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                                                                   EXHIBIT 10.38

                                     MASTER
                                 LEASE AGREEMENT




MASTER LEASE Number    UKCSC1265    dated October 27, 2000
between:

CISCO SYSTEMS CAPITAL (also known as Leasetec UK Limited)

having its principal place of business at: Ashurst Manor, Ashurst Park,
                            Church Lane, Sunninghill, Ascot, Berkshire, SL5 7DD

(hereafter called "the Lessor")

and

VIATEL U.K. LIMITED


having its principal place of business at:  Parnell House, 25 Wilton Road,
                                             London, SW1V 1LW UK
(hereafter called "the Lessee)



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1. DEFINITIONS
In this Master Lease the following words or expressions shall have the following
meanings:

"BUSINESS  DAY"  means a day on which  banks are open for  business  in  London,
England, and New York, New York, except Saturdays.

"CERTIFICATE OF ACCEPTANCE"  means,  in relation to the Products,  a certificate
delivered  by  Lessor,  and  countersigned  by the  Lessee  confirming  that the
Products fully meet the Lessee's requirements.

"COMMENCEMENT  DATE" means the date when the Products are deemed accepted by the
Lessee pursuant to Article 8 hereunder.

"EQUIPMENT"  means, in relation to each Equipment  Schedule,  the equipment from
time to time subject to such  Schedule,  and includes  each and every part of it
and all substitutions,  replacements, renewals and additions (wherever made) and
all manuals, operating instructions and documents relating thereto.

"EQUIPMENT SCHEDULE" means an agreement  substantially in the form of Addendum A
hereto, signed by Lessee and Lessor,  listing items to be leased and the related
rentals.

"EVENTS OF DEFAULT" means the events specified in Article 17.1.

"LEASE  PAYMENTS"  means the  payment  of  rentals  specified  in the  Equipment
Schedule(s) as varied or amended pursuant to the terms of the Lease.

"LESSEE" includes its successors and permitted assigns.

"LESSOR" includes its successors and assigns.

"LICENSED  PROCESSOR"  means a processor or equipment  configuration of the type
specified in the Equipment Schedule and which may be in a Software Licence.

"MASTER  LEASE" means this  agreement  and includes its Addenda and Exhibits but
excludes any associated Equipment Schedules.

"PRODUCTS" means, in relation to each Equipment Schedule,  the Equipment and the
Software listed thereon.

"SOFTWARE"  means,  in relation to each  Equipment  Schedule,  the operating and
application  Software from time to time subject to such Schedule and all updates
thereto.

"SOFTWARE LICENCE" means the right granted by the Supplier to use the Software.

"STANDARD  TERMS"  means  the  terms and  conditions  of supply of the  Supplier
applicable to the Lessee.

"SUPPLIER"  means Cisco  Systems,  Inc.,  or any affiliate  thereof  (other than
Lessor) or any,  Value Added  Reseller  of Cisco  products,  or any  licensor of
Software.


2. OBJECT

The Lessor  hereby agrees to lease to the Lessee and the Lessee hereby agrees to
take on lease from the Lessor the Products on the terms and  conditions  of this
Master  Lease  and any  additional  terms  set out in the  applicable  Equipment
Schedule.  Each Equipment  Schedule shall  constitute a separate and independent
Lease  (a  "Lease");   the   original  of  such  Lease  shall   consist  of  the
manually-signed Equipment Schedule and a reprographic copy of the Master Lease.


3. TERM

This Master Lease and each  Equipment  Schedule  shall come into force as of the
date of their signature by the Lessor and Lessee;  the Master Lease shall remain



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effective as long as any Equipment Schedule is in effect. The term of each Lease
shall commence on the  Commencement  Date and shall continue  thereafter for the
number of months or years as  specified  in such Lease  (hereinafter  called the
"Initial  Term").

Provided no Event of Default shall have occurred and be  continuing,  the Lessee
may extend the Initial Term to the extent  provided in the applicable  Equipment
Schedule. Lessee will notify the Lessor in writing of its decision to extend the
Initial  Term  pursuant to any such right at least three (3) months prior to the
expiration  date of the Initial  Term or the  then-current  extended  term.  The
Lessee  will  execute at the  Lessor's  request  any  amendment  that may in the
Lessor's  opinion be required  to the Lease  before  such  extension  comes into
effect.

The Lessee may terminate all or any Leases at any time by giving 30 days' notice
in writing to the Lessor, by returning the Products to the location specified by
the Lessor within the  jurisdiction in which they were  originally  installed in
compliance  with the Equipment  Schedule,  in the condition  required  under the
Lease,  and by paying such sum as would be payable  under  clause  17.2(c)  upon
termination of such Lease(s) under clause 17.2(b).  Any such notice, once given,
shall be irrevocable.


4. LEASE PAYMENTS/TAXES

The Lessee shall pay the Lessor the Lease Payments specified in the Lease at the
intervals  specified  therein.

The first  Lease  Payment  shall be due on the  Commencement  Date.  The  Lessee
acknowledges  that such Lease  Payments are to be made without notice or invoice
and without defence, counterclaim, recoupment or set-off and that its obligation
to pay the  Lease  Payments  and any  other  amounts  owing  hereunder  shall be
absolute and  unconditional.  The Lessor will make reasonable  efforts to supply
invoices  to the  Lessee  but lack  thereof  does  not  alleviate  the  Lessee's
obligation to pay.

The Lessee  shall make Lease  Payments to the Lessor by direct  debit,  standing
order or by such other means and to such address as the Lessor shall  reasonably
stipulate. Time shall be of the essence to all sums payable hereunder.

