EMPLOYMENT AGREEMENT

                  THIS EMPLOYMENT  AGREEMENT  ("Agreement")  is made and entered
into as of April 1, 1998 by and between  VIATEL,  INC.,  a Delaware  corporation
with an office at 800 Third Avenue,  New York,  New York 10022 (the  "Company"),
and MICHAEL J. MAHONEY, an individual currently residing at 77 Park Avenue, Apt.
15E, New York, New York 10016 (the "Executive").

                              W I T N E S S E T H:

             WHEREAS, the Company and the Executive have previously entered into
an Employment Agreement,  dated as of September 23, 1996, and the parties desire
to amend and restate such agreement as set forth below.

                  NOW  THEREFORE,   each  of  the  Company  and  the  Executive,
intending to be legally bound, hereby mutually covenant and agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

                  The  following  terms  used in this  Agreement  shall have the
meanings set forth below.

                  1.1  "Accrued  Obligations"  shall  mean,  as of the  date  of
Termination,  the sum of  Executive's  aggregate  accrued  but  unpaid  (A) Base
Salary,  (B) Bonus Award,  (C) other cash  compensation  and (D)  vacation  pay,
expense  reimbursements and other cash entitlements,  all determined through the
date of Termination.

                  1.2 "Base  Salary"  shall mean the amount set forth in Section
3.1 hereof, or if the Executive has received  different Base Salaries during the
course of a year, the average of such Base Salaries.

                  1.3 "Bonus  Agreement" shall mean that certain Bonus Agreement
dated  September 23, 1996, as amended by the First  Amendment to Bonus Agreement
attached hereto as Exhibit A.

                  1.4 "Bonus  Award"  shall have the  meaning  specified  in the
Bonus Agreement.

                  1.5 "Cause" shall mean  Executive's (i) material  violation of
Section 2.3 hereof,  which  violation  has not been cured  within 15 days of the
date that  written  notice  thereof is received by  Executive  from the Board of
Directors of the Company (the "Board");  (ii) material  violation of Section 4.1
or 4.2 hereof;  (iii) violation of Section 4.3 hereof;  (iv) gross negligence or
dishonesty in the  performance  of his duties  hereunder or habitual  neglect in
managing  the  Company;   PROVIDED,   HOWEVER,   that  the  Board  undertakes  a
comprehensive review and determines that such conduct is materially injurious or
materially damaging to the Company or its reputation;  or (vi) conviction of any
felony or a misdemeanor involving fraud, misrepresentation or dishonesty.


                                       1

<PAGE>

                  1.6  "Change of Control" is defined to mean such time as (i) a
"person" or "group"  (within the meaning of Sections  13(d) and  14(d)(2) of the
Exchange Act), becomes the ultimate "beneficial owner" (as defined in Rule 13d-3
under the  Exchange  Act) of more than 50% of the total voting power of the then
outstanding  Voting  Stock  of the  Company  on a fully  diluted  basis  or (ii)
individuals who at the beginning of any period of two consecutive calendar years
constituted  the Board  (together  with any new directors  whose election by the
Board or  whose  nomination  for  election  by the  Company's  stockholders  was
approved by a vote of at least two-thirds of the members of the Board then still
in office who either were  members of the Board at the  beginning of such period
or whose election or nomination  for election was previously so approved)  cease
for any  reason to  constitute  a majority  of the  members of the Board then in
office.

                  1.7  "Common Stock"  shall  mean  the  common stock, par value
$.01 a share, of the Company.

                  1.8  "Competitive Activities" shall have the meaning set forth
in Section 4.3 hereof.

                  1.9  "Confidential Material" shall have the meaning set  forth
in Section 4.2 hereof.

                  1.10 "Control"  (including,  with  correlative  meanings,  the
terms "controlling,"  "controlled by," and "under common control with"), as used
with respect to any Person,  shall mean the possession,  directly or indirectly,
of the power to direct or cause the  direction of the  management or policies of
such Person,  whether  through  ownership of voting  securities,  by contract or
otherwise.

                  1.11 "Disability" shall mean Executive's death or inability to
perform  his  material  duties to the  Company by reason of a physical or mental
disability,  which has  existed  for an  aggregate  of nine  months  during  any
twelve-month period.

