##### 









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 June 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
June 30, 2003, the registrant had outstanding 10,000,000
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                            |          |  | 14  | 
|                             | Item 4. |  | Controls and Procedures                                                                   |          |  | 16  | 
|PART II OTHER INFORMATION    |         |  | 17                                                                                        |         
|                             | Item 1. |  | Legal Proceedings                                                                         |          |  | 17  | 
|                             | Item 2. |  | Changes in Securities and Use of Proceeds                                                 |          |  | 17  | 
|                             | Item 3. |  | Defaults Upon Senior Securities                                                           |          |  | 17  | 
|                             | Item 4. |  | Submission of Matters to a Vote of
    Security-Holders                                   |          |  | 17  | 
|                             | Item 5. |  | Other Information                                                                         |          |  | 17  | 
|                             | Item 6. |  | Exhibits and Reports on Form 8-K                                                          |          |  | 17  | 
|SIGNATURES                   |         |  | 20                                                                                        |         



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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 June 30, 2003 (Successor Company)


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


(Unaudited)


|                                                      |                                                                                                                                                                                                                                                     |                                             |         |            |           |   |         |        |         | 
|----------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------- | ------- | ---------- | --------- | - | ------- | ------ | ------- | 
|                                                      |                                                                                                                                                                                                                                                     | Predecessor                                 |         | Successor 
|                                                      |                                                                                                                                                                                                                                                     | Company                                     |         | Company   
|                                                      |                                                                                                                                                                                                                                                     | December 31,                                |         | June 30,  
|                                                      |                                                                                                                                                                                                                                                     | 2002                                        |         | 2003      
|                                                      |                                                                                                                                                                                                                                                     |                                             |         |           
|ASSETS                                               
|CURRENT ASSETS:                                       |                                                                                                                                                                                                                                                     |                                             |         |            |           |   |         |       
|                                                      | Cash and cash equivalents                                                                                                                                                                                                                           |                                             | $       | 32,563     |           |   | $       | 63,761 |        
|                                                      | Trading investments                                                                                                                                                                                                                                 |                                             |         | 23,021     |           |   |         |        |        
|                                                      | Trade accounts receivable, net                                                                                                                                                                                                                      |                                             |         | 31,012     |           |   |         | 35,252 |        
|                                                      | Other receivables                                                                                                                                                                                                                                   |                                             |         | 16,674     |           |   |         | 10,289 |        
|                                                      | Prepaid expenses                                                                                                                                                                                                                                    |                                             |         | 2,746      |           |   |         | 4,271  |        
|                                                      | Assets held for disposal                                                                                                                                                                                                                            |                                             |         |            |           |   |         | 2,956  |        
|                                                      |                                                                                                                                                                                                                                                     |                                             |         |            |           |   |         |       
|                                                      |                                                                                                                                                                                                                                                     | Total current assets                        |         |            | 106,016   |   |         |        | 116,529 | 
|                                                      |                                                                                                                                                                                                                                                     |                                             |         |            |           |   |         |       
|PROPERTY, PLANT AND EQUIPMENT, Net                    |                                                                                                                                                                                                                                                     |                                             | 403,948 |            |           |   | 329,701 |       
|                                                      |                                                                                                                                                                                                                                                     |                                             |         |            |           |   |         |       
|NON-CURRENT ASSETS:                                   |                                                                                                                                                                                                                                                     |                                             |         |            |           |   |         |       
|                                                      | Investments in common stock                                                                                                                                                                                                                         |                                             |         | 86         |           |   |         | 203    |        
|                                                      | Other non-current assets                                                                                                                                                                                                                            |                                             |         | 10,633     |           |   |         | 12,035 |        
|                                                      |                                                                                                                                                                                                                                                     |                                             |         |            |           |   |         |       
|                                                      |                                                                                                                                                                                                                                                     | Total non-current assets                    |         |            | 10,719    |   |         |        | 12,238  | 
|                                                      |                                                                                                                                                                                                                                                     |                                             |         |            |           |   |         |       
|TOTAL                                                 |                                                                                                                                                                                                                                                     | $                                           | 520,683 |            |           | $ | 458,468 |       
|                                                      |                                                                                                                                                                                                                                                     |                                             |         |            |           |   |         |       
|LIABILITIES AND STOCKHOLDERS
    (DEFICIENCY) EQUITY
|LIABILITIES NOT SUBJECT TO COMPROMISE:                |                                                                                                                                                                                                                                                     |                                             |         |            |           |   |         |       
|CURRENT LIABILITIES:                                  |                                                                                                                                                                                                                                                     |                                             |         |            |           |   |         |       
|                                                      | Accounts payable  trade                                                                                                                                                                                                                            |                                             | $       | 72,860     |           |   | $       | 48,699 |        
|                                                      | Short-term debt                                                                                                                                                                                                                                     |                                             |         |            |           |   |         | 348    |        
|                                                      | Current portion of long-term debt                                                                                                                                                                                                                   |                                             |         | 281,680    |           |   |         | 18,021 |        
|                                                      | Accrued and other liabilities                                                                                                                                                                                                                       |                                             |         | 48,446     |           |   |         | 29,372 |        
|                                                      |                                                                                                                                                                                                                                                     |                                             |         |            |           |   |         |       
|                                                      |                                                                                                                                                                                                                                                     | Total current liabilities                   |         |            | 402,986   |   |         |        | 96,440  | 
|LONG-TERM DEBT, Net                                   |                                                                                                                                                                                                                                                     |                                             | 27,592  |            |           |   | 241,899 |       
|OTHER LONG-TERM LIABILITIES                           |                                                                                                                                                                                                                                                     |                                             | 15,280  |            |           |   | 14,359  |       
|DEFERRED REVENUES                                     |                                                                                                                                                                                                                                                     |                                             | 69,918  |            |           |   |         |       
|                                                      |                                                                                                                                                                                                                                                     |                                             |         |            |           |   |         |       
|                                                      |                                                                                                                                                                                                                                                     | Total liabilities not subject to compromise |         |            | 515,776   |   |         |        | 352,698 | 
|LIABILITIES SUBJECT TO COMPROMISE                     |                                                                                                                                                                                                                                                     |                                             | 727,522 |            |           |   |         |       
|                                                      |                                                                                                                                                                                                                                                     |                                             |         |            |           |   |         |       
|                                                      |                                                                                                                                                                                                                                                     | Total liabilities                           |         |            | 1,243,298 |   |         |        | 352,698 | 
|                                                      |                                                                                                                                                                                                                                                     |                                             |         |            |           |   |         |       
|COMMITMENTS AND CONTINGENCIES (NOTE
    14)           |                                                                                                                                                                                                                                                     |                                             |         |            |           |   |         |       
|STOCKHOLDERS (DEFICIENCY) EQUITY:                    |                                                                                                                                                                                                                                                     |                                             |         |            |           |   |         |       
|                                                      | Common Stock, $0.01 par value; 50,000,000 shares
    authorized, 10,000,000 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) |                                             |         |            |           |   |         | 100    |        
|                                                      | 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    |           |   |         | 95,257 |        
|                                                      | Common stock reserve pool (Note 2)                                                                                                                                                                                                                  |                                             |         |           |           |   |         | (6,037 | )      
|                                                      | (Accumulated deficit) retained earnings                                                                                                                                                                                                             |                                             |         | (1,276,845 | )         |   |         | 22,246 |        
|                                                      | Deferred stock-based compensation                                                                                                                                                                                                                   |                                             |         | (4,530     | )         |   |         | (1,320 | )      
|                                                      | Accumulated other comprehensive income (loss)                                                                                                                                                                                                       |                                             |         | 20,263     |           |   |         | (4,476 | )      
|                                                      |                                                                                                                                                                                                                                                     |                                             |         |            |           |   |         |       
|                                                      |                                                                                                                                                                                                                                                     | Total stockholders (deficiency) equity     |         |            | (722,615  | ) |         |        | 105,770 | 
|                                                      |                                                                                                                                                                                                                                                     |                                             |         |            |           |   |         |       
|TOTAL                                                 |                                                                                                                                                                                                                                                     | $                                           | 520,683 |            |           | $ | 458,468 |       
|                                                      |                                                                                                                                                                                                                                                     |                                             |         |            |           |   |         |       

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 JUNE 30, 2002
(PREDECESSOR COMPANY),


FOR THE THREE MONTHS ENDED JUNE 30, 2003
(SUCCESSOR COMPANY),


FOR THE SIX MONTHS ENDED JUNE 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)


|                                          |                                                                                                                                                                                                                |                        |                               |                           |        |                    |        |                    |        |                  |          |         |        |          |         |         |        |         |        |        |        |        | 
|----------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------- | ----------------------------- | ------------------------- | ------ | ------------------ | ------ | ------------------ | ------ | ---------------- | -------- | ------- | ------ | -------- | ------- | ------- | ------ | ------- | ------ | ------ | ------ | ------ | 
|                                          |                                                                                                                                                                                                                |                        |                               |                           |        |                    |        |                   
|                                          |                                                                                                                                                                                                                | Three months ended     |                               |                          
|                                          |                                                                                                                                                                                                                | June 30,               |                               | Six months ended June 30,
|                                          |                                                                                                                                                                                                                |                        |                               |                          
|                                          |                                                                                                                                                                                                                | Predecessor            |                               | Successor                 |        | Predecessor        |        | Predecessor        |        | Successor       
|                                          |                                                                                                                                                                                                                | Company                |                               | Company                   |        | Company            |        | Company            |        | Company         
|                                          |                                                                                                                                                                                                                |                        |                               |                           |        |                    |        |                    |        |                 
|                                          |                                                                                                                                                                                                                |                        |                               |                           |        | January 1, 2002 to |        | January 1, 2003 to |        | April 1, 2003 to
|                                          |                                                                                                                                                                                                                | 2002                   |                               | 2003                      |        | June 30, 2002      |        | March 31, 2003     |        | June 30, 2003   
|                                          |                                                                                                                                                                                                                |                        |                               |                           |        |                    |        |                    |        |                 
|NET REVENUES:                             |                                                                                                                                                                                                                |                        |                               |                           |        |                    |        |                    |        |                  |          |         |        |          |         |         |        |         |        |       
|                                          | Broadband and satellite                                                                                                                                                                                        |                        | $                             | 44,451                    |        |                    | $      | 41,781             |        |                  | $        | 90,764  |        |          | $       | 41,382  |        |         | $      | 41,781 |       
|                                          | Internet                                                                                                                                                                                                       |                        |                               | 7,269                     |        |                    |        | 5,761              |        |                  |          | 15,123  |        |          |         | 5,733   |        |         |        | 5,761  |       
|                                          | Value added services                                                                                                                                                                                           |                        |                               | 3,504                     |        |                    |        | 3,852              |        |                  |          | 7,121   |        |          |         | 4,781   |        |         |        | 3,852  |       
|                                          | Telephony                                                                                                                                                                                                      |                        |                               | 3,971                     |        |                    |        | 4,595              |        |                  |          | 8,317   |        |          |         | 4,106   |        |         |        | 4,595  |       
|                                          | Sales of equipment                                                                                                                                                                                             |                        |                               | 146                       |        |                    |        | 385                |        |                  |          | 429     |        |          |         | 74      |        |         |        | 385    |       
|                                          |                                                                                                                                                                                                                |                        |                               |                           |        |                    |        |                    |        |                  |          |         |        |          |         |         |        |         |        |       
|                                          |                                                                                                                                                                                                                |                        | Total net revenues            |                           |        | 59,341             |        |                    |        | 56,374           |          |         |        | 121,754  |         |         |        | 56,076  |        |        |        | 56,374 | 
|                                          |                                                                                                                                                                                                                |                        |                               |                           |        |                    |        |                    |        |                  |          |         |        |          |         |         |        |         |        |       
|COSTS AND EXPENSES:                       |                                                                                                                                                                                                                |                        |                               |                           |        |                    |        |                    |        |                  |          |         |        |          |         |         |        |         |        |       
|                                          | Direct costs:                                                                                                                                                                                                  |                        |                               |                           |        |                    |        |                    |        |                  |          |         |        |          |         |         |        |         |        |        |       
|                                          |                                                                                                                                                                                                                | Contracted services    |                               |                           | 4,966  |                    |        |                    | 4,525  |                  |          |         | 11,083 |          |         |         | 4,125  |         |        |        | 4,525  |       
|                                          |                                                                                                                                                                                                                | Other direct costs     |                               |                           | 4,800  |                    |        |                    | 7,868  |                  |          |         | 10,554 |          |         |         | 4,696  |         |        |        | 7,868  |       
|                                          |                                                                                                                                                                                                                | Leased capacity        |                               |                           | 19,508 |                    |        |                    | 17,559 |                  |          |         | 39,888 |          |         |         | 17,407 |         |        |        | 17,559 |       
|                                          |                                                                                                                                                                                                                | Cost of equipment sold |                               |                           | 123    |                    |        |                    | 108    |                  |          |         | 241    |          |         |         | 48     |         |        |        | 108    |       
|                                          |                                                                                                                                                                                                                |                        |                               |                           |        |                    |        |                    |        |                  |          |         |        |          |         |         |        |         |        |       
|                                          |                                                                                                                                                                                                                |                        | Total direct costs            |                           |        | 29,397             |        |                    |        | 30,060           |          |         |        | 61,766   |         |         |        | 26,276  |        |        |        | 30,060 | 
|                                          | Salaries and wages                                                                                                                                                                                             |                        |                               | 12,593                    |        |                    |        | 11,842             |        |                  |          | 25,635  |        |          |         | 10,727  |        |         |        | 11,842 |       
|                                          | Selling, general and administrative                                                                                                                                                                            |                        |                               | 7,154                     |        |                    |        | 7,127              |        |                  |          | 15,389  |        |          |         | 5,553   |        |         |        | 7,127  |       
|                                          | Gain on extinguishment of debt                                                                                                                                                                                 |                        |                               | (16,367                   | )      |                    |        | (8,793             | )      |                  |          | (16,367 | )      |          |         |         |        |         |        | (8,793 | )     
|                                          | Depreciation and amortization                                                                                                                                                                                  |                        |                               | 23,359                    |        |                    |        | 8,969              |        |                  |          | 47,268  |        |          |         | 19,216  |        |         |        | 8,969  |       
|                                          |                                                                                                                                                                                                                |                        |                               |                           |        |                    |        |                    |        |                  |          |         |        |          |         |         |        |         |        |       
|                                          |                                                                                                                                                                                                                |                        | Total costs and expenses      |                           |        | 56,136             |        |                    |        | 49,205           |          |         |        | 133,691  |         |         |        | 61,772  |        |        |        | 49,205 | 
|                                          |                                                                                                                                                                                                                |                        |                               |                           |        |                    |        |                    |        |                  |          |         |        |          |         |         |        |         |        |       
|Operating income (loss)                   |                                                                                                                                                                                                                |                        | 3,205                         |                           |        |                    | 7,169  |                    |        |                  | (11,937  | )       |        |          | (5,696  | )       |        |         | 7,169  |       
|                                          |                                                                                                                                                                                                                |                        |                               |                           |        |                    |        |                    |        |                  |          |         |        |          |         |         |        |         |        |       
|OTHER INCOME (EXPENSES):                  |                                                                                                                                                                                                                |                        |                               |                           |        |                    |        |                    |        |                  |          |         |        |          |         |         |        |         |        |       
|                                          | Interest income                                                                                                                                                                                                |                        |                               | 1,172                     |        |                    |        | 970                |        |                  |          | 1,527   |        |          |         | 200     |        |         |        | 970    |       
|                                          | Interest expense (contractual interest of $43,710
    and $77,528 for the three and six months ended June 30,
    2002, respectively, and $21,801 for the three months ended
    March 31, 2003 (Predecessor)) |                        |                               | (38,903                   | )      |                    |        | (6,281             | )      |                  |          | (72,721 | )      |          |         | (1,909  | )      |         |        | (6,281 | )     
|                                          | Net (loss) gain on foreign exchange                                                                                                                                                                            |                        |                               | (45,065                   | )      |                    |        | 21,445             |        |                  |          | (52,431 | )      |          |         | 9,969   |        |         |        | 21,445 |       
|                                          | Reorganization items                                                                                                                                                                                           |                        |                               | (5,574                    | )      |                    |        |                    |        |                  |          | (5,692  | )      |          |         | 726,127 |        |         |        |        |       
|                                          | Other income (loss), net                                                                                                                                                                                       |                        |                               | 246                       |        |                    |        | (313               | )      |                  |          | (1,704  | )      |          |         | 2,781   |        |         |        | (313   | )     
|                                          |                                                                                                                                                                                                                |                        |                               |                           |        |                    |        |                    |        |                  |          |         |        |          |         |         |        |         |        |       
|                                          |                                                                                                                                                                                                                |                        | Total other (expenses) income |                           |        | (88,124            | )      |                    |        | 15,821           |          |         |        | (131,021 | )       |         |        | 737,168 |        |        |        | 15,821 | 
|                                          |                                                                                                                                                                                                                |                        |                               |                           |        |                    |        |                    |        |                  |          |         |        |          |         |         |        |         |        |       
|(LOSS) INCOME BEFORE INCOME TAXES         |                                                                                                                                                                                                                |                        | (84,919                       | )                         |        |                    | 22,990 |                    |        |                  | (142,958 | )       |        |          | 731,472 |         |        |         | 22,990 |       
|PROVISION FOR FOREIGN INCOME TAXES        |                                                                                                                                                                                                                |                        | (711                          | )                         |        |                    | (744   | )                  |        |                  | (1,149   | )       |        |          | (406    | )       |        |         | (744   | )     
|                                          |                                                                                                                                                                                                                |                        |                               |                           |        |                    |        |                    |        |                  |          |         |        |          |         |         |        |         |        |       
|NET (LOSS) INCOME                         |                                                                                                                                                                                                                | $                      | (85,630                       | )                         |        | $                  | 22,246 |                    |        | $                | (144,107 | )       |        | $        | 731,066 |         |        | $       | 22,246 |       
|                                          |                                                                                                                                                                                                                |                        |                               |                           |        |                    |        |                    |        |                  |          |         |        |          |         |         |        |         |        |       
|NET (LOSS) INCOME PER COMMON SHARE:       |                                                                                                                                                                                                                |                        |                               |                           |        |                    |        |                    |        |                  |          |         |        |          |         |         |        |         |        |       
|                                          | BASIC AND DILUTED                                                                                                                                                                                              |                        | $                             | (0.94                     | )      |                    | $      | 2.22               |        |                  | $        | (1.58   | )      |          | $       | 8.00    |        |         | $      | 2.22   |       
|                                          |                                                                                                                                                                                                                |                        |                               |                           |        |                    |        |                    |        |                  |          |         |        |          |         |         |        |         |        |       
|WEIGHTED AVERAGE NUMBER OF COMMON SHARES: |                                                                                                                                                                                                                |                        |                               |                           |        |                    |        |                    |        |                  |          |         |        |          |         |         |        |         |        |       
|                                          | BASIC AND DILUTED                                                                                                                                                                                              |                        |                               | 91,429                    |        |                    |        | 10,000             |        |                  |          | 91,429  |        |          |         | 91,429  |        |         |        | 10,000 |       
|                                          |                                                                                                                                                                                                                |                        |                               |                           |        |                    |        |                    |        |                  |          |         |        |          |         |         |        |         |        |       

