  |             |       |  |  |  |        |   |  |  |        |  



---



|    |                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------
|(1) | Increase (decrease) as of end of third
    quarter of 2003 compared to end of third quarter of 2002.
|   
|(2) | Increase (decrease) as of end of third
    quarter of 2003 compared to end of 2002.                 

We lost a net total of 136 customers in Argentina
between the end of the third quarter of 2002 and the end of the
third quarter of 2003. These losses occurred because of adverse
economic conditions and pricing pressure in Argentina. During
the third quarter of 2003 we gained a net total of 49 customers
in Argentina, and during the first nine months of 2003 we gained
a net total of 14 customers in Argentina. The closing of our
operations in Mexico during the second quarter of 2003 also
served to reduce our total number of customers as compared to
the corresponding periods in 2002.

In addition to net revenues from services, our
total net revenues for the third quarter and first nine months
of 2003 included revenues from sales of equipment, which totaled
$0.6 million and $1.1 million, respectively. This
compares to $0.3 million and $0.8 million for the same
periods in 2002. Because equipment sales are ancillary to our
core business and are generally engaged in by our company only
on an opportunistic basis, we are currently unable to predict
more than minimal sales of equipment during the remainder of
2003.

6



---



##### 



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,
|                                                  |                   |                                  |   |                                
|                                                  |                   | 2002                             |   | 2003                            |  | % change(1) |   | 2002   |  | 2003 |  | % change(1)
|                                                  |                   |                                  |   |                                 |  |             |   |        |  |      |  |            
|                                                  |                   |                                 
|                                                  |                   | (dollar amounts in thousands)   
|IMPSAT Argentina                                  |                   |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                                                  | Services          |                                  | $ | 13,385                          |  |             | $ | 15,298 |  |      |  | 14.3        | % |  | $ | 43,397 |  |  | $ | 45,226 |  |  |  | 4.2    | %
|                                                  | Sale of equipment |                                  |   | 204                             |  |             |   | 461    |  |      |  | 126.0       |   |  |   | 309    |  |  |   | 841    |  |  |  | 172.2  |  
|                                                  |                   |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                                                  | Total             |                                  | $ | 13,589                          |  |             | $ | 15,759 |  |      |  | 16.0        |   |  | $ | 43,706 |  |  | $ | 46,067 |  |  |  | 5.4    |  
|                                                  |                   |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|IMPSAT Colombia                                   |                   |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                                                  | Services          |                                  | $ | 14,185                          |  |             | $ | 13,423 |  |      |  | (5.4        | ) |  | $ | 44,195 |  |  | $ | 40,561 |  |  |  | (8.2   | )
|                                                  | Sale of equipment |                                  |   | 5                               |  |             |   | 58     |  |      |  | 1,060.0     |   |  |   | 15     |  |  |   | 59     |  |  |  | 293.3  |  
|                                                  |                   |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                                                  | Total             |                                  | $ | 14,190                          |  |             | $ | 13,481 |  |      |  | (5.0        | ) |  | $ | 44,210 |  |  | $ | 40,620 |  |  |  | (8.1   | )
|                                                  |                   |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|IMPSAT Brazil                                     |                   |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                                                  | Services          |                                  | $ | 7,899                           |  |             | $ | 8,064  |  |      |  | 2.1         |   |  | $ | 28,719 |  |  | $ | 23,188 |  |  |  | (19.3  | )
|                                                  | Sale of equipment |                                  |   | 9                               |  |             |   |       |  |      |  | (100.0      | ) |  |   | 8      |  |  |   |       |  |  |  | (100.0 | )
|                                                  |                   |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                                                  | Total             |                                  | $ | 7,908                           |  |             | $ | 8,064  |  |      |  | 2.0         |   |  | $ | 28,727 |  |  | $ | 23,188 |  |  |  | (19.3  | )
|                                                  |                   |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|IMPSAT Venezuela                                  |                   |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                                                  | Services          |                                  | $ | 7,541                           |  |             | $ | 8,709  |  |      |  | 15.5        |   |  | $ | 22,974 |  |  | $ | 26,260 |  |  |  | 14.3   |  
|                                                  | Sale of equipment |                                  |   | 86                              |  |             |   | 23     |  |      |  | (73.3       | ) |  |   | 211    |  |  |   | 81     |  |  |  | (61.6  | )
|                                                  |                   |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                                                  | Total             |                                  | $ | 7,627                           |  |             | $ | 8,732  |  |      |  | 14.5        |   |  | $ | 23,185 |  |  | $ | 26,341 |  |  |  | 13.6   |  
|                                                  |                   |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|IMPSAT Ecuador                                    |                   |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                                                  | Services          |                                  | $ | 3,965                           |  |             | $ | 4,209  |  |      |  | 6.2         |   |  | $ | 12,725 |  |  | $ | 11,935 |  |  |  | (6.2   | )
|                                                  | Sale of equipment |                                  |   |                                |  |             |   |       |  |      |  |            |   |  |   | 88     |  |  |   |       |  |  |  | (100.0 | )
|                                                  |                   |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                                                  | Total             |                                  | $ | 3,965                           |  |             | $ | 4,209  |  |      |  | 6.2         |   |  | $ | 12,813 |  |  | $ | 11,935 |  |  |  | (6.9   | )
|                                                  |                   |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|IMPSAT Chile                                      |                   |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                                                  | Services          |                                  | $ | 2,340                           |  |             | $ | 2,081  |  |      |  | (11.1       | ) |  | $ | 7,079  |  |  | $ | 6,647  |  |  |  | (6.1   | )
|                                                  |                   |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                                                  | Total             |                                  | $ | 2,340                           |  |             | $ | 2,081  |  |      |  | (11.1       | ) |  | $ | 7,079  |  |  | $ | 6,647  |  |  |  | (6.1   | )
|                                                  |                   |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|IMPSAT Peru                                       |                   |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                                                  | Services          |                                  | $ | 2,580                           |  |             | $ | 3,655  |  |      |  | 41.7        |   |  | $ | 8,224  |  |  | $ | 10,371 |  |  |  | 26.1   |  
|                                                  | Sale of equipment |                                  |   | 47                              |  |             |   |       |  |      |  | (100.0      | ) |  |   | 128    |  |  |   |       |  |  |  | (100.0 | )
|                                                  |                   |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                                                  | Total             |                                  | $ | 2,627                           |  |             | $ | 3,655  |  |      |  | 39.1        |   |  | $ | 8,352  |  |  | $ | 10,371 |  |  |  | 24.2   |  
|                                                  |                   |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|IMPSAT USA                                        |                   |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                                                  | Services          |                                  | $ | 7,113                           |  |             | $ | 7,351  |  |      |  | 3.3         |   |  | $ | 25,970 |  |  | $ | 23,175 |  |  |  | (10.8  | )
|                                                  | Sale of equipment |                                  |   |                                |  |             |   | 69     |  |      |  | 100.0       |   |  |   |       |  |  |   | 90     |  |  |  | 100.0  |  
|                                                  |                   |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                                                  | Total             |                                  | $ | 7,113                           |  |             | $ | 7,420  |  |      |  | 4.3         |   |  | $ | 25,970 |  |  | $ | 23,265 |  |  |  | (10.5  | )
|                                                  |                   |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|International Satellite Capacity Holding, Ltd.(2) |                   |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                                                  | Services          |                                  | $ | 4,165                           |  |             | $ | 3,542  |  |      |  | (15         | ) |  | $ | 12,445 |  |  | $ | 10,836 |  |  |  | (12.9  | )
|                                                  |                   |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                                                  | Total             |                                  | $ | 4,165                           |  |             | $ | 3,542  |  |      |  | (15         | ) |  | $ | 12,445 |  |  | $ | 10,836 |  |  |  | (12.9  | )
|                                                  |                   |                                  |   |                                 |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       