                  1.12 "Disability  Payment" shall mean, for purposes of Section
5.3(d)  hereof,  an amount  equal to 60% of the Base  Salary  in effect  for the
calendar year in which such  Disability  occurred (or the average Base Salary if
such Disability occurred over more than one calendar year).

                  1.13 "Exchange Act" shall mean the Securities  Exchange Act of
1934, as amended.

                  1.14 "Good Reason" shall mean any (i) reduction in Executive's
Base Salary,  (ii)  failure by the Company to continue  any material  benefit or
compensation  plan,  life insurance plan,  health and accident plan,  disability
plan (or plan providing Executive with substantially  similar benefits) in which
Executive  is  participating  or  the  material  reduction  by  the  Company  of
Executive's benefits under any such plan, (iii) failure by the Company to obtain
an assumption of this Agreement by any successor of the Company (as contemplated
in Section 6.2 hereof),  (iv) transaction  resulting in a Change of Control,  if
Executive  has  provided  written  notice to the Company  within 60 days of such
Change  of  Control  of his  intentions  to cease  employment  hereunder  or (v)

                                       2


<PAGE>


material  diminution  in  Executive's  authority,  function or position with the
Company which continues after 15 days of the date that written notice thereof is
given to the Board by Executive.

                  1.15  "Intellectual  Property"  shall mean any idea,  process,
trademark,  service  mark,  trade or  business  secret,  invention,  technology,
computer  program or hardware,  original work of  authorship,  design,  formula,
discovery,   patent  or  copyright,   application,   record,   design,  plan  or
specification and any improvement, right or claim related to the foregoing.

                  1.16  "Participation"   shall  mean  the  direct  or  indirect
participation  in any  Competitive  Activity,  whether as an operator,  manager,
consultant, and whether individually or jointly.

                  1.17 "Performance  Year"   shall  mean   each   calendar  year
beginning on January 1 and ending on December 31.

                  1.18 "Person" shall mean any  individual or entity,  whether a
governmental or other agency or political subdivision thereof or otherwise.

                  1.19  "Severance  Amount" shall mean,  for purposes of Section
5.3(b)  hereof,  an amount  equal to (i) the sum of (A) the Base  Salary for the
calendar year in the Term in which the date of  Termination  occurs plus (B) the
prior year's Bonus Award (not to be less than  $100,000)  MULTIPLIED BY (ii) the
Severance Period Multiple.

                  1.20  "Severance  Period  Multiple"  shall mean,  the quotient
obtained by dividing (i) the  Severance  Period by (ii) 12;  PROVIDED,  HOWEVER,
that the Severance  Period  Multiple shall not be less than one (1), except that
in the case of a Change of Control,  the Severance  Period Multiple shall not be
less than two and one half (2.5).

                  1.21 "Severance Period" shall mean the number of full calendar
months remaining in the Term on the date of any Termination.

                  1.22  "Term"  shall have the  meaning set forth in Section 2.2
hereof and shall include any renewal or extension as set forth therein.

                  1.23  "Termination"  shall  mean  termination  of  Executive's
employment with the Company for any reason,  including (i) for Disability,  (ii)
with or without  Cause,  (iii)  resignation  by  Executive  with or without Good
Reason or (iv) upon the expiration of the Term.

                  1.24  "Voting  Stock"  shall  mean with  respect to any share,
interest,  participation or other equivalent (however designated, whether voting
or non-voting) in equity of the Company, whether now outstanding or issued after
the date hereof, including,  without limitation, any Common Stock, any preferred
stock and any class or kind ordinarily having the power to vote for the election
of directors, managers or other voting members of the Board.

                                       3

<PAGE>


                                   ARTICLE Il

                               EMPLOYMENT AND TERM

                  2.1  EMPLOYMENT.  The   Executive  shall  be  employed  as the
President  and Chief  Executive  Officer of the Company,  and  Executive  hereby
accepts such employment. In addition, Executive agrees that he will serve in any
similar  capacity on behalf of any existing or future  subsidiary of the Company
as reasonably requested by the Board.