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 JUNE 30, 2002
(PREDECESSOR COMPANY),


FOR THE THREE MONTHS ENDED JUNE 30, 2003
(SUCCESSOR COMPANY),


FOR THE SIX MONTHS ENDED JUNE 30, 2002
(PREDECESSOR COMPANY) AND


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


(In thousands of U.S. Dollars)


(Unaudited)


|                                   |                                                                        |                    |         |                           |       |                    |        |                    |        |                  |          |        |       |   |         |        |        |   |        |        |        |  
|---------------------------------- | ---------------------------------------------------------------------- | ------------------ | ------- | ------------------------- | ----- | ------------------ | ------ | ------------------ | ------ | ---------------- | -------- | ------ | ----- | - | ------- | ------ | ------ | - | ------ | ------ | ------ | -
|                                   |                                                                        |                    |         |                           |       |                    |        |                   
|                                   |                                                                        | Three months ended |         |                          
|                                   |                                                                        | June 30,           |         | Six months ended June 30,
|                                   |                                                                        |                    |         |                          
|                                   |                                                                        | Predecessor        |         | Successor                 |       | Predecessor        |        | Predecessor        |        | Successor       
|                                   |                                                                        | Company            |         | Company                   |       | Company            |        | Company            |        | Company         
|                                   |                                                                        |                    |         |                           |       |                    |        |                    |        |                 
|                                   |                                                                        |                    |         |                           |       | January 1, 2002 to |        | January 1, 2003 to |        | April 1, 2003 to
|                                   |                                                                        | 2002               |         | 2003                      |       | June 30, 2002      |        | March 31, 2003     |        | June 30, 2003   
|                                   |                                                                        |                    |         |                           |       |                    |        |                    |        |                 
|NET (LOSS) INCOME                  |                                                                        | $                  | (85,630 | )                         |       | $                  | 22,246 |                    |        | $                | (144,107 | )      |       | $ | 731,066 |        |        | $ | 22,246 |       
|                                   |                                                                        |                    |         |                           |       |                    |        |                    |        |                  |          |        |       |   |         |        |        |   |        |       
|OTHER COMPREHENSIVE (LOSS) INCOME: |                                                                        |                    |         |                           |       |                    |        |                    |        |                  |          |        |       |   |         |        |        |   |        |       
|                                   | Foreign currency translation adjustment                                |                    |         | 7,972                     |       |                    |        | (4,538             | )      |                  |          | 7,707  |       |   |         | (4,097 | )      |   |        | (4,538 | )     
|                                   | Unrealized gain on investments available for sale                      |                    |         | (362                      | )     |                    |        | 62                 |        |                  |          | (1,229 | )     |   |         | 55     |        |   |        | 62     |       
|                                   | Recognition of other-than-temporary decline in
    value of investment |                    |         | 142                       |       |                    |        |                    |        |                  |          | 816    |       |   |         |        |        |   |        |        |       
|                                   |                                                                        |                    |         |                           |       |                    |        |                    |        |                  |          |        |       |   |         |        |        |   |        |       
|                                   |                                                                        | TOTAL              |         |                           | 7,752 |                    |        |                    | (4,476 | )                |          |        | 7,294 |   |         |        | (4,042 | ) |        |        | (4,476 | )
|                                   |                                                                        |                    |         |                           |       |                    |        |                    |        |                  |          |        |       |   |         |        |        |   |        |       
|COMPREHENSIVE (LOSS) INCOME        |                                                                        | $                  | (77,878 | )                         |       | $                  | 17,770 |                    |        | $                | (136,813 | )      |       | $ | 727,024 |        |        | $ | 17,770 |       
|                                   |                                                                        |                    |         |                           |       |                    |        |                    |        |                  |          |        |       |   |         |        |        |   |        |       

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 THREE MONTHS ENDED JUNE 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   |        
|                                                       | Unrealized gain on Investment available for sale                                                      |              |            |             |   |         |     |             |   |             |         |               |   |               |        |        |   |   |            |         |  |   |        |        |   |   |        | 62      |   |   |          | 62      |  
|                                                       | Foreign currency translation adjustment                                                               |              |            |             |   |         |     |             |   |             |         |               |   |               |        |        |   |   |            |         |  |   |        |        |   |   |        | (4,538  | ) |   |          | (4,538  | )
|                                                       | Net income for the period                                                                             |              |            |             |   |         |     |             |   |             |         |               |   |               |        |        |   |   |            | 22,246  |  |   |        |        |   |   |        |         |   |   |          | 22,246  |  
|                                                       |                                                                                                       |              |            |             |   |         |     |             |   |             |         |               |   |               |        |        |   |   |            |         |  |   |        |        |   |   |        |         |   |   |          |        
|BALANCE AT JUNE 30, 2003
    (SUCCESSOR COMPANY)       |                                                                                                       |              | 10,000,000 |             |   | $       | 100 |             |   | $           | 95,257  |               |   | $             | (6,037 | )      |   | $ | 22,246     |         |  | $ | (1,320 | )      |   | $ | (4,476 | )       |   | $ | 105,770  |        
|                                                       |                                                                                                       |              |            |             |   |         |     |             |   |             |         |               |   |               |        |        |   |   |            |         |  |   |        |        |   |   |        |         |   |   |          |        

See notes to condensed consolidated financial
statements.

F-4



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS

FOR SIX MONTHS ENDED JUNE 30, 2002
(PREDECESSOR COMPANY),


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


FOR THREE MONTHS ENDED JUNE 30, 2003
(SUCCESSOR COMPANY)


(In thousands of U.S. Dollars)


(Unaudited)


|                                                                         |                                                                                                        |                                                                         |                                                                           |                                                         |         |                  |        |         |          |        |         |        |        |         |        |  
|------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------- | ------------------------------------------------------------------------- | ------------------------------------------------------- | ------- | ---------------- | ------ | ------- | -------- | ------ | ------- | ------ | ------ | ------- | ------ | -
|                                                                         |                                                                                                        |                                                                        
|                                                                         |                                                                                                        | Six Months Ended June 30,                                              
|                                                                         |                                                                                                        |                                                                        
|                                                                         |                                                                                                        | Predecessor                                                             |                                                                           | Predecessor                                             |         | Successor       
|                                                                         |                                                                                                        | Company                                                                 |                                                                           | Company                                                 |         | Company         
|                                                                         |                                                                                                        |                                                                         |                                                                           |                                                         |         |                 
|                                                                         |                                                                                                        | January 1, 2002                                                         |                                                                           | January 1, 2003                                         |         | April 1, 2003   
|                                                                         |                                                                                                        | to June 30, 2002                                                        |                                                                           | to March 31, 2003                                       |         | to June 30, 2003
|                                                                         |                                                                                                        |                                                                         |                                                                           |                                                         |         |                 
|CASH FLOWS FROM OPERATING ACTIVITIES:                                    |                                                                                                        |                                                                         |                                                                           |                                                         |         |                  |        |         |          |        |         |       
|                                                                         | Net (loss) income                                                                                      |                                                                         | $                                                                         | (144,107                                                | )       |                  | $      | 731,066 |          |        | $       | 22,246 |       
|                                                                         | Adjustments to reconcile net (loss) income to net
    cash (used in) provided by operating activities: |                                                                         |                                                                           |                                                         |         |                  |        |         |          |        |         |        |       
|                                                                         |                                                                                                        | Amortization and depreciation                                           |                                                                           |                                                         | 47,268  |                  |        |         | 19,216   |        |         |        | 8,969  |        
|                                                                         |                                                                                                        | Gain on extinguishment of debt                                          |                                                                           |                                                         | (16,367 | )                |        |         | (728,203 | )      |         |        | (8,793 | )      
|                                                                         |                                                                                                        | Stock-based compensation                                                |                                                                           |                                                         |         |                  |        |         | 440      |        |         |        |        |        
|                                                                         |                                                                                                        | Deferred income tax provision                                           |                                                                           |                                                         | 170     |                  |        |         | 82       |        |         |        | 103    |        
|                                                                         |                                                                                                        | Provision for doubtful accounts                                         |                                                                           |                                                         | 5,010   |                  |        |         | 515      |        |         |        | 2,123  |        
|                                                                         |                                                                                                        | Paid-in-kind interest on Senior Notes                                   |                                                                           |                                                         |         |                  |        |         |          |        |         |        | 3,433  |        
|                                                                         |                                                                                                        | Recognition of other-than-temporary decline in
    value of investments |                                                                           |                                                         | 816     |                  |        |         |          |        |         |        |        |        
|                                                                         |                                                                                                        | Loss on sale of assets held for disposal                                |                                                                           |                                                         |         |                  |        |         |          |        |         |        | 94     |        
|                                                                         |                                                                                                        | Changes in assets and liabilities:                                      |                                                                           |                                                         |         |                  |        |         |          |        |         |        |        |        
|                                                                         |                                                                                                        |                                                                         | Decrease (increase) in trade accounts receivable,
    net                 |                                                         |         | 10,561           |        |         |          | (3,996 | )       |        |        | (2,882  | )     
|                                                                         |                                                                                                        |                                                                         | Increase in prepaid expenses                                              |                                                         |         | (391             | )      |         |          | (950   | )       |        |        | (575    | )     
|                                                                         |                                                                                                        |                                                                         | Decrease (increase) in other receivables and
    other non-current assets |                                                         |         | 52,663           |        |         |          | (12    | )       |        |        | 1,795   |       
|                                                                         |                                                                                                        |                                                                         | (Decrease) increase in accounts
    payable  trade                       |                                                         |         | (10,046          | )      |         |          | 1,584  |         |        |        | (10,225 | )     
|                                                                         |                                                                                                        |                                                                         | Increase (decrease) in accrued and other
    liabilities                  |                                                         |         | 54,494           |        |         |          | (228   | )       |        |        | (11,135 | )     
|                                                                         |                                                                                                        |                                                                         | Decrease in deferred revenues                                             |                                                         |         | (1,997           | )      |         |          | (1,132 | )       |        |        |         |       
|                                                                         |                                                                                                        |                                                                         | Decrease in other long-term liabilities                                   |                                                         |         | (2,374           | )      |         |          | (1,515 | )       |        |        | (1,557  | )     
|                                                                         |                                                                                                        |                                                                         |                                                                           |                                                         |         |                  |        |         |          |        |         |       
|                                                                         |                                                                                                        |                                                                         |                                                                           | Net cash (used in) provided by operating
    activities |         |                  | (4,300 | )       |          |        | 16,867  |        |        |         | 3,596  |  
|                                                                         |                                                                                                        |                                                                         |                                                                           |                                                         |         |                  |        |         |          |        |         |       
|CASH FLOWS FROM INVESTING ACTIVITIES:                                    |                                                                                                        |                                                                         |                                                                           |                                                         |         |                  |        |         |          |        |         |       
|                                                                         | Net decrease (increase) in trading investments                                                         |                                                                         |                                                                           | 3,423                                                   |         |                  |        | (3,303  | )        |        |         | 26,324 |       
|                                                                         | Proceeds from sale of assets held for disposal                                                         |                                                                         |                                                                           |                                                         |         |                  |        |         |          |        |         | 2,435  |       
|                                                                         | Purchases of property, plant and equipment, net
    of disposals                                       |                                                                         |                                                                           | (7,842                                                  | )       |                  |        | (8,205  | )        |        |         | (2,589 | )     
|                                                                         |                                                                                                        |                                                                         |                                                                           |                                                         |         |                  |        |         |          |        |         |       
|                                                                         |                                                                                                        |                                                                         |                                                                           | Net cash (used in) provided by investing
    activities |         |                  | (4,419 | )       |          |        | (11,508 | )      |        |         | 26,170 |  
|                                                                         |                                                                                                        |                                                                         |                                                                           |                                                         |         |                  |        |         |          |        |         |       
|CASH FLOWS FROM FINANCING ACTIVITIES:                                    |                                                                                                        |                                                                         |                                                                           |                                                         |         |                  |        |         |          |        |         |       
|                                                                         | Net borrowings from short-term debt                                                                    |                                                                         |                                                                           |                                                         |         |                  |        |         |          |        |         | 348    |       
|                                                                         | Net payments on short-term debt                                                                        |                                                                         |                                                                           | (653                                                    | )       |                  |        |         |          |        |         |        |       
|                                                                         | Repayments of long-term debt                                                                           |                                                                         |                                                                           | (3,925                                                  | )       |                  |        | (2,464  | )        |        |         | (2,186 | )     
|                                                                         |                                                                                                        |                                                                         |                                                                           |                                                         |         |                  |        |         |          |        |         |       
|                                                                         |                                                                                                        |                                                                         |                                                                           | Net cash used in financing activities                   |         |                  | (4,578 | )       |          |        | (2,464  | )      |        |         | (1,838 | )
|                                                                         |                                                                                                        |                                                                         |                                                                           |                                                         |         |                  |        |         |          |        |         |       
|EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH
    EQUIVALENTS          |                                                                                                        |                                                                         | 7,707                                                                     |                                                         |         |                  | 107    |         |          |        | 268     |       
|                                                                         |                                                                                                        |                                                                         |                                                                           |                                                         |         |                  |        |         |          |        |         |       
|NET (DECREASE) INCREASE IN CASH AND CASH
    EQUIVALENTS                 |                                                                                                        |                                                                         | (5,590                                                                    | )                                                       |         |                  | 3,002  |         |          |        | 28,196  |       
|CASH AND CASH EQUIVALENTS AT BEGINNING OF THE
    PERIOD                 |                                                                                                        |                                                                         | 35,606                                                                    |                                                         |         |                  | 32,563 |         |          |        | 35,565  |       
|                                                                         |                                                                                                        |                                                                         |                                                                           |                                                         |         |                  |        |         |          |        |         |       
|CASH AND CASH EQUIVALENTS AT END OF THE PERIOD                           |                                                                                                        | $                                                                       | 30,016                                                                    |                                                         |         |                  | 35,565 |         |          | $      | 63,761  |       
|                                                                         |                                                                                                        |                                                                         |                                                                           |                                                         |         |                  |        |         |          |        |         |       
|SUPPLEMENTAL CASH FLOW INFORMATION:                                      |                                                                                                        |                                                                         |                                                                           |                                                         |         |                  |        |         |          |        |         |       
|                                                                         | Interest paid                                                                                          |                                                                         | $                                                                         | 10,827                                                  |         |                  | $      | 940     |          |        | $       | 778    |       
|                                                                         |                                                                                                        |                                                                         |                                                                           |                                                         |         |                  |        |         |          |        |         |       
|                                                                         | Foreign income taxes paid                                                                              |                                                                         | $                                                                         | 1,377                                                   |         |                  | $      | 594     |          |        | $       | 1,598  |       
|                                                                         |                                                                                                        |                                                                         |                                                                           |                                                         |         |                  |        |         |          |        |         |       
|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                                  |                                                                         | $                                                                         | (1,229                                                  | )       |                  | $      | 55      |          |        | $       | 62     |       
|                                                                         |                                                                                                        |                                                                         |                                                                           |                                                         |         |                  |        |         |          |        |         |       
|                                                                         | Issuance of Series B Notes in settlement of
    certain vendor financing obligations                   |                                                                         |                                                                           |                                                         |         |                  |        |         |          |        | $       | 1,689  |       
|                                                                         |                                                                                                        |                                                                         |                                                                           |                                                         |         |                  |        |         |          |        |         |       

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 this 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 certain creditors who voted against the Plan. Under the
Plan, the claims of these creditors were contingent obligations
arising under guarantees by the Holding Company of certain
primary indebtedness of its operating subsidiaries. In
accordance with the Plan, these holders may receive, in full
satisfaction of their contingent guarantee claim
(Post-Effective Date Contingencies), a pro
rata share of the shares of the Companys new common
stock issuable to the Holding Companys creditors under the
Plan. Notwithstanding the Companys settlement of the
Post-Effective Date Contingencies, as a consequence of the
occurrence of the Companys Chapter 11 bankruptcy, an
event of default has occurred and is continuing with respect to
certain of the related primary underlying indebtedness of the
Holding Companys operating subsidiaries. These defaults,
which relate to indebtedness totaling approximately $13.1
million in outstanding principal amount, give the respective
creditors 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 its operating subsidiaries with
these creditors with a view to rescheduling or otherwise
restructuring these defaulted debt obligations. There is no
assurance, however, that the Company will be successful in these
negotiations or that the Company will reach a definitive
agreement with these creditors to reschedule or restructure such
obligations. Under those circumstances, certain of the
Companys operating subsidiaries could be forced to seek
protection or liquidate under the bankruptcy laws of their
respective jurisdictions.