7



---



##### 



|                  |  |                                  |       |                                 |  |             |     |      |  |      |        |             |  |   |       |  |  |   |       |  |  |  |        |  
|----------------- |  | -------------------------------- | ----- | ------------------------------- |  | ----------- | --- | ---- |  | ---- | ------ | ----------- |  | - | ----- |  |  | - | ----- |  |  |  | ------ | -
|                  |  |                                  |       |                                
|                  |  | Three Months Ended September 30, |       | Nine months Ended September 30,
|                  |  |                                  |       |                                
|                  |  | 2002                             |       | 2003                            |  | % change(1) |     | 2002 |  | 2003 |        | % change(1)
|                  |  |                                  |       |                                 |  |             |     |      |  |      |        |            
|                  |  |                                 
|                  |  | (dollar amounts in thousands)   
|Other Services    |  | $                                | 1,067 |                                 |  | $           | 241 |      |  |      | (77.4  | )           |  | $ | 3,516 |  |  | $ | 1,721 |  |  |  | (51.1  | )
|Sale of equipment |  |                                  | 1     |                                 |  |             |    |      |  |      | (100.0 | )           |  |   | 5     |  |  |   |      |  |  |  | (100.0 | )
|                  |  |                                  |       |                                 |  |             |     |      |  |      |        |             |  |   |       |  |  |   |       |  |  |  |        |  
|Total             |  | $                                | 1,068 |                                 |  | $           | 241 |      |  |      | (77.4  | )           |  | $ | 3,521 |  |  | $ | 1,721 |  |  |  | (51.1  | )
|                  |  |                                  |       |                                 |  |             |     |      |  |      |        |             |  |   |       |  |  |   |       |  |  |  |        |  



---



|    |                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Percentage increase (decrease) in relevant
    period in 2003 compared to corresponding period in 2002.                                                                                                         
|   
|(2) | This subsidiarys principal function is to
    lease private telecommunications capacity from
    telecommunications carriers and then sublease this capacity at
    market rates to our operating subsidiaries.

Argentina, which is showing signs of emerging
from the economic recession that has affected it since 1999, is
our largest market in terms of number of customers and in
revenues. In the first weeks of January 2002, Argentina
defaulted on its external debt payments and devalued its
currency, exacerbating declining commercial confidence and
activity and further inflating exorbitant costs of financing for
Argentine companies. Although Argentinas economy has shown
signs of recovery during 2003, it continues to experience
adverse economic conditions and a lack of access to
international capital markets. We are unable to predict whether
the conditions affecting the Argentine economy will subside or
if future economic developments in Argentina will improve in any
significant respect, and it is possible that the Argentine
economic and political environment could deteriorate further.
The political and economic crises in Argentina, our largest
country of operation, will continue to have a materially adverse
impact on our financial condition and results of operations.

Although the Argentine pesogained
strength during the first nine months of 2003 (2.90
pesos= $1.00 at September 30, 2003
compared to 3.40 pesos= $1.00 at
December 31, 2002) and the Argentine economy has shown
signs of growth in the first nine months of 2003 as compared to
the same period in 2002, the Argentine economy continues to face
severe challenges. IMPSAT Argentinas financial condition
and results of operations continue to be severely and negatively
impacted by the political and social uncertainty and economic
weakness that continue to affect Argentina. The ongoing economic
downturn in Argentina has adversely affected many of our
customers in that country and caused a number of them to
terminate their contracts with us, fail to renew their
contracts, reduce the amount of services contracted, or delay
their payment of amounts owed to us for services provided.
Notwithstanding these economic factors (and largely due to the
average appreciation of the Argentine pesoduring the
first nine months of 2003 compared to the same period in 2002,
as discussed above), our net revenues at IMPSAT Argentina
increased during the periods in 2003. Our total net revenues
from services at IMPSAT Argentina for the three and nine months
ended September 30, 2003 totaled $15.3 million and
$45.2 million, an increase of $1.9 million (or 14.3%)
and $1.8 million (or 4.2%) compared to the corresponding
periods in 2002.