                  2.2  TERM.  (a) The Term shall commence on the date hereof and
shall end on the  earlier  of (i) one week after the third  anniversary  of such
date and (ii) the date of any Termination.

                              (b) Subject  to  Section  5.2  hereof,  if six (6)
months'  advance  written notice  terminating  this Agreement is not received by
either  party  from the other  party  before  March 19,  2001 or any  subsequent
anniversary of such date, then this Agreement shall be automatically renewed for
successive one year-periods.

                  2.3  DUTIES.  The Executive shall be directly  responsible for
the Company's  strategy and daily  operations and shall have all powers,  duties
and responsibilities commensurate with his positions as set forth in Section 2.1
hereof or as may be assigned by the Board from time to time; PROVIDED,  HOWEVER,
that any such  powers,  duties and  responsibilities  assigned  by the Board are
commensurate  with such positions.  The Executive shall use his best efforts and
devote all of his business  time,  attention and energy in performing his duties
hereunder.  Notwithstanding  the  foregoing,  nothing  in this  Agreement  shall
restrict  Executive from managing his personal  investments,  personal  business
affairs and other personal matters,  or serving on civic or charitable boards or
committees,  if such  activities do not interfere  with the  performance  of his
duties hereunder or conflict with the Company's interests.

                                   ARTICLE III

                            COMPENSATION AND BENEFITS

                  3.1 BASE SALARY.  For services  performed by Executive for the
Company and its  subsidiaries  hereunder,  the Company  shall pay  Executive  an
annual Base Salary of $300,000 in accordance with the Company's  regular payroll
practices.  On each anniversary  date of this Agreement,  the Executive shall be
subject to an annual review; PROVIDED, HOWEVER, that the Executive's Base Salary
shall be increased  (but not decreased) to an amount equal to the product of the
Base Salary multiplied by the sum of (i) one plus (ii) the percentage  increase,
if any, in the Consumer Price Index for all Urban Consumers,  All Items, for the
most recent  twelve-month  period for which such  figures are then  available as
promulgated by the Department of Labor Bureau of Statistics.

                  3.2 BONUSES.  Executive shall be eligible to receive an annual
cash bonus in accordance with the Bonus Agreement. Any compensation which may be

                                       4


<PAGE>


otherwise authorized from time to time by the Board (or an appropriate committee
thereof) shall be in addition to the Base Salary and any Bonus Award.

                  3.3 STOCK  OPTIONS.  Executive  shall be  entitled  to receive
annual grants of stock options or restricted stock in amounts  determined by the
Board (or any committee thereof) in its sole and absolute discretion.

                  3.4 OTHER  BENEFITS.  In addition to  the  Base Salary and the
Bonus Award, Executive shall also be entitled to the following:

                              (a) PARTICIPATION  IN  BENEFIT  PLANS.   Executive
shall be entitled to participate  in and receive  benefits under all present and
future life, accident,  disability,  medical,  pension, and savings plan and all
similar  benefits made  available to senior  executive  officers of the Company.
Executive shall also be entitled to participate in all other welfare and benefit
plans maintained by the Company and/or its subsidiaries, as the case may be, for
their respective employees generally.

                              (b) VACATION.  Executive   shall  be  entitled  to
vacation and paid holidays  consistent  with the Company's  practices as adopted
from time to time; PROVIDED,  HOWEVER, that such vacation shall not be less than
20 days each year.

                              (c) EXPENSES.   The   Company   shall    reimburse
Executive for reasonable  travel  expenses and out of pocket  business  expenses
incurred by  Executive  in the  performance  of his duties  hereunder,  provided
appropriate  documentation  supporting  such expenses is submitted in accordance
with the Company's governing policies.

                                   ARTICLE IV

                                    COVENANTS

                  4.1  NON-INTERFERENCE.  During  the Term  and a period  of two
years  thereafter,  Executive agrees not to solicit or encourage any employee of
the  Company  who is employed in an  executive,  managerial,  administrative  or
professional  capacity  or who  possesses  Confidential  Material  to leave  the
employment of the Company.

