EXHIBIT 10.40

                                    GUARANTY


            THIS GUARANTY (this  "Guaranty") is executed as of October 27, 2000,
by VIATEL, INC., a Delaware corporation  ("Guarantor") to and for the benefit of
CISCO SYSTEMS CAPITAL ("Lessor").

            Lessor is party to that certain Master Lease  Agreement  dated as of
October  27,  2000  (the  "Master   Agreement")  with  Viatel  U.K.  Limited,  a
corporation  existing under the laws of the United Kingdom  ("Lessee"),  and has
entered into or may hereafter  enter into certain  Schedules  (the  "Schedules")
relating to and  incorporating  by reference such Master Agreement in connection
with the leasing or financing of equipment thereunder (such Schedules,  together
with the Master  Agreement,  collectively  referred to herein as the  "Leases").
Capitalized  terms not otherwise  defined herein have the meanings  specified in
the Leases.  In order to be assured of payment under the Leases,  Lessor desires
that Guarantor  guarantee the payment and other  obligations  and liabilities of
Lessee to Lessor as set forth herein.  Guarantor will derive  substantial direct
and indirect benefits from the extension of credit to Lessee (which benefits are
hereby acknowledged by the Guarantor).  Accordingly,  to induce Lessor to extend
credit to, and to contract with, Lessee, and in consideration thereof, Guarantor
hereby agrees as follows:

            1. Guarantor hereby irrevocably and unconditionally  guarantees,  as
primary obligor and not as a surety merely, without offset or deduction, the due
and  punctual  payment  when  due  (whether  at  stated  maturity,  declaration,
acceleration,  demand  or  otherwise)  and  performance  by  Lessee  of all  the
indebtedness,  liabilities  and other  obligations  of Lessee  now or  hereafter
arising  under or in  connection  with the Leases,  including the payment of all
Rent (as  defined in the Leases)  and any and all other  amounts  which may from
time to time become due and payable in  accordance  with the terms of the Leases
and the performance by Lessee of all of its other  obligations  under the Leases
(the  payment  of  Rent  and  all  other  such  indebtedness,   liabilities  and
obligations of Lessee  guaranteed  hereby being  hereinafter  referred to as the
"Obligations"). In the event that Lessee fails to perform any Obligation for any
reason, Guarantor will perform or otherwise provide for such Obligation and will
forthwith  make full payment of any amount due with respect  thereto at its sole
cost and expense.  This Guaranty of the Obligations  shall constitute a guaranty
of payment and performance  and not of collection.  It shall not be necessary or
required,  and Guarantor shall not be entitled to require,  that Lessor (a) file
suit or proceed to obtain or assert a claim for personal judgment against Lessee
or any other person or entity ("Person") for any Obligation, (b) make any effort
at collection or other  enforcement of any Obligation  from or against Lessee or
any other Person,  (c)  repossess and re-lease or sell any Equipment  subject to
any Lease,  or  foreclose  against or seek to realize  upon any  security now or
hereafter  existing for any  Obligation or upon any balance of any credit on the
books of Lessor or any other Person in favor of Lessee or any other Person,  (d)
exercise  or  assert  any other  right or  remedy  to which  Lessor is or may be
entitled in connection  with any  Obligation  or any security or other  guaranty
therefor or otherwise mitigate damages,  or (e) assert or file any claim against
the  assets of Lessee or any other  guarantor  of other  Person  liable  for any
Obligation,  or any part  thereof,  before or as a condition  of  enforcing  the
liability of Guarantor  under this Guaranty or requiring  payment or performance
of any Obligation by Guarantor hereunder, or at any time thereafter.

            2. Guarantor waives notice of the acceptance of this Guaranty and of
the  performance  or  nonperformance  by  Lessee,  presentment  to or demand for
payment  or other  performance  from  Lessee or any other  Person  and notice of
nonpayment  or failure to perform  on the part of  Lessee.  The  obligations  of
Guarantor hereunder shall be absolute and unconditional and shall remain in full
force  and  effect  and  shall  not be  subject  to any  reduction,  limitation,


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impairment or termination for any reason.  Guarantor  waives any right,  whether
legal or equitable,  statutory or  non-statutory,  to require  Lessor to proceed
against or take any action  against or pursue any remedy with  respect to Lessee
or any other Person or make  presentment  or demand for  performance or give any
notice of  nonperformance  before Lessor may enforce  rights  against  Guarantor
hereunder  and, to the fullest  extent  permitted by law, any other  defenses or
benefits  that may be derived  from or afforded by  applicable  law limiting the
liability of or exonerating  guarantors or sureties,  or which may conflict with
the terms of this Guaranty. The unconditional obligations of Guarantor hereunder
will not be affected,  impaired or released by any extension,  waiver, amendment
or thing  whatsoever  which  would  release a  guarantor  or surety  (other than
complete performance).

            3.  Guarantor  agrees that this  Guaranty is a  continuing  guaranty
relating to any Obligations,  including Obligations which may exist continuously
or  which  may  arise  from  time to time  under  successive  transactions,  and
Guarantor  expressly  acknowledges that this Guaranty shall remain in full force
and effect  notwithstanding  that  there may be periods in which no  Obligations
exist.  This  Guaranty  shall  continue in effect and be binding upon  Guarantor
until  fifteen  (15)  business  days after  actual  receipt by Lessor of written
notice from Guarantor of its intention to discontinue this Guaranty as to future
transactions (which notice shall not be effective until noon on the business day
following  such  receipt);  provided that no revocation or  termination  of this
Guaranty shall affect in any way any rights of Lessor  hereunder with respect to
any Obligations or commitments arising or outstanding prior to the expiration of
such fifteen (15) business day period after the date of receipt of such notice.