IMPSAT Brazils revenues from services for
the three and nine months ended September 30, 2003 totaled
$8.1 million and $23.2 million, an increase of $0.2
million (or 2.1%) and a decrease of $5.5 million (or 19.3%)
compared to the corresponding periods in 2002. IMPSAT
Brazils results were positively affected during the third
quarter of 2003 by a relative appreciation of Brazilian
real, on average, compared to the average exchange rate
for the same period in 2002. Conversely, although the Brazilian
realappreciated steadily during the first three quarters
of 2003, IMPSAT Brazils results for that period were
adversely affected by the relative devaluation of the Brazilian
realcompared to the average exchange rate during the
same period in 2002. At September 30, 2002, the realtraded at a rate of R$3.84 = $1.00, and at March
31, 2003 and September 30, 2003 it had appreciated to
R$3.46 = $1.00 and R$2.92 = $1.00,
respectively. Future or repeated devaluations of the realand the decline in growth in the Brazilian economy could
have an adverse effect on IMPSAT Brazils and our
companys overall financial condition and results of
operations.

In Colombia, we recorded revenues from services
of $13.4 million and $40.6 million during the three and
nine months ended September 30, 2003, compared to
$14.2 million and $44.2 million for the same periods
in 2002.

8



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##### 



Revenues at IMPSAT Venezuela equaled
$8.7 million and $26.3 million for the third quarter
and first nine months of 2003, compared to $7.6 million and
$23.2 million million for the same periods in 2002.
Venezuela has experienced and continues to experience political
and economic uncertainty following the attempted military coup
staged against that countrys President Hugo Chavez during
the first weeks of April 2002 and the labor strikes that
commenced in December 2002 and ended two months later. In
response to this political and economic turmoil affecting
Venezuela, the Venezuelan government imposed foreign exchange
and price controls during February 2003, making it difficult for
our customers in that country to obtain the U.S. dollars needed
to make payments due to us in U.S. dollars on a timely basis.
These foreign exchange controls also limit our ability to
convert local currency into U.S. dollars and transfer funds out
of Venezuela and to obtain U.S. dollars required to purchase
needed telecommunications equipment and repair parts. The
continuation or worsening of this crisis in Venezuela could have
a material adverse effect on IMPSAT Venezuelas results of
operations and financial condition.

Direct Costs.Our
direct costs for the third quarter and first nine months of 2003
totaled $27.1 million and $83.5 million, an increase
of $0.8 million (or 2.9%) and a decrease of
$4.7 million (or 5.3%) compared to the same periods in
2002. Of our total direct costs for the three and nine months
ended September 30, 2003, $9.6 million and
$30.7 million related to the operations of IMPSAT
Argentina, compared to $9.4 million and $32.6 million
for the corresponding periods in 2002. Direct costs for IMPSAT
Brazil totaled $4.0 million and $12.3 million for the
three and nine months ended September 30, 2003, compared to
$4.4 million and $17.2 million for the same periods in
2002. 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, 2003,
our contracted services costs totaled $4.2 million and
$12.9 million, an increase of $0.7 million (or 20.8%) and a
decrease of $1.7 million (or 11.7%) compared to the same periods
in 2002. Of these amounts, maintenance costs for our
telecommunications network infrastructure, including the
Broadband Network, totaled $3.0 million and
$9.5 million for the third quarter and first nine months of
2003 compared to $2.6 million and $11.5 million for
the same periods in 2002. Installation costs totaled
$1.3 million and $3.3 million for the third quarter
and first nine months of 2003 compared to $1.0 million and
$3.5 million during the corresponding periods in 2002.

(2) Other Direct Costs.Other direct
costs principally include licenses and other fees; sales
commissions paid to third-party sales representatives; and our
provision for doubtful accounts. We recorded other direct costs
of $5.9 million and $18.5 million during the third
quarter and first nine months of 2003, an increase of
$0.5 million (or 9.7%) and $2.5 million (or 15.9%)
compared to the same periods in 2002.

Sales commissions paid to third-party sales
representatives for the three and nine months ended
September 30, 2003 totaled $1.6 million and
$4.4 million, compared to $1.2 million and
$3.8 million for the corresponding periods in 2002. The
majority of these commissions related to customers of IMPSAT
Argentina.

We recorded a net provision for doubtful accounts
of $0.8 million and $3.4 million for the three and
nine months ended September 30, 2003, compared to
$2.6 million and $7.7 million for the same periods in
2002. At September 30, 2003, approximately 31.6% of our
gross trade accounts receivable were past due more than six
months compared to 37.3% at September 30, 2002. The average
days in quarterly gross trade accounts receivable decreased from
85 days at September 30, 2002 to 79 days at
September 30, 2003. The average days in quarterly net trade
accounts receivable decreased from 58 days at
September 30, 2002 to 48 days at September 30,
2003.

(3) Leased Capacity.Our leased
capacity costs for the three and nine months ended
September 30, 2002 totaled $16.8 million and $51.7
million, a decrease of $0.7 million (or 3.8%) and
$5.6 million (or 9.7%) from the corresponding periods in
2002. This decrease also reflects an overall reduction in
interconnection and telephony termination costs and frequency
rights (which are components of our leased capacity costs), as
described below.

9



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Our leased satellite capacity costs for the three
and nine months ended September 30, 2003 totaled
$6.5 million and $20.9 million, a decrease of
$0.6 million (or 8.1%) and $3.5 million (or 14.2%)
from the corresponding periods in 2002. In Argentina, our leased
satellite capacity costs totaled $1.6 million and
$5.5 million for the three and nine months ended
September 30, 2003, as compared to $1.7 million and
$6.1 million for the same periods in 2002. Our leased satellite
capacity costs for IMPSAT Brazil totaled $0.8 million and
$2.6 million for the three and nine months ended
September 30, 2003, as compared to $0.9 million and
$3.2 million for the same periods in 2002. We had approximately
734 MHz of leased satellite capacity at September 30, 2003
and 895 MHz at September 30, 2002.