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 the Post-Effective Date Contingencies
    and certain other claims of unsecured creditors of the Holding
    Company. Under the Plan, the dollar value of the Post-Effective
    Date Contingencies and other unsecured claims is to be
    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

F-7



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | (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
    Post-Effective Date Contingencies and 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 have
    determined that the Common Stock Reserve Pool shall 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 the
    Post-Effective Date Contingencies and 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

F-8



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


Company may not create, designate, authorize or
cause to be issued any class or series of nonvoting stock to the
extent prohibited by Section 1123 of the United States
Bankruptcy Code.

As a result of these transactions, as of
March 31, 2003, the Company had 10,000,000 shares of new
common stock issued and outstanding (including 686,000 shares
held in the Common Stock Reserve Pool pending the resolution of
the Post-Effective Date Contingencies and 150,000 shares held in
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 the Post-Effective Date
    Contingencies);                                                                                                                                                                                                              
|
| |  | The extinguishment of the Companys 2003
    Senior Notes plus accrued interest in exchange for the issuance
    of $67.5 million in aggregate principal amount of
    Series A Notes ($60.0 million as of March 31,
    2003);                                                                                                                                                                                                                                                                                                           
|
| |  | The extinguishment of the Companys
    Broadband Vendor Financing agreements that voted in favor of the
    plan plus accrued interest in exchange for the issuance of a
    combination of $144.0 million in senior indebtedness issued
    by IMPSAT Argentina and IMPSAT Brazil ($128.0 million as of
    March 31, 2003), $23.9 million in aggregate principal
    amount of Series B Notes ($21.2 million as of
    March 31, 2003) and eight-year warrants to acquire 15.3% in
    the aggregate of the Companys new common stock;

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
    under EITF 01-3; however, the fair value (based on incremental
    costs incurred to honor the legal

F-11



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##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




| |  |                                                                                                                                                                
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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 certain creditors 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 these defaults and
is in active negotiations with the creditors. 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 June 30, 2003 and for the three
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 tear 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
June 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 peso free market
opened on January 11, 2002 at 1.65 pesos to the
U.S. dollar and has been volatile since. At
December 31, 2002, and June 30, 2003 the Argentine
peso traded at 3.40 and 2.82 pesos to the
U.S. dollar, respectively. The devaluation of the Argentine
peso will

F-12



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##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


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 rate), 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. Because
of the recent nature of these events and the significant
uncertainties regarding the extent and duration of the
devaluation and the direction of the fiscal policies in
Argentina, management cannot presently determine or reasonably
estimate the impact a continued economic crisis in that country
could possibly have on IMPSAT Argentinas and the
Companys overall cash flows, financial condition, and
results of operations.

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 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

F-13



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##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


items, (i) the realized revenues the Company
receives for services offered in Argentina; (ii) the timing
of repatriations of any dividends or other cash flows from
IMPSAT Argentina to the Company in the United States;
(iii) the Companys asset valuations; and
(iv) the Companys peso-denominated monetary
assets and liabilities.

The Companys results in Brazil also were
adversely affected during the period by the devaluation of the
Brazilian real against the U.S. dollar. At
December 31, 2001, the real traded at a rate of
R$2.41 = $1.00, and at December 31, 2002 it had depreciated
to R$3.53 = $1.00. At June 30, 2003, the real traded
at R$2.87 to the U.S. dollar. Devaluations of the
real against the U.S. dollar have had a negative
effect on the Companys real-denominated revenues.
The devaluation of the real and the decline in growth in
the Brazilian economy have been caused in part by the continued
recession in the region, a general aversion to emerging markets
by foreign direct and financial investors and the overall
decline in worldwide economic production. On October 27,
2002, Luiz Inacio Lula da Silva of the left-wing Workers
Party was elected president of Brazil. Although as a candidate
Mr. da Silva expressed support for tightening of
Brazils fiscal policy as a condition of an IMF loan and
promised to honor and stabilize government debt, anxiety
persists within the investor community regarding whether
Mr. da Silva can restore financial confidence and quickly
establish trust in his administration and its ability to govern.
A protraction or worsening of the 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 June 30, 2003, approximately $6.4 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).

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 IRU. Amounts received in
advance are recorded as deferred revenue in the accompanying
condensed consolidated balance sheets. The Securities and
Exchange Commission (the SEC) issued Staff
Accounting Bulletin (SAB) No. 101, Revenue
Recognition in Financial Statements. SAB No. 101
summarizes the SECs views on the application of generally
accepted accounting principles to revenue recognition. The
Company has reviewed SAB No. 101 and believes that it is in
compliance with the SECs interpretation of revenue
recognition.

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

F-14



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##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


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

Assets Held for Disposal During the first quarter of 2003, the
Company 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 transaction in the second half of 2003.

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 Right 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.

F-15



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##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


Foreign Currency
Translation The
Companys subsidiaries generally use the U.S. dollar
as the functional currency. Accordingly, the financial
statements of the subsidiaries were remeasured. The effects of
foreign currency transactions and of remeasuring the financial
position and results of operations into the functional currency
are included as net gain or loss on foreign exchange, except for
IMPSAT Brazil, which uses the local currency as the functional
currency, and are included in accumulated other comprehensive
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 13) 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 $685,000 and basic and diluted
earnings per share would have decreased by $0.06 to $2.16 per
share for the three months ended June 30, 2003. No
stock-based compensation cost is reflected in the accompanying
condensed consolidated statements of operations because all the
options granted had an exercise price greater than the market
value of the underlying common stock on the date of grant.

Fair Value of Financial
Instruments The
Companys financial instruments include receivables,
investments in common stock, payables, short-and long-term debt.
The Companys common stock investments were valued at
market closing prices at June 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 June 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                                                             |  |             | (4,538  | )               |  |       | 62  |   |  |   | (4,476  | )
|                                                                                     |  |             |         |                 |  |       |     |   |  |   |         |  
|Balance at June 30, 2003
    (Successor Company)                                     |  | $           | (4,538  | )               |  | $     | 62  |   |  | $ | (4,476  | )
|                                                                                     |  |             |         |                 |  |       |     |   |  |   |         |  

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. 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 June 30, 2003:

|                                   |  |                     |        |                   |  |   |     | 
|---------------------------------- |  | ------------------- | ------ | ----------------- |  | - | --- | 
|                                   |  | Predecessor Company |        | Successor Company
|                                   |  | December 31, 2002   |        | June 30, 2003    
|                                   |  |                     |        |                  
|Trading investments, at fair value |  | $                   | 23,021 |                   |  |   |     | 
|                                   |  |                     |        |                   |  |   |     | 
|Investments in common stock        |  | $                   | 86     |                   |  | $ | 203 | 
|                                   |  |                     |        |                   |  |   |     | 

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 three months ended June 30, 2003, the Company
transferred the funds classified as trading investments into a
money market fund and has reclassified such funds to cash and
cash equivalents as of June 30, 2003.

The Companys investments in common stock at
December 31, 2002 and June 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 June 30, 2003,
are summarized as follows:

|                                      |       |                     |         |                   |  |   |         |        | 
|------------------------------------- | ----- | ------------------- | ------- | ----------------- |  | - | ------- | ------ | 
|                                      |       | Predecessor Company |         | Successor Company
|                                      |       | December 31, 2002   |         | June 30, 2003    
|                                      |       |                     |         |                  
|IMPSAT Argentina                      |       | $                   | 27,739  |                   |  | $ | 27,163  |       
|IMPSAT Brazil                         |       |                     | 4,577   |                   |  |   | 6,037   |       
|IMPSAT Colombia                       |       |                     | 3,542   |                   |  |   | 4,761   |       
|IMPSAT Venezuela                      |       |                     | 8,154   |                   |  |   | 6,943   |       
|All other countries                   |       |                     | 10,384  |                   |  |   | 12,752  |       
|                                      |       |                     |         |                   |  |   |         |       
|                                      | Total |                     |         | 54,396            |  |   |         | 57,656 | 
|Less: allowance for doubtful accounts |       |                     | (23,384 | )                 |  |   | (22,404 | )     
|                                      |       |                     |         |                   |  |   |         |       
|Trade accounts receivable, net        |       | $                   | 31,012  |                   |  | $ | 35,252  |       
|                                      |       |                     |         |                   |  |   |         |       

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
customers 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 three months
ended June 30, 2003 is as follows:

|                                |  |                     |        |                     |  |                   |        |   |  |   |        |  
|------------------------------- |  | ------------------- | ------ | ------------------- |  | ----------------- | ------ | - |  | - | ------ | -
|                                |  | Predecessor Company |        | Predecessor Company |  | Successor Company
|                                |  | December 31, 2002   |        | March 31, 2003      |  | June 30, 2003    
|                                |  |                     |        |                     |  |                  
|Beginning balance               |  | $                   | 23,782 |                     |  | $                 | 23,384 |   |  | $ | 21,358 |  
|Provision for doubtful accounts |  |                     | 13,053 |                     |  |                   | 515    |   |  |   | 2,123  |  
|Write-offs, net of recoveries   |  |                     | (4,741 | )                   |  |                   | (1,553 | ) |  |   | (1,573 | )
|Effect of exchange rate change  |  |                     | (8,710 | )                   |  |                   | (988   | ) |  |   | 496    |  
|                                |  |                     |        |                     |  |                   |        |   |  |   |        |  
|Ending balance                  |  | $                   | 23,384 |                     |  | $                 | 21,358 |   |  | $ | 22,404 |  
|                                |  |                     |        |                     |  |                   |        |   |  |   |        |  

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 June 30, 2003:

|                    |       |                     |       |                   |  |   |       |        | 
|------------------- | ----- | ------------------- | ----- | ----------------- |  | - | ----- | ------ | 
|                    |       | Predecessor Company |       | Successor Company
|                    |       | December 31, 2002   |       | June 30, 2003    
|                    |       |                     |       |                  
|IMPSAT Argentina    |       | $                   | 3,576 |                   |  | $ | 641   |       
|IMPSAT Brazil       |       |                     | 2,150 |                   |  |   | 2,171 |       
|IMPSAT Colombia     |       |                     | 3,498 |                   |  |   | 1,951 |       
|IMPSAT Venezuela    |       |                     | 2,024 |                   |  |   | 2,557 |       
|All other countries |       |                     | 5,426 |                   |  |   | 2,969 |       
|                    |       |                     |       |                   |  |   |       |       
|                    | Total |                     | $     | 16,674            |  |   | $     | 10,289 | 
|                    |       |                     |       |                   |  |   |       |       

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 June 30, 2003 consists of:

|                                                 |       |                     |          |                   |  |   |         |         | 
|------------------------------------------------ | ----- | ------------------- | -------- | ----------------- |  | - | ------- | ------- | 
|                                                 |       | Predecessor Company |          | Successor Company
|                                                 |       | December 31, 2002   |          | June 30, 2003    
|                                                 |       |                     |          |                  
|Land                                             |       | $                   | 11,238   |                   |  | $ | 10,109  |        
|Building and improvements                        |       |                     | 70,070   |                   |  |   | 29,418  |        
|Operating communications equipment               |       |                     | 535,394  |                   |  |   | 153,567 |        
|Network infrastructure (including rights of way) |       |                     | 167,907  |                   |  |   | 109,232 |        
|IRU investments                                  |       |                     | 42,618   |                   |  |   | 21,392  |        
|Furniture, fixtures and other equipment          |       |                     | 38,824   |                   |  |   | 12,525  |        
|                                                 |       |                     |          |                   |  |   |         |        
|                                                 | Total |                     |          | 866,051           |  |   |         | 336,243 | 
|Less: accumulated depreciation                   |       |                     | (465,142 | )                 |  |   | (8,551  | )      
|                                                 |       |                     |          |                   |  |   |         |        
|                                                 | Total |                     |          | 400,909           |  |   |         | 327,692 | 
|Equipment in transit                             |       |                     | 2,705    |                   |  |   | 1,859   |        
|Works in process                                 |       |                     | 334      |                   |  |   | 150     |        
|                                                 |       |                     |          |                   |  |   |         |        
|Property, plant and equipment, net               |       | $                   | 403,948  |                   |  | $ | 329,701 |        
|                                                 |       |                     |          |                   |  |   |         |        

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

|                                     |  |                     |         |                     |  |                   |          |   |  |   |       |  
|------------------------------------ |  | ------------------- | ------- | ------------------- |  | ----------------- | -------- | - |  | - | ----- | -
|                                     |  | Predecessor Company |         | Predecessor Company |  | Successor Company
|                                     |  | December 31, 2002   |         | March 31, 2003      |  | June 30, 2003    
|                                     |  |                     |         |                     |  |                  
|Beginning balance                    |  | $                   | 415,718 |                     |  | $                 | 465,142  |   |  | $ |      |  
|Depreciation expense                 |  |                     | 82,199  |                     |  |                   | 18,654   |   |  |   | 8,969 |  
|Disposals and retirements            |  |                     | (32,775 | )                   |  |                   | (2,394   | ) |  |   | (418  | )
|Application of fresh-start reporting |  |                     |         |                     |  |                   | (481,402 | ) |  |   |       |  
|                                     |  |                     |         |                     |  |                   |          |   |  |   |       |  
|Ending balance                       |  | $                   | 465,142 |                     |  | $                 |         |   |  | $ | 8,551 |  
|                                     |  |                     |         |                     |  |                   |          |   |  |   |       |  

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 June 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 June 30, 2003, Global Crossing was in default for
a total of approximately $3.3 million and
$6.2 million, respectively, for services provided under
such agreements. The Company has recorded provisions for
doubtful accounts of approximately $2.1 million and
$4.3 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 June 30, 2003, the
unamortized balance of IRU investments acquired from Global
Crossing approximated $10.3 million. See also Note 14
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.

8.     SHORT TERM
DEBT

During the second quarter of 2003, IMPSAT Brazil
entered into a new short term credit facility denominated in
local currency with a local bank. The facility bears interest at
26% and, as of June 30, 2003, the outstanding balance
amounted to $0.3 million. The outstanding amount was repaid
on July 1, 2003 and the credit facility remains open with
no outstanding amount.

F-21



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




9.     LONG TERM
DEBT

The Companys long-term debt at
December 31, 2002 and June 30, 2003 is detailed as
follows:

|                                                                                                                                                           |                                               |                      |          |                   |         |   |         |        |         | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------- | -------------------- | -------- | ----------------- | ------- | - | ------- | ------ | ------- | 
|                                                                                                                                                           |                                               | Predecessor Company  |          | Successor Company
|                                                                                                                                                           |                                               | December 31, 2002    |          | June 30, 2003    
|                                                                                                                                                           |                                               |                      |          |                  
|Series A 6% Senior Guaranteed Notes due 2011                                                                                                               |                                               |                      |          |                   |         | $ | 60,945  |       
|Series B 6% Senior Guaranteed Notes due 2011                                                                                                               |                                               |                      |          |                   |         |   | 23,099  |       
|Senior Secured Notes 10%, maturing 2009                                                                                                                    |                                               |                      |          |                   |         |   | 133,324 |       
|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            |         |   |         | 12,252 |        
|                                                                                                                                                           | Local currency (interest rates 12.85%)        |                      |          | 19,279            |         |   |         | 13,173 |        
|Eximbank notes (interest rates 3.34% to 3.88%),
    maturing semiannually through 2007                                                                     |                                               |                      | 18,275   |                   |         |   | 4,266   |       
|Vendor financing (3.59% to 11.28%), maturing 2003
    to 2005                                                                                              |                                               |                      | 259,897  |                   |         |   | 12,861  |       
|                                                                                                                                                           |                                               |                      |          |                   |         |   |         |       
|                                                                                                                                                           |                                               | Total long-term debt |          |                   | 309,272 |   |         |        | 259,920 | 
|Less: current portion including defaulted
    indebtedness                                                                                                 |                                               |                      | (281,680 | )                 |         |   | (18,021 | )     
|                                                                                                                                                           |                                               |                      |          |                   |         |   |         |       
|Long-term debt, net                                                                                                                                        |                                               | $                    | 27,592   |                   |         | $ | 241,899 |       
|                                                                                                                                                           |                                               |                      |          |                   |         |   |         |       

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.