            4. Until the Obligations shall be satisfied in full, Guarantor shall
not have, and shall not directly or indirectly exercise,  (i) any rights that it
may acquire by way of subrogation under this Guaranty,  by any payment hereunder
or otherwise, (ii) any rights of contribution, indemnification, reimbursement or
similar suretyship claims arising out of this Guaranty, or (iii) any other right
which it might  otherwise  have or acquire (in any way  whatsoever)  which could
entitle it at any time to share or participate in any right,  remedy or security
of Lessor as against Lessee or other guarantors, whether in connection with this
Guaranty or  otherwise.  If any amount  shall be paid to Guarantor on account of
the foregoing  rights at any time when any  Obligations  are  outstanding,  such
amount  shall be held in trust for the benefit of Lessor and shall  forthwith be
paid to Lessor to be credited and applied to the Obligations.

            5.  (a)  Guarantor  represents  and  warrants  to  Lessor  that  (i)
Guarantor is a corporation duly organized, validly existing and in good standing
under the law of its jurisdiction of incorporation,  and has all requisite power
and  authority  to  execute,  deliver and  perform  its  obligations  under this
Guaranty;  (ii) the  execution,  delivery and  performance  by Guarantor of this
Guaranty  have  been  duly  authorized  by all  necessary  corporate  action  of
Guarantor;  and (iii) this  Guaranty  constitutes  the legal,  valid and binding
obligation  of  Guarantor.  (b) So long as this  Guaranty  shall  be in  effect,
Guarantor will furnish to Lessor from time to time such  information  respecting
Guarantor's  financial  condition  as Lessor  may from  time to time  reasonably
request;  provided,  however,  that so long as  Guarantor  shall be a  reporting
company under the Securities  Exchange Act of 1934,  the Guarantor  shall not be
required to deliver to Lessor annual or quarterly financial statements.

            6. No right,  power or remedy herein  conferred  upon or reserved to
Lessor  is  intended  to be  exclusive  of any other  right,  power or remedy or
remedies and each and every right,  power and remedy of Lessor  pursuant to this
Guaranty  now or  hereafter  existing  at  law or in  equity  or by  statute  or
otherwise  shall,  to the extent  permitted by law, be cumulative and concurrent
and shall be in addition to each other right,  power or remedy  pursuant to this
Guaranty, and the exercise by Lessor of anyone or more of such rights, powers or
remedies shall not preclude the  simultaneous or later exercise by Lessor of any
or all such other rights, powers or remedies.


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            7. No  failure  or  delay  by  Lessor  to  insist  upon  the  strict
performance of any term, condition, covenant or agreement of this Guaranty or to
exercise any right, power or remedy hereunder or consequent upon a breach hereof
shall  constitute  a waiver of any such term,  condition,  covenant,  agreement,
right, power or remedy or of any such breach, or preclude Lessor from exercising
any such right, power or remedy at any later time or times.

            8. In case  any one or  more  of the  provisions  contained  in this
Guaranty  should be  invalid,  illegal  or  unenforceable  in any  respect,  the
validity,  legality and  enforceability  of the remaining  provisions  contained
herein shall not in any way be affected or impaired thereby.

            9.  This  Guaranty  (a)  constitutes  the  entire   agreement,   and
supersedes all prior agreements and understandings,  both written and oral, with
respect to the subject matter hereof, (b) may not be amended except by a writing
signed by Guarantor and Lessor,  and (c) shall be binding upon Guarantor and its
successors  and  assigns  and  shall  inure  to the  benefit  of,  and  shall be
enforceable by, Lessor and its successors and assigns.

            10. All  notices and other  communications  provided  for  hereunder
shall be in  writing  (including  by  facsimile)  and shall be  mailed,  sent or
delivered (i) if to Lessor,  to Cisco Systems  Capital,  Ashurst Manor,  Ashurst
Park,  Church  Lane,  Sunninghill,  Ascot,  Berkshire,  SL5 7DD;  and (ii) if to
Guarantor,  at or to its address or facsimile number set forth below its name on
the signature page hereof, or at or to such other address or facsimile number as
such party shall have  designated  in a written  notice to the other party.  All
such notices and communications shall be effective upon receipt.

            11. This Guaranty  shall be governed by, and construed in accordance
with,  the laws of the State of New York.  Guarantor  hereby (i)  submits to the
non-exclusive  jurisdiction  of the  courts  of the  State  of New  York and the
Federal  courts of the  United  States  sitting in the State of New York for the
purpose of any action or proceeding arising out of or relating to this Guaranty,
(ii) agrees that all claims in respect of any such action or  proceeding  may be
heard and  determined in such courts,  (iii)  irrevocably  waives (to the extent
permitted by applicable law) any objection which it now or hereafter may have to
the  laying of venue of any such  action  or  proceeding  brought  in any of the
foregoing  courts  in and of the  State of New York,  and any  objection  on the
ground that any such action or  proceeding in any such court has been brought in
an inconvenient  forum, and (iv) agrees that a final judgment in any such action
or proceeding shall be conclusive and may be enforced in other  jurisdictions by
suit on the judgment or in any other manner permitted by law.

            12.  Guarantor  agrees to pay on  demand  all  reasonable  costs and
expenses  of  Lessor  and  reasonable  fees  and  disbursements  of  counsel  in
connection  with the  enforcement,  or  preservation  of any rights under,  this
Guaranty.

            IN WITNESS  WHEREOF,  Guarantor  has caused this Guaranty to be duly
executed as of the date first hereinabove set forth.

                                         VIATEL, INC.

                                         By:    /s/ Allan Shaw
                                                ------------------------------

                                         Title: Chief Financial Officer
                                                ------------------------------

                                         Address:    685 Third Avenue
                                                     New York, NY 10017
                                                     Attention: General Counsel
                                                     Facsimile:  (212) 350-9250