Any Lease  Payments  or other sums  payable  hereunder  not paid on the due date
shall be subject to late charges at a rate of 3% per annum above one-month LIBOR
as of the last Business Day of each  calendar  month  (commencing  with the rate
based upon the calendar month immediately preceding such due date) as determined
by Lessor from the applicable Reuters screen,  without prejudice to the Lessor's
right hereunder to treat non-payment as a repudiatory  breach of this Lease. All
sums due to the Lessor under this Lease are (unless  otherwise stated) exclusive
of Value Added Tax ("VAT") and any other  applicable  sales or turnover taxes or
duties which may from time to time be introduced, which shall be charged thereon
in accordance  with the relevant  regulations in force at the time of making the
taxable  supply  and  shall be paid by the  Lessee.

For the purpose of United Kingdom  taxation,  and irrespective of the accounting
treatment to be adopted by the Lessee, the Lessee shall not be entitled to claim
capital  allowances  on the  Products.  The Lessee  shall take such steps as the
Lessor  may  reasonably  require  in  connection  with the  application  for and
preservation of any available capital allowances for the benefit of the Lessor.


5. WARRANTY OF QUIET ENJOYMENT AND DISCLAIMER OF WARRANTIES

The Lessor  warrants to the Lessee  that,  so long as the Lessee shall not be in
default of any of the provisions of this Lease or of the licence  referred to in
clause 6, the Lessor will not disturb the Lessee's quiet and peaceful possession
of the  Products  and the  Lessee's  unrestricted  use thereof for the  purposes
intended  in the Lease.

The Lessee shall be entitled to the benefit of and the Lessor hereby (so long as
there exists no Event of Default)  assigns to Lessee all warranties given by the
Supplier on the whole or any part of the  Products  (subject to the  limitations
and exclusions contained in Supplier's Standard Terms),  insofar as such benefit
is capable of being  transferred  to the  Lessee.  If any such  warranty  is not
capable of being  transferred,  then Lessor shall take  commercially  reasonable
efforts to enforce same, (i) at the cost and expense of Lessee,  (ii) subject to
execution of indemnity agreement by Lessee in form and substance satisfactory to
Lessor,  and (iii)  provided  Lessee  is not in breach of any term or  provision
hereof.



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THE LESSOR MAKES NO EXPRESS OR IMPLIED  CONDITIONS OR WARRANTIES  CONCERNING THE
CONDITION,  DESCRIPTION,  QUALITY OR  PERFORMANCE  OF THE  PRODUCTS  OR OF THEIR
MERCHANTABILITY  OR FITNESS FOR A  PARTICULAR  PURPOSE AND HEREBY  EXCLUDES  THE
SAME.  THE LESSOR SHALL HAVE NO  LIABILITY  FOR ANY DAMAGES IN CONTRACT OR TORT,
WHETHER DIRECT OR  CONSEQUENTIAL,  FOR LOSS,  DAMAGE OR INJURY  SUSTAINED BY THE
LESSEE AS A RESULT OF ANY DEFECT OR MALFUNCTION OF THE PRODUCTS.

The Lessee  acknowledges that no representation has been made by or on behalf of
the Lessor in relation to the  Products  and agrees that the Lessor shall not be
liable for any delay in delivery of the Products or any part  thereof  howsoever
caused.

Nothing  herein shall  exclude or restrict the Lessor's  liability  for death or
personal injury  resulting from the negligence or intentional  misconduct of the
Lessor or its employees while acting in the course of their employment.


6. SOFTWARE LICENCE

The Lessee agrees to indemnify and hold the Lessor harmless from and against any
and all claims, costs, expenses, damages,  liabilities and reasonable legal fees
that the Lessor may suffer or incur as a result of any  dispute  that may arise,
in any way whatsoever,  in connection with any Software  Licence relating to any
Products.

The Lessee  undertakes to continue  making Lease  Payments to the Lessor in full
without  deduction  or  set-off  of any kind  for the full  term of each and any
Equipment Schedule  notwithstanding  termination of the Software License for any
reason whatsoever.

Notwithstanding the terms of this Lease, the Software Licences may be terminated
by the Suppliers  thereof in accordance  with their terms.  The Lessor agrees to
exercise  reasonable  efforts to notify the Lessee of any claim of  infringement
brought against it in relation to any such Software Licenses, provided, however,
that any failure to provide such notice shall not be deemed to provide the basis
for any claim of damages or other compensation by the Lessee.


7. RETURN OF PRODUCTS

Upon  termination (by expiration or otherwise) of each Equipment  Schedule,  the
Lessor or such  other  party as may be  appointed  by the Lessor  shall,  at the
Lessee's  sole cost and  expense,  de-install  the Products and prepare them for
return to the Lessor.  The Lessee shall,  pursuant to the Lessor's  instructions
and at the  Lessee's  sole  cost and  expense  (including,  without  limitation,
expenses of storage, transportation,  import and export, if applicable, tariffs,
taxes, and in-transit insurance),  promptly return the Products to the Lessor in
the same  operating  order,  repair,  condition and appearance as when received,
except for normal depreciation and wear and tear, and eligible for a maintenance
contract  with the Supplier or a third party  maintenance  provider  approved by
Lessor at standard rates.  The Lessee shall return the Products to the Lessor by
delivering them within 30 days of such termination of such Equipment Schedule to
the Lessor at its address set forth herein or at such other  address  within the
jurisdiction  in which they were  originally  installed in  accordance  with the
applicable Equipment Schedule as reasonably directed by the Lessor.