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 second quarter of
2003, the Company extinguished certain of its Eximbank notes
obligations prior to maturity for cash and recorded a gain on
extinguishment of approximately $3.8 million.

During the second quarter of 2003, the Company
issued a combination of new senior secured indebtedness totaling
$3.7 million ($3.3 million as of June 30, 2003)
and new Series B Notes totaling

F-22



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


$1.7 million ($1.5 million as of
June 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.

10.     INCOME
TAXES

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

|         |       |                    |      |                           |   |                    |      |                    |   |                  |      |        |   |   |      |      |   |   |      |      |  
|-------- | ----- | ------------------ | ---- | ------------------------- | - | ------------------ | ---- | ------------------ | - | ---------------- | ---- | ------ | - | - | ---- | ---- | - | - | ---- | ---- | -
|         |       |                    |      |                           |   |                    |      |                   
|         |       | Three months ended |      |                          
|         |       | June 30,           |      | Six months ended June 30,
|         |       |                    |      |                          
|         |       | Predecessor        |      | Successor                 |   | Predecessor        |      | Predecessor        |   | Successor       
|         |       | Company            |      | Company                   |   | Company            |      | Company            |   | Company         
|         |       |                    |      |                           |   |                    |      |                    |   |                 
|         |       |                    |      |                           |   | January 1, 2002 to |      | January 1, 2003 to |   | April 1, 2003 to
|         |       | 2002               |      | 2003                      |   | June 30, 2002      |      | March 31, 2003     |   | June 30, 2003   
|         |       |                    |      |                           |   |                    |      |                    |   |                 
|Current  |       | $                  | (565 | )                         |   | $                  | (641 | )                  |   | $                | (979 | )      |   | $ | (324 | )    |   | $ | (641 | )   
|Deferred |       |                    | (146 | )                         |   |                    | (103 | )                  |   |                  | (170 | )      |   |   | (82  | )    |   |   | (103 | )   
|         |       |                    |      |                           |   |                    |      |                    |   |                  |      |        |   |   |      |      |   |   |      |     
|         | Total |                    | $    | (711                      | ) |                    | $    | (744               | ) |                  | $    | (1,149 | ) |   | $    | (406 | ) |   | $    | (744 | )
|         |       |                    |      |                           |   |                    |      |                    |   |                  |      |        |   |   |      |      |   |   |      |     

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.

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

F-23



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


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.

12.     OPERATING
SEGMENT INFORMATION

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

Three Months Ended June 30,

|                        |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |        |  |  |   |         |   |  |   |         | 
|----------------------- |  | --------- | ------- | ------ |  | -------- | ------- | --------- |  | --------- | ------ | ------------ |  | ----- | ------ |  |  | - | ------ |  |  | - | ------- | - |  | - | ------- | 
|                        |  |           |         |        |  |          |         |           |  | All other |        |              |  |      
|2003 Successor Company  |  | Argentina |         | Brazil |  | Colombia |         | Venezuela |  | countries |        | Eliminations |  | Total
|                        |  |           |         |        |  |          |         |           |  |           |        |              |  |      
|Net Revenues            |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |        |  |  |   |         |   |  |   |         | 
|Satellite and Broadband |  | $         | 9,404   |        |  | $        | 6,162   |           |  | $         | 12,064 |              |  | $     | 7,480  |  |  | $ | 13,269 |  |  | $ | (6,598  | ) |  | $ | 41,781  | 
|Internet                |  |           | 1,567   |        |  |          | 759     |           |  |           | 1,136  |              |  |       | 765    |  |  |   | 3,879  |  |  |   | (2,345  | ) |  |   | 5,761   | 
|Value added services    |  |           | 1,331   |        |  |          | 901     |           |  |           | 340    |              |  |       | 368    |  |  |   | 1,065  |  |  |   | (153    | ) |  |   | 3,852   | 
|Telephony               |  |           | 2,987   |        |  |          | 4       |           |  |           | 41     |              |  |       |        |  |  |   | 3,125  |  |  |   | (1,562  | ) |  |   | 4,595   | 
|Sales of equipment      |  |           | 339     |        |  |          |         |           |  |           |        |              |  |       | 30     |  |  |   | 16     |  |  |   |         |   |  |   | 385     | 
|                        |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |        |  |  |   |         |   |  |   |         | 
|Total net revenues      |  | $         | 15,628  |        |  | $        | 7,826   |           |  | $         | 13,581 |              |  | $     | 8,643  |  |  | $ | 21,354 |  |  | $ | (10,658 | ) |  | $ | 56,374  | 
|                        |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |        |  |  |   |         |   |  |   |         | 
|Operating income (loss) |  | $         | 1,122   |        |  | $        | (2,654  | )         |  | $         | 2,070  |              |  | $     | 2,763  |  |  | $ | 4,456  |  |  |   |         |   |  | $ | 7,169   | 
|                        |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |        |  |  |   |         |   |  |   |         | 
|Total assets            |  | $         | 121,422 |        |  | $        | 117,238 |           |  | $         | 79,963 |              |  | $     | 49,775 |  |  | $ | 90,070 |  |  |   |         |   |  | $ | 458,468 | 
|                        |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |        |  |  |   |         |   |  |   |         | 

|                         |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |         |   |  |   |         |   |  |   |         | 
|------------------------ |  | --------- | ------- | ------ |  | -------- | ------- | --------- |  | --------- | ------ | ------------ |  | ----- | ------ |  |  | - | ------- | - |  | - | ------- | - |  | - | ------- | 
|                         |  |           |         |        |  |          |         |           |  | All other |        |              |  |      
|2002 Predecessor Company |  | Argentina |         | Brazil |  | Colombia |         | Venezuela |  | countries |        | Eliminations |  | Total
|                         |  |           |         |        |  |          |         |           |  |           |        |              |  |      
|Net Revenues             |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |         |   |  |   |         |   |  |   |         | 
|Satellite and Broadband  |  | $         | 8,670   |        |  | $        | 8,112   |           |  | $         | 13,667 |              |  | $     | 6,594  |  |  | $ | 13,232  |   |  | $ | (5,824  | ) |  | $ | 44,451  | 
|Internet                 |  |           | 1,517   |        |  |          | 1,190   |           |  |           | 1,093  |              |  |       | 634    |  |  |   | 3,731   |   |  |   | (896    | ) |  |   | 7,269   | 
|Value added services     |  |           | 1,118   |        |  |          | 784     |           |  |           | 191    |              |  |       | 405    |  |  |   | 3,815   |   |  |   | (2,809  | ) |  |   | 3,504   | 
|Telephony                |  |           | 2,925   |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   | 3,150   |   |  |   | (2,104  | ) |  |   | 3,971   | 
|Sales of equipment       |  |           | 43      |        |  |          |         |           |  |           |        |              |  |       | 71     |  |  |   | 32      |   |  |   |         |   |  |   | 146     | 
|                         |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |         |   |  |   |         |   |  |   |         | 
|Total net revenues       |  | $         | 14,273  |        |  | $        | 10,086  |           |  | $         | 14,951 |              |  | $     | 7,704  |  |  | $ | 23,960  |   |  | $ | (11,633 | ) |  | $ | 59,341  | 
|                         |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |         |   |  |   |         |   |  |   |         | 
|Operating income (loss)  |  | $         | 7,750   |        |  | $        | (5,595  | )         |  | $         | 797    |              |  | $     | 1,425  |  |  | $ | (1,172  | ) |  |   |         |   |  | $ | 3,205   | 
|                         |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |         |   |  |   |         |   |  |   |         | 
|Total assets             |  | $         | 184,653 |        |  | $        | 145,704 |           |  | $         | 97,254 |              |  | $     | 54,441 |  |  | $ | 113,602 |   |  |   |         |   |  | $ | 595,654 | 
|                         |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |         |   |  |   |         |   |  |   |         | 

F-24



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


Six Months Ended June 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 June 30, 2003 |  |           |         |        |  |          |         |           |  | All other |        |              |  |      
|(Successor Company)            |  | Argentina |         | Brazil |  | Colombia |         | Venezuela |  | countries |        | Eliminations |  | Total
|                               |  |           |         |        |  |          |         |           |  |           |        |              |  |      
|Net Revenues                   |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |        |  |  |   |         |   |  |   |         | 
|Satellite and Broadband        |  | $         | 9,404   |        |  | $        | 6,162   |           |  | $         | 12,064 |              |  | $     | 7,480  |  |  | $ | 13,269 |  |  | $ | (6,598  | ) |  | $ | 41,781  | 
|Internet                       |  |           | 1,567   |        |  |          | 759     |           |  |           | 1,136  |              |  |       | 765    |  |  |   | 3,879  |  |  |   | (2,345  | ) |  |   | 5,761   | 
|Value added services           |  |           | 1,331   |        |  |          | 901     |           |  |           | 340    |              |  |       | 368    |  |  |   | 1,065  |  |  |   | (153    | ) |  |   | 3,852   | 
|Telephony                      |  |           | 2,987   |        |  |          | 4       |           |  |           | 41     |              |  |       |        |  |  |   | 3,125  |  |  |   | (1,562  | ) |  |   | 4,595   | 
|Sales of equipment             |  |           | 339     |        |  |          |         |           |  |           |        |              |  |       | 30     |  |  |   | 16     |  |  |   |         |   |  |   | 385     | 
|                               |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |        |  |  |   |         |   |  |   |         | 
|Total net revenues             |  | $         | 15,628  |        |  | $        | 7,826   |           |  | $         | 13,581 |              |  | $     | 8,643  |  |  | $ | 21,354 |  |  | $ | (10,658 | ) |  | $ | 56,374  | 
|                               |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |        |  |  |   |         |   |  |   |         | 
|Operating income (loss)        |  | $         | 1,122   |        |  | $        | (2,654  | )         |  | $         | 2,070  |              |  | $     | 2,763  |  |  | $ | 4,456  |  |  |   |         |   |  | $ | 7,169   | 
|                               |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |        |  |  |   |         |   |  |   |         | 
|Total assets                   |  | $         | 121,422 |        |  | $        | 117,238 |           |  | $         | 79,963 |              |  | $     | 49,775 |  |  | $ | 90,070 |  |  |   |         |   |  | $ | 458,468 | 
|                               |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |        |  |  |   |         |   |  |   |         | 

|                                  |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |         |   |  |   |         |   |  |   |         |  
|--------------------------------- |  | --------- | ------- | ------ |  | -------- | ------- | --------- |  | --------- | ------ | ------------ |  | ----- | ------ |  |  | - | ------- | - |  | - | ------- | - |  | - | ------- | -
|January 1, 2002 to June 30, 2002, |  |           |         |        |  |          |         |           |  | All other |        |              |  |      
|(Predecessor Company)             |  | Argentina |         | Brazil |  | Colombia |         | Venezuela |  | countries |        | Eliminations |  | Total
|                                  |  |           |         |        |  |          |         |           |  |           |        |              |  |      
|Net Revenues                      |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |         |   |  |   |         |   |  |   |         |  
|Satellite and Broadband           |  | $         | 18,311  |        |  | $        | 16,700  |           |  | $         | 27,403 |              |  | $     | 13,360 |  |  | $ | 26,465  |   |  | $ | (11,475 | ) |  | $ | 90,764  |  
|Internet                          |  |           | 3,699   |        |  |          | 2,510   |           |  |           | 2,247  |              |  |       | 1,266  |  |  |   | 7,301   |   |  |   | (1,900  | ) |  |   | 15,123  |  
|Value added services              |  |           | 2,579   |        |  |          | 1,609   |           |  |           | 361    |              |  |       | 808    |  |  |   | 7,652   |   |  |   | (5,888  | ) |  |   | 7,121   |  
|Telephony                         |  |           | 5,422   |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   | 6,729   |   |  |   | (3,834  | ) |  |   | 8,317   |  
|Sales of equipment                |  |           | 105     |        |  |          |         |           |  |           | 10     |              |  |       | 125    |  |  |   | 189     |   |  |   |         |   |  |   | 429     |  
|                                  |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |         |   |  |   |         |   |  |   |         |  
|Total net revenues                |  | $         | 30,116  |        |  | $        | 20,819  |           |  | $         | 30,021 |              |  | $     | 15,559 |  |  | $ | 48,336  |   |  | $ | (23,097 | ) |  | $ | 121,754 |  
|                                  |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |         |   |  |   |         |   |  |   |         |  
|Operating income (loss)           |  | $         | (1,619  | )      |  | $        | (12,096 | )         |  | $         | 1,201  |              |  | $     | 2,005  |  |  | $ | (1,428  | ) |  |   |         |   |  | $ | (11,937 | )
|                                  |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |         |   |  |   |         |   |  |   |         |  
|Total assets                      |  | $         | 184,653 |        |  | $        | 145,704 |           |  | $         | 97,254 |              |  | $     | 54,441 |  |  | $ | 113,602 |   |  |   |         |   |  | $ | 595,654 |  
|                                  |  |           |         |        |  |          |         |           |  |           |        |              |  |       |        |  |  |   |         |   |  |   |         |   |  |   |         |  

13.     STOCKHOLDERS
EQUITY

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

F-25



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


(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 11) 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.

14.     COMMITMENTS
AND CONTINGENCIES

Commitments
The Company leases satellite capacity with average annual rental
commitments of approximately $20.8 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 $2.2 million per year through
2007. The Company has commitments to purchase communications and
data center equipment amounting to approximately
$2.1 million at June 30, 2003.

F-26



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


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 Company, certain
individuals who were then officers and directors of the Company,
and the underwriters to the Companys initial public
offering (IPO). This lawsuit alleges on behalf of a proposed
class of all shareholders that the Company and its underwriters
violated various provisions of the securities laws in connection
with the IPO in February 2000. 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 Company receives in connection with the litigation, but
otherwise the claims of the plaintiffs against the 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. The
Company and Global Crossing are currently seeking to agree to a
schedule for evidence, briefing and adjudication of the disputes
regarding the Argentine and 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 half 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 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

F-27



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


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. The Company and Global Crossing are currently
seeking to agree to a schedule for evidence, briefing and
adjudication of Global Crossings asserted proprietary
interest in the IRUs arising under the TAC Agreement and other
backhaul agreements.

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.