Our costs for dedicated leased capacity on
third-party fiber optic networks totaled $6.1 million and
$17.3 million for the third quarter and first nine months
of 2003, an increase of $0.3 million (or 5.4%) and a
decrease of $2.2 million (or 11.4%) compared to the
corresponding periods in 2002. These costs were incurred
principally in Argentina, Colombia and the United States. We
will continue to require leased capacity to provide
telecommunications services to clients with facilities outside
of the footprint of our Broadband Network in order to provide
end-to-end telecommunications services.

In connection with services that we have offered
since the effectiveness of our license in Argentina to provide
domestic and international long distance services, we incur
costs for interconnection and telephony termination
(I&T) and frequency rights. Our I&T and
frequency rights costs totaled $3.5 million and
$10.5 million during the third quarter and first nine
months of 2003. These totals are composed of $2.6 million
and $7.6 million of I&T costs. This compares to
$3.9 million and $11.7 million of I&T and
frequency rights costs during the third quarter and first nine
months of 2002 (composed of $3.0 million and $9.2 million
of I&T costs).

(4) Cost of Equipment Sold.In the
three and nine months ended September 30, 2003, we incurred
costs of equipment sold of $0.2 million and
$0.4 million, compared to $0.1 million and
$0.3 million for the same periods in 2002.

Salaries and Wages.Salaries and wages for the three and
nine months ended September 30, 2003 totaled
$12.0 million and $34.6 million, an increase of
$1.1 million (or 10.4%) and a decrease of $1.9 million
(or 5.3%), from the same periods in 2002. As a result of the
adverse economic conditions experienced in Argentina, Brazil and
elsewhere in Latin America, our aggregate number of employees
fell from 1,331 at September 30, 2002 to 1,264 at September
30, 2003. Management expects to continue to monitor the size of
its total workforce and to make appropriate adjustments if
required by financial and competitive circumstances. The
decrease in these costs during the nine-month period in 2003 was
also due, in part, to the effect on such costs of the period
over period relative devaluation of local currencies in Brazil,
Colombia and Venezuela compared to the average exchange rates of
those currencies for the same period in 2002. The third quarter
2003 increase in these costs was principally due to the impact
(in U.S. dollar terms) of the relative appreciation of the
Argentine pesoand the Brazilian realduring the
third quarter in 2003 as compared to the same quarter in 2002.

IMPSAT Argentina incurred salaries and wages for
the three and nine months ended September 30, 2003 of
$3.5 million and $9.1 million, an increase of $1.5
million (or 74.9%) and $2.3 million (or 33.7%) compared to
the same periods in 2002. This increase was due to the quarter
over quarter appreciation of the Argentine peso(which
increased the U.S. dollar value of our salaries and wages
expenses incurred in Argentina). IMPSAT Argentina had 300
employees as of September 30, 2003 as compared to 320
employees as of September 30, 2002.

IMPSAT Brazil incurred salaries and wages for the
three and nine months ended September 30, 2003 of
$2.3 million and $6.6 million, unchanged compared to
the third quarter of 2002 and a decrease of $2.2 million
(or 24.7%) compared to the same nine-month period in 2002.
IMPSAT Brazil decreased its number of employees to 212 persons
at September 30, 2003, compared to 287 persons at
September 30, 2002. In addition to our reduced employee
headcount in that country, the decrease in salaries and wages at
IMPSAT Brazil during the first nine months of 2003 as compared
to the same period in 2002 is in part related to the relative
devaluation of the realagainst the U.S. dollar (compared
to the average exchange rate for the same period in 2002), which
resulted in a decrease in U.S. dollar terms of our salaries and
wages expense in Brazil.

10



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



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

We incurred SG&A expenses of
$6.3 million and $18.9 million for the three and nine
months ended September 30, 2003, a decrease of
$0.4 million (or 6.3%) and $3.1 million (or 14.2%)
compared to the same periods in 2002. The decline in our
SG&A expenses for the first nine months of 2003 is due
principally to a decrease in our publicity and promotion costs,
the effect of the period over period relative devaluation of
local currencies in Brazil, Colombia and Venezuela against the
U.S. dollar, and overall cost control measures undertaken by
management.

SG&A expenses at IMPSAT Argentina for the
three and nine months ended September 30, 2003 totaled
$2.0 million and $6.0 million, which represented
increases of $0.6 million (or 40.0%) and $0.6 million
(or 11.8%), from SG&A expenses incurred by IMPSAT Argentina
for the three and nine months ended September 30, 2002.
SG&A expenses at IMPSAT Brazil for the three and nine months
ended September 30, 2003 totaled $0.9 million and
$3.1 million, compared to $1.5 million and
$4.6 million for the same periods in 2002.

Gain on Extinguishment of
Debt.We recorded gains on
extinguishment of debt of $5.5 million and
$14.3 million during the third quarter and first nine
months of 2003, compared to zero and $16.4 million during
the corresponding periods in 2002. Our gain on extinguishment of
debt during these three- and nine-month periods in 2003 is
attributable to our settlement in full of certain of our
operating subsidiary vendor financing obligations that were not
resolved as part of the Plan. We do not anticipate any further
substantial restructuring of our subsidiary or other
indebtedness in the foreseeable future and, therefore, do not
expect to generate any significant gain, if at all, on
extinguishment of debt during future periods.

Depreciation and Amortization.Our depreciation and amortization
expenses for the three months (Successor Company) and nine
months (Predecessor Company and Successor Company combined)
ended September 30, 2003 totaled $10.3 million and
$38.5 million. This represents a decrease of
$6.4 million (or 38.3%) and $25.5 million (or 39.8%)
compared to our depreciation and amortization for the
corresponding periods in 2002. The decrease in depreciation and
amortization is primarily due to the reduction of the dollar
value of our depreciable fixed asset base in connection with our
Chapter 11 reorganization.