                  4.2  NONDISCLOSURE  OF  CONFIDENTIAL   MATERIAL.  (a)  In  the
performance of his duties hereunder, Executive shall have access to confidential
records and information,  including, but not limited to, information relating to
(i)  any  Intellectual  Property  or  (ii)  the  Company's  business  practices,
finances, developments,  customers, affairs, marketing or purchasing strategy or
other  secret  information  (collectively,  clauses (i) and (ii) of this Section
4.2(a) are referred to as the "Confidential Material").

                           (b)  All  Confidential  Material  shall be  disclosed
to Executive in confidence. Except in performing his duties hereunder, Executive
shall not,  during  the Term and at all times  thereafter,  disclose  or use any
Confidential Material.

                           (c)  All   records,   files,   drawings,   documents,
equipment and other tangible items containing Confidential Material shall be the
Company's  exclusive

                                       5

<PAGE>

property,  and, upon termination of this Agreement, or whenever requested by the
Company, Executive shall promptly deliver to the Company all of the Confidential
Material (and copies thereof) that may be in Executive's  possession or control.
The Company  hereby  represents  and warrants that it shall give custody of such
Confidential  Material  to a escrow  agent,  with terms  acceptable  to both the
Company  and the  Executive,  for a  three-year  period at an annual cost not to
exceed $500.

                           (d)  The foregoing  restrictions  shall not  apply if
(i) such Confidential  Material has been publicly disclosed (not due to a breach
by Executive of his obligations  hereunder or by breach of any other person of a
fiduciary  or  confidential  obligation  to the  Company) or (ii)  Executive  is
required  to  disclose  Confidential  Material  by or to any court of  competent
jurisdiction or any  governmental  or  quasi-governmental  agency,  authority or
instrumentality of competent  jurisdiction;  PROVIDED,  HOWEVER,  that Executive
shall,  prior to any such  disclosure,  immediately  notify the  Company of such
requirement;  PROVIDED,  FURTHER,  that the Company shall have the right, at its
expense, to object to such disclosures and to seek confidential treatment of any
Confidential Material to be so disclosed on such terms as it shall determine.

                  4.3  NON-COMPETITION.  (a) The Executive shall not, during the
Term,  Control  any  Person  which  is  engaged,   directly  or  indirectly,  or
Participate in any business that is competitive  with the Company's  business of
developing,  operating or expanding a facilities-based  telecommunications voice
or voice band data  network  within any  country in any  European  Union  member
state,  Switzerland or any country (excluding the Americas) in which the Company
currently  has  a  switch  or  point  of  presence  for  either  origination  or
termination of voice or voice band data transmissions or in which the Company is
so engaged in business  or  proposes to be so engaged in business in  accordance
with  its  strategic  business  plan  current  at the  time  of the  Termination
(including  the  solicitation  of any  customer  of the Company on behalf of any
competitor or any other business,  directly,  indirectly on behalf of himself or
any other Person) (collectively,  "Competitive Activities");  PROVIDED, HOWEVER,
that nothing in this Agreement shall preclude Executive from owning less than 5%
of any class of publicly  traded equity of any Person engaged in any Competitive
Activity. Notwithstanding the immediately preceding sentence, if the Company has
ceased to so  provide  such  services  within  any such  country  at the time of
Executive's Termination (or any time thereafter),  the covenant set forth in the
immediately  preceding  sentence  shall no longer be applicable to such any such
business in such country.

                       (b) Upon   Termination   for   Disability   or  Cause  or
without  Good Reason the  Executive  shall not,  for himself or any third party,
directly  or  indirectly,  for a period of one year  following  the date of such
Termination engage in Competitive Activities.

                       (c) Upon  Termination  either  without  Cause or for Good
Reason the  Executive  shall not,  for himself or any third  party,  directly or
indirectly,  engage in Competitive  Activities for a period equal to the greater
of (i) the Severance Period and (ii) one year following the date of Termination.