Until return of the Products to the Lessor,  the Lessee shall be responsible for
all  storage  and for proper and safe  custody of the  Products,  and  continued
insurance in accordance with the terms hereof.  If the Products are not returned
when required by the foregoing terms, the Lessee shall pay the Lessor rentals at
the Lessor's month-to-month rental rates.


8. LESSEE'S ACCEPTANCE

The  Lessee's  acceptance  of the  Products  shall occur when the Lessee signs a
Certificate of Acceptance stating that the Products fully meet its requirements,
or upon thirty (30) days from their date of delivery to the Lessee without prior
written objection (in reasonable  detail) by the Lessee delivered to the Lessor,
whichever  shall occur first.  The Lessee agrees on the date of  acceptance  and
satisfaction of the matters stated in such certificate to execute and deliver to
the Lessor a Certificate of Acceptance of the Products.



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9. TITLE, LOCATION AND INSPECTION

The  Lessee  shall  have no right,  title or  interest  in the  Products  leased
hereunder except as expressly set forth in this Lease. The Lessee at its expense
will  protect and defend the owner's  title and the  interests of the Lessor and
any secured party and/or assignee and will keep the Products free and clear from
any and all claims,  liens,  encumbrances  and legal  processes  of the Lessee's
creditors and other persons.

The Lessee shall immediately  notify third parties of the Lessor's rights in the
Products in case of exercise by them of any claim in possession of said Products
and will  promptly  inform the Lessor of such claims;  the Lessee shall bear all
reasonable  legal costs on a full  indemnity  basis which the Lessor may have to
disburse in order to defend its rights as the Lessor of the Products.

The  parties  acknowledge  that the  Products  are or will be  installed  at the
premises listed on each Equipment  Schedule,  or as specified on the invoice for
the Products from the Supplier relating to such Equipment  Schedule.  As between
the Lessor and the Lessee, the Lessee assumes the full expense of transportation
and insurance to, and  installation  of the Products at, the Lessee's  site. The
Lessee shall not remove any Products from the location  shown on the  applicable
Equipment  Schedule  without in each  instance (i) if the new location is within
the same legal jurisdiction, giving the Lessor not less than fifteen days' prior
written  notice  thereof,  and (ii) if the new location is within  another legal
jurisdiction, obtaining the Lessor's prior written consent thereto, such consent
not to be unreasonably withheld or delayed.

All  Products  shall at all times be and remain  personal  property;  the Lessee
shall  exercise  reasonable  efforts to provide the Lessor with any  certificate
which the Lessor may reasonably  require from the owner (which  expression shall
include any person having title to or interest in such premises) of the premises
where the  Products  are to be  installed.  The  Lessor  may  require  plates or
markings  to be  affixed  to the  Products  to  indicate  its  interest  in such
Products.

The Lessor shall have the right,  upon reasonable prior notice to the Lessee and
during Lessee's regular business hours (subject to satisfaction of customary and
reasonable  security and  confidentiality  policies of Lessee or, in the case of
co-located  Products of the entity  owning or  controlling  such  facility),  to
inspect the  Products at their  location.  The Lessee  shall,  upon the Lessor's
request make the Lessee's  records  pertaining to the Products  available to the
Lessor for inspection.


10. USE AND MAINTENANCE

The Lessee  shall use the  Products  in a good and careful  manner,  in a proper
environment and in compliance with the applicable operating instructions and all
applicable  laws and  regulations  and for no other  purpose than that for which
such Products were designed.

The  Lessee  shall  not make any  alterations,  enhancements,  modifications  or
attachments to the Products without the Lessor's prior written consent if and to
the extent any such  alteration,  enhancement,  modification,  or attachment (i)
would reasonably be expected to impair the  marketability,  function or value of
the Product,  or (ii) is not subject to removal or  detachment  without  causing
cosmetic or functional damage to the Product or (iii) could cause the Product to
become  subject  to the  claim or lien of any  third  person.  Unless  otherwise
agreed, all such alterations, enhancements,  modifications and attachments shall
become a part of the Products.  Lessee  agrees to remove any such  attachment at
the end of the term of the Lease,  unless such removal  would result in cosmetic
or  functional  damage  to the  Product,  and upon such  removal,  title to such
attachment shall revert to Lessee.

Lessee, at its sole cost and expense, shall during the continuance of this
Lease,

(i)  maintain the Products in good repair,  condition  and working  order,  fair
     wear and tear excepted,

(ii) enter into and  maintain  in full force and effect  during the term of
     the applicable Equipment Schedule a standard maintenance contract with
     the  Supplier  or  a  third  party  maintenance   provider  reasonably
     acceptable to Lessor and comply with all of its obligations  contained
     therein.

In the event the Lessee  contracts for  maintenance  with a party other than the
Supplier,  the Lessee shall, at the Lessor's request,  provide the Lessor with a
copy of such maintenance  contract.  All parts furnished in connection with such
maintenance  or repair,  shall  thereupon  become the property of the Lessor and




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part of the Products  for all  purposes  hereof.  Upon  Lessor's  request at the
expiration  of the Initial Term (or, in the event of any  extension of the Term,
upon the expiration of such  extension),  the Lessee will have the Supplier or a
third party maintenance  provider approved by Lessor inspect the Products at the
Lessee's cost in order to confirm whether such Products meet the Supplier's then
current operating standards and are eligible for a maintenance contract with the
Supplier or a third party  maintenance  provider approved by the Lessor; if they
do not, the Lessee will be required to have the Products  serviced to bring them
up to such  standards  prior to their  return to the Lessor and the Lessee shall
pay rental for the  period  during  which  their  return is delayed at  Lessor's
month-to-month rental rates.