Interest Expense, Net.Our net interest expense for the three
months (Successor Company) ended September 30, 2003 totaled
$4.2 million, consisting of interest expense of
$4.5 million and interest income of $0.3 million. Our
net interest expense for the nine months ended
September 30, 2003 (Predecessor Company and Successor
Company combined) totaled $11.2 million, consisting of
interest expense of $12.1 million and interest income of
$1.0 million. Our net interest expense decreased
$8.9 million (or 68.0%) and $73.0 million (or 86.7%)
for the three and nine months ended September 30, 2003 from
net interest expense for the same periods in 2002. Our quarter
over quarter interest expense decreased principally because of
reductions in outstanding indebtedness and contractual interest
following the filing of the Plan and the restructuring of our
indebtedness (particularly our former 12 1/8% Senior
Guaranteed Notes due 2003, 13 3/4% Senior Notes due 2005,
and 12 3/8% Senior Notes due 2008 (the Old Senior
Notes)) pursuant to the Plan.

Our total indebtedness as of September 30,
2003 (as Successor Company) was $257.5 million, as compared
to $961.5 million as of September 30, 2002 (as
Predecessor Company).

Net (Loss) Gain on Foreign Exchange.We recorded a net loss on foreign
exchange for the three months ended September 30, 2003 of
$3.6 million and a net gain on foreign exchange for the
nine months ended September 30, 2003 of $27.8 million.
This compares to net losses on foreign exchange of $62.6 million
and $115.1 million for the same periods in 2002. The net
gain on foreign exchange for the nine months ended

11



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##### 



September 30, 2003 reflects the effect of
the appreciation during those nine months (i.e.,
compared to the end of 2002) of the Argentine pesoand
the Brazilian realon the book value of our monetary
assets and liabilities in Argentina and Brazil.


IMPSAT Argentina recorded a net gain on foreign
exchange for the three and nine months ended September 30,
2003 of $0.8 million and $2.0 million, compared to a
net gain for the third quarter of 2002 of $1.1 million, and
net loss for the first nine months of 2002 of
$11.7 million. IMPSAT Brazil recorded a net loss on foreign
exchange for the third quarter of 2003 of $5.2 million and
a net gain on foreign exchange first nine months of 2003 of
$25.9 million, compared to net losses of $66.0 million
and $105.1 million for the same periods in 2002.

Reorganization
Items.We recorded reorganization
items for the three months (Successor Company) and nine months
(Predecessor Company and Successor Company combined) ended
September 30, 2003 of zero and $726.1 million. These
items included an extraordinary gain on extinguishment of
indebtedness pursuant to the Plan of $728.2 million,
reduced by $2.1 million in reorganization expenses
(principally professional fees, incurred during the first
quarter of 2003 in connection with the negotiation and formation
of our Plan and Chapter 11 filing). We recorded reorganization
items for the three and nine months ended September 30,
2002 (Predecessor Company) of $9.3 million and $15.0
million, which represent costs incurred during those periods in
connection with our Plan and Chapter 11 filing.

Provision for Foreign Income Taxes.For the three and nine months ended
September 30, 2003, we recorded a provision for foreign
income taxes of $0.6 million and $1.8 million, compared to
a provision of $0.4 million and $1.6 million for the same
periods in 2002.

Net Income (Loss).For the three months (Successor Company) ended
September 30, 2003 we recorded a net loss of
$3.0 million, and for the nine months (Predecessor Company
and Successor Company combined) ended September 30, 2003 we
recorded net income of $750.3 million. This compares to net
losses of $92.7 million and $236.8 million for the
same periods in 2002 (Predecessor Company). Our reduced net
losses and net income for the periods in 2003 were principally
due to the effects of the extraordinary gain on extinguishment
of indebtedness pursuant to the Plan (as discussed above under
 Reorganization Items), and our gain on
extinguishment of debt (as discussed above under
 Gain on Extinguishment of Debt). For the
third quarter (Successor Company) and first nine months
(Predecessor Company and Successor Company combined) of 2003, we
recorded operating income of $6.2 million and
$7.7 million, compared to operating losses of
$5.3 million and $17.2 million for the same periods in
2002 (Predecessor Company).

Liquidity and Capital Resources

At September 30, 2003, we had total cash,
cash equivalents and trading investments of $64.6 million.
This compares to our cash, cash equivalents and trading
investments of $59.2 million at September 30, 2002,
$55.6 million as of December 31, 2002, and
$63.8 million (with zero trading investments) at June 30,
2003.

As of September 30, 2003, approximately
$5.8 million of our cash and cash equivalents were held in
Venezuelan bolivarsby IMPSAT Venezuela (based on the
official exchange rate at that date of
Bs.1,600 = $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. 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 bolivarand/or the implementation of stiffer
exchange control restrictions in that country could have a
material adverse effect on our financial condition and results
of operations in Venezuela. See Quantitative and
Qualitative Disclosures About Market Risk  Foreign
Currency Risk.

At September 30, 2003, our total
indebtedness as Successor Company was $257.5 million (as
compared to $1.04 billion as Predecessor Company at
December 31, 2002 and $961.5 million as Predecessor Company
at September 30, 2002), of which $13.2 million
represented current portion of long-term debt and $244.3 million
represented long-term debt. Our capital expenditures budget
contemplates that we will need approximately $19.0 million
(including amounts spent to date) through the end of 2003 for
capital expenditures.