                                       6

<PAGE>

                  4.4  EXECUTIVE INVENTIONS AND IDEAS.

                       (a) Executive   hereby    agrees   to   assign   to   the
Company,  without further  consideration,  his entire right,  title and interest
(within the United States and all foreign  jurisdictions),  to any  Intellectual
Property  created,  conceived,  developed  or reduced to practice  by  Executive
(alone  or with  others),  free and  clear of any  lien or  encumbrance.  If any
Intellectual  Property  shall be deemed  patentable  or  otherwise  registrable,
Executive shall assist the Company (at its expense) in obtaining  letters patent
or other applicable  registration therein and shall execute all documents and do
all  things  (including  testifying  at  the  Company's  expense)  necessary  or
appropriate to obtain letters patent or other  applicable  registration  therein
and to vest in the Company, or any affiliate specified by the Board.

                       (b) Should  the  Company be unable to secure  Executive's
signature on any document necessary to apply for,  prosecute,  obtain or enforce
any patent,  copyright or other right or protection relating to any Intellectual
Property,  whether due to  Executive's  Disability  or other  reason,  Executive
hereby  irrevocably  designates  and  appoints  the Company and each of its duly
authorized officers and agents as Executive's agent and  attorney-in-fact to act
for and on  Executive's  behalf  and  stead  and to  execute  and  file any such
document and to do all other lawfully permitted acts to further the prosecution,
issuance  and  other  enforcement  of  patents,  copyrights  or other  rights or
protections with the same effect as if executed and delivered by Executive.

                  4.5  ENFORCEMENT.

                       (a) Executive   acknowledges   that    violation  of  any
covenant  or  agreement  set forth in this  Article IV would  cause the  Company
irreparable  damage for which the Company  cannot be reasonably  compensated  in
damages in an action at law,  and,  therefore,  upon any breach by  Executive of
this Article IV, the Company shall be entitled to make application to a court of
competent  jurisdiction  for equitable  relief by way of injunction or otherwise
(without being required to post a bond). This provision shall not,  however,  be
construed  as a waiver  of any of the  rights  which  the  Company  may have for
damages, and all of the Company's rights and remedies shall be unrestricted.

                       (b) If any  provision of this Agreement,  or  application
thereof  to any  person,  place  or  circumstance,  shall  be held by a court of
competent  jurisdiction or be found in an arbitration  proceeding to be invalid,
unenforceable  or void, the remainder of this  Agreement and such  provisions as
applied to any other person,  place and circumstance  shall remain in full force
and  effect.  It is the  intention  of the  parties  hereto  that the  covenants
contained herein shall be enforced to the maximum extent (but no greater extent)
in time,  area,  and degree of  participation  as is permitted by the law of the
jurisdiction whose law is found to be applicable to the acts allegedly in breach
of this  Agreement,  and the parties hereby agree that the court making any such
determination shall have the power to so reform the Agreement.

                                       7

<PAGE>

                       (c)  The  Executive  understands  that  the provisions of
this Article IV may limit his ability to earn a livelihood in a business similar
to the business of the Company but nevertheless  agrees and hereby  acknowledges
that (i) such provisions do not impose a greater  restraint than is necessary to
protect the  goodwill or other  business  interests  of the  Company;  (ii) such
provisions contain  reasonable  limitations as to time and the scope of activity
to be restrained;  and (iii) the  consideration  provided under this  Agreement,
including,  without limitation, any amounts or benefits provided under Article V
hereof, is sufficient to compensate Executive for the restrictions  contained in
this Article IV. In  consideration  of the foregoing and in light of Executive's
education,  skills and abilities,  Executive agrees that he will not assert, and
it should not be  considered,  that any  provisions of this Article IV prevented
him from earning a living or otherwise are void,  voidable or  unenforceable  or
should be voided or held unenforceable.

                       (d)  Each of the covenants of this Article IV is given by
Executive as part of the  consideration  for this Agreement and as an inducement
to the  Company  to  enter  into  this  Agreement  and  accept  the  obligations
hereunder.

                                    ARTICLE V

                                   TERMINATION

                  5.1  TERMINATION OF AGREEMENT.  Except for those provisions of
this Agreement that survive Termination, this Agreement shall terminate upon any
Termination.

                  5.2  PROCEDURES APPLICABLE TO TERMINATION.

                       (a) TERMINATION  FOR  CAUSE.   The   Executive   may   be
terminated for Cause, upon at least 30 days' prior written notice from the Board
to  Executive  for  termination  for Cause  provided  that  Executive,  with his
counsel,  shall have had the  opportunity  during  such  period to be heard at a
meeting of the Board concerning such determination.