11. INSURANCE/RISK OF LOSS

The Lessee shall  during the term of this Lease insure the Products  against all
insurable  risks in an amount not less than the amount that would be required to
be paid to Lessor  under  paragraph  (c) of this clause 11 and shall  insure the
Lessor and the Lessee  against  liability  to others for injury,  loss or damage
caused by the  Products in each case with a reputable  insurer and in amounts of
coverage and  deductibles  customary  among  businesses for items similar to the
Products (but not less than $1 million per occurrence).

The Lessee's  obligation to maintain  insurance  shall  commence on the delivery
date of the  Products and shall  continue  until the Initial Term or any renewal
term  terminates and the Products are returned to the Lessor.  Furthermore,  the
Lessee shall pay the cost of any specific insurance to be taken by the Lessor in
connection with the delivery of the Products to the Lessee.

The Lessee shall  cooperate and cause its insurers to cooperate  with the Lessor
with respect to the Products;  the Lessee shall have the Lessor's interest noted
on the insurance policy and produce on request written evidence of insurance and
of the payment of premiums. If adequate insurance is not evidenced to the Lessor
upon such request,  the Lessor may effect the insurance and claim  reimbursement
with the next Lease Payment.

The Lessee  hereby  assumes  and bears the entire risk of loss,  theft,  damage,
destruction or requisition of the Products during the continuance of the term of
each Lease and until  return of the  Equipment  to Lessor;  no such event  shall
relieve the Lessee from its  obligation to make Lease Payments or to perform any
other  obligation under the Lease,  except if such Lease terminates  pursuant to
paragraph (c) below.

The Lessee shall notify the Lessor  promptly in writing of the occurrence of any
of the above  events and Lessee at the option of the Lessee  (provided  that the
Lessee shall,  no later than the date on which payment under paragraph (c) below
would be required, elect one of the following) shall:

a) place the  Products in good  repair,  condition  and  working  order at the
    sole cost and expense of the Lessee, or

b) replace  such  Products  with like ones from the  Supplier or its  authorized
   agents in good repair,  condition and working order, with clear title thereto
   in Lessor at the sole cost and  expense of the  Lessee,  and  following  such
   replacement  the new product(s)  shall be deemed to be the "Products" for the
   purpose of the Lease, or

c) pay to Lessor within 30 days after demand therefor (or, if later, prior to 60
   days after the occurrence of the applicable  casualty  event) an amount equal
   to the  total  Lease  Payments  and other  sums past due and owing  hereunder
   (using a discount at the rate of 4% per annum) and (without  prejudice to any
   other  right or remedy of the  Lessor)  the lease of such  Products  shall be
   terminated.

The proceeds of any Lessee  insurance  payable with respect to any loss,  theft,
damage,  destruction or requisition of the Products shall be applied towards one
of the following (as Lessor shall promptly elect):

(i)  Lessee's replacement, restoration or repair of the Products or

(ii) payment of any of the  Lessee's  other  obligations  under this Lease.  The
     Lessee hereby  appoints the Lessor as the Lessee's  agent in order to claim
     and/or receive payment of and execute and endorse all documents, cheques or
     drafts  issued with respect to such loss,  theft,  damage,  destruction  or
     requisition  under any insurance policy relating  thereto.  Any proceeds of
     Lessee insurance  remaining after  application  above shall, be paid to the
     Lessee.



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12. INTELLECTUAL PROPERTY RIGHTS

     The Lessor  disclaims  all  liability for  violation,  misappropriation  or
infringement  of  intellectual  property  rights  (including  but not limited to
claims concerning  patents,  copyrights and trade secrets) and further disclaims
any  liability  for  incidental  or  consequential  damages.  No  rights  to any
intellectual  property are conveyed,  assigned or licensed under this Lease, nor
shall the foregoing  disclaimer  impair any right or claim of Lessee against any
Supplier. Lease Payments for Software are made in lieu of license fees otherwise
due for such Software under the related Software License.

13. TRANSFER OF RIGHTS

     The Lessee shall not transfer, sell, assign, sublet, sublicense,  part with
possession,  pledge or  encumber  any right or  interest  in the Lease or in the
Products  without the Lessor's  prior  written  consent,  such consent not to be
unreasonably withheld or delayed,  provided,  however, the Lessee may assign the
Lease or sublet the Products to any  subsidiary of Viatel,  Inc.  located in any
jurisdiction  previously approved by the Lessor,  provided prompt written notice
thereof is given to the Lessor.  Such consent  shall not relieve the Lessee from
its obligations set forth in the Lease. The Lessee  acknowledges that the Lessor
may sell and assign its interest  absolutely or grant a security interest in the
Lease and/or in the Products listed therein in whole or in part.

     The Lessee  hereby  agrees that upon receipt of a notice of  assignment  of
this Lease,  it shall pay  directly to the Lessor's  assignee or secured  party,
unconditionally,  all amounts which become due hereunder.  The Lessee represents
that it will not assert  against  the  Lessor's  assignee  or secured  party any
claims by way of defence or set-off, counterclaim, recoupment or otherwise which
the Lessee may have against the Lessor, Supplier or any third party.


14. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE LESSEE

     14.1 The Lessee hereby  represents and warrants that,  with respect to this
Master Lease and to the Equipment  Schedules  executed  pursuant hereto:  a) the
execution,  delivery  and  performance  thereof  by the  Lessee  have  been duly
authorized by all necessary corporate action and shall not contravene any law or
obligation to which the Lessee or Viatel, Inc. is bound;

b) this  Master  Lease and each  Equipment  Schedule  constitute  legal,  valid
    and  binding agreements of the Lessee;

c) each Product has been selected on the basis of the Lessee's own judgement;

d) the  Products  are  personal  property and will not, by or through any act or
   omission of Lessee (or any successor or  predecessor  in interest of Lessee),
   be or become fixtures under any applicable law;

e) all financial  statements furnished to the Lessor are true and correct in all
   material  respects  and there has been no material  adverse  change since the
   date of such  statements  and the Lessee  shall  provide  the Lessor with the
   annual  audited  financial  statements of Viatel,  Inc.  (unless at such time
   Viatel,  Inc. is a reporting  company  under the  Securities  Exchange Act of
   1934) and such other  financial  information  as the  Lessor  may  reasonably
   request from time to time; and

f) the Lessee has received all necessary import and export licenses  required by
   any government in connection with the shipment,  delivery,  installation  and
   usage of the Equipment as contemplated by the Lease.

     14.2 The Lessee further  warrants and covenants that Viatel,  Inc. shall at
all  times  observe  and  perform  or cause to be  observed  and  performed  the
obligations  set forth in Sections 4.03 through 4.11, and 4.13 through 4.15, and
Section  5.01 of that  Senior  Euro Notes  Indenture  dated as of April 20, 2000
between Viatel, Inc. and The Bank of New York (the "Indenture"),  which sections
(together with all applicable  defined terms) of such Indenture are incorporated
herein by this  reference  in the form  existing on the  execution  date of such
Indenture.

     14.3 [Redacted]

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15. GENERAL INDEMNITY

     15.1 The Lessee shall and does hereby agree to defend,  indemnify  and hold
the Lessor and any assignee and any secured  party of the Lessor  harmless  from
and  against  any and all  claims,  cost,  expenses,  damages  and  liabilities,
including  storage and reasonable legal fees on a full indemnity basis,  arising
directly or indirectly, whether in breach of contract or tort, or from any other
applicable  rule of law arising in connection  with, or pertaining to the lease,
manufacture,  design, possession, import, export, licensing, operation, control,
use, maintenance,  delivery or return of the Products.  The Lessee shall further
indemnify and hold the Lessor  harmless  from all losses,  costs,  damages,  and
expenses (including reasonable attorneys' fees), if for any reason the Lessor is
not able to assert its  ownership  rights or regain  possession of the Products,
including  due to the fact that the  Products  are  located  outside  the United
Kingdom,  or at the site of  another  company.  Lessor and any  assignee  and/or
secured party may at its option and at its sole expense, participate in any such
action with counsel of its own choice.

     The  provisions  of this Article  shall  survive any  expiration  or sooner
termination of this Master Lease and any Equipment Schedule.

     15.2 The indemnities contained in clause 15.1 (General Indemnity) shall not
extend to:

a) any claim made by any person  pursuant to that clause (a "Claim") in relation
   to any of the Lessor,  any assignee or any secured  party of the Lessor (each
   an  "Indemnitee") to the extent that that Claim is paid pursuant to any other
   indemnity provision of this Agreement and/or by the proceeds of any insurance
   received by an Indemnitee;

b) any Claim to the extent arising from:

     (i)  any act or omission of any Indemnitee  which  constitutes a breach of,
          or an express  representation  given by the Indemnitee being incorrect
          under this Agreement, or wilful misconduct of such Indemnitee; or

     (ii) an act of gross negligence of the Indemnitee;

c)   any Claim  resulting  directly from the Lessee  acting on the  Indemnitee's
     written instructions;

d)   any Claim in respect of taxes;

e)   any Claim in respect  of loss of profit,  indirect  or  consequential  loss
     suffered  by any  Indemnitee;  or

f)   any Claim to the extent it arises  directly  as a result of a lien over any
     of the Products  which is entered into by or assessable  against the Lessor
     or any superior titleholder to Lessor.


16. FURTHER ASSURANCES

If  reasonably  requested  by the  Lessor,  the Lessee  shall  promptly  secure,
execute,  and/or deliver to Lessor such further  documents and take such further
action as Lessor  shall  reasonably  deem  necessary to carry out the intent and
purpose of this Lease and to protect the Lessor's interest in the Products.

17. DEFAULT, ETC.

     17.1 EVENTS OF DEFAULT

An Event of Default shall occur hereunder if:

a)   The  Lessee  fails  to pay any  Lease  Payment  or other  payment  required
     hereunder  or under any Lease within ten (10) days after the due date or if
     no date is specified  within ten (10) days of written demand by the Lessor;
     or