15.     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 months ended June 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 JUNE 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                |                           | $       | 27,701  |             |  | $             | 4,488   |              |  | $            | 31,572  |         |  |   |          |          |   | $ | 63,761  |        
|Trade accounts receivable, net           |                           |         |        |             |  |               | 14,981  |              |  |              | 20,271  |         |  |   |          |          |   |   | 35,252  |        
|Other receivables                        |                           |         | 116,949 |             |  |               | 19,312  |              |  |              | 39,202  |         |  | $ | (165,174 | )        |   |   | 10,289  |        
|Prepaid expenses                         |                           |         |        |             |  |               | 384     |              |  |              | 4,857   |         |  |   | (970     | )        |   |   | 4,271   |        
|Assets held for disposal                 |                           |         |        |             |  |               |        |              |  |              | 2,956   |         |  |   |         |          |   |   | 2,956   |        
|                                         |                           |         |         |             |  |               |         |              |  |              |         |         |  |   |          |          |   |   |         |        
|                                         | Total current assets      |         |         | 144,650     |  |               |         | 39,165       |  |              |         | 98,858  |  |   |          | (166,144 | ) |   |         | 116,529 | 
|                                         |                           |         |         |             |  |               |         |              |  |              |         |         |  |   |          |          |   |   |         |        
|PROPERTY, PLANT AND EQUIPMENT, Net       |                           |         |        |             |  |               | 76,460  |              |  |              | 253,241 |         |  |   |         |          |   |   | 329,701 |        
|                                         |                           |         |         |             |  |               |         |              |  |              |         |         |  |   |          |          |   |   |         |        
|NON-CURRENT ASSETS:                      |                           |         |         |             |  |               |         |              |  |              |         |         |  |   |          |          |   |   |         |        
|Investments                              |                           |         | 48,209  |             |  |               |        |              |  |              | 1       |         |  |   | (48,007  | )        |   |   | 203     |        
|Other non-current assets                 |                           |         |        |             |  |               | 5,797   |              |  |              | 6,238   |         |  |   |         |          |   |   | 12,035  |        
|                                         |                           |         |         |             |  |               |         |              |  |              |         |         |  |   |          |          |   |   |         |        
|                                         | Total non-current assets  |         |         | 48,209      |  |               |         | 5,797        |  |              |         | 6,239   |  |   |          | (48,007  | ) |   |         | 12,238  | 
|                                         |                           |         |         |             |  |               |         |              |  |              |         |         |  |   |          |          |   |   |         |        
|TOTAL                                    |                           | $       | 192,859 |             |  | $             | 121,422 |              |  | $            | 358,338 |         |  | $ | (214,151 | )        |   | $ | 458,468 |        
|                                         |                           |         |         |             |  |               |         |              |  |              |         |         |  |   |          |          |   |   |         |        
|                                        
|LIABILITIES AND STOCKHOLDERS
    EQUITY
|CURRENT LIABILITIES:                     |                           |         |         |             |  |               |         |              |  |              |         |         |  |   |          |          |   |   |         |        
|Accounts payable  trade                 |                           | $       | 3,016   |             |  | $             | 27,119  |              |  | $            | 66,414  |         |  | $ | (47,850  | )        |   | $ | 48,699  |        
|Short term debt                          |                           |         |        |             |  |               |        |              |  |              | 348     |         |  |   |         |          |   |   | 348     |        
|Current portion of long-term debt        |                           |         |        |             |  |               | 12,236  |              |  |              | 5,785   |         |  |   |         |          |   |   | 18,021  |        
|Accrued and other liabilities            |                           |         | 30      |             |  |               | 13,372  |              |  |              | 37,074  |         |  |   | (21,104  | )        |   |   | 29,372  |        
|                                         |                           |         |         |             |  |               |         |              |  |              |         |         |  |   |          |          |   |   |         |        
|                                         | Total current liabilities |         |         | 3,046       |  |               |         | 52,727       |  |              |         | 109,621 |  |   |          | (68,954  | ) |   |         | 96,440  | 
|LONG-TERM DEBT, Net                      |                           |         | 84,043  |             |  |               | 50,335  |              |  |              | 107,521 |         |  |   |         |          |   |   | 241,899 |        
|OTHER LONG-TERM LIABILITIES              |                           |         |        |             |  |               | 160     |              |  |              | 111,874 |         |  |   | (97,675  | )        |   |   | 14,359  |        
|                                         |                           |         |         |             |  |               |         |              |  |              |         |         |  |   |          |          |   |   |         |        
|                                         | Total liabilities         |         |         | 87,089      |  |               |         | 103,222      |  |              |         | 329,016 |  |   |          | (166,629 | ) |   |         | 352,698 | 
|STOCKHOLDERS EQUITY                     |                           |         | 105,770 |             |  |               | 18,200  |              |  |              | 29,322  |         |  |   | (47,522  | )        |   |   | 105,770 |        
|                                         |                           |         |         |             |  |               |         |              |  |              |         |         |  |   |          |          |   |   |         |        
|TOTAL                                    |                           | $       | 192,859 |             |  | $             | 121,422 |              |  | $            | 358,338 |         |  | $ | (214,151 | )        |   | $ | 458,468 |        
|                                         |                           |         |         |             |  |               |         |              |  |              |         |         |  |   |          |          |   |   |         |        

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 JUNE 30,
2003


(In thousands of U.S. Dollars)


|                                   |                                     |                        |                               |             |   |               |       |              |        |              |        |        |         |         |         |         |        |         |        |         |         |         |  
|---------------------------------- | ----------------------------------- | ---------------------- | ----------------------------- | ----------- | - | ------------- | ----- | ------------ | ------ | ------------ | ------ | ------ | ------- | ------- | ------- | ------- | ------ | ------- | ------ | ------- | ------- | ------- | -
|                                   |                                     |                        |                               | IMPSAT      |   |               |       |              |        |             
|                                   |                                     | Holding                |                               | Argentina   |   | Non-Guarantor |       | Intercompany |        |             
|                                   |                                     | Company                |                               | (Guarantor) |   | Subsidiaries  |       | Eliminations |        | Consolidated
|                                   |                                     |                        |                               |             |   |               |       |              |        |             
|NET REVENUES:                      |                                     |                        |                               |             |   |               |       |              |        |              |        |        |         |         |         |         |        |         |        |        
|                                   | Broadband and satellite             |                        |                               |             |   |               | $     | 9,404        |        |              | $      | 38,975 |         |         | $       | (6,598  | )      |         | $      | 41,781  |        
|                                   | Internet                            |                        |                               |             |   |               |       | 1,567        |        |              |        | 6,539  |         |         |         | (2,345  | )      |         |        | 5,761   |        
|                                   | Value added services                |                        |                               |             |   |               |       | 1,331        |        |              |        | 2,632  |         |         |         | (111    | )      |         |        | 3,852   |        
|                                   | Telephony                           |                        |                               |             |   |               |       | 2,987        |        |              |        | 3,170  |         |         |         | (1,562  | )      |         |        | 4,595   |        
|                                   | Sales of equipment                  |                        |                               |             |   |               |       | 339          |        |              |        | 46     |         |         |         |         |        |         |        | 385     |        
|                                   |                                     |                        |                               |             |   |               |       |              |        |              |        |        |         |         |         |         |        |         |        |        
|                                   |                                     |                        | Total net revenues            |             |   |              |       |              |        | 15,628       |        |        |         | 51,362  |         |         |        | (10,616 | )      |         |         | 56,374  |  
|                                   |                                     |                        |                               |             |   |               |       |              |        |              |        |        |         |         |         |         |        |         |        |        
|COSTS AND EXPENSES:                |                                     |                        |                               |             |   |               |       |              |        |              |        |        |         |         |         |         |        |         |        |        
|                                   | Direct costs:                       |                        |                               |             |   |               |       |              |        |              |        |        |         |         |         |         |        |         |        |         |        
|                                   |                                     | Contracted services    |                               |             |   |               |       |              | (1,418 | )            |        |        | (3,121  | )       |         |         | 14     |         |        |         | (4,525  | )      
|                                   |                                     | Other direct costs     |                               |             |   |               |       |              | (4,463 | )            |        |        | (3,401  | )       |         |         | (4     | )       |        |         | (7,868  | )      
|                                   |                                     | Leased capacity        |                               |             |   |               |       |              | (5,690 | )            |        |        | (22,038 | )       |         |         | 10,169 |         |        |         | (17,559 | )      
|                                   |                                     | Cost of equipment sold |                               |             |   |               |       |              | (62    | )            |        |        | (46     | )       |         |         |        |         |        |         | (108    | )      
|                                   |                                     |                        |                               |             |   |               |       |              |        |              |        |        |         |         |         |         |        |         |        |        
|                                   |                                     |                        | Total direct costs            |             |   |              |       |              |        | (11,633      | )      |        |         | (28,606 | )       |         |        | 10,179  |        |         |         | (30,060 | )
|                                   | Salaries and wages                  |                        |                               |             |   |               |       | (3,074       | )      |              |        | (8,768 | )       |         |         |         |        |         |        | (11,842 | )      
|                                   | Selling, general and administrative |                        | $                             | (836        | ) |               |       | (2,193       | )      |              |        | (4,535 | )       |         |         | 437     |        |         |        | (7,127  | )      
|                                   | Gain on extinguishment of debt      |                        |                               | 4,538       |   |               |       | 4,255        |        |              |        |       |         |         |         |         |        |         |        | 8,793   |        
|                                   | Depreciation and amortization       |                        |                               |             |   |               |       | (1,861       | )      |              |        | (7,108 | )       |         |         |         |        |         |        | (8,969  | )      
|                                   |                                     |                        |                               |             |   |               |       |              |        |              |        |        |         |         |         |         |        |         |        |        
|                                   |                                     |                        | Total costs and expenses      |             |   | 3,702         |       |              |        | (14,506      | )      |        |         | (49,017 | )       |         |        | 10,616  |        |         |         | (49,205 | )
|                                   |                                     |                        |                               |             |   |               |       |              |        |              |        |        |         |         |         |         |        |         |        |        
|Operating income (loss)            |                                     |                        | 3,702                         |             |   |               | 1,122 |              |        |              | 2,345  |        |         |         |        |         |        |         | 7,169  |        
|                                   |                                     |                        |                               |             |   |               |       |              |        |              |        |        |         |         |         |         |        |         |        |        
|OTHER INCOME (EXPENSES):           |                                     |                        |                               |             |   |               |       |              |        |              |        |        |         |         |         |         |        |         |        |        
|                                   | Interest income                     |                        |                               | 4,900       |   |               |       | 720          |        |              |        | 191    |         |         |         | (4,841  | )      |         |        | 970     |        
|                                   | Interest expense                    |                        |                               | (1,748      | ) |               |       | (2,068       | )      |              |        | (7,306 | )       |         |         | 4,841   |        |         |        | (6,281  | )      
|                                   | Net gain on foreign exchange        |                        |                               | 31          |   |               |       | 662          |        |              |        | 20,752 |         |         |         |         |        |         |        | 21,445  |        
|                                   | Equity in income of affiliates      |                        |                               | 15,568      |   |               |       |              |        |              |        | 9,109  |         |         |         | (24,677 | )      |         |        |         |        
|                                   | Other income (loss), net            |                        |                               | 95          |   |               |       | (80          | )      |              |        | (337   | )       |         |         | 9       |        |         |        | (313    | )      
|                                   |                                     |                        |                               |             |   |               |       |              |        |              |        |        |         |         |         |         |        |         |        |        
|                                   |                                     |                        | Total other (expenses) income |             |   | 18,846        |       |              |        | (766         | )      |        |         | 22,409  |         |         |        | (24,668 | )      |         |         | 15,821  |  
|                                   |                                     |                        |                               |             |   |               |       |              |        |              |        |        |         |         |         |         |        |         |        |        
|INCOME BEFORE INCOME TAXES         |                                     |                        | 22,548                        |             |   |               | 356   |              |        |              | 24,754 |        |         |         | (24,668 | )       |        |         | 22,990 |        
|PROVISION FOR FOREIGN INCOME TAXES |                                     |                        | (302                          | )           |   |               |       |              |        |              | (442   | )      |         |         |         |         |        |         | (744   | )      
|                                   |                                     |                        |                               |             |   |               |       |              |        |              |        |        |         |         |         |         |        |         |        |        
|NET INCOME                         |                                     | $                      | 22,246                        |             |   | $             | 356   |              |        | $            | 24,312 |        |         | $       | (24,668 | )       |        | $       | 22,246 |        
|                                   |                                     |                        |                               |             |   |               |       |              |        |              |        |        |         |         |         |         |        |         |        |        

F-30



---



##### 



IMPSAT FIBER NETWORKS, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


CONDENSED CONSOLIDATING STATEMENT OF CASH
FLOWS

(SUCCESSOR COMPANY)


FOR THE THREE MONTHS ENDED JUNE 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  |  | $       | 2,369  |             |  | $             | (2,066 | )            |  | $            | (4,356 | ) |  | $ | 7,649  |   |  | $ | 3,596  |  
|Cash flows provided by (used in) from investing
    activities  |  |         | 21,947 |             |  |               | (1,513 | )            |  |              | 6,948  |   |  |   | (1,212 | ) |  |   | 26,170 |  
|Cash flows provided by (used in) from financing
    activities  |  |         | 2,802  |             |  |               |        |              |  |              | 1,797  |   |  |   | (6,437 | ) |  |   | (1,838 | )
|Effect of exchange rate change on cash and cash
    equivalents |  |         | (4,476 | )           |  |               |        |              |  |              | 4,744  |   |  |   |        |   |  |   | 268    |  
|                                                                |  |         |        |             |  |               |        |              |  |              |        |   |  |   |        |   |  |   |        |  
|Net increase in cash and cash equivalents                       |  |         | 22,642 |             |  |               | (3,579 | )            |  |              | 9,133  |   |  |   |       |   |  |   | 28,196 |  
|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                  |  | $       | 27,701 |             |  | $             | 4,488  |              |  | $            | 31,572 |   |  | $ |       |   |  | $ | 63,761 |  
|                                                                |  |         |        |             |  |               |        |              |  |              |        |   |  |   |        |   |  |   |        |  

* * * * * *

F-31



---



##### 



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 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 June 30, 2003, our total indebtedness was
approximately $260.3 million and our cash and cash
equivalents totaled approximately $63.8 million. We held no
trading investments at June 30, 2003. 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 during 2003.

Upon our emergence from bankruptcy on
March 25, 2003, we have 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
requires 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
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 will 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.

During the second quarter of 2003, we recognized
revenues totaling $4.1 million from Global Crossing for the
services provided under our agreements with Global Crossing. Of
this amount, $3.1 million represented

1



---



##### 



services that were billed on a quarterly basis.
During the second quarter of 2003, Global Crossing invoiced us a
total of $0.5 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 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
June 30, 2003, Global Crossing owed us $6.2 million
that we invoiced to them during prior periods. We have recorded
a provision for doubtful accounts of $4.3 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
June 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 receipt of certain
regulatory approvals and satisfaction of other conditions to the
effectiveness of its plan of reorganization, and there is no
guaranty as to when or if it will emerge from bankruptcy.
Published reports indicate that the proposed reorganization plan
of Global Crossing, which contemplates the acquisition of
control of Global Crossing by certain new investors, failed to
obtain all applicable U.S. governmental approvals and that
Global Crossing is currently discussing a revised reorganization
plan with certain of the initial proposed new investors.

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. At a minimum, Global Crossings
bankruptcy proceedings have caused delays in our efforts to
enforce our contracts with Global Crossing. If Global Crossing
is unsuccessful in emerging from its Chapter 11 proceedings
as a going concern, there is a risk that all of Global
Crossings contracts with us will be terminated. In the
event that Global Crossing emerges successfully from its
bankruptcy proceedings but chooses 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 realize 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.

We have filed motions in Global Crossings
bankruptcy proceeding seeking an order that Global Crossing make
payment to us of the amounts claimed by us. Global Crossing has
disputed that it owes us any amounts under the contracts at
issue and has filed a proceeding seeking that the bankruptcy
court grant Global Crossing a property right in the IRUs that it
acquired from us. We are currently agreeing on a schedule with
Global Crossing regarding the prosecution of such disputes as
part of Global Crossings bankruptcy proceeding.

2



---



##### 



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.

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 1 (Financial Restructuring, Petition For Relief Under
Chapter 11 And Emergence  Allocation of
Reorganization Value) and Note 2 (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