                       (b)  RESIGNATION  FOR  GOOD  REASON.  The  Executive  may
terminate his employment  for Good Reason,  upon at least 30 days' prior written
notice  from  Executive  to the Board of his  intent to resign  for Good  Reason
provided that  Executive,  with his counsel,  shall have met with the Board,  if
requested by the Board, during such period with respect to his intent to resign.

                       (c)  TERMINATION  WITHOUT CAUSE OR FOR  DISABILITY.   The
Executive may be terminated  without Cause or for  Disability,  upon at least 30
days' prior written notice from the Board to Executive,  by a vote of the Board,
provided that Executive, with his counsel, shall have had the opportunity during
such  period  to be  heard  at a  meeting  of the  Board  with  respect  to such
determination.

                       (d)  NO EFFECT  ON  RIGHTS.   The  Executive's  right  or
obligation  to be heard in  connection  with a  Termination  shall not otherwise
effect the rights and obligations of Executive or the Company hereunder.

                                       8

<PAGE>

                  5.3  OBLIGATIONS OF THE COMPANY UPON TERMINATION.

                       (a) ACCRUED  OBLIGATIONS  AND OTHER  BENEFITS.  Upon  any
Termination,   the  Company  shall  pay  to  Executive,   or,  upon  Executive's
Disability,  to his heirs, estate or legal representatives,  as the case may be,
the following:

                           (i)  all  Accrued  Obligations  in a lump sum  within
10 days after the date of Termination; and

                           (ii) all benefits accrued by Executive as of the date
of Termination under all qualified and nonqualified retirement,  pension, profit
sharing and similar  plans of the Company to such extent,  in such manner and at
such time as are provided under the terms of such plans and arrangements.

                       (b) TERMINATION  WITHOUT  CAUSE  OR RESIGNATION  FOR GOOD
REASON. If the Board terminates  Executive's employment without Cause (excluding
Termination because of Disability),  or if Executive resigns for Good Reason, in
addition to the amounts payable under Section 5.3(a) hereof:

                            (i) The Company  shall pay  Executive the  Severance
Amount in a lump sum within 10 days after the date of Termination; and

                            (ii) The   Company   shall   continue  all  benefits
coverage of Executive and any  dependents  then provided under its benefit plans
or policies for the unexpired portion of the Term.

                       (c) TERMINATION FOR  CAUSE OR  RESIGNATION  WITHOUT  GOOD
REASON.  If  the  Board  terminates  Executive's  employment  for  Cause,  or if
Executive  resigns without Good Reason,  Executive shall only be entitled to the
amounts payable under Section 5.3(a) hereof:

                       (d) TERMINATION  FOR  DISABILITY.  Upon   Termination  of
Executive  because of a  Disability,  in addition to the amounts  payable  under
Section 5.3(a) hereof,  the Company shall pay the aggregate  Disability  Payment
for three years in accordance with the Company's  regular payroll practices then
in existence.

                       (e) EXCLUSIVITY.  Any   amount   payable   to   Executive
pursuant to this Article V shall be Executive's  sole remedy upon a Termination,
and Executive  waives any and all rights to pursue any other remedy at law or in
equity;  PROVIDED,  HOWEVER,  that  Executive  does not  hereby  waive any right
provided  under  any  federal,  state or local  law or  regulation  relating  to
employment discrimination.

                                   ARTICLE VI

                                  MISCELLANEOUS

                  6.1 EXECUTIVE ACKNOWLEDGMENT.  The Executive acknowledges that
he has consulted  with or has had the  opportunity  to consult with  independent
counsel of his own choice  concerning  this Agreement and has been advised to do
so by the

                                       9

<PAGE>


Company,  and that he has read and understands the Agreement,  is fully aware of
its legal effect, and has entered into it freely based on his own judgment.