12



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Although we have emerged from bankruptcy, we
remain in default under indebtedness owed to one creditor who
voted against the Plan. Under the Plan, the claims of that
creditor were contingent obligations arising under guarantees by
us of certain primary indebtedness of IMPSAT Argentina. This
default, which relates to indebtedness totaling approximately
$8.0 million in outstanding principal amount, gives the
creditor the right to accelerate such indebtedness and seek
immediate repayment of all outstanding amounts and accrued
interest thereon. There is no assurance that we will be
successful in reaching a definitive agreement with this creditor
to reschedule or restructure such obligations.

Under those circumstances, IMPSAT Argentina could
be forced to seek protection or liquidate under the bankruptcy
laws of Argentina.

As set forth in our condensed consolidated
statement of cash flows, our operating activities provided
$30.5 million in net cash flows for the first nine months
of 2003, compared to $19.3 million provided by operating
activities during the corresponding period in 2002.

For the first nine months of 2003, we generated
$7.9 million in net cash flows from investing activities,
compared to $9.7 million of net cash flows used by
investing activities during the corresponding period in 2002.
The increased net cash flows from investing activities was
principally due to the receipt of proceeds from the sale of our
Mexican operations and the decrease in our trading investments
(a decrease of $21.1 million during the period in 2003,
compared to a decrease of $3.2 million during the period in
2002). During the first nine months of 2003, we used
$8.5 million in net cash flows from financing activities.
This compares to $12.7 million in net cash flows used in
financing activities during the corresponding period in 2002.

At September 30, 2003, we had leased
satellite capacity with annual rental commitments of
approximately $20.2 million through the year 2007. In
addition, at September 30, 2003, we had commitments to
purchase telecommunications equipment amounting to approximately
$3.6 million. As reported in our 2002 Form 10-K, our
commitments in respect of IRU purchases under contracts with 360
networks and Global Crossing have been terminated. Furthermore,
we have leased from third parties a series of terrestrial links
for the provision of data, Internet and telephony services to
our clients in the different countries in which we operate. We
have committed to long term contracts for the purchase of
terrestrial links from third parties in Argentina, Colombia, and
the United States for approximately $2.3 million per year
through 2007. The remainder of the leases are typically under
one-year contracts, the early cancellation of which is subject
to a fee.



|        |                                                               
|------- | --------------------------------------------------------------
|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, 2003 and assuming that the
hypothetical interest rate and foreign exchange rate changes
used in the analyses occurred during 2003. 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
360 days. As a result of the short-term nature of these
instruments, we do not believe that a hypothetical 10% change in
interest rates would have a material impact on our future
earnings and cash flows related to these instruments. A
hypothetical 10% change in interest rates would also have an
immaterial impact on the fair values of these instruments.

We are exposed to interest rate risk on our
floating rate indebtedness, which affects our cost of financing.
At September 30, 2003, our floating rate indebtedness
totaled approximately $16 million. Our actual interest rate
is not quantifiable or predictable because of the variability of
future interest rates and business requirements. We do not
believe such risk is material and we do not customarily use
derivative instruments to adjust interest rate risk. As of
September 30, 2003, a hypothetical 100 basis point increase
in the London

13



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##### 



Interbank Offered Rate (LIBOR) would
adversely affect our annual interest cost related to our
floating rate indebtedness by approximately $0.2 million
annually.


|                                 |                    |                                      |       |       |   |      |       |       |   |      |        |            |   |       |        |       |   |   |        |       |   |   |         |       |   |   |         |       |   |   |         |   | 
|-------------------------------- | ------------------ | ------------------------------------ | ----- | ----- | - | ---- | ----- | ----- | - | ---- | ------ | ---------- | - | ----- | ------ | ----- | - | - | ------ | ----- | - | - | ------- | ----- | - | - | ------- | ----- | - | - | ------- | - | 
|                                 |                    |                                      |       |       |   |     
|                                 |                    | Expected Maturities at September 30, |       |       |   |     
|                                 |                    |                                      |       |       |   | Fair
|                                 |                    | 2003                                 |       | 2004  |   | 2005 |       | 2006  |   | 2007 |        | Thereafter |   | Total |        | Value
|                                 |                    |                                      |       |       |   |      |       |       |   |      |        |            |   |       |        |      
|                                 |                    |                                     
|                                 |                    | (dollar amounts in thousands)       
|Senior Notes (fixed rate)        |                    | $                                    |      |       |   | $    |      |       |   | $    | 30,315 |            |   | $     | 30,315 |       |   | $ | 30,315 |       |   | $ | 130,766 |       |   | $ | 221,711 |       |   | $ | 221,711 |  
|                                 | Avg. Interest rate |                                      |       |      |   |      |       |      |   |      |        | 8.46       | % |       |        | 8.46  | % |   |        | 8.46  | % |   |         | 8.46  | % |   |         | 8.46  | % |   |         |  | 
|Term Notes (fixed rate)          |                    | $                                    | 5,104 |       |   | $    | 2,417 |       |   | $    | 7,733  |            |   | $     | 11,421 |       |   | $ | 926    |       |   |   |        |       |   | $ | 27,601  |       |   | $ | 27,601  |  
|                                 | Avg. Interest rate |                                      |       | 12.73 | % |      |       | 12.73 | % |      |        | 12.73      | % |       |        | 12.73 | % |   |        | 12.73 | % |   |         | 12.73 | % |   |         | 12.73 | % |   |         |  | 
|Vendor Financing (variable rate) |                    | $                                    | 8,050 |       |   | $    | 131   |       |   |      |       |            |   |       |       |       |   |   |       |       |   |   |        |       |   | $ | 8,181   |       |   | $ | 8,181   |  
|                                 | Avg. Interest rate |                                      |       | 10.06 | % |      |       | 10.06 | % |      |        | 10.06      | % |       |        | 10.06 | % |   |        | 10.06 | % |   |         | 10.06 | % |   |         | 10.06 | % |   |         |  | 