3



---



##### 



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

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 three-month period ended June 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 six months ended
June 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 June 30,                                 |                                  | Six Months Ended June 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                                     |                                  | $                         | 44,451 |                     |       |                  | 74.9 | %     |        | $      | 41,781 |        |       |      | 74.1 | %     |         | $      | 90,764 |         |       |      | 74.5 | %     |        | $      | 83,163 |         |      |      | 74.0 | %    
|                                             |                             | Internet                                                    |                                  |                           | 7,269  |                     |       |                  | 12.3 |       |        |        | 5,761  |        |       |      | 10.2 |       |         |        | 15,123 |         |       |      | 12.4 |       |        |        | 11,494 |         |      |      | 10.2 |      
|                                             |                             | Value added services                                        |                                  |                           | 3,504  |                     |       |                  | 5.9  |       |        |        | 3,852  |        |       |      | 6.8  |       |         |        | 7,121  |         |       |      | 5.8  |       |        |        | 8,633  |         |      |      | 7.7  |      
|                                             |                             | Telephony                                                   |                                  |                           | 3,971  |                     |       |                  | 6.7  |       |        |        | 4,595  |        |       |      | 8.2  |       |         |        | 8,317  |         |       |      | 6.8  |       |        |        | 8,701  |         |      |      | 7.7  |      
|                                             |                             |                                                             |                                  |                           |        |                     |       |                  |      |       |        |        |        |        |       |      |      |       |         |        |        |         |       |      |      |       |        |        |        |         |      |     
|                                             |                             |                                                             | Total net revenues from services |                           |        | 59,195              |       |                  |      | 99.8  |        |        |        | 55,989 |       |      |      | 99.3  |         |        |        | 121,325 |       |      |      | 99.6  |        |        |        | 111,991 |      |      |      | 99.6  | 
|                                             | Sales of equipment          |                                                             |                                  | 146                       |        |                     |       | 0.2              |      |       |        | 385    |        |        |       | 0.7  |      |       |         | 429    |        |         |       | 0.4  |      |       |        | 459    |        |         |      | 0.4  |     
|                                             |                             |                                                             |                                  |                           |        |                     |       |                  |      |       |        |        |        |        |       |      |      |       |         |        |        |         |       |      |      |       |        |        |        |         |      |     
|                                             |                             |                                                             | Total net revenues               |                           |        | 59,341              |       |                  |      | 100.0 |        |        |        | 56,374 |       |      |      | 100.0 |         |        |        | 121,754 |       |      |      | 100.0 |        |        |        | 112,450 |      |      |      | 100.0 | 
|Direct costs:                                |                             |                                                             |                                  |                           |        |                     |       |                  |      |       |        |        |        |        |       |      |      |       |         |        |        |         |       |      |      |       |        |        |        |         |      |     
|                                             | Contracted services         |                                                             |                                  | 4,966                     |        |                     |       | 8.4              |      |       |        | 4,525  |        |        |       | 8.0  |      |       |         | 11,083 |        |         |       | 9.1  |      |       |        | 8,650  |        |         |      | 7.7  |     
|                                             | Other direct costs          |                                                             |                                  | 4,800                     |        |                     |       | 8.1              |      |       |        | 7,868  |        |        |       | 14.0 |      |       |         | 10,554 |        |         |       | 8.7  |      |       |        | 12,564 |        |         |      | 11.2 |     
|                                             | Leased capacity             |                                                             |                                  | 19,508                    |        |                     |       | 32.9             |      |       |        | 17,559 |        |        |       | 31.1 |      |       |         | 39,888 |        |         |       | 32.8 |      |       |        | 34,966 |        |         |      | 31.1 |     
|                                             | Cost of equipment sold      |                                                             |                                  | 123                       |        |                     |       | 0.2              |      |       |        | 108    |        |        |       | 0.2  |      |       |         | 241    |        |         |       | 0.2  |      |       |        | 156    |        |         |      | 0.1  |     
|                                             |                             |                                                             |                                  |                           |        |                     |       |                  |      |       |        |        |        |        |       |      |      |       |         |        |        |         |       |      |      |       |        |        |        |         |      |     
|                                             |                             |                                                             | Total direct costs               |                           |        | 29,397              |       |                  |      | 49.5  |        |        |        | 30,060 |       |      |      | 53.3  |         |        |        | 61,766  |       |      |      | 50.7  |        |        |        | 56,336  |      |      |      | 50.1  | 
|Salaries and wages                           |                             |                                                             | 12,593                           |                           |        |                     | 21.2  |                  |      |       | 11,842 |        |        |        | 21.0  |      |      |       | 25,635  |        |        |         | 21.1  |      |      |       | 22,569 |        |        |         | 20.1 |     
|Selling, general and administrative expenses |                             |                                                             | 7,154                            |                           |        |                     | 12.1  |                  |      |       | 7,127  |        |        |        | 12.6  |      |      |       | 15,389  |        |        |         | 12.6  |      |      |       | 12,680 |        |        |         | 11.3 |     
|Gain on extinguishment of debt               |                             |                                                             | (16,367                          | )                         |        |                     | (27.6 | )                |      |       | (8,793 | )      |        |        | (15.6 | )    |      |       | (16,367 | )      |        |         | (13.4 | )    |      |       | (8,793 | )      |        |         | (7.8 | )   

4



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##### 



|                                    |  |                                                             |         |                           |  |                     |        |                  |  |   |         |   |  |  |       |   |  |   |          |   |  |  |        |    |  |   |          |   |  |  |        |  
|----------------------------------- |  | ----------------------------------------------------------- | ------- | ------------------------- |  | ------------------- | ------ | ---------------- |  | - | ------- | - |  |  | ----- | - |  | - | -------- | - |  |  | ------ | -- |  | - | -------- | - |  |  | ------ | -
|                                    |  |                                                             |         |                          
|                                    |  | Three Months Ended June 30,                                 |         | Six Months Ended June 30,
|                                    |  |                                                             |         |                          
|                                    |  |                                                             |         |                           |  |                     |        |                 
|                                    |  | Predecessor Company                                         |         | Successor Company         |  | Predecessor Company |        | Combined Results
|                                    |  | 2002                                                        |         | 2003                      |  | 2002                |        | 2003            
|                                    |  |                                                             |         |                           |  |                     |        |                 
|                                    |  |                                                             |         |                           |  |                     |        |                  |  |   |         |   |  |  |       |  
|                                    |  |                                                            
|                                    |  | (in thousands and as a percentage of consolidated revenues)
|Depreciation and amortization       |  |                                                             | 23,359  |                           |  |                     | 39.4   |                  |  |   | 8,969   |   |  |  | 15.9  |   |  |   | 47,268   |   |  |  | 38.8   |    |  |   | 28,185   |   |  |  | 25.1   |  
|Interest expense, net               |  |                                                             | 37,731  |                           |  |                     | 63.6   |                  |  |   | 5,311   |   |  |  | 9.4   |   |  |   | 71,194   |   |  |  | 58.5   |    |  |   | 7,020    |   |  |  | 6.2    |  
|Net loss (gain) on foreign exchange |  |                                                             | 45,065  |                           |  |                     | 75.9   |                  |  |   | (21,445 | ) |  |  | (38.0 | ) |  |   | 52,431   |   |  |  | 43.1   |    |  |   | (31,414  | ) |  |  | (27.9  | )
|Reorganization items                |  |                                                             | 5,574   |                           |  |                     | 9.4    |                  |  |   |        |   |  |  |      |   |  |   | 5,692    |   |  |  | 4.7    |    |  |   | (726,127 | ) |  |  | (645.7 | )
|Other (income) loss, net            |  |                                                             | (246    | )                         |  |                     | (0.4   | )                |  |   | 313     |   |  |  | 0.6   |   |  |   | 1,704    |   |  |  | 1.4    |    |  |   | (2,468   | ) |  |  | (2.2   | )
|Provision for foreign income taxes  |  |                                                             | 711     |                           |  |                     | 1.2    |                  |  |   | 744     |   |  |  | 1.3   |   |  |   | 1,149    |   |  |  | 0.9    |    |  |   | 1,150    |   |  |  | 1.0    |  
|                                    |  |                                                             |         |                           |  |                     |        |                  |  |   |         |   |  |  |       |   |  |   |          |   |  |  |        |    |  |   |          |   |  |  |        |  
|Net (loss) income                   |  | $                                                           | (85,630 | )                         |  |                     | (144.3 | )%               |  | $ | 22,246  |   |  |  | 39.5  | % |  | $ | (144,107 | ) |  |  | (118.4 | )% |  | $ | 753,312  |   |  |  | 669.9  | %
|                                    |  |                                                             |         |                           |  |                     |        |                  |  |   |         |   |  |  |       |   |  |   |          |   |  |  |        |    |  |   |          |   |  |  |        |  

Six Months Ended June 30, 2003
Compared to Six Months Ended June 30, 2002

Revenues.Our total
net revenues for the three and six months ended June 30,
2003 equaled $56.4 million and $112.5 million. This
compares to total net revenues of $59.3 million and
$121.8 million for the corresponding periods in 2002. Net
revenues were composed of net revenues from services and sales
of equipment. The decrease in our net revenues was principally
due to the continuing adverse economic conditions being
experienced throughout Latin America, including the negative
impact on these revenues (in U.S. dollar terms) of the
devaluation of the Brazilian real during the periods in
2003 as compared to the average exchange rate for this currency
during the periods in 2002. The decrease in these revenues was
partially offset by the relative appreciation of the Argentine
peso during the second quarter of 2003 compared to the
same 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 our most
significant markets and at the dates indicated:

|               |  |                               |      |           |  |          |      |              |  |           |      |          |  |  |      |  |  |  |      |  |  |  |      | 
|-------------- |  | ----------------------------- | ---- | --------- |  | -------- | ---- | ------------ |  | --------- | ---- | -------- |  |  | ---- |  |  |  | ---- |  |  |  | ---- | 
|               |  | December 31,                  |      | March 31, |  | June 30, |      | December 31, |  | March 31, |      | June 30,
|Currency       |  | 2001                          |      | 2002      |  | 2002     |      | 2002         |  | 2003      |      | 2003    
|               |  |                               |      |           |  |          |      |              |  |           |      |         
|               |  |                              
|               |  | (exchange rate per U.S.$1.00)
|Argentina Peso |  |                               | 1.00 |           |  |          | 2.85 |              |  |           | 3.90 |          |  |  | 3.40 |  |  |  | 3.00 |  |  |  | 2.82 | 
|Brazil Real    |  |                               | 2.41 |           |  |          | 2.32 |              |  |           | 2.83 |          |  |  | 3.53 |  |  |  | 3.46 |  |  |  | 2.87 | 

Our net revenues from services for the three and
six months ended June 30, 2003 totaled $56.0 million
and $112.0 million, a decrease of $3.2 million (or
5.4%) and $9.3 million (or 7.7%) compared to the
corresponding periods in 2002. Our net revenues from services
during the second 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.

5



---



##### 



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

|                                 |  |                               |        |                           |  |             |        |      |  |      |       |             |  |   |         |  |  |   |         |  |  |  |       |   
|-------------------------------- |  | ----------------------------- | ------ | ------------------------- |  | ----------- | ------ | ---- |  | ---- | ----- | ----------- |  | - | ------- |  |  | - | ------- |  |  |  | ----- | --
|                                 |  |                               |        |                          
|                                 |  | Three Months Ended June 30,   |        | Six Months Ended June 30,
|                                 |  |                               |        |                          
|                                 |  | 2002                          |        | 2003                      |  | % change(1) |        | 2002 |  | 2003 |       | % change(1)
|                                 |  |                               |        |                           |  |             |        |      |  |      |       |            
|                                 |  |                              
|                                 |  | (dollar amounts in thousands)
|Broadband and satellite          |  | $                             | 44,451 |                           |  | $           | 41,781 |      |  |      | (6.0  | )%          |  | $ | 90,764  |  |  | $ | 83,163  |  |  |  | (8.4  | )%
|Internet                         |  |                               | 7,269  |                           |  |             | 5,761  |      |  |      | (20.7 | )           |  |   | 15,123  |  |  |   | 11,494  |  |  |  | (24.0 | ) 
|Value added services(2)          |  |                               | 3,504  |                           |  |             | 3,852  |      |  |      | 9.9   |             |  |   | 7,121   |  |  |   | 8,633   |  |  |  | 21.2  |   
|Telephony                        |  |                               | 3,971  |                           |  |             | 4,595  |      |  |      | 15.7  |             |  |   | 8,317   |  |  |   | 8,701   |  |  |  | 4.6   |   
|                                 |  |                               |        |                           |  |             |        |      |  |      |       |             |  |   |         |  |  |   |         |  |  |  |       |   
|Total net revenues from services |  | $                             | 59,195 |                           |  | $           | 55,989 |      |  |      | (5.4  | )           |  | $ | 121,325 |  |  | $ | 111,991 |  |  |  | (7.7  | ) 
|                                 |  |                               |        |                           |  |             |        |      |  |      |       |             |  |   |         |  |  |   |         |  |  |  |       |   



---



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

The decrease in our net revenues from services in
the three and six months ended June 30, 2003 as compared to
the corresponding periods in 2002 resulted from lower revenues
from satellite and Internet services, which offset the increase
in our revenues from broadband, telephony and other value added
services.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The decrease in our revenues from broadband and
    satellite services during the second quarter and first half of
    2003 in comparison to the same periods in 2002 was due to lower
    satellite-based services volume.                                                                                                                                                                                                      
|
| |  | Our revenues from value added services increased
    in U.S. dollar terms principally because of the
    appreciation of the Argentine peso during the second
    quarter of 2003 compared to the same period in 2002.                                                                                                                                                                                                           
|
| |  | We experienced lower Internet revenues
    principally because of pricing pressure resulting from
    competition and adverse economic conditions.                                                                                                                                                                                                                                                                               
|
| |  | Our telephony services revenues increased during
    the second quarter and first half of 2003 as compared to the
    same periods in 2002. This increase in our telephony services
    revenues was due to 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 and the United States.

We had 2,706 customers as of June 30, 2003,
compared to 2,649 customers at December 31, 2002 and 2,854
customers at June 30, 2002. The following table shows the
evolution of our customer base as of the dates indicated:

|                 |  |                            |       |              |  |          |       |             |  |             |       |  |  |  |        |   |  |  |        |  
|---------------- |  | -------------------------- | ----- | ------------ |  | -------- | ----- | ----------- |  | ----------- | ----- |  |  |  | ------ | - |  |  | ------ | -
|                 |  |                            |       |              |  |         
|                 |  | Number of Customers as of: |       |              |  |         
|                 |  |                            |       |              |  |         
|                 |  | June 30,                   |       | December 31, |  | June 30, |       |             |  |            
|                 |  | 2002                       |       | 2002         |  | 2003     |       | % Change(1) |  | % Change(2)
|                 |  |                            |       |              |  |          |       |             |  |            
|IMPSAT Argentina |  |                            | 1,097 |              |  |          | 953   |             |  |             | 918   |  |  |  | (16.3  | ) |  |  | (3.7   | )
|IMPSAT Colombia  |  |                            | 697   |              |  |          | 678   |             |  |             | 704   |  |  |  | 1.0    |   |  |  | 3.8    |  
|IMPSAT Brazil    |  |                            | 371   |              |  |          | 366   |             |  |             | 386   |  |  |  | 4.0    |   |  |  | 5.5    |  
|IMPSAT Venezuela |  |                            | 239   |              |  |          | 215   |             |  |             | 209   |  |  |  | (12.6  | ) |  |  | (2.8   | )
|IMPSAT Ecuador   |  |                            | 226   |              |  |          | 216   |             |  |             | 218   |  |  |  | (3.5   | ) |  |  | 0.9    |  
|IMPSAT Mexico    |  |                            | 47    |              |  |          | 24    |             |  |             |      |  |  |  | (100.0 | ) |  |  | (100.0 | )
|IMPSAT Chile     |  |                            | 53    |              |  |          | 60    |             |  |             | 102   |  |  |  | 92.5   |   |  |  | 70.0   |  
|IMPSAT Peru      |  |                            | 55    |              |  |          | 70    |             |  |             | 88    |  |  |  | 60.0   |   |  |  | 25.7   |  
|IMPSAT USA       |  |                            | 69    |              |  |          | 67    |             |  |             | 72    |  |  |  | 4.3    |   |  |  | 7.5    |  
|Other            |  |                            |      |              |  |          |      |             |  |             | 9     |  |  |  |       |   |  |  |       |  
|                 |  |                            |       |              |  |          |       |             |  |             |       |  |  |  |        |   |  |  |        |  
|Total            |  |                            | 2,854 |              |  |          | 2,649 |             |  |             | 2,706 |  |  |  | (5.2   | ) |  |  | 2.2    |  
|                 |  |                            |       |              |  |          |       |             |  |             |       |  |  |  |        |   |  |  |        |  



| | 
| | 
| | 



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

6



---



##### 



We lost a net total of 35 customers in Argentina
during the first half of 2003. These losses occurred because of
adverse economic conditions in that country and despite our
gaining a net total of 32 customers during the second quarter of
2003. 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.
During the second quarter of 2003, we did not experience any
significant customer losses to our competitors.

In addition to net revenues from services, our
total net revenues for the second quarter and first half of 2003
included revenues from sales of equipment, which totaled
$0.4 million and $0.5 million, respectively. This
compares to $0.1 million and $0.4 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.