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b)   The Lessee fails to perform or observe or cause to be performed or observed
     (i) any  warranty or covenant set forth in Article 14.2 and such failure is
     not remedied  within 30 days of the date written  notice of such failure is
     provided to Viatel,  Inc. by the Trustee or Holders of more than 25% of the
     Notes under (and as defined in) the Indenture,  or (ii) any other covenant,
     condition or  agreement  to be  performed or observed by it hereunder  and,
     other than a failure to maintain  insurance  under Article 11 or a transfer
     of any Product in violation of Article 13, shall fail to remedy such breach
     within 30 days after being required by the Lessor in writing to do so; or

c)   The  Lessee  makes  any  representation   herein  or  in  any  document  or
     certificate furnished to the Lessor in connection herewith which shall have
     been materially false and inaccurate; or

d)   A voluntary  agreement  is approved,  or a petition  for an  administration
     order is presented,  or a receiver or administrative  receiver is appointed
     over any of the  Lessee's  assets or any  undertaking  or a  resolution  or
     petition  to  wind  up  the  Lessee  is  passed  or  presented  or  if  any
     circumstances  arise  which  entitles  the Court or a creditor to appoint a
     receiver,  administrative receiver or administrator or to present a winding
     up petition or make a winding-up  order and, except in the event the Lessee
     or any of its affiliates has sought or acquiesced in such  presentation  or
     appointment, any such proceeding is not dismissed or vacated within 30 days
     of commencement; or

e)   The Lessee  ceases or  threatens  to cease or carry on  business  or if the
     Lessee  sells,  transfers  or disposes of all or  substantially  all of its
     assets; or

f)   Any governmental consent or approval at any time necessary to enable Lessee
     to comply with its material  obligations  under this Lease or the Equipment
     Schedule,  or any licence  required in relation to the Products is revoked,
     withheld or modified or fails to remain in full force and effect; or

g)   The Lessee or Viatel,  Inc. shall suffer or commit any breach or default in
     respect of Indebtedness  (as such term is defined in the Indenture)  having
     an  outstanding  principal  amount of $10 million or more in the aggregate,
     (i) which breach or default has caused the holder of such  Indebtedness  to
     declare  such  Indebtedness  to be due  and  payable  prior  to its  Stated
     Maturity (as defined in the Indenture) and such  Indebtedness  has not been
     discharged  in full or such  acceleration  rescinded or annulled  within 10
     days of such acceleration, or (ii) which breach or default shall consist of
     a failure to make a  principal  payment at the final (but not any  interim)
     fixed maturity and such default payment shall not have been made, waived or
     extended within 30 days of such payment default; or

h)   The Products or any part thereof are illegally used or confiscated; or

i)   There shall occur any event of default under Section  6.01(g) or (h) of the
     Indenture; or

j)   The Lessee shall cease to be a subsidiary of Viatel, Inc.


     17.2 REMEDIES

Upon the  occurrence  of any of the above Events of Default,  the Lessor may, as
its option, exercise any one or more of the following remedies:

a)   Proceed by appropriate court action to enforce performance by the Lessee of
     the  applicable  terms and  conditions  of all or any  Leases or to recover
     damages for the breach thereof;

b)   By notice terminate all or any Leases whereupon all rights of the Lessee to
     use the  Products  listed  on the  terminated  Equipment  Schedule(s)  will
     absolutely  cease;  the  Lessee,  if so  requested,  will,  at its  expense
     promptly  return  the  Products  to the  Lessor  at the  place  within  the
     jurisdiction  of original  installation  in accordance  with the applicable
     Equipment  Schedule  designated by the Lessor and in the condition required
     pursuant to the terms hereof, or the Lessor,  at its option,  may enter the
     premises  where the  Products  are  located and take  immediate  possession
     thereof and remove the same.

c)   In the case of  termination  of any Lease  pursuant to sub-clause b) above,
     the Lessee shall pay the Lessor:

     (1)  all arrears in Lease  Payments and other sums due  hereunder as at the
          date of  termination  plus  interest as specified  herein for past due
          amounts, plus,



<PAGE>


     (2)  an amount equal to the aggregate of the Lease Payments which would but
          for  termination  have  become  due  and  payable  from  the  date  of
          termination  up to the end of the term of the Lease less a discount on
          each  Lease  Payment  for  accelerated  receipt  at the rate of 4% per
          annum.

Following  return of the Products to Lessor pursuant to this clause,  the Lessor
will  proceed to either sell or re-lease  the  Equipment  in such a manner as it
deems appropriate in its sole discretion. In the event that as a result thereof,
the aggregate amount previously received by the Lessor pursuant to paragraph (c)
of this Section exceeds the amount that would have been payable had such sale or
re-lease  occurred before the payment under paragraph (c), then the Lessor shall
remit such  excess to the Lessee  promptly  thereafter.

d)   Avail  itself  of any other  remedy or  remedies  available  at law,  or in
     bankruptcy or insolvency proceedings.

     The remedies  herein set forth shall be cumulative  and not  exclusive.  In
     addition, the Lessee shall be liable for

     (i)  all reasonable costs and expenses  incurred in repossessing,  storing,
          repairing, restoring and selling or leasing the Products.

     (ii) all other amounts owing by the Lessee hereunder, and

     (iii)all reasonable costs and expenses,  including (without limitation) all
          legal  costs on a full  indemnity  basis  incurred  by the Lessor as a
          result of the Lessee's default hereunder.

     17.3 CHANGE OF CONTROL

Upon the  occurrence of a "Change of Control" (as defined in the  Indenture) the
Lessee shall:

a)   Promptly notify the Lessor of such occurrence; and

b)   Unless  otherwise  agreed by the Lessor,  within 30 days of such occurrence
     pay the Lessor the amount that would be due and payable  under clause 11(c)
     had  there  occurred  a  casualty  event  relating  to all  such  Products,
     whereupon  (i) the Leases  shall be  terminated,  and (ii) the Lessor shall
     transfer  its  right,  title and  interest  in and to the  Products  to the
     Lessee, without representation or warranty.