Foreign Currency Risk.A substantial portion of our costs,
including lease payments for certain satellite transponder and
fiber optic capacity, purchases of capital equipment, and
payments of interest and principal on our indebtedness, is
payable in U.S. dollars. To date, we have not entered into
hedging or swap contracts to address currency risks because our
contracts with our customers, except in Brazil, 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-pesoexchange rate and devalued the
Argentine pesoand, 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 pesosat a rate of one
Argentine pesoto one U.S. dollar. The floating exchange
rate at November 10, 2003 was pesos2.85 = $1.00. These and any further devaluations
of the pesohave and will adversely affect IMPSAT
Argentinas results of operations and, in turn, our
companys consolidated results of operations and financial
condition. Management is currently unable to predict the most
likely average or end-of-period peso/dollar exchange
rates for 2003 or provide estimates of the impacts that the
changes in Argentine law, the potential impacts of the currency
devaluation and other recent events in Argentina could have on
our companys consolidated results of operation and
financial condition. There could occur during 2003 increases to
our consolidated results that would result from transaction
gains or losses on our dollar-denominated monetary assets and
liabilities. Also, operating income reductions could result from
the potential impacts on our consolidated revenues from services
of the conversion to pesosof contract obligations that
were previously tied to the dollar. Potential balance sheet
exposures include the reduction to our consolidated
stockholders equity due to the effects of lower net income
on retained earnings. Our management is continuing to assess the
impact that the events in Argentina could have on our
consolidated results of operations and financial condition.

Pursuant to Brazilian law, our contracts with
customers in Brazil cannot be denominated in dollars or linked
to the exchange rate between the Brazilian realand the
U.S. dollar. In Brazil, we are permitted to amend the pricing of
our services for our long-term telecommunication services
contracts with our customers annually based on changes in the
consumer price index in Brazil for the prior year. In Argentina,
obligations that were mandatorily converted to pesosunder the pesification decree are to be
adjusted pursuant to the CER, an index rate based on variations
in the Argentine consumer price index. These aspects of the laws
in Brazil and Argentina do not eliminate completely the currency
exchange risk facing our operations in those countries. Changes
in the consumer price indices in Brazil and Argentina may lag or
be lower than changes in the exchange rate between the Brazil
and Argentine local currency and the U.S. dollar and therefore
may not fully allow us to address the impact of a devaluation of
those currencies against the U.S. dollar. Also, contracts
entered into after the pesification
decrees enactment that are initially denominated in
pesosare not entitled to be adjusted according to the
CER or any other consumer price index. Accordingly, our
operations in Brazil and Argentina have exposed us, and will
increase our exposure, to exchange rate risks. At
November 10, 2003, the realtraded at a rate of R
2.88 = $1.00.

14



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##### 



As discussed above, in response to political and
economic turmoil currently affecting Venezuela, that
countrys government imposed foreign exchange and price
controls during February 2003, making it difficult for our
customers in Venezuela to obtain the U.S. dollars needed to make
payments due to us in U.S. dollars on a timely basis. These
foreign exchange controls also limit our ability to convert
local currency into U.S. dollars and transfer funds out of
Venezuela. As of September 30, 2003, approximately
$5.8 million of our cash and cash equivalents were held in
Venezuelan bolivarsby IMPSAT Venezuela. At
December 31, 2001, the bolivartraded at a rate of
Bs.769.00 = $1.00, at December 31, 2002, it
traded at a rate of Bs.1,392.00 = $1.00, and at
September 30, 2003, it traded at the rate of approximately
Bs.1,600 = $1.00. On February 6, 2003, the
Venezuelan government set a single fixed exchange rate for the
bolivaragainst the U.S. dollar of approximately
Bs.1,600 = $1.00 as part of the new currency controls.
If the U.S. dollar value of our cash and cash equivalents
denominated in bolivarswere to decline as a result of
the devaluation of the bolivarprior to the time when we
were permitted to repatriate these funds, we would recognize a
loss.

Net revenues from services from our Argentine
operations for the three months ended September 30, 2003
and 2002 represented approximately 27.4% and 24.3% 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, 2003 and 2002 represented approximately
14.4% and 14.4% of our total net revenues from services for such
periods. Our net revenues from services in Venezuela accounted
for 15.6% and 13.7% of our total revenues from services for the
three months ended September 30, 2003 and 2002.

Item 4.     Controls
and Procedures

An evaluation was performed under the supervision
and with the participation of the management of IMPSAT Fiber
Networks, Inc. (IMPSAT), including its Chief
Executive Officer (CEO) and Chief Financial Officer
(CFO), of the effectiveness of IMPSATs
disclosure controls and procedures (as defined in
Rule 13a-15(e) under the Securities Exchange Act of 1934)
as of September 30, 2003. Based upon that evaluation, the
CEO and CFO concluded that these disclosure controls and
procedures were effective as of September 30, 2003. There
were no changes in IMPSATs internal control over financial
reporting (as defined in Rule 13a-15(f) under the
Securities Exchange Act of 1934) during the fiscal quarter
covered by this quarterly report that have materially affected,
or are reasonably likely to materially affect, its internal
control over financial reporting.

15



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##### 



PART II

OTHER INFORMATION




|        |                  
|------- | -----------------
|Item 1. | Legal Proceedings

Not applicable.



|        |                                              
|------- | ---------------------------------------------
|Item 2. | Changes in Securities and Use of
    Proceeds

Not applicable.



|        |                                    
|------- | -----------------------------------
|Item 3. | Defaults Upon Senior
    Securities

Not applicable.



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

Not applicable.



|        |                  
|------- | -----------------
|Item 5. | Other Information

Not applicable.