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

|                 |                   |                               |   |                           |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |        |   
|---------------- | ----------------- | ----------------------------- | - | ------------------------- |  | ----------- | - | ------ |  | ---- |  | ----------- | - |  | - | ------ |  |  | - | ------ |  |  |  | ------ | --
|                 |                   |                               |   |                          
|                 |                   | Three Months Ended June 30,   |   | Six Months Ended June 30,
|                 |                   |                               |   |                          
|                 |                   | 2002                          |   | 2003                      |  | % change(1) |   | 2002   |  | 2003 |  | % change(1)
|                 |                   |                               |   |                           |  |             |   |        |  |      |  |            
|                 |                   |                              
|                 |                   | (dollar amounts in thousands)
|IMPSAT Argentina |                   |                               |   |                           |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                 | Services          |                               | $ | 14,230                    |  |             | $ | 15,289 |  |      |  | 7.4         | % |  | $ | 30,011 |  |  | $ | 29,928 |  |  |  | (0.3   | )%
|                 | Sale of equipment |                               |   | 43                        |  |             |   | 339    |  |      |  | 688.4       |   |  |   | 105    |  |  |   | 380    |  |  |  | 261.9  |   
|                 |                   |                               |   |                           |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                 | Total             |                               | $ | 14,273                    |  |             | $ | 15,628 |  |      |  | 9.5         |   |  | $ | 30,116 |  |  | $ | 30,308 |  |  |  | 0.6    |   
|                 |                   |                               |   |                           |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|IMPSAT Colombia  |                   |                               |   |                           |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                 | Services          |                               | $ | 14,951                    |  |             | $ | 13,581 |  |      |  | (9.2        | ) |  | $ | 30,011 |  |  | $ | 27,138 |  |  |  | (9.6   | ) 
|                 | Sale of equipment |                               |   |                          |  |             |   |       |  |      |  |            |   |  |   | 10     |  |  |   |       |  |  |  | (100.0 | ) 
|                 |                   |                               |   |                           |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                 | Total             |                               | $ | 14,951                    |  |             | $ | 13,581 |  |      |  | (9.2        | ) |  | $ | 30,021 |  |  | $ | 27,138 |  |  |  | (9.6   | ) 
|                 |                   |                               |   |                           |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|IMPSAT Brazil    |                   |                               |   |                           |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                 | Services          |                               | $ | 10,086                    |  |             | $ | 7,826  |  |      |  | (22.4       | ) |  | $ | 20,819 |  |  | $ | 15,124 |  |  |  | (27.4  | ) 
|                 |                   |                               |   |                           |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                 | Total             |                               | $ | 10,086                    |  |             | $ | 7,826  |  |      |  | (22.4       | ) |  | $ | 20,819 |  |  | $ | 15,124 |  |  |  | (27.4  | ) 
|                 |                   |                               |   |                           |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|IMPSAT Venezuela |                   |                               |   |                           |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                 | Services          |                               | $ | 7,633                     |  |             | $ | 8,613  |  |      |  | 12.8        |   |  | $ | 15,434 |  |  | $ | 17,551 |  |  |  | 13.7   |   
|                 | Sale of equipment |                               |   | 71                        |  |             |   | 30     |  |      |  | (57.7       | ) |  |   | 125    |  |  |   | 59     |  |  |  | (52.8  | ) 
|                 |                   |                               |   |                           |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                 | Total             |                               | $ | 7,704                     |  |             | $ | 8,643  |  |      |  | 12.2        |   |  | $ | 15,559 |  |  | $ | 17,610 |  |  |  | 13.2   |   
|                 |                   |                               |   |                           |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|IMPSAT Ecuador   |                   |                               |   |                           |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                 | Services          |                               | $ | 4,529                     |  |             | $ | 3,799  |  |      |  | (16.1       | ) |  | $ | 8,743  |  |  | $ | 7,726  |  |  |  | (11.6  | ) 
|                 | Sale of equipment |                               |   |                          |  |             |   |       |  |      |  |            |   |  |   | 105    |  |  |   |       |  |  |  | (100.0 | ) 
|                 |                   |                               |   |                           |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                 | Total             |                               | $ | 4,529                     |  |             | $ | 3,799  |  |      |  | (16.1       | ) |  | $ | 8,848  |  |  | $ | 7,726  |  |  |  | (12.7  | ) 
|                 |                   |                               |   |                           |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|IMPSAT Chile     |                   |                               |   |                           |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                 | Services          |                               | $ | 2,525                     |  |             | $ | 2,279  |  |      |  | (9.7        | ) |  | $ | 4,739  |  |  | $ | 4,566  |  |  |  | (3.7   | ) 
|                 |                   |                               |   |                           |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                 | Total             |                               | $ | 2,525                     |  |             | $ | 2,279  |  |      |  | (9.7        | ) |  | $ | 4,739  |  |  | $ | 4,566  |  |  |  | (3.7   | ) 
|                 |                   |                               |   |                           |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|IMPSAT Peru      |                   |                               |   |                           |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                 | Services          |                               |   | 2,612                     |  |             | $ | 3,506  |  |      |  | 34.2        |   |  | $ | 5,644  |  |  | $ | 6,716  |  |  |  | 19.0   |   
|                 | Sale of equipment |                               |   | 30                        |  |             |   |       |  |      |  | (100.0      | ) |  |   | 81     |  |  |   |       |  |  |  | (100.0 | ) 
|                 |                   |                               |   |                           |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                 | Total             |                               | $ | 2,642                     |  |             | $ | 3,506  |  |      |  | 32.7        |   |  | $ | 5,725  |  |  | $ | 6,716  |  |  |  | 17.3   |   
|                 |                   |                               |   |                           |  |             |   |        |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       

7



---



##### 



|                                                  |                   |                               |   |                           |  |             |   |       |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |        |  
|------------------------------------------------- | ----------------- | ----------------------------- | - | ------------------------- |  | ----------- | - | ----- |  | ---- |  | ----------- | - |  | - | ------ |  |  | - | ------ |  |  |  | ------ | -
|                                                  |                   |                               |   |                          
|                                                  |                   | Three Months Ended June 30,   |   | Six Months Ended June 30,
|                                                  |                   |                               |   |                          
|                                                  |                   | 2002                          |   | 2003                      |  | % change(1) |   | 2002  |  | 2003 |  | % change(1)
|                                                  |                   |                               |   |                           |  |             |   |       |  |      |  |            
|                                                  |                   |                              
|                                                  |                   | (dollar amounts in thousands)
|IMPSAT USA                                        |                   |                               |   |                           |  |             |   |       |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                                                  | Services          |                               | $ | 9,240                     |  |             | $ | 7,444 |  |      |  | (19.4       | ) |  | $ | 18,857 |  |  | $ | 15,825 |  |  |  | (16.1  | )
|                                                  | Sale of equipment |                               |   |                          |  |             |   | 16    |  |      |  |            |   |  |   |       |  |  |   | 20     |  |  |  |       |  
|                                                  |                   |                               |   |                           |  |             |   |       |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                                                  | Total             |                               | $ | 9,240                     |  |             | $ | 7,460 |  |      |  | (19.3       | ) |  | $ | 18,857 |  |  | $ | 15,845 |  |  |  | (16.0  | )
|                                                  |                   |                               |   |                           |  |             |   |       |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|International Satellite Capacity Holding, Ltd.(2) |                   |                               |   |                           |  |             |   |       |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                                                  | Services          |                               | $ | 4,132                     |  |             | $ | 3,634 |  |      |  | (12.1       | ) |  | $ | 8,280  |  |  | $ | 7,294  |  |  |  | (11.9  | )
|                                                  |                   |                               |   |                           |  |             |   |       |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                                                  | Total             |                               | $ | 4,132                     |  |             | $ | 3,634 |  |      |  | (12.1       | ) |  | $ | 8,280  |  |  | $ | 7,294  |  |  |  | (11.9  | )
|                                                  |                   |                               |   |                           |  |             |   |       |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                                                  | Other Services    |                               | $ | 891                       |  |             | $ | 676   |  |      |  | (24.1       | ) |  | $ | 1,885  |  |  | $ | 1,433  |  |  |  | (24.0  | )
|                                                  | Sale of equipment |                               |   | 2                         |  |             |   |      |  |      |  | (100.0      | ) |  |   | 3      |  |  |   |       |  |  |  | (100.0 | )
|                                                  |                   |                               |   |                           |  |             |   |       |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       
|                                                  | Total             |                               | $ | 893                       |  |             | $ | 676   |  |      |  | (24.3       | ) |  | $ | 1,888  |  |  | $ | 1,433  |  |  |  | (24.1  | )
|                                                  |                   |                               |   |                           |  |             |   |       |  |      |  |             |   |  |   |        |  |  |   |        |  |  |  |       



| | 
| | 
| | 



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

The growth in our net revenues from services has
been adversely impacted by continued adverse economic conditions
in our most important markets in Argentina, Brazil and Colombia,
as well as in Venezuela.

Argentina, which has been mired in economic
recession for the past four years, is our largest market in
terms of number of customers and, until the devaluation of the
peso in 2002, 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. Argentina 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 peso gained
strength during the first half of 2003 (2.82
pesos = $1.00 at June 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
half of 2003 as compared to the same period in 2002, the
Argentine economy continues to face severe challenges. The
Argentine government is currently negotiating with the IMF
regarding a medium term assistance program. To date, however,
the Argentine government has not reached any agreement with the
IMF or other multilateral and official sector lenders to
restructure Argentinas external indebtedness. 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. As a consequence of these economic factors,
net revenues at IMPSAT Argentina were relatively flat during the
periods in 2003. Our total net revenues at IMPSAT Argentina for
the three and six months ended June 30, 2003 totaled
$15.6 million and $30.3 million, an increase of
$1.4 million (or 9.5%) and $0.2 million (or 0.6%)
compared to the corresponding periods in 2002.

8



---



##### 



IMPSAT Brazils revenues from services for
the three and six months ended June 30, 2003 totaled
$7.8 million and $15.1 million, a decrease of
$2.3 million (or 22.4%) and $5.7 million (or 27.4%)
compared to the corresponding periods in 2002. Our results in
Brazil also were adversely affected during the first half of
2003 as compared to the corresponding period in 2002 by the
devaluation of the Brazilian real against the
U.S. dollar. At June 30, 2002, the real traded
at a rate of R$2.83 = $1.00, and at June 30, 2003
it had depreciated to R$2.87 = $1.00. These and prior
devaluations have had a negative effect on our
real-denominated revenues. The devaluation of the
real and the decline in growth in the Brazilian economy
have been caused in part by the continued recession in the
region, a general aversion to emerging markets by foreign direct
and financial investors and the overall decline in worldwide
economic production. In addition, there remains a degree of
uncertainty among the international investor community regarding
whether Mr. da Silva, who was elected president of Brazil
on October 27, 2002, will cause Brazil to alter its
policies in a manner that would adversely affect its economy.
These conditions have had, and can be expected to continue to
have, an adverse effect on IMPSAT Brazils and our
companys overall financial condition and results of
operations. IMPSAT Brazils net revenues increased for the
second quarter of 2003 compared to the first quarter of 2003
primarily because of the appreciation of the real during
the second quarter of 2003 as compared to the first quarter of
2003.

In Colombia, we recorded revenues from services
of $13.6 million and $27.1 million during the three
and six months ended June 30, 2003, compared to
$15.0 million and $30.0 million for the same periods
in 2002.

Revenues at IMPSAT Venezuela equaled
$8.6 million and $17.6 million for the second quarter
and first half of 2003, compared to $7.7 million and
$15.6 million for the same periods in 2002. On
February 12, 2002, Venezuelas government floated its
currency, ending a five-year regime that permitted the
bolivar to trade only within a fixed-band against the
U.S. dollar. As a result, devaluation of the bolivar
occurred. 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, that countrys 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 second quarter and first half of 2003
totaled $30.1 million and $56.3 million, an increase
of $0.7 million (or 2.3%) and a decrease of
$5.4 million (or 8.8%) compared to the same periods in
2002. Of our total direct costs for the three and six months
ended June 30, 2003, $11.6 million and
$21.1 million related to the operations of IMPSAT
Argentina, compared to $11.2 million and $23.2 million
for the corresponding periods in 2002. Direct costs for IMPSAT
Brazil totaled $4.5 million and $8.3 million for the
three and six months ended June 30, 2003, compared to
$5.8 million and $12.8 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 six months ended June 30, 2003, our
contracted services costs totaled $4.5 million and
$8.7 million, a decrease of $0.4 million (or 8.9%) and
$2.4 million (or 22.0%) compared to the same periods in
2002. Of these amounts, maintenance costs for our
telecommunications network infrastructure, including the
Broadband Network, totaled $3.4 million and
$6.6 million for the second quarter and first half of 2003
compared to $3.7 million and $8.6 million for the same
periods in 2002. Installation costs totaled $1.1 million
and $2.1 million for the second quarter and first half of
2003 compared to $1.2 million and $2.5 million during
the corresponding periods in 2002. Our installation costs
decreased because we had fewer new customers in the first half
of 2003 compared to the same period in 2002. Of our total
contracted services costs for the second quarter and first half
of 2003,

9



---



##### 



$1.4 million and $2.8 million related
to the operations of IMPSAT Argentina, compared to
$1.5 million and $3.3 million at IMPSAT Argentina for
the same 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 $7.9 million and $12.6 million during the second
quarter and first half of 2003, an increase of $3.1 million
(or 63.9%) and $2.0 million (or 19.0%) compared to the same
periods in 2002.

Sales commissions paid to third-party sales
representatives for the three and six months ended June 30,
2003 totaled $1.6 million and $2.8 million, compared
to $1.2 million and $2.6 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 $2.1 million and $2.6 million for the three and six
months ended June 30, 2003, compared to $2.0 million
and $5.0 million for the same periods in 2002. At
June 30, 2003, approximately 30.2% of our gross trade
accounts receivable were past due more than six months compared
to 32.3% at June 30, 2002. The average days in quarterly
gross trade accounts receivable decreased from 84 days at
June 30, 2002 to 79 days at June 30, 2003. The
average days in quarterly net trade accounts receivable
decreased from 56 days at June 30, 2002 to
48 days at June 30, 2003.

(3) Leased Capacity. Our leased
capacity costs for the three and six months ended June 30,
2002 totaled $17.6 million and $35.0 million, a
decrease of $1.9 million (or 10.0%) and $4.9 million
(or 12.3%) from the corresponding periods in 2002. This decrease
also reflects an overall reduction in costs for interconnection
and telephony termination costs and frequency rights (which are
components of our leased capacity costs), as described below.

Our leased satellite capacity costs for the three
and six months ended June 30, 2003 totaled
$7.1 million and $14.3 million, a decrease of
$1.2 million (or 17.5%) and $2.9 million (or 16.7%)
from the corresponding periods in 2002. In Argentina, our leased
satellite capacity costs totaled $1.9 million and
$4.0 million for the three and six months ended
June 30, 2003, as compared to $2.1 million and
$4.5 million for the same periods in 2002. Our leased
satellite capacity costs for IMPSAT Brazil totaled
1.0 million and $1.8 million for the three and six
months ended June 30, 2003, as compared to
$1.2 million and $2.3 million for the same periods in
2002. We had approximately 753 MHz of leased satellite capacity
at June 30, 2003 and 907 MHz at June 30, 2002.

Our costs for dedicated leased capacity on
third-party fiber optic networks totaled $6.9 million and
$13.6 million for the second quarter and first half of
2003, an increase of $0.1 million (or 1.4%) and a decrease
of $1.3 million (or 8.7%) 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 $3.6 million and
$7.0 million during the second quarter and first half of
2003. These totals are composed of $2.6 million and
$5.2 million of I&T costs. This compares to
$4.4 million and $7.8 million of I&T and frequency
rights costs during the second quarter and first half of 2002
(composed of $3.4 million and $6.2 million of I&T
costs). Our I&T costs increased during the second quarter of
2003 compared to such costs for the first quarter of 2003
principally because of the appreciation of the Argentine
peso (which resulted in an increase, in U.S. dollar
terms, of the amounts paid to interconnect our telephony
business in Argentina) and a higher volume of telephony business.

Our I&T and frequency rights costs in
Argentina totaled $1.7 million and $3.3 million during
the three and six months ended June 30, 2003. These totals
are composed of $1.6 million and $3.1 million of
I&T costs. This compares to $2.6 million and
$4.3 million of I&T and frequency rights costs for the
three and six months ended June 30, 2002 (composed of
$2.4 million and $4.0 million of I&T costs).

10



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

Salaries and Wages.Salaries and wages for the three and six months ended
June 30, 2003 totaled $11.8 million and
$22.6 million, a decrease of $0.8 million (or 6.0%)
and $3.1 million (or 12.0%), 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 1,324 at June 30, 2002 to
1,250 at June 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 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.

IMPSAT Argentina incurred salaries and wages for
the three and six months ended June 30, 2003, of
$3.1 million and $5.6 million, an increase of
$1.1 million (or 57.2%) and $0.8 million (or 16.7%)
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 449 employees as of June 30, 2003 as compared
to 444 employees as of June 30, 2002.

IMPSAT Brazil incurred salaries and wages for the
three and six months ended June 30, 2003 of
$2.4 million and $4.3 million, a decrease of
$0.9 million (or 28.2%) and $2.2 million (or 33.4%)
over the same periods in 2002. IMPSAT Brazil decreased its
number of employees to 211 persons at June 30, 2003,
compared to 290 persons at June 30, 2002. In addition to
our reduced employee headcount in that country, the decrease in
salaries and wages at IMPSAT Brazil during the first half of
2003 as compared to the same period in 2002 is in part related
to the period over period relative devaluation of the
real against the U.S. dollar, which resulted in a
decrease in U.S. dollar terms of our salaries and wages
expense in Brazil.

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
$7.1 million and $12.7 million for the three and six
months ended June 30, 2003, a decrease of $0.1 million
(or 0.4%) and $2.7 million (or 17.6%) compared to the same
periods in 2002. The decrease in our SG&A expenses narrowed
slightly in the second quarter of 2003 compared to the second
quarter of 2002 because of a difference between those two
quarters in the manner we accounted for legal and professional
fees related to our Chapter 11 process. In accordance with
GAAP, we accounted for legal and professional fees incurred
during, and related to, our chapter 11 proceedings as
reorganization items. Following the Effective Date, in
accordance with GAAP we are recording these fees as part of our
SG&A expenses. The first half 2003 decline in our SG&A
expenses 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 six months ended June 30, 2003 totaled
$2.2 million and $4.0 million, which represented
increases of $0.3 million (or 15.8%) and $0.1 million
(or 1.4%), from SG&A expenses incurred by IMPSAT Argentina
for the three and six months ended June 30, 2002. SG&A
expenses at IMPSAT Brazil for the three and six months ended
June 30, 2003 totaled $1.0 million and
$2.1 million, compared to $1.3 million and
$3.1 million for the same periods in 2002.