                  6.2 BINDING  EFFECT.  This Agreement shall be binding upon and
inure to the benefit of Executive's heirs and  representatives and the Company's
successors and assigns.  The Company shall require any successor (whether direct
or indirect, by purchase, merger, reorganization,  consolidation, acquisition of
assets or stock, liquidation,  or otherwise), by agreement in form and substance
reasonably satisfactory to Executive, to assume performance of this Agreement in
the same  manner  that the  Company  would have been  required  to perform  this
Agreement  if no such  succession  had taken place.  Regardless  of whether such
agreement is executed, this Agreement shall be binding upon any successor of the
Company in accordance with the operation of law.

                  6.3  NOTICES.  All  notices,   requests,   demands  and  other
communications  hereunder  shall be in writing  and shall be deemed to have been
duly given if delivered by hand or mailed within the  continental  United States
by first class  certified  mail,  return  receipt  requested,  postage  prepaid,
addressed as follows:

                       (a)   if to the Board or the Company, to:

                             Viatel, Inc.
                             800 Third Avenue, 18th Floor
                             New York, New York 10022
                             Attention:  Senior Vice President, Business
                                         Affairs and General Counsel

                       (b)   if to Executive, to:

                             77 Park Avenue, Apt. 15E
                             New York, New York 10016

                             with a copy to:

                             Lanny A. Oppenheim, Esq.
                             Christy & Viener
                             620 Fifth Avenue
                             New York, New York 10020


Any such address may be changed by written notice sent to the other party at the
last recorded address of that party.

                  6.4  TAX  WITHHOLDING.  The  Company  shall  provide  for  the
withholding of any taxes required to be withheld under federal,  state and local
law (other  than the  employer's  portion  of such  taxes)  with  respect to any
payment in cash and/or other  property made by or on behalf of the Company to or
for the benefit of Executive under this Agreement or otherwise. The Company may,
at its option:  (i) withhold  such taxes from any cash  payments  owing from the
Company to Executive,  (ii) require Executive to pay to the Company in cash such
amount as may be required to satisfy such

                                       10

<PAGE>


withholding  obligations and/or (iii) make other satisfactory  arrangements with
Executive to satisfy such withholding obligations.

                  6.5 NO  ASSIGNMENT;  NO THIRD PARTY  BENEFICIARIES.  Except as
otherwise  expressly  provided  in Section  6.2 hereof,  this  Agreement  is not
assignable by any party, and no payment to be made hereunder shall be subject to
alienation,  sale, transfer,  assignment,  pledge,  encumbrance or other charge.
Except for the Company and its existing and future subsidiaries, no Person shall
be, or deemed to be, a third party beneficiary of this Agreement.

                  6.6 EXECUTION IN COUNTERPARTS. This Agreement  may be executed
by the parties hereto in one or more counterparts, each of which shall be deemed
to be an original,  but all such counterparts  shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.

                  6.7 JURISDICTION AND GOVERNING LAW. Jurisdiction over disputes
with regard to this Agreement shall be exclusively in the courts of the State of
New York,  and this Agreement  shall be construed and  interpreted in accordance
with and  governed by the laws of the State of New York as applied to  contracts
capable of being wholly performed in such State.

                  6.8 ENTIRE  AGREEMENT;  AMENDMENT.  This Agreement,  the Bonus
Agreement,  and the Exhibits attached hereto embody the entire  understanding of
the parties hereto, and supersede all prior agreements, including the employment
agreement  dated  September 23, 1996,  regarding the subject matter  hereof.  No
change,  alteration  or  modification  hereof  may be made  except in a writing,
signed by both of the parties hereto.

                  6.9  HEADINGS.   The  headings  in  this   Agreement  are  for
convenience  of  reference  only  and  shall  not be  construed  as part of this
Agreement or to limit or otherwise affect the meaning hereof.

                  6.10  SURVIVAL.   Notwithstanding  anything  to  the  contrary
herein, Article IV, Section 5.3 and Article VI of  this  Agreement shall survive
termination of this Agreement or Termination for any reason whatsoever.

                  IN WITNESS  WHEREOF,  the  parties  hereto have  executed  and
delivered this Agreement as of the day first written above.

                                  VIATEL, INC.

                                  By: /S/ ALLAN L. SHAW
                                      _____________________


                                  EXECUTIVE

                                   /S/ MICHAEL J. MAHONEY
                                   ________________________