18. NOTICES

All  notices  and other  communications  made or required to be given under this
Lease shall be in writing and shall be deemed  given upon  receipt  when sent by
registered  or  recorded  mail,  return  receipt  requested,  or  by  recognised
overnight  delivery courier,  or when delivered  personally,  or by telefax with
mail  confirmation:

In case of the  Lessor:  at the  address  set  forth in the
applicable  Equipment  Schedule  with a copy to any assignee or secured party at
the address(es) set forth in any notice thereof given to the Lessee;

In case of the Lessee: at the address set forth in the applicable Equipment
Schedule.


19. MISCELLANEOUS

a) The  Lessor  and the  Lessee  acknowledge  that  there are no  agreements  or
   understandings,  written or oral,  between  the  Lessor  and the Lessee  with
   respect to the leasing of the Products  except as set forth herein and in the
   Equipment  Schedule  and that this Master Lease and each  Equipment  Schedule
   contain the entire  agreement  between the Lessor and the Lessee with respect
   thereto;

b) Neither this Master Lease nor any Equipment Schedule may be altered, modified
   or terminated  except by a written statement signed by the party against whom
   enforcement of such alteration, modification or termination is sought;

c) The  headings  set  forth  herein  and  in the  Equipment  Schedule  are  for
   convenience  only and  shall not  define or limit any of the terms  herein or
   therein;



<PAGE>


d) If more than one  Lessee is named in this  Master  Lease or in the  Equipment
   Schedule, the liability of each Lessee shall be joint and several.

e) This  Master  Lease  and any  associated  Equipment  Schedules  shall  become
   effective  and  binding as of the date it is  accepted  by the Lessor and the
   Lessee, and shall be binding upon and inure as of such date to the benefit of
   both parties hereto and their  respective legal  representatives,  successors
   and assigns, unless otherwise expressly provided herein;

f) All  agreements,  representations,  indemnities  and  warranties  made by the
   Lessee in this Master Lease, any Equipment Schedule or any document delivered
   pursuant  hereto or  thereto  shall be for the  benefit  of the  Lessor,  any
   assignee and any secured  party and shall  survive the  expiration  or sooner
   termination of this Master Lease or such Equipment Schedule.

g) (1)The Lessee acknowledges that it has or will contract with the Supplier for
   any  maintenance,  support,  consultancy,   facilities  management  or  other
   services  listed on the  Equipment  Schedule  which will be  provided  to the
   Lessee by the  Supplier  under the terms of the relevant  services  agreement
   entered into between the Supplier and the Lessee or, in the absence  thereof,
   then under the  Supplier's  Standard  Terms  relating  thereto (such separate
   services agreement or Standard Terms, as applicable, being referred to herein
   as the "Services Agreement").

   (2)The  Lessor shall have no obligation  whatsoever  and makes no warranty or
   representation  regarding  the  quality of  services  or  performance  of any
   obligation  under the Services  Agreement,  and shall have no other liability
   whatsoever  in  contract,   tort,   negligence  or  otherwise  in  connection
   therewith.

   (3)The  Lessee  undertakes  with the  Lessor,  subject to the  express  terms
   hereof,  to continue  making  Lease  Payments  to the Lessor in full  without
   deduction or set-off of any kind for the full term of each Equipment Schedule
   notwithstanding   termination  of  the  Services  Agreement  for  any  reason
   whatsoever,  or any  negligence  on the part of the Supplier or any breach by
   the  Supplier of its  obligations  thereunder.  The Lessee  accepts  that the
   Lessee's  sole remedy in respect of such  termination,  negligence  or breach
   shall be against the Supplier under the Services Agreement or otherwise.

   (4)The undertaking shall apply  notwithstanding  that the Lease Payments have
   been  calculated  partly by  reference  to the level of fees which the Lessee
   would  have  been  obligated  to pay under the  Services  Agreement  had such
   obligation to pay not been assigned to the Lessor.

h) No omission or delay by the Lessor at any time to enforce any right or remedy
   reserved to it or to require  performance  by the Lessee of any of the terms,
   covenants or provisions of this Master Lease or any Equipment Schedule at the
   times  designated  herein or therein,  shall be a waiver of any such right or
   remedy to which the  Lessor is  entitled,  nor shall it in any way affect the
   right of the Lessor to thereafter enforce such provision;

i) If any term or provision of this Master Lease or of any Equipment Schedule or
   the application thereof to any person or circumstance shall, to any extent be
   held invalid or unenforceable,  the remainder of this Master Lease or of such
   Equipment  Schedule or the  application of such terms or provision to persons
   or   circumstances   other  than  those  to  which  it  is  held  invalid  or
   unenforceable  shall not be affected  thereby and each term and  provision of
   this  Master  Lease  and any such  Equipment  Schedule  shall  be  valid  and
   enforceable to the fullest extent permitted by law;

j) Upon execution of this Master Lease, the Lessee shall provide the Lessor with
   certified   resolutions  addressed  to  the  Lessor  in  form  and  substance
   satisfactory to the Lessor.

k) This  Master  Lease and each  Equipment  Schedule  shall in all  respects  be
   governed by, and construed in accordance with English Law;

i) The Parties hereby submit to the exclusive jurisdiction of the English
   Courts.