11



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Gain on Extinguishment of
Debt.We recorded gains on
extinguishment of debt of $8.8 million during the second
quarter and first half of 2003, and $16.4 million during
the second quarter and first half of 2002. Our gain on
extinguishment of debt during the first half of 2003 is
attributable to the following:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | During the second quarter of 2003, we issued a
    combination of new senior indebtedness totaling
    $5.4 million ($4.8 million as of June 30, 2003)
    in aggregate principal amount of new senior secured notes and 6%
    Senior Guaranteed Convertible Notes due 2011 
    Series B, in full settlement of certain vendor financing
    obligations of IMPSAT Argentina totaling $10.3 million. We
    recorded a $5.5 million gain on extinguishment of debt as a
    result of this transaction.
|
| |  | During the second quarter of 2003, we
    extinguished certain indebtedness and recorded a gain on
    extinguishment of approximately $3.8 million.                                                                                                                                                                                                                                                                                                                                                      

Our gain on extinguishment of debt during the
first half of 2002 is attributable to our settlement in full of
certain of our vendor financing obligations.

Depreciation and Amortization.Our depreciation and amortization
expenses for the three months (Successor Company) and six months
(Predecessor Company and Successor Company combined) ended
June 30, 2003 totaled $9.0 million and
$28.2 million. This represents a decrease of
$14.4 million (or 61.6%) and $19.1 million (or 40.4%)
compared to our depreciation and amortization for the
corresponding periods in 2002. As the Predecessor Company, we
incurred depreciation and amortization for the first quarter of
2003 of $19.2 million, a decrease of $4.7 million (or
19.6%) compared to our depreciation and amortization for the
first quarter in 2002.

Interest Expense, Net.Our net interest expense for the three
months (Successor Company) ended June 30, 2003 totaled
$5.3 million, consisting of interest expense of
$6.3 million and interest income of $1.0 million. Our
net interest expense for the six months ended June 30, 2003
(Predecessor Company and Successor Company combined) totaled
$7.0 million, consisting of interest expense of
$8.2 million and interest income of $1.2 million. Our
net interest expense decreased $32.4 million (or 85.9%) and
$64.2 million (or 90.1%) for the three and six months ended
June 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, 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. As Predecessor Company, our net interest expense for
the first quarter of 2003 totaled $1.7 million (consisting
of interest expense, including financing costs and taxes, of
$1.9 million and interest income of $0.2 million)
compared to $33.4 million (consisting of interest expense,
including financing costs and taxes, of $33.8 million and
interest income of $0.4 million) for the first quarter of
2002.

Our total indebtedness as of June 30, 2003
(as Successor Company) was $260.3 million, as compared to
$1.04 billion as of June 30, 2002 (as Predecessor
Company).

Net Gain (Loss) on Foreign Exchange.We recorded a net gain on foreign
exchange for the three and six months ended June 30, 2003
of $21.4 million and $31.4 million, compared to net
losses of $45.1 million and $52.4 million for the same
periods in 2002. This net gain on foreign exchange reflects the
effect of the appreciation during the first half of 2003
(i.e., compared to the end of 2002) of the
Argentine peso and the Brazilian real on 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 six months ended June 30, 2003
of $0.7 million and $1.2 million, compared to a net
losses of $5.7 million and $12.8 million for the same
periods in 2002. IMPSAT Brazil recorded a net gain on foreign
exchange for the first quarter and second half of 2003 of
$21.5 million and $31.1 million, compared to a net
losses of $39.0 million and $39.1 million for the same
periods in 2002.

Reorganization
Items.We recorded reorganization
items or the three months (Successor Company) and six months
(Predecessor Company and Successor Company combined) ended
June 30, 2003 of zero and $726.1 million. These items
included an extraordinary gain on extinguishment of indebtedness
pursuant to the

12



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##### 



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). See Liquidity and Capital
Resources for managements estimate of further
reorganization expenses to be paid by us during the third
quarter of 2003. We recorded reorganization items for the three
and six months ended June 30, 2002 (Predecessor Company) of
$5.6 million and $5.7 million, which represent costs
incurred during those periods in connection with our Plan and
Chapter 11 filing. As Predecessor Company, we recorded
reorganization items for the first quarter of 2003 of
$726.1 million.


Provision for Foreign Income Taxes.For the three and six months ended
June 30, 2003, we recorded a provision for foreign income
taxes of $0.7 million and $1.2 million, compared to a
provision of $0.7 million and $1.1 million for the
same periods in 2002.

Net Income (Loss).For the three months (Successor Company) and six months
(Predecessor Company and Successor Company combined) ended
June 30, 2003, we recorded net income of $22.2 million
and $753.3 million, compared to net losses of
$85.6 million and $144.1 million the same periods in
2002 (Predecessor Company). Our net income for these periods in
2003 was principally due to the effects of the extraordinary
gain on extinguishment of indebtedness pursuant to the Plan (as
discussed above under  Reorganization
Items), our gain on extinguishment of debt (as discussed
above under  Gain on Extinguishment of
Debt), and our net gain on foreign exchange. For the
second quarter (Successor Company) and first half (Predecessor
Company and Successor Company combined) of 2003, we recorded
operating income of $7.2 million and $1.5 million,
compared to operating income of $3.2 million and an
operating loss of $11.9 million for the same periods in
2002 (Predecessor Company). As Predecessor Company, we recorded
net income of $731.1 million for the first quarter of 2003,
compared to a net loss of $58.5 million the first quarter
of 2002.

Liquidity and Capital Resources

At June 30, 2003, we had total cash and cash
equivalents (with no trading investments) of $63.8 million.
This compares to our cash, cash equivalents and trading
investments of $55.9 million at June 30, 2002,
$55.6 million as of December 31, 2002, and
$61.9 million at March 31, 2003. During the third
quarter of 2003, we expect to pay approximately
$0.2 million in cash, including amounts expended to date,
in satisfaction of all allowed general unsecured convenience
class claims as well as certain fees and expenses relating to
our Chapter 11 proceedings and reorganization.

As of June 30, 2003, approximately
$6.4 million of our cash and cash equivalents were held in
Venezuelan bolivars by 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 bolivar and/or the
implementation of stiffer exchange control restrictions in that
country could have a material adverse effect on our financial
condition and results of operations in Venezuela. See
Quantitative and Qualitative Disclosures About Market
Risk  Foreign Currency Risk.

At June 30, 2003, our total indebtedness as
Successor Company was $260.3 million (as compared to
$1.04 billion as Predecessor Company at December 31,
2002 and at June 30, 2002), of which $18.0 million
represented current portion of long-term debt and
$241.9 million represented long-term debt. As a result of
the financial restructuring of our Old Senior Notes and the
Original Vendor Financing Agreements that accompanied our
emergence from Chapter 11 protection, our capital
requirements for the remainder of 2003 are projected to be less
than our available capital resources. Our capital expenditures
budget contemplates that we will need approximately
$21.0 million (including amounts spent to date) through the
end of 2003 for capital expenditures.

Although we have emerged from bankruptcy, we
remain in default under indebtedness owed to certain creditors
who voted against the Plan. Under the Plan, the claims of these
creditors were contingent obligations arising under guarantees
by us of certain primary indebtedness of our operating
subsidiaries. In accordance

13



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##### 



with the Plan, these holders may receive, in full
satisfaction of their contingent guarantee claim
(Post-Effective Date Contingencies), a pro
rata share of the shares of our new common stock issuable to
our creditors under the Plan. Notwithstanding our settlement of
the Post-Effective Date Contingencies, as a consequence of the
occurrence of our Chapter 11 bankruptcy, an event of
default has occurred and is continuing with respect to certain
of the related primary underlying indebtedness of our operating
subsidiaries. These defaults, which relate to indebtedness
totaling approximately $13.1 million in outstanding
principal amount, give the respective creditors the right to
accelerate such indebtedness and seek immediate repayment of all
outstanding amounts and accrued interest thereon. We are
currently conducting negotiations at the level of our operating
subsidiaries with these creditors with a view to rescheduling or
otherwise restructuring these defaulted debt obligations. There
is no assurance, however, that we will be successful in these
negotiations or that we will reach a definitive agreement with
these creditors to reschedule or restructure such obligations.
Under those circumstances, certain of our operating subsidiaries
could be forced to seek protection or liquidate under the
bankruptcy laws of their respective jurisdictions.


As set forth in our condensed consolidated
statement of cash flows, our operating activities provided
$20.5 million in net cash flow for the first half of 2003,
compared to $4.3 million used by operating activities
during the corresponding period in 2002. The increase in cash
flow from operating activities in the first half of 2003 was
primarily due to the effect of the emergence from bankruptcy,
the decrease in our operating losses and an increase in accounts
payable.

For the first half of 2003, we generated
$14.7 million in net cash flow from investing activities,
compared to $4.4 million of net cash flow used by investing
activities during the corresponding period in 2002. The
increased net cash flow from investing activities was
principally due to a decrease in our trading investments of
$23.0 million during the period in 2003, compared to a
decrease in our trading investments of $3.4 million during
the period in 2002, the receipt of proceeds from the sale of our
Mexican operations and a decrease in our purchases of property,
plant and equipment. During the first half of 2003, we used
$4.3 million in net cash flows from financing activities.
This compares to $4.6 million in net cash flows used in
financing activities during the corresponding period in 2002.

At June 30, 2003, we had leased satellite
capacity with annual rental commitments of approximately
$20.8 million through the year 2007. In addition, at
June 30, 2003, we had commitments to purchase
telecommunications equipment amounting to approximately
$2.1 million. As reported in our 2002 Form 10-K, our
commitments in respect of IRU purchases under contracts with
360networks 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
$2.2 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 June 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.

14



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##### 



We are exposed to interest rate risk on our
floating rate indebtedness, which affects our cost of financing.
At June 30, 2003, our floating rate indebtedness totaled
approximately $19.0 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
June 30, 2003, a hypothetical 100 basis point increase in
the London Interbank Offered Rate (LIBOR) would adversely affect
our annual interest cost related to our floating rate
indebtedness by approximately $0.2 million annually.

|                                 |                    |                                 |        |      |   |      |       |      |   |      |        |            |   |       |        |       |   |   |        |      |   |   |         |      |   |   |         |      |   |   |         |  | 
|-------------------------------- | ------------------ | ------------------------------- | ------ | ---- | - | ---- | ----- | ---- | - | ---- | ------ | ---------- | - | ----- | ------ | ----- | - | - | ------ | ---- | - | - | ------- | ---- | - | - | ------- | ---- | - | - | ------- |  | 
|                                 |                    |                                 |        |      |   |     
|                                 |                    | Expected Maturities at June 30, |        |      |   |     
|                                 |                    |                                 |        |      |   | Fair
|                                 |                    | 2003                            |        | 2004 |   | 2005 |       | 2006 |   | 2007 |        | Thereafter |   | Total |        | Value
|                                 |                    |                                 |        |      |   |      |       |      |   |      |        |            |   |       |        |      
|Senior Notes (fixed rate)        |                    | $                               |       |      |   | $    |      |      |   | $    | 29,628 |            |   | $     | 29,628 |       |   | $ | 29,628 |      |   | $ | 128,485 |      |   | $ | 217,368 |      |   | $ | 217,368 | 
|                                 | Avg. Interest rate |                                 |        |      |   |      |       |      |   |      |        | 8.45       | % |       |        | 8.45  | % |   |        | 8.45 | % |   |         | 8.45 | % |   |         | 8.45 | % |   |         |  | 
|Term Notes (fixed rate)          |                    | $                               | 5,293  |      |   | $    | 7,046 |      |   | $    | 6,445  |            |   | $     | 9,981  |       |   | $ | 926    |      |   | $ |        |      |   | $ | 29,691  |      |   | $ | 29,691  | 
|                                 | Avg. Interest rate |                                 |        | 9.73 | % |      |       | 9.73 | % |      |        | 9.73       | % |       |        | 9.73  | % |   |        | 9.73 | % |   |         |      |   |   |         | 9.73 | % |   |         |  | 
|Vendor Financing (variable rate) |                    | $                               | 12,728 |      |   | $    | 66    |      |   | $    | 66     |            |   | $     |       |       |   | $ |       |      |   | $ |        |      |   | $ | 12,861  |      |   | $ | 12,861  | 
|                                 | Avg. Interest rate |                                 |        | 7.44 | % |      |       | 7.44 | % |      |        | 7.44       | % |       |        |       |   |   |        |      |   |   |         |      |   |   |         | 7.44 | % |   |         |  | 

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

During January 2002, Argentina abandoned the
fixed dollar-to-peso exchange rate and devalued the
Argentine peso and, on February 3, 2002, pursuant to
the pesification decree, the Argentine
government announced the mandatory conversion of all foreign
currency denominated contractual obligations governed by
Argentine law into Argentine pesos at a rate of one
Argentine peso to one U.S. dollar. The floating
exchange rate at August 11, 2003 was pesos
2.92 = $1.00. These and any further devaluations of
the peso have and will adversely affect IMPSAT
Argentinas results of operations and, in turn, our
companys consolidated results of operations and financial
condition. 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 laws, the potential impacts of the currency
devaluation and other recent events in Argentina could have on
our companys consolidated results of operation and
financial condition. There 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 pesos of 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 real and the
U.S. dollar. In Brazil, we are permitted to amend the
pricing of our services for our long-term telecommunication
services contracts with our customers annually based on changes
in the consumer price index in Brazil for the prior year. In
Argentina, obligations that were mandatorily converted to
pesos under the pesification decree
are to be adjusted pursuant to 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

15



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##### 



fully allow us to address the impact of a
devaluation of those currencies against the U.S. dollar.
Also, contracts entered into after the
pesification decrees enactment that are
initially denominated in pesos are not entitled to be
adjusted according to 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
August 11, 2003, the real traded at a rate of R$3.00
= $1.00.


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 June 30, 2003, approximately
$6.4 million of our cash and cash equivalents were held in
Venezuelan bolivars by IMPSAT Venezuela. At
December 31, 2001, the bolivar traded 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 June 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 bolivar against 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 bolivars were to
decline as a result of the devaluation of the bolivar
prior to the time when we were permitted to repatriate these
funds, we would recognize a loss.

Revenues from services from our Argentine
operations for the three months ended June 30, 2003 and
2002 represented approximately 27.8% and 24.0% of our total net
revenues from services for such periods. Revenues from services
from our Brazilian operations for the three months ended
June 30, 2003 and 2002 represented approximately 13.9% and
17.0% of our total net revenues from services for such periods.
Our revenues from services in Venezuela accounted for 15.3% and
13.0% of our total revenues from services for the three months
ended June 30, 2003 and 2002.



|        |                        
|------- | -----------------------
|Item 4. | Controls and Procedures

An evaluation was performed under the supervision
and with the participation of the Companys management,
including the Chief Executive Officer (the CEO) and
Chief Financial Officer (the CFO), of the
effectiveness of the design and operation of the Companys
disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) promulgated under the
Securities and Exchange Act of 1934, as amended) as of
June 30, 2003. Based on that evaluation, the Companys
management, including the CEO and CFO, concluded that the
Companys disclosure controls and procedures were
effective. There have been no significant changes in the
Companys internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
their evaluation.

16



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##### 



PART II

OTHER INFORMATION




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

The following supplements and amends our
discussion set forth under Item 3 Legal
Proceedings in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2002, as updated by our
Quarterly Report on Form 10-Q for the quarter ended
March 31, 2003. On July 25, 2003, as part of its
bankruptcy proceedings (see Managements Discussion
and Analysis of Financial Condition and Results of
Operations  Global Crossing Insolvency), Global
Crossing rejected its agreements with us pursuant to which we
had agreed to lease to Global Crossing space in our telehouses
in Buenos Aires, Argentina, Caracas, Venezuela and Lima, Peru.



|        |                                              
|------- | ---------------------------------------------
|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

On June 30, 2003, Mr. Eddy Zervigon was
appointed to our board of directors to fill a vacancy created by
the resignation of Mr. Raul Ramirez. Mr. Zervigon, who
is 34 years old, will serve a term that will initially expire at
our annual stockholders meeting in 2004. Mr. Zervigon is an
Executive Director at Morgan Stanley & Co.
Incorporated, where he has worked since 1997. Prior to joining
Morgan Stanley, Mr. Zervigon worked in the international
tax practice of Coopers & Lybrand (now known as
PriceWaterhouseCoopers).



|        |                                     
|------- | ------------------------------------
|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).                                                                                                                                                                               

17



---



##### 



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|No.     |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|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).                                                                                                                                                                                                                                                                                                                                                                                                                          
|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 herewith).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.6    |  | Employment Agreement between Hector R. Alonso and
    the Company dated as of March 25, 2003 (filed herewith).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.7    |  | Letter Agreement between Marcelo Girotti and the
    Company dated March 25, 2003 (filed herewith). 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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

18



---



##### 



|        |  |                                                                                                                                           
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                           
|No.     |  | Description                                                                                                                               
|        |  |                                                                                                                                           
|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. On
May 27, 2003, we filed a current report on Form 8-K
disclosing our announcement by means of a press release of our
results of operations for the fiscal quarter ending
March 31, 2003.

19



---



##### 



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: August 14, 2003  

20