16



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##### 





|        |                                     
|------- | ------------------------------------
|Item 6. | Exhibits and Reports on
    Form 8-K

(a)(1)

Exhibit Index:

|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|No.     |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|3.1     |  | Restated Certificate of Incorporation of the
    Company (filed on March 26, 2003 as Exhibit No. 2.1 to the
    Companys Amendment No. 1 to Registration Statement on
    Form 8-A and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|3.2     |  | Restated Bylaws of the Company (filed on March
    26, 2003 as Exhibit No. 2.2 to the Companys Amendment
    No. 1 to Registration Statement on Form 8-A and
    incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|4.1     |  | Indenture for the Companys 6% Senior
    Guaranteed Convertible Notes due 2011  Series A,
    dated as of March 25, 2003, among the Company, The Bank of
    New York, as trustee and IMPSAT Argentina, as guarantor
    (including form of Note) (filed on April 15, 2003 as
    Exhibit 4.1 to the Companys 2002 Annual Report on
    Form 10-K and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                  
|4.2     |  | Indenture for the Companys 6% Senior
    Guaranteed Convertible Notes due 2011  Series B,
    dated as of March 25, 2003, among the Company, The Bank of
    New York, as trustee and IMPSAT Argentina, as guarantor
    (including form of Note) (filed on April 15, 2003 as
    Exhibit 4.2 to the Companys 2002 Annual Report on
    Form 10-K and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                  
|4.3     |  | Disclosure Statement Under Chapter 11 of the
    Bankruptcy Code (filed on December 19, 2002 as
    Exhibit No. 99.2 to the Companys Current Report
    on Form 8-K, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.4     |  | Plan of Reorganization of the Company Under
    Chapter 11 of the Bankruptcy Code (filed on December 19,
    2002 as Exhibit No. 99.3 to the Companys Current
    Report on Form 8-K, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|4.5     |  | Order Confirming the Companys Plan of
    Reorganization Under Chapter 11 of the Bankruptcy Code
    dated December 16, 2002 (filed on December 19, 2002 as
    Exhibit 99.1 to the Companys Current Report on
    Form 8-K, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.6     |  | Registration Rights Agreement among the Company,
    IMPSAT Argentina and the securityholders party thereto, dated as
    of March 25, 2003 (filed on April 15, 2003 as Exhibit
    4.6 to the Companys 2002 Annual Report on Form 10-K
    and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                          
|4.7     |  | Specimen Common Stock Certificate (filed on
    March 26, 2003 as Exhibit No. 2.6 to the
    Companys Amendment No. 1 to Registration Statement on
    Form 8-A and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|4.8     |  | Warrant Agreement between the Company and The
    Bank of New York, as warrant agent, dated as of March 25, 2003
    (including form of Warrant) (filed on April 15, 2003 as
    Exhibit 4.8 to the Companys 2002 Annual Report on
    Form 10-K and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                     
|9.1     |  | 2003 Stock Incentive Plan (filed on
    April 15, 2003 as Exhibit 9.1 to the Companys
    2002 Annual Report on Form 10-K and incorporated herein by
    reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.1   |  | Global Crossing Framework Agreement (filed on
    October 4, 1999 as an exhibit to the Companys
    Registration Statement on Form S-1 (No. 333-88389) and
    incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.2   |  | Turnkey Backhaul Construction and IRU Agreement
    between IMPSAT Brazil and South American Crossing, Ltd. (Rio de
    Janeiro), dated as of February 17, 2000 (filed on
    April 17, 2000 as an exhibit to the Companys
    Registration Statement on Form S-4 (No. 333-34954) and
    incorporated herein by reference). In accordance with
    Instruction 2 to Item 601 of Regulation S-K, the following
    agreement was not filed as an exhibit because it is
    substantially identical in all material respects to
    Exhibit 10.2: Turnkey Backhaul Construction and IRU
    Agreement between IMPSAT Brazil and South American Crossing,
    Ltd. (Sao Paolo), dated as of February 17, 2000.
|10.3   |  | TAC Turnkey Construction and IRU Agreement among
    IMPSAT Argentina, IMPSAT Chile and South American Crossing Ltd.
    (filed on October 4, 1999 as an exhibit to the
    Companys Registration Statement on Form S-1
    (No. 333-88389) and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                          

17



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##### 



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|No.     |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.4    |  | Amended and Restated Financing Agreement among
    IMPSAT Argentina, Nortel Networks Limited, and Deutsche Bank
    Trust Company Americas and the Lenders party thereto, dated as
    of March 25, 2003 (filed on April 15, 2003 as
    Exhibit 10.4 to the Companys 2002 Annual Report on
    Form 10-K and incorporated herein by reference). In
    accordance with Instruction 2 to Item 601 of
    Regulation S-K, the following agreement was not filed as
    exhibits because they are substantially identical in all
    material respects to Exhibit 10.4: Amended and Restated
    Financing Agreement between IMPSAT Brazil and Nortel Networks
    Limited, dated as of March 25, 2003.                                
|10.5    |  | 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
    third quarter 2003 Quarterly Report on Form 10-Q and
    incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.6    |  | 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
    third quarter 2003 Quarterly Report on Form 10-Q and
    incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.7    |  | 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 third quarter 2003
    Quarterly Report on Form 10-Q 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 10.7: Letter Agreement between
    Mariano Torre Gomez and the Company dated March 25, 2003;
    Letter Agreement between Matias Heinrich and the Company dated
    March 25, 2003; Letter Agreement between Alexander Rivelis
    and the Company dated March 25, 2003.
|21.1    |  | List of subsidiaries of the registrants
    (incorporated by reference to the Business 
    General section of the Companys 2002 Annual Report
    on Form 10-K and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|31.1    |  | Certification by the Companys Chief
    Executive Officer pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002 (filed herewith).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|31.2    |  | Certification by the Companys Chief
    Financial Officer pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002 (filed herewith).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|32.1    |  | Certification by the Companys Chief
    Executive Officer pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002 (filed herewith).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|32.2    |  | Certification by the Companys Chief
    Financial Officer pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002 (filed herewith).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            



---

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

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

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

18



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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 ALONSO

| |                        
| | -----------------------
| |                        
| | Héctor Alonso          
| | Chief Financial Officer
|
| | Date: November 14, 2003

19