<PAGE>


SIGNED FOR AND ON BEHALF OF LESSEE: VIATEL U.K. LIMITED



-----------------------------------
SIGNATURE


-----------------------------------
NAME


-----------------------------------
TITLE


-----------------------------------
DATE



SIGNED IN THE PRESENCE OF:


-----------------------------------
SIGNATURE


-----------------------------------
NAME AND TITLE


-----------------------------------
DATE


<PAGE>


SIGNED FOR AND ON BEHALF OF LESSOR: CISCO SYSTEMS CAPITAL


-----------------------------------
SIGNATURE


-----------------------------------
NAME


-----------------------------------
TITLE


-----------------------------------
DATE


SIGNED IN THE PRESENCE OF:


-----------------------------------
SIGNATURE


-----------------------------------
NAME AND TITLE


-----------------------------------
DATE



<PAGE>


                                   ADDEMDUM A


Equipment Schedule No. to Master Lease Agreement No.     dated  October 27, 2000

Lessee:             VIATEL U.K. LIMITED
Address for         Parnell House, 25 Wilton Reed, London, SW1V 1LW
  Notices:          United Kingdom

Lessor:           CISCO SYSTEMS CAPITAL
Address for       Ashurst Manor, Ashurst Park, Church Lane, Sunninghill, Ascot,
 Notices:         Berkshire, SL5 7DD


  APPLICATION
  -----------

We  hereby  apply  to take  the  Products  set out in  this  Equipment  Schedule
("Schedule")  on  lease on the  terms  set out  below  and in the  Master  Lease
Agreement terms and conditions.  We confirm before signing this Schedule we read
the terms and  particulars  and that our signature is made on the  understanding
that upon your  acceptance of this Schedule we will be bound by all the terms of
this Schedule and the Master Lease Agreement terms and conditions.


For and on behalf of Lessee:                   Agreed for and on behalf Cisco
                                               Systems Capital (the "Lessor"):

Signature:                                     Signature:

Title:                                         Title:

Witness Name:                                  Witness Name:

Signature:                                     Signature:


Date                                           Agreement Date:



<PAGE>


A. LEASE TERMS
--------------

Initial Term       Payment Frequency       Number of Lease        Lease Payment
   Payments       (Monthly/Quarterly         Payments          Amount (excl VAT)
                  Half Yearly/Yearly)
-------------     -------------------      ----------------    -----------------


B. SPECIAL TERMS
----------------

At the end of the Initial Term the Lessee has the option to use all and not less
than all of the Products at an annual  charge of 0.1% of the original  equipment
cost, payable annually in advance.

C. EQUIPMENT
------------

      QTY                TYPE                              DESCRIPTION
      ---                ----                              -----------


INSTALLATION SITE
-------------------



<PAGE>


C. EQUIPMENT CONTINUED /2...
----------------------------


      QTY                TYPE                              DESCRIPTION
      ---                ----                              -----------


INSTALLATION SITE
-------------------




C. EQUIPMENT CONTINUED /3...
----------------------------



      QTY                TYPE                              DESCRIPTION
      ---                ----                              -----------







<PAGE>




                                                        PURCHASE OPTION ADDENDUM
                                                        (Master Lease Agreement)



This  PURCHASE  OPTION  ADDENDUM  dated as of , is an  attachment  to  Equipment
Schedule No. to Master Lease  Agreement  No.--- dated  October 27, 2000,  (Such
Equipment  Schedule  and Master Lease  Agreement  are  hereinafter  collectively
referred to as, the "Lease"),  between CISCO SYSTEMS  CAPITAL ("the Lessor") and
Viatel U.K.  Limited ("the Lessee").  Unless  otherwise  specified  herein,  all
capitalized  terms shall have the  meanings  ascribed to them in the Lease.  The
Lessor and the Lessee hereby agree as follows:

      So long as no Event of Default shall have  occurred and be continuing  and
      the Lessee shall have given the Lessor at least ninety (90) days,  but not
      more than one hundred eighty (180) days, prior written notice,  the Lessee
      shall have the option to purchase  the Products at the  expiration  of the
      Initial Term (the  "Purchase  Option Date") for a purchase  price equal to
      $1.00 + VAT (the "Purchase Option Price").  Payment of the Purchase Option
      Price,  together with all applicable  sales taxes,  including VAT, and all
      other  amounts  due and owing by the  Lessee  under the Lease  (including,
      without limitation, Lease Payments) on or before the Purchase Option Date,
      shall be made on the Purchase  Option Date in immediately  available funds
      against  delivery to the Lessee of all of the  Lessor's  right,  title and
      interest in and to the  Products  ON AN "AS IS" "WHERE IS" BASIS,  WITHOUT
      ANY WARRANTIES, EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING
      WITHOUT LIMITATION,  THE CONDITION OF THE PRODUCTS,  THEIR MERCHANTABILITY
      OR THEIR FITNESS FOR ANY PARTICULAR  PURPOSE.  THE LESSOR MAY SPECIFICALLY
      DISCLAIM ANY SUCH REPRESENTATIONS AND WARRANTIES. If and to the extent the
      purchase  option is exercised,  Section 7 and the last sentence of Section
      10 of the Lease shall not apply in respect of the equipment related to the
      above-mentioned Equipment Schedule.


Except as modified  hereby,  all of the terms,  covenants and  conditions of the
Lease  shall  remain in full  force and effect  and are in all  respects  hereby
ratified and affirmed.

IN WITNESS  WHEREOF,  Lessor and  Lessee  have  executed  this  Purchase  Option
Addendum as of the date first above written.

Signed for and on behalf of Lessor:      Signed for and on behalf of Lessee:
CISCO SYSTEMS CAPITAL                    VIATEL U.K. LIMITED


Signature:--------------------------     Signature:--------------------------

Name:     --------------------------     Name:     --------------------------

Title:    --------------------------     Title:    --